Nonprofit to For-Profit Conversions in Health Care

Privatization is a term that has triggered passionate debate in recent years. Here in Massachusetts, a law to stop it has been enacted. What we are really debating, however, is not true privatization at all. Privatization implies a complete withdrawl of government from provision and finacncing of a formerly public service, usually through the sale of government owned assets. Rather the debate has been about “private contracting,” whether government should contract with private vendors for provision of services instead of providing services directly.

Opponents of private contracting fear that any savings will come largly from lower wages and reduced fringe benefits. Others are concerned that, while private contracting may be beneficial for services such as snow removal or highway maintenance, it is less appropriate for human services where quality may be difficult to define and is often hard to monitor. Using Child Support Enforcement (CSE) as a case study, this paper examines several questions about priavtely contracted human services: Are they cost-effective? Can private companies be trusted to perform quality work? Do private companies operate differently than public agencies? If so, do those differences translate into lower cost and/or better service?