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May 14, 2026The Quarterly Journal of Economics1 citationsOpen Access

Public Services Under Private Management

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MCMaíra CoubeLFLuiz Felipe FontesRRRudi Rocha

Key Points

  • The research aims to evaluate how outsourcing hospital management to private organizations affects efficiency and quality of care in Brazil.
  • Assessed the impact of the OSS model on hospital services in Brazil.
  • Evaluated operational efficiency, inpatient production, and care quality metrics.
  • Analyzed data on staffing adjustments and managerial capacity among private organizations.
  • Increased hospital production led to higher inpatient care, reducing mortality rates.
  • Operational efficiency improved without compromising quality or equity in healthcare delivery.
  • Performance gains were notably higher in organizations with greater managerial experience.

Abstract

Abstract Theory predicts that outsourcing public services to the private sector can reduce costs and improve efficiency, but can also induce cost-cutting and compromise quality. We assess the Brazilian “Organizações Sociais de Saude” model (OSS), which outsources management of public hospital services to the private sector while the state remains the residual claimant. We show that this enhances hospital production and operational efficiency without adverse effects on hospital quality and equity. Increased inpatient production addresses previously unmet demand, expanding local access to hospital care and reducing population mortality. Performance gains arise from improved operational efficiency achieved through increased hospital management capacity. This facilitates staffing adjustments, favoring higher-skilled personnel, dismissing lower-productivity staff, and adopting flexible, performance-tied employment contracts. Effects are larger among private organizations with more management experience, underscoring returns to managerial capacity. Our findings show that incentive-ownership structures can address the quantity-quality trade-off in public service delivery, even when contracts are incomplete and quality is hard to measure.

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Cite This Study

Coube et al. (2026) studied this question.

synapsesocial.com/papers/6a0567fda550a87e60a20516https://doi.org/10.1093/qje/qjag028
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