New Public Management and the Corporatization of Portuguese Public Hospitals

This paper reports an in-depth and longitudinal case study on the new public management (NPM) reforms introduced in Portuguese public hospitals throughout the 2000s. The objectives of the investigation were twofold: firstly, it sought to analyse the role of accounting technologies and market-based mechanisms in the NPM reforms introduced in the sector when compared with other cases of NPM implementation; and, secondly, it aimed to investigate the impact of NPM on hospitals and individuals following calls that more research on the consequences and side effects of NPM was needed (Kurunmäki, 2009; Lapsley, 2008; Hood and Peters, 2004). Public hospitals were criticised for having grown inefficiently and wastefully under the Portuguese Government’s former policy of full cost reimbursement. There was a general belief that a spirit of entrepreneurship and dynamism needed to be created in the Portuguese national health services (NHS) in order to encourage the sector to restrain costs. NPM, which has been promoted at a global scale as leading public services to efficiency improvements, was regarded as the solution. Portuguese health care reforms included the transformation of public hospitals into public enterprises, the introduction of purchaser-provider splits, the establishment of contracts based on DRG prospective payment schemes and, ultimately, activity-based costing (ABC) implementation in pilot hospitals. The research evidenced the Ministry of Health’s efforts in developing accounting and accountability mechanisms in the sector, despite suspicion and scepticism from some, particularly the medical profession, in charge of the provision of health care services. Furthermore, it showed how managerial reforms led hospitals managers to develop financial and non-financial indicators to help them monitor and control the efficiency and quality of the services contracted, and how hospitals’ patterns of health care delivery changed.