Covert Costs of Privatization: Lessons from the Closure of Three Public Chronic Care Hospitals in Massachusetts

This article analyzes the process of applying cost/benefit analysis to decisions about privatizing public services. This process is examined in the context of a decision by the Commonwealth of Massachusetts to save costs by closing three of its seven public chronic hospitals. A postaudit of the outcomes from the closure showed that the realized cost savings were less than those projected in the original proposal. This shortfall could be traced to a failure to include certain relevant costs in the original proposal. Based on the findings, the article concludes with a discussion of policy recommendations for better analyses of similar decisions.