Health Policy 99 (2011) 158–166 Contents lists available at ScienceDirect Health Policy journal homepage: www.elsevier.com/locate/healthpol An analysis of hospital capital planning and financing in three European countries: Using the principal–agent approach to identify the potential for economic problems Ceri R. Thompson ∗ , Martin McKee London School of Hygiene and Tropical Medicine, Keppel Street, London, WC1E 7HT, United Kingdom article info Keywords: Hospital planning Governance Capital investment Principal–agent model Economic incentives European Union abstract Objective: To explore differences in national approaches to hospital capital planning and financing in three European countries and to understand the roles and positions of the actors involved. Methods: Case studies of major new hospital developments were undertaken in each of the study countries (France, Sweden and England), based on a review of documents related to each development and the national framework within which they took place, as well as interviews with key informants. The principal–agent model was used, focusing on identi- fication of differing utilities and information asymmetries. Results: There are substantial differences between countries, for example in relation to the role of the hospital in its own redevelopment, the organisational distance between actors, the institutional level at which decision rights for major investments are exercised, and how principals control the agents. These differences have implications for the processes involved and the nature of economic and health care problems that can arise. Conclusions: There is evidence of, and opportunity for economic problems in all systems but these seems to be greater in France and England where the hospital leads the process, where there is limited involvement by the regional bodies, and informational differences appear greater. We conclude that hospital planning processes should be informed by an explicit understanding of the powerful groups involved and their divergent preferences and utilities. © 2010 Elsevier Ireland Ltd. All rights reserved. 1. Introduction Determining the appropriate size, shape and capacity of a hospital is complex because there are so many uncer- tainties about the future provision of health care, such as the burden of disease, the technologies and models of care available, and their affordability [1]. Opportunities to reshape the hospital sector occur infrequently in any one region so that few individuals accumulate significant prac- tical experience that can be applied to subsequent projects. Yet the process of hospital planning is rarely studied and ∗ Corresponding author. Tel.: +44 352 621 303 435. E-mail address: cerithompson@yahoo.co.uk (C.R. Thompson). the decision-making is often thought of as taking place within a “black box” [2]. Such processes demand attention as the consequences of mistakes can be grave. Hospitals built under the United Kingdom’s controversial Private Finance Initiative have been subjected to particular scrutiny, with reports of seri- ous design faults with implications for patient safety, failure to plan for adequate capacity, and financial non- viability [3,4]. Elsewhere, the construction of hospitals that have been designed around therapeutic pathways and work patterns show what can be achieved, a stark contrast with traditional designs [5]. In this paper we argue that the hospital planning pro- cess should be informed by an explicit understanding of the powerful groups involved and their divergent prefer- 0168-8510/$ – see front matter © 2010 Elsevier Ireland Ltd. All rights reserved. doi:10.1016/j.healthpol.2010.07.015