What Decentralising Public Hospitals Looks Like, Based On Khairy’s Vision

Khairy Jamaluddin’s radical proposal sees MOH hospitals run autonomously by their own CEO and governance board to incentivise savings, while treatment charges remain controlled by MOH. Health care services may be regulated by an independent regulator.

KUALA LUMPUR, August 23 – The Ministry of Health (MOH), which employs nearly a quarter of a million people, isn’t just a health care provider, but also a payer and sole regulator of health care.

At the Health Policy Summit 2022 last week, Health Minister Khairy Jamaluddin described MOH as a “bureaucratic Leviathan”.

He envisions transforming the role of MOH with the radical proposal of not just devolving health care service delivery from the country’s biggest health care provider, but even transferring MOH’s powers to regulate health care services across the public and private sectors to an independent regulator.

“The White Paper will also be an exercise for our own existential reform,” Khairy says, referring to the Health White Paper that he intends to table in Parliament by year-end to get a policy statement on the future direction of Malaysia’s health care system.

While a highly centralised MOH structure has its advantages, such as being able to change certain policies rapidly with a quick circular, Khairy highlights increased administrative costs as a result of over-bureaucratisation and conflict of interest between MOH’s varying roles that ultimately affect the quality of health care service delivery.

“So one thing we should look at in the long run, I think it should be there in the White Paper, is what the future MOH, which is fit for purpose, should be.”

So what will decentralising MOH look like, in a country with a dual health care system where private health spending (45 per cent) is nearly equal to public health expenditure (55 per cent)?

Before we get to Khairy’s ambitious vision of reforming the MOH bureaucratic “monster”, in the minister’s own words, we need to understand how the current public health care system operates.

Public hospitals comprise not just MOH facilities, but also teaching hospitals run by public universities and military hospitals run by the Defence Ministry, although MOH operates the biggest share of government hospitals.

With the annual allocation of the federal government’s budget determined by the Finance Ministry, MOH decides how to distribute the funding to its various health care facilities and pays for the health care it provides.

Public health care provided by MOH, with RM1 and RM5 medical fees for outpatient and specialist care respectively, is hugely subsidised by the government.

University hospitals, on the other hand, are far more autonomous in setting charges for treatment and, as such, are able to provide newer and more expensive treatments, such as for cancer, that are unavailable in MOH, but at a much lower cost than private hospitals.

When it comes to regulation of health care, MOH is the only regulator, regulating private health care facilities under the Private Healthcare Facilities and Services Act (PHFSA) 1998.

There is still no law that regulates public health care facilities run by MOH, which means that MOH, as a regulator, has the discretion to regulate the health care services it provides based on its own internal standards, without being subject to the PHFSA.

An example is fire safety certification that is mandatory for private health care facilities under the PHFSA, but not for MOH facilities. Forty-four unnamed public hospitals and clinics do not have a fire certificate, according to a Parliament reply last October. An independent committee that investigated the 2016 fire disaster at Sultanah Aminah Johor Bahru Hospital, which killed six patients, found that the MOH facility lacked a fire certificate.

The question of regulation is also murky when it comes to teaching hospitals operated by public universities.

According to the Auditor-General’s Report 2019 Series 1, MOH’s stand is that all health care facilities, except MOH hospitals, must get their operating licence under the PHFSA. The Ministry of Higher Education, however, has requested for university hospitals to be exempt from the PHFSA.

Khairy’s idea, therefore, is to decentralise the MOH behemoth by giving more autonomy to public hospitals, particularly larger facilities, that can be run independently by a hospital chief executive officer (CEO) with their own board, as opposed to the current practice of hospital directors that report to federal MOH.

These autonomous hospitals will have the ability to manage their own expenditure and to retain savings, instead of presently having to return the money to the federal government’s consolidated fund that does not encourage health care facilities to operate more efficiently.

“There’s no incentive for your hospital director to behave like a CEO. Of course, you have to put in safeguards to ensure that autonomous hospitals continue to serve the public good. That’s very important. Otherwise, they can be too business-minded as well,” Khairy says.

He justifies the need for decentralisation by pointing out that different hospitals have different needs, such as Putrajaya Hospital versus hospitals in Perlis or in the interiors of Sabah and Sarawak.

“So we need to give some, or a lot, of autonomy to the field.”

Khairy does not envision, however, giving MOH hospitals the freedom to set their own prices for treatment under the decentralisation model.

“It’s still a public hospital in terms of fee schedules that are determined by MOH.”

On devolving regulatory functions from MOH, Khairy points out that the UK’s NHS doesn’t regulate its own health care services that are separately regulated by the Care Quality Commission, the independent regulator of health and social care in England.

“It’s outside the Department of Health [and Social Care], so there’s no issue of conflict of interest. They can regulate independently,” Khairy tells reporters.

“That is a system that perhaps we need to look at. In Malaysia, power is overly centralised in MOH. We’re the main payer, we’re the main health care provider, and we’re the sole regulator. So, it’s a rather unusual situation.”

Instead, he says MOH can simply maintain regulatory functions in terms of things like setting costs of treatment or health care so that the general public will continue to be charged at MOH rates, regardless of whether or not public hospitals have more autonomy with their own governance boards.

“We will review the implementation of policies, whereas an independent regulator looks at what’s happening in the hospital. Perhaps this check-and-balance system will increase the quality of services.”

With more autonomous hospitals and fewer regulatory functions, Khairy says MOH can then focus on public health surveillance, policy development, research, regulation, monitoring, and evaluation.

“If the MOH continues to be where it is now, I’m the one who’s happiest because I sit at the top of a huge bureaucracy. Nobody wants to lose this power or this breadth of influence that you have throughout the country.

“But if you are looking at it dispassionately, if you’re looking at it objectively, you have to conclude that it’s actually quite big.”

You may also like