KUALA LUMPUR, August 30 — The Association of Private Hospitals Malaysia (APHM) has defended private hospital charges, after an insurance industry veteran complained about his 13-page hospital bill of nearly RM19,000 for a minor hernia surgery.
The private hospital industry group noted that the hospital portion of hospital bills is often unfairly highlighted, without taking into account the expenses borne by the hospital with “an intention of reducing hospital profits”.
“It is important to highlight that insurance businesses operate with numerous revenue lines and often generate big profits. While there may be occasional losses in particular sectors, they are not frequent,” APHM president Dr Kuljit Singh said in a statement yesterday.
“However, it is worth noting that these observations are made without direct challenges or a debate. By contrast, a hospital relies solely on one source of revenue, which is carefully controlled due to the continuously rising expense of health care.
“It is crucial for customers to comprehend that insurance firms derive a substantial portion of their total income from numerous sources. However, inevitably premium rates will increase every year for their clients.”
Coincidentally, KPJ Healthcare Berhad announced last Wednesday its best ever quarterly results in the Group’s history, recording its highest ever revenue of RM930.6 million for the second quarter ended June 30, marking an 18 per cent increase from RM785.4 million in Q2 FY2023. The private hospital operator’s gross profit improved to RM402.7 million for Q2 FY2024, up 25 per cent from RM321.1 million in the same quarter last year.
On the other hand, Allianz Malaysia Berhad, which recently reported its second quarter financial results, recorded a 17.7 per cent increase in revenue year-on-year to RM1.37 billion from RM1.16 billion. The insurance company – which provides life and general insurance, including health insurance – recorded net profit of RM167.02 million for Q2 FY2024.
Hospital Bills Are Lengthy In The Interest Of Transparency
In a recent interview with CodeBlue, Life Insurance Association of Malaysia (LIAM) chief executive Mark O’Dell disclosed his 13-page hospital bill of RM18,837.55 from a major private hospital in Kuala Lumpur for a minor hernia procedure last May, involving an overnight hospital stay, that included charges for 95 line items across 13 different categories.
The former CEO of multinational insurance companies, AIA and Manulife, complained that he didn’t understand some of the line items on his long bill and that such charges weren’t regulated.
Dr Kuljit pointed out that the Private Healthcare Facilities and Services Act (PHFSA) 1998 requires private hospitals to itemise bills down to each individual line.
“This is perhaps the only industry where such a high level of detail is provided, including as an example the number of gauzes used. As a result, the bill contains a lengthy list of items and pages, which is intended to be transparent to the patient and client,” he said.
“It is unfortunate that a senior member of the insurance sector had difficulties understanding the bill, considering that it has been in existence for years and all private hospitals are obligated to provide detailed explanations of the bills upon request from the patient or payor.”
APHM also expressed hope that the “alleged complexity” of medical bills would not be a frequent factor that causes insurance companies to delay issuing guarantee letters, or making deferments or late payments that often leads to hardship for hospitalised patients.
Dr Kuljit further highlighted O’Dell’s “optional” one-night room and board in a suite room charged at RM2,508, describing it as “not customary or clinically necessary”.
“However, it is undeniable that the inclusion of additional luxurious amenities has significantly increased the overall expense of the bill.”
O’Dell said yesterday that his suite room stay was not covered by his insurance. His RM2,508 one night’s stay at a suite room comprised 13 per cent of the total RM18,837.55 bill.
Private Hospitals Bear Expenses Beyond Medical Consumables
Dr Kuljit explained that hospital management has always focused on cost optimisation and containment, encompassing not just medical and surgical consumables, but also expenses related to preventative maintenance, energy, waste management, facilities, and housekeeping, among others.
“Although hospitals may consider establishing a dedicated department for cost containment, the absence of such a department does not indicate a lack of emphasis on controlling expenses,” he said.
O’Dell was charged for the use of equipment like a 4K UHD NIR/ICG Camera System (RM1,648.20), a digital blood pressure (RM53.60), and pulse oximeter (RM57.40), or medical supplies like gauze swabs (RM45.70), among others. Malaysians commenting on his hospital bill have criticised such charges, even joking about having to bring their own medical devices or supplies to private hospitals.
APHM said “every piece” of medical equipment comes with a capital expenditure, whether it is a substantial investment like an MRI or CT scanner, or a “considerable quantity” of smaller devices like blood pressure monitors.
“All of these equipment must be certified by the Medical Device Authority (MDA) and undergo regular calibration and preventive maintenance. The clinical service may include the charging of the equipment, which refers to both the equipment itself and the process of measuring and recording. Alternatively, the equipment can be charged individually.”
Dr Kuljit also stressed the importance of examining an overall hospital bill, given the absence of a universally accepted method for pricing equipment and services. “Focusing solely on specific items and making comparisons may not provide a comprehensive understanding of the billing structure.”
He highlighted the impact of forcing patients and health care providers to meet the financial criteria of the payor – i.e. insurer – in exchange for a cashless privilege, as a result of “unfair audits and arguments” about the hospital’s part in overall health care costs.
“The government should be concerned whether the payor’s moral and ethical obligation towards the patient is met when the paying client’s right to choose health care is restricted by implementing a pay and claim system in order to control costs.”
Bundled Payment Scheme Can Be Considered In National Health Care Financing Model
APHM said it was “receptive” to various billing and payment methods for private hospitals, such as Diagnostic Related Groups (DRG) and value-based, but stressed that these models must be evaluated “comprehensively”.
DRG, which was advocated by O’Dell, involves paying a fixed amount based on the complexity of the case, rather than itemising each charge. Hospitals would receive a set amount (for example, RM21,000) and manage their resources within that budget.
Value-based health care is a payment model where payers pay for health outcomes, instead of the current pay-for-service model.
“If Malaysia is transitioning to a health care financing model that allows all citizens to access private health care through a national plan, it would be suitable to consider implementing a bundled payment scheme (where it is government funded),” Dr Kuljit said.
“This can be combined with transparent treatment protocols and limitations, but ideally with a supplementary programme where patients have the option to personally cover the cost of more services.”
The conflict between the insurance and private hospital industries intensified after Bank Negara Malaysia imposed a minimum 5 per cent copayment mandate on all new health and medical insurance products to halt the unsustainable increase of insurance premiums, amid Malaysia’s high medical inflation rate of 12.6 per cent last year.
Insurers accuse private hospitals of overcharging (private hospital charges are currently unregulated, except for doctors’ fees), whereas private hospitals blame the insurance industry for restricting patients’ access to health care to control costs.
“In order to safeguard the well-being of our patients in this country, it is imperative that we collaborate to prevent the occurrence of unethical practices within many sectors, including hospitals, doctors, and insurance companies,” APHM said.
“Patients have a right to receive fair and equitable health care services, regardless of whether it is provided by a public or private institution.”
