Several articles written under the heading “DRG: One Step Forward or Two Steps Back” by Dr Musa Mohd Nordin et al, question the need for DRG. The core message of all four articles relates to their opposition to DRG due to the financial impact on private medical centers and specialist earnings.
Dr. Musa claims the present system is an efficient, effective, impactful, and profit-making ecosystem that does not require any changes. In other words, there is no need to reinvent the wheel.
This write-up will evaluate the author’s view and present an alternative perspective for readers to consider why the present dual system (private and public) needs to change.
Specialist Fee Stagnation
In Part 1, Dr Musa et al highlighted that the specialist fees are strictly regulated by the 13th Schedule of the Private Healthcare Facilities and Services (Amendment) Order 2013 and have not been revised in the last 11 years.
Indeed, this is true. However, the crucial question that needs to be addressed is whether the existing fees are too small and impoverished for private specialists and whether they live the same lifestyle and at the same parity as their public hospital counterparts. The answer to this question is obvious. Is there a need for the fees to be revised?
The published consultation fees range from RM80 to RM235, which does not include the various earnings from procedures and tests imposed on the patients.
When a patient is admitted, all sources of fees are combined, and their income is substantial. There is financial motivation for them to order test procedures and admit patients.
Evaluating the specialist and GP income qualitatively and quantitatively is not difficult. The qualitative aspect can be assessed from their lifestyles, cars they drive, homes they own locally and abroad, and the frequency of holidays taken abroad.
If the present charges are low and need revision, then how do they explain their affluent lifestyles?
Objectively, their earnings can be evaluated by their financial statement and tax returns. Most hospital-based income is placed under companies to reduce taxes through creative accounting.
Private specialists must ask themselves how much earnings are enough in this social-linked business, and they keep raising and harping on the issue of their fees.
If their earnings and lifestyles have dropped to the level of public hospital specialist, then there is a justification to support their quest for fee review.
The same article states that the specialist’s fee is only a tiny fraction of the itemised hospital bill.
This statement is far from the truth, and the average total fees paid to specialists show that they are pretty sizeable, but certainly less than what the hospital itself earns. Insurers’ data can validate this statement and justify the qualitative and quantitative assessment of specialist earnings.
ASPMP, MMA, And Specialist Objections To DRG
The private hospital leaders have been relatively silent in the media when the DRG topic surfaced. As a business entity, they are expected to raise their concerns with the Ministry of Health (MOH) directly and not in the public sphere.
Apart from MMA and the Association of Specialists in Private Medical Practice Malaysia (ASPMP), few specialists have publicly raised their concerns.
None of their concerns are directed toward the quality and accessibility of patient care but more toward their financial impact. Perhaps those who question this issue from an economic perspective must revisit their moral compass and take a more balanced position. After all, doctors are trained primarily to help people.
In Article No. 3, Dr. Musa et al suggest that the DRG system will play into insurance firms’ hands and may backfire on Rakan KKM without offering any details.
Private medical practices are indeed valuable partners of the health care system. They complement the MOH’s services in the public sector. However, being health care service partners in this socially flavoured industry should not be a ticket for a quick, get-rich scheme for hospitals and doctors to take advantage of.
It is a fact that MOH hospitals have lost its crown as the go-to place when someone is sick, and private hospital gains are primarily due to MOH hospitals’ logistics and operational limitations.
It cannot be denied that optimal and timely care is relatively difficult to obtain in public service due to its organisational limitations and patient loads.
Value-based care (VBC), as mentioned in Dr Musa’s fourth article, must be taken in a balanced context. Is Dr. Musa accusing doctors in public hospitals of spending less time bringing quality medical history?
From observation, private specialists spend less time with history and doing medical exams but are heavily dependent on and overutilised the various diagnostic services.
Diagnostic delays in public hospitals are less likely due to doctors’ competency than to timely access to critical diagnostic tools. Making such tools available will improve services in public hospitals.
Dr. Musa proposed that KKM adopt Value-Based Care (VBC). For the benefit of many readers, this is a service where providers are paid based on the results they deliver for their patients instead of the usual fee-based service.
Whether it is the VBC or DRG model, a regulator must regulate the mechanism and pricing. In several countries, VBC is actively accepted by the medical profession as they earn more through this model than the fee-based model.
Hospitals and doctors cannot be allowed to decide on VBC charges as they are the care providers and the certifying authorities that the treatment they provide has been successful.
There is an apparent conflict of interest if the treating doctor and certifying doctor are the same person and want the freedom to decide on the fees.
Whether VBC or DRG, an independent authority must regulate the fees. There is a need for a single system so that the UHC goals can be achieved. Would doctors accept the contrarian views of independent assessors that treatment has been unsuccessful?
Like DRG, VBC has its challenges. ASPMP and Dr Musa should focus on the UHC for Malaysia rather than the short-term monetary benefits.
Why Malaysia Needs DRG
Contrary to assertions by Dr Musa, MMA, and ASPMP, there is a critical need to regulate the pricing of health care businesses to ensure a sustainable long-term industry. It must be done whether the pricing is based on DRG, market forces or some other models.
Unfortunately, the market forces mechanism proved ineffective because the insurance industry, the hospital’s largest payors, chose not to negotiate pricing collectively. It is not difficult today, provided the whole sector works in unison. There are diverging views that such actions might breach the Competition Act 2010.
Should doctors and private hospitals continue to be given the freedom to decide treatment charges based on their existing practice? Hospital charges in Malaysia should be regulated to protect patients from exorbitant costs by ensuring price transparency, preventing excessive medical inflation, and making health care more accessible to a broader population.
Regulating hospital charges directly correlates with the medical insurance premiums paid by policy owners.
It is not appropriate to allow hospitals to change their charges arbitrarily and make excessive profits, as health care is a basic universal need. Having unregulated charges would deny the public equal access to health care services.
Those who can’t afford private health care will wait in line and may die while being diagnosed. An expensive medical service is a barrier to the concept of Universal Health Care (UHC).
Neither ASPMP, Dr Musa, nor MMA has come forward to propose any alternative pricing method that focuses on the UHC.
Universal Health Care
UHC is a concept in which all residents of a particular country or region are assured access to health care. Malaysia’s existing private health care system does not meet this definition, but the public health care system does.
These two-tier systems cannot run in parallel, with considerable gaps in service quality and accessibility. A low-cost system should not be equated with UHC, as timely access to diagnostic, surgical, and other procedures is relatively poor in public service.
Having access means having access to adequate treatment in a timely manner. The gap between private and public services must be narrowed.
This gap can be narrowed by increasing government funding to modernise hospital services and getting the public to contribute to a standard, dedicated health fund (National Health Fund, NHF) through a National Healthcare Financing Scheme (NHFS).
The NHF pays for all contributing members’ medical bills, and people can access health care in private and public (or corporatised) systems equally. DRG is an essential mathematical component in determining the required NHF contribution.
For this structure to work, a functional DRG is needed. It will mean more business for private hospitals if NHF-funded patients can have equal access to private hospitals.
Unlike Dr Musa’s contention, the DRG system is not about playing into the hands of insurance firms. Providing equal access to health treatment at a reasonable cost is essential to UHC.
DRG and UHC must be seen from a bigger picture. DRG will not solely benefit assurance companies but also policy owners and the public. Lower claims payout means policy owners will not be exposed to the risk of premium increase.
Insurance companies don’t have exclusive benefits from this scheme. As NHF matures, it will be a major competitor to health assurance providers.
As previously mentioned, DRG applications should not be limited to private hospitals. It should be equally applied to all NHF panel hospitals.
Dr Musa contends that DRG is reducing doctors’ income. This contention is not valid. With a more standardized, affordable pricing and implementation of NHFS, private and public doctors’ earnings will be increased and not reduced as the volume of patients increases.
Proposal: Assurers As Drivers Of NHFS
In the life assurance business, prices have been relatively stable or reduced in the last 60 years due to improved quality of life, but health assurance products are rising.
In reality, health products sold by insurance companies are not “true assurances” as companies price their products with enough buffers that downside risk does not affect the company.
They are closer to a health administrative business under the Preferred Provider Organizations (PPO) model and almost like the proposed National Health Fund (NHF).
It differs from NHF by virtue of its high price due to the limited number of contributors to the assurance fund. If the entire population contributes to NHFS, the contribution (premium) would be much lower.
On a collective basis, the assurance industry should explore establishing a nucleus NHFS with government backing. The government does not need to set up and drive the system.
The assurance sector can do it much faster as they have most of the skillsets to set up such a system. Such systems can be modeled based on private-public partnerships, as done by the Abu Dhabi government (Daman Health Ae) 20 years ago.
In Abu Dhabi, private insurers provided the system, the operations, and training for the first 12 years before it was entirely handed over to the government. The insurer earns their earnings from the premiums collected. Several other European countries have also done the same.
Conclusion
DRG is a critical component of NHFS and ensures equitable access under the concept of UHC. Private hospitals and specialists must appreciate the broader business opportunities with DRG.
Private health care is a social business; they must balance their financial desires and social needs.
Unless alternative pricing standardising models can be developed, then DRG would be a start. It is not stagnant but will continue to evolve and refine with the development of new treatment modalities and the cost of doing business.
The private hospitals and specialists must continue feeding the much-needed data to the committee that develops the DRG.
Whether it is VBC or DRG, an authority must regulate the fees. Whether it is VBC or DRG, there is a need to ensure that the present dual health care system (private and public) migrates to a single system (private and corporate) based on standard pricing.
It’s about time private specialists and hospitals engage insurers and try to understand how insurers price their policies rather than continue to attack insurers and claim they are making humongous profits. If private hospitals think the highly regulated insurance business is easy meat to chew, they should consider setting up their own insurance company.
The assurance industry should explore establishing a nucleus NHFS based on private-public partnerships. It is a proven model in Dubai and several other European countries.
Dr Mohamed Rafick Khan, a reassurer and assurance industry consultant, is a trained physician with 12 years of experience in military medical services and over 22 years of experience in the assurance industry. He retired as the CEO of a multinational reinsurance company in 2019. Currently, he remains active as an independent international assurance industry consultant.
- This is the personal opinion of the writer or publication and does not necessarily represent the views of CodeBlue.
