Diagnosis-Related Groups (DRGs) were originally designed to improve efficiency, cost control, and transparency in hospital financing. While DRGs have demonstrated some utility in inpatient and procedural care, their application to General Practitioner (GP) clinics remains highly contentious.
In Malaysia’s mixed public-private health care ecosystem, primary care operates on fundamentally different clinical, operational, and financial principles compared to hospitals.
Applying DRG-like payment models to GP clinics risks unintended consequences for patient care, clinic sustainability, and professional autonomy.
How GP Clinics Are Actually Financed In Malaysia
GP clinics in Malaysia fundamentally operate on a fee-for-service (FFS) model, where charges reflect consultation time, clinical complexity, and services provided. In practice, many clinics choose not to itemise basic instruments, consumables, or minor procedures separately, absorbing these into the consultation fee for simplicity and patient affordability.
This pragmatic approach should not be confused with formal DRG or bundled payment systems, which involve predetermined payments for defined episodes of care set by payers or funders.
In primary care, fees remain clinic-determined and variable by case, rather than fixed per episode. Therefore, the prevailing model in Malaysian GP practice remains FFS rather than true bundled or DRG-based reimbursement.
Why DRG Works In Hospitals, But Not GP Clinics
DRGs are built around clearly defined diagnoses, discrete episodes of care, and relatively predictable resource utilisation features that fit hospital medicine well. In contrast, primary care deals with:
- Undifferentiated symptoms
- Evolving diagnoses
- Multimorbidity
- Preventive care
- Psychosocial and longitudinal care
GP consultations are not single “episodes”, but part of continuous care over time. Attempting to package this complexity into fixed diagnostic payments risks oversimplifying real-world primary care.
Key Concerns if DRG Is Applied to GP Clinics
- Under-Compensation for Clinical Complexity
GPs routinely manage patients with multiple chronic conditions, vague early symptoms, mental health concerns, and social issues. DRG-style fixed payments do not adequately account for time, uncertainty, and complexity, risking systematic underpayment for comprehensive care. - Distortion of Clinical Behaviour
Fixed payments may create subtle pressure to shorten consultations, limit follow-ups, or avoid complex patients, none of which align with high-quality primary care or patient-centred medicine. - Cost-Shifting from Hospitals to GPs
If hospitals operate under DRGs, there is a risk that care may be pushed into the community without corresponding adjustments in funding, effectively transferring workload and cost to GP clinics without proper remuneration. - Administrative and Coding Burden
DRG systems require detailed coding, documentation, and compliance mechanisms. Small GP clinics, especially solo practices, lack the administrative infrastructure to absorb this additional burden without compromising clinical time. - Threat to GP Clinic Sustainability
Primary care sustainability depends on fair compensation for consultation time, continuity of care, and case complexity. Poorly adapted DRG implementation could worsen income stagnation, accelerate burnout, and contribute to clinic closures undermining access to frontline health care.
The Risk Of Mislabelling FFS As ‘Bundled Care’
There is a growing misconception that because some GP clinics do not itemise every consumable or minor procedure, they are already practising “bundled payments” or DRG-like care. This is incorrect.
The current system remains clinician-priced FFS, not payer-imposed bundled reimbursement. Conflating these two models risks justifying external price controls without recognising the true cost structure of primary care.
What Would Be Needed If DRG Is Ever Considered In Primary Care
If policymakers intend to involve GP clinics in DRG-linked frameworks, several safeguards are essential:
- Complexity and risk adjustment (age, multimorbidity, social risk)
- Blended payment models (DRG components plus consultation/professional fees)
- Clear protection of professional fees
- Defined scope of GP responsibilities versus hospital responsibilities
- Pilot studies with GP leadership involvement before any large-scale rollout
Conclusion
DRGs are not inherently flawed, but they are ill-suited as a standalone payment mechanism for GP clinics. Primary care thrives on flexibility, continuity, and individualised decision-making elements that rigid diagnosis-based payment systems struggle to capture.
In Malaysia, GP clinics remain rooted in a fee-for-service model precisely because primary care is complex, longitudinal, and context-dependent. Any move towards DRG-like financing in primary care must be approached cautiously, with meaningful GP engagement, robust safeguards, and a clear understanding of how primary care actually functions on the ground.
Health care financing reform should strengthen not erode the foundation of community-based care that keeps patients out of hospitals in the first place.
This letter was written by Association of Private Practitioners Sabah (APPS) president Dr Devadas Pathiyil Ramankutty.
- This is the personal opinion of the writer or publication and does not necessarily represent the views of CodeBlue.
