PETALING JAYA: Private hospitals would agree to the Diagnosis-Related Groups (DRGs) model if there is evidence to show its actual benefit in bringing down medical inflation, says the Association of Private Hospitals Malaysia.
“It’s only workable if the treatment in a private setting is funded by the government as in many countries.
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“We are happy to do DRG, but we have to study a successful model that has benefited sole private healthcare (without government funding) and has brought costs down,” said its president Datuk Dr Kuljit Singh when contacted.
DRG is a payment system that involves paying an amount that is predetermined by the DRG, instead of paying for each service received.
Dr Kuljit said DRGs have positively impacted public and private healthcare costs by standardising reimbursement rates for inpatient services, promoting efficiency and reducing unnecessary procedures.
“For example, hospitals can optimise resource allocation by focusing on cost-effective treatment protocols where streamlined processes have cut down lengths of stay and improved patient throughput,” he said.
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Additionally, Dr Kuljit said DRGs encourage hospitals to enhance quality of care because reimbursement is linked to patient outcomes, as evidenced by improved care in procedures.
“Overall, DRGs promote fiscal responsibility while maintaining care standards, benefiting both healthcare providers and patients in private settings,” he added.
He said one successful example is that of Germany, which standardised payments for inpatient care and incentivises hospitals to enhance efficiency and manage costs effectively.
This model, said Dr Kuljit, has fostered competition among providers, leading to better patient outcomes and overall cost containment in the system.
Other countries that have implemented this are Sweden, Canada and Australia.
The Australian National Health Reform Agreement uses DRGs for funding, enhancing value and efficiency in care delivery.
“It’s challenging to provide an exact number of private healthcare systems globally that have benefited from DRGs due to variations in reporting and healthcare infrastructure.
“Although some countries have successfully implemented DRG systems, we must first understand these countries do not have a dichotomy of healthcare systems like Malaysia; hence its applicability will not be the same,” he said.
“Many private hospitals across these countries report improvements in cost management and patient care outcomes, indicating a widespread beneficial impact of DRG systems.
“But most of them are government funded, unlike private hospitals in Malaysia that are 100% privately run by private investors or GLC, which have a private fund,” he added.
Recently, Health Minister Datuk Seri Dr Dzulkefly Ahmad said the government is mulling the DRG system to regulate private hospital bills.
Former deputy health minister Datuk Dr Lee Boon Chye said DRG involves putting an average charge for a specific disease condition.“For the operation of acute appendicitis or coronary artery bypass, the payee pays a fixed amount based on historical average cost,” he said, adding that this could be done in Malaysia.
However, Dr Lee said there are some caveats.
“The provider may choose to do only the low-risk and uncomplicated cases, which will ensure that the hospital will not end up being burdened by higher costs due to prolonged hospital stays and complications.
“The high-risk cases will end up in government facilities,” he said.
Those who argue for DRG may state that the cases can be further stratified based on risk profile, where higher-risk cases will command higher payment.
Even with this mechanism, the assessment of the risk profile is still subjected to discretionary evaluation by the providers, such as in emergency cases.
“DRG will eventually encourage multiple specialists involved in treating one patient.
“For example, a patient who requires coronary artery bypass grafting also has diabetes and hypertension.
“The DRG will have a separate item for each medical condition, so it may increase costs rather than reduce them,” he said.
Dr Lee said other issues include the failure to take into account the containment of costs for “end-of-life care”, which constitutes at least 30% of an individual lifetime health expenses.
“How does DRG take into account differences in cost structure between different locations?
“For example, medical charges in the Klang Valley are about 20% to 30% higher than in other states, even for the same operation,” he said.
The DRG proposal, Dr Lee said, may also see some pushback from healthcare professionals, as there is no uniformity in the level of expertise and experience of a specialist, as well as the use of different technology for the same operation.
“The current fee-for-service structure also has major flaws as it encourages providers to offer services that may not be necessary,” he said.
Dr Lee also said DRG may not be desirable on a short-term basis as it will increase costs and burden government hospitals with more complicated cases.
“DRG can be implemented only when there is a national health insurance policy,” he said.
He said it is also good for insurance players to make public the average cost of treatment in private hospitals, as this will encourage competition and cost containment.
“I also feel that co-payment of medical insurance should be made mandatory for all new policies, but this must also be accompanied by a reduction in insurance premiums.
“The Health Ministry should improve its efficiency and increase its capacity to act as a counterbalance against the unchecked escalation of healthcare costs,” he said.
