EFFICIENCY GAINS FROM CREATION OF SINGHEALTH AND NATIONAL HEALTHCARE GROUPS

EFFICIENCY GAINS FROM CREATION OF SINGHEALTH AND NATIONAL HEALTHCARE GROUPS: 11.

Mr Viswa Sadasivan asked the Minister for Health (a) whether the creation of the SingHealth Group and the

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National Healthcare Group in 2000 has brought in the expected efficiency gains; (b) how have the citizens of Singapore benefited from this; and (c) whether the exercise has created real competition in the sector and, if so, whether this competition has driven costs lower and raised service standards.

The Minister for Health (Mr Khaw Boon Wan): In 2000, MOH reorganised its restructured hospitals and polyclinics into two clusters. There were two objectives.

First, Ministry of Health wanted to better integrate the hospitals and polyclinics to facilitate the referral of patients from polyclinics to hospitals and to coordinate the care of the patients with chronic diseases after their discharge from hospitals. There was also a desire for greater integration and coordination between hospitals and the national specialty centres.

Second, Ministry of Health wanted the two clusters to compete more actively to provide better care at lower cost to their patients.

The clustering experience has generally been positive. The clusters compete in a friendly manner, to innovate and pilot new ideas, especially in the area of greater service integration, IT applications and chronic disease management. Some ideas were started by one cluster and when confirmed useful, were adopted by the other cluster. Patients gained along the way.

Where appropriate, the clusters also collaborate and synergise for mutual benefits. For example, they combined their supply needs through bulk tenders and purchases, reaping substantial cost savings for our patients. Other areas of efficiency gains include: cost savings through sharing centralised services, such as laboratory and imaging services; and

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sharing best clinical practices, such as the protocols to reduce hospital acquired infections.

In the past three years, we have further reviewed the clustering experience and have progressively refined the healthcare delivery model to make it serve Singaporeans better. We have taken several significant steps, after factoring in our new insights.

First, integration has to be more comprehensive, going beyond the public sector, to also include the private and charity sectors. This is particularly so for the care of the elderly with chronic diseases. These patients will during the course of their sickness consult many healthcare professionals from any or all of the three sectors, including GPs and nursing homes, besides restructured hospitals and polyclinics. The reason why we need to better integrate the care rendered by public hospitals and polyclinics applies similarly to the care rendered by the healthcare professionals from the private and charity sectors. This does not mean that we should nationalise all healthcare services, but it does require a stronger level of coordination and sharing of information across the entire range of healthcare service providers.

Second, competition in healthcare has to be better understood and more skillfully managed in a way that is mindful of the

unique characteristics of this sector. Many economists have concluded that there is significant market failure in healthcare. Hence, "real competition" as observed by Mr Viswa Sadasivan in presumably other economic sectors, is not as prevalent as in the healthcare sector. One key obstacle to "real competition" is what economists refer to as "information asymmetry": the providers know much more than the consumers. But market does not inevitably fail in healthcare. If conditions conducive for competition exist, serious competition can take place. The generic

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principles of healthy competition, including greater information transparency, can be applied to healthcare. So we need to discern what is applicable and implement those which are relevant.

Third, competition in healthcare is less intense between large systems, but is more likely to occur at the micro level, between individual doctors or the hospital clinical departments. For example, when a pregnant woman is looking for an obstetrician, her decision is less about whether she would go to the SingHealth Cluster or the NHG Cluster. If she has decided to use the public sector, then she would more likely pick from among the Obstetrics Department of KK Hospital or NUH or SGH. And if she is familiar with the healthcare sector, she may even pick a particular doctor by name, never mind where the obstetrician operates.

With these insights, Ministry of Health has since brought the reorganisation further down the road. We have established regional clusters to build partnerships and seek synergies beyond the public healthcare sector. With an ageing population and increased prevalence of chronic diseases, we are strengthening community-based prevention, management and rehabilitation services, most of which are delivered by the private and charity sectors. There is a need for more proactive and coordinated joint management of patients by healthcare players from all the three sectors.

These regional clusters will focus on providing integrated patient-centric care in partnership with other healthcare institutions within their respective geographical areas. For instance, the Changi General Hospital will anchor the eastern cluster, in partnership with St. Andrew’s Community Hospital next door, GPs, polyclinics, nursing homes and other healthcare

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providers in the east. We are doing the same in the other parts of Singapore.

Healthcare delivery will continue to evolve as medical science continues to make progress and better educated patients demand higher levels of service. We have restructured the public healthcare sector since the '80s and the enhancement in service level is visible to our patients. But it is not perfect and we will continue to improve it in the light of experience.

Mr Viswa Sadasivan: I would like to thank the Minister for his comprehensive reply. It is very clear that in the area of service integration and sharing of resources that have been benefits. The question is really whether competition is indeed useful, necessary and in fact desirable in the healthcare sector. From what the Minister had said so far, there have been modifications to the existing practice by the Ministry of Health, which appears to be working on the ground, especially in the area of regionalising the clusters. The anecdotal feedback that we have been getting on the ground is that it is reaching out to the customers and consumers pretty well. Does this mean that in the next few years, we might be seeing a complete restructuring and perhaps an end to the existing two-cluster holdings?

Mr Khaw Boon Wan: I thank the Member for his comment. Certainly, I believe competition is – to use his words – "useful, necessary and desirable". But as I explained in my reply, you have to be skilful in managing competition in this unique sector, called healthcare. Where the conditions are conducive, it can work and it works pretty well.

My favourite example of demonstrating this is in the obstetrics service. Many friends who are obstetricians have always grumbled to me that for the last 15 years, their fees and the antenatal package

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charges remain the same, in nominal terms. What it means in real terms is their income have been dropping because the productivity remains the same – how many babies can they deliver per day? This is the result of competition. I mentioned "information asymmetry" in healthcare, but in obstetrics, there is less asymmetry, because 90-odd percent of pregnancies will be routine pregnancies: simple deliveries, the mother stays two or three days, and mother and child go home happy. Pregnant ladies, after nine months of antenatal care in the clinics, have a lot of things to share. They know which doctors are charging what etc. There is information transparency. Here is a classic example of where the conditions for competition exist and competition will prevail. That is why obstetrics service has been pretty competitive. Likewise, look at our GP services. The reason why primary healthcare in Singapore is of good standard and is relatively inexpensive, is because it has been a pretty competitive market.

Members may remember a few years ago that I did an experiment by just simply publishing the prices charged by ophthalmologists, when they do lasik operation. Just a simple act, and within two or three months, the prices of lasik packages dropped by more than a thousand dollars per eye. Lasik is a fairly homogenous product, though there are complications for some. With information transparency, you can achieve competition. Unfortunately, the bulk of healthcare services do not lend itself to such a competitive environment. But we have to continue to make progress, and therefore I look at this as a really long journey. We have started the first few steps, I think it has been positive, and we will continue to push it. Does it mean the end of the two clusters? Yes, in a way, it has ended. We now have a third cluster coming up in NUH. We have the fourth cluster coming up with Khoo Teck Puat Hospital near my Constituency. And I think that is a positive development.

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Ms Denise Phua Lay Peng (Jalan Besar): Minister, I am still a little bit baffled by the logic. If there is real competition and real advantage in injecting competition for an essential service like healthcare, such that it will increase innovation and elevate service standards, then why not extend this logic to all essential services, such as education, transport, national security and utilities? How is it that the competition that we tried to inject in media, for example, did not really succeed as expected?

Mr Khaw Boon Wan: Sir, my purview does not extend beyond healthcare. But I was in the MTI for several years, so I understand how some of the competitive forces have played. The generic principles of competition and competition being the most rational form of organising economic activity applies to all sectors, but the conditions must be conducive, for perfect competition to take place. Even in some products, where seemingly there is perfect competition, there is actually no such thing as perfect competition. But each sector tries to reduce the imperfection, so that the advantages of competition can be exploited. As for transport and education, the Member will have to pose different PQs to the relevant Ministers.