HEALTHCARE COSTS

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HEALTHCARE COSTS: 2.

Dr Lily Neo asked the Acting Minister for Health what are the steps taken or will be taken by his Ministry to help contain the healthcare costs in the public sector.

The Acting Minister for Health (Mr Khaw Boon Wan): Mr Speaker, Sir, managing medical inflation so that healthcare costs do not run wild is one of my Ministry's priorities.

It is, however, not possible to eliminate medical inflation and keep healthcare cost constant. This is because healthcare is both labour and capital intensive and it will not be realistic to expect healthcare workers to have no wage increases.

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However, it is possible to manage healthcare costs with a view to keep medical inflation within affordable limits. But it requires major and continuous efforts, from all the stakeholders in the healthcare sector: doctors, hospitals, patients and their loved ones.

To understand this phenomenon, we need to first know the key drivers behind medical inflation. There are several. But I will highlight three: shortage of skilled manpower, rapid introduction of new medical technology and rising expectation from patients.

While skilled manpower and new medical technology have led to significant improvements in medical outcome, the results come with a large price tag. At the same time, increasing affluence of Singaporeans and greater awareness of technological advances in medicine have led to higher expectations from patients in terms of the care and kind of treatment they should receive.

Against this backdrop, the challenge is to keep pace with medical advancement, but at a rate which the society as a whole is willing to pay. Inevitably and realistically, some sort of rationing has to be done and patient expectations need to be managed.

It is little wonder that rising healthcare cost is a global phenomenon. Indeed, relative to many other developed countries, Singapore has fared not too badly.

I will not be able to give a comprehensive account of all our steps in managing medical inflation. But broadly, I will group them into six major thrusts.

First, emphasise personal responsibility in healthcare. Government can only provide healthcare services, but good health has to be attained by individuals.

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The most effective way to manage medical inflation is to keep Singaporeans healthy. That is why it is so important for all Singaporeans to lead a healthy lifestyle, thus avoiding illness and hospitalisation. On this score, as Members of Parliament, we have an important role to play. I think we should walk-the-talk and be shining examples of what healthy lifestyle is all about. Incidentally, this Sunday, I will be taking part in a 5-km run to raise money for SSO. Mr Speaker and our colleagues, especially those in the GPC on Health, are most welcome to join in the run. We will kill several birds with one stone - promote health and support the arts and sports.

Second, increase supply of skilled manpower, especially specialists and nurses, to match rising demand. Without this, any prolonged shortage must inevitably lead to excessive wage increases. We are thus expanding our training capacity, but meanwhile we will mount external recruitment to augment our local supply.

Third, our healthcare providers, especially the hospitals, must squeeze as much productivity as they can out of their resources. They must strive to produce more with less. This is a continuous endeavour.

Some examples of their recent effort: the clusters have consolidated their IT systems management and support, reducing IT manpower requirements by 15%. TTSH and NUH have combined their Central Sterile Supplies Department (CSSD) services at TTSH. If I am not mistaken, I recall reading the Hansard record when a few years back, Dr Lily Neo indeed made such a suggestion about combining CSSD to reap the economies of scale. I am pleased to announce that her suggestion has been put into practice. This has saved $600,000 in capital expense and $130,000 a year in operating expense.

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Other consolidations such as Finance are being explored. Further savings are expected from outsourcing of services, such as catering and maintenance/engineering. I also encourage them to consider cross-border outsourcing where it makes sense.

Fourth, I have urged the clusters to collaborate for mutual benefit. The objective is to avoid dysfunctional competition and costly duplication.

One example. The clusters have derived significant savings in the procurement of medical supplies, drugs and services through group procurement. The aim is to source for lower cost alternatives and achieve better economies of scale through product standardisation and consolidation of purchase volumes.

Fifth, the doctors are reviewing their clinical practices. The aim is to maximise health outcome with minimum resources. This includes efforts to ensure that care is rendered at the most appropriate setting.

One example. My Ministry has been working with the clusters to develop the Singapore National Asthma Programme that aims to reduce hospital admissions and move treatment to the primary care level.

The clusters have also actively sought to decrease the length of stay in hospitals by promoting day surgery, same day admission for surgery as well as a seamless transition to step down care.

Other examples. The clusters have introduced prescribing protocols that encourage the use of generic drugs. The increasing use of electronic medical records would further help to save costs by avoiding repeat tests being carried out on the same patient as the hospital doctor

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can then access test results already done in the polyclinic and vice versa.

Finally, moderate public expectations. Patients and their loved ones quite naturally will demand the best possible care. While we will always do our best, we must be realistic about our ability to match rising expectations and demand, especially if the patients are unwilling to pay for the incremental cost of service enhancement.

The best way forward is to ensure a range of services available at different prices and to push out such information into the public domain. That is why my Ministry has since last year published hospital bill size statistics for common medical conditions on our website. By promoting greater transparency of hospital charges, hospitals are now able to compare the effectiveness of their cost management initiatives, not only against their own historical costs but also against that of other hospitals. As I explained to the House recently, this allows the hospitals to ask intelligent questions if their charges are significantly different from others, and take proactive steps to cut waste and reduce costs.

In summary, we will continue to strive to cut inefficiency and frills without compromising the quality of medical care. We must, however, be realistic as to the extent to which hospitals can keep cost down while continuing to maintain healthcare standards. If we expect the best treatment and diagnostics, short queues and good service, costs will increase and patients must be prepared to bear part of the cost for it.

I would like to assure Singaporeans, however, for essential services, no Singaporean will be denied such care because of their financial status.

Dr Lily Neo (Jalan Besar): May I ask the Minister whether our present policy of

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encouraging competition between hospital clusters and sectors is effective in controlling healthcare cost inflation? Should there not be a review to favour more centralised control over healthcare resources for better control of healthcare patients?

Mr Khaw Boon Wan: Mr Speaker, Sir, I recall making a fairly extensive speech last year about this whole topic. Obviously, the solution is not the extreme - either complete centralisation, going back to the good old days of the Ministry of Health when I started my career as a young officer, or to go all the way to compete and duplicate. Like all things, take the middle path and pick the best of both worlds. There are values in centralisation but there are also values in competition.

My challenge to the clusters is: compete by all means but compete to produce more with less. But where it makes sense to collaborate, please do so. Recently, when SingHealth cluster started a public cord blood bank, I sat tight to see what was the reaction. Not bad. A few days later, I received an email from the other cluster saying that they would back this project, instead of duplicating a second cord blood bank.

Dr Lily Neo: May I ask the Minister on the reasons why public hospitals compete against one another for patients and market share? Has this resulted in supply-induced demand for services in our public hospitals? Are public hospitals too focused on cost recovery and is it correct for public hospitals to spend money branding themselves to attract more patients?

Mr Khaw Boon Wan: Mr Speaker, Sir, in the same speech that I talked about a few minutes ago, I also covered this topic. I think I should send the speech to Dr Lily Neo.

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The competition for market share has to be taken in its right spirit. I advised the clusters that, stretching the argument, I would clap hands if their workload shrinks, but not if their workload expands. Of course, provided they achieve this not because of lousy service or unsafe standards when everybody runs away from them, like SARS. But, if despite giving good service and, let us say, all the parliamentarians help me out in promoting healthy lifestyles and after a while, illnesses drop, so that patient load comes down or if good economic management leads to strong growth, and more and more people can afford unsubsidised private hospitals and would rather not spend time waiting in the queue of public hospitals, and our market share shrinks, I clap hands. That is the spirit I bring to this whole issue about market share.

Mr Sin Boon Ann (Tampines): Sir, in a competitive environment, I would like to ask the Minister who decides when he collaborates and when he competes. Presumably, it is the Government and if the Government decides finally who competes and when you collaborate, can you effectively have free market forces operating in the healthcare industry in such a context?

Mr Khaw Boon Wan: It is for the players to decide. It is not possible for the Ministry of Health, or Parliament, to micro-manage and decide, "Ok, you do this, you do that." The communist countries tried to do that and, of course, they discovered that they could not achieve the desired outcome through that way. What we can do is to make sure that at the macro level, we have the right parameters in place. What are those parameters? How much subvention am I prepared to give to the hospitals? What are those expectations about fee increases? And, of course, as shareholders of both clusters, our expectations are that they must balance

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their accounts. You cannot chalk up and build up losses perennially.

That is why last year, I sat down with them and said that it was a bad time to raise fees, although I knew they were under a lot of pressure because they would otherwise be losing money. I said, "No. Learn to live within your means. Cut your costs." In any case, we are no longer providing them with very small sums. As you know, the Ministry of Health's budget is now more than $2 billion. I put out this paper last week where it showed a subsidy of more than $1 billion. This is not chicken-feed. So the question is, as a trustee of taxpayer's money, our job is to decide how best to stretch this budget. The way to do so is to make sure they spend their money properly and if they can collaborate to bring their costs down, do so. If they can outsource to private players in Singapore or even outside of Singapore, do so.

The other day I met a pathologist from Tan Tock Seng and he was telling me that our storage cost for pathology samples cannot beat Johor Baru. I do not know exactly what he is talking about. But he seems to make sense. He said that we could store them in Johor Baru where land cost is low. So there are possibilities of that kind. I think we should let the players decide, they are paid to do so, to balance their accounts, provide the best possible service with the budget that they have, to stretch the budget as much as they can to produce the outcome that the society needs.

Dr Lily Neo: rose -

Mr Speaker: May I remind Members we have 16 Questions to deal with today. Dr Neo.

Dr Lily Neo: Thank you, Mr Speaker. Following the Minister's early mention on

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subsidies, may I ask the Minister on this subvention to Government hospitals? Has there been a decrease in subvention in relation to hospital admissions? Is it correct that in the years 2000 to 2003, public hospitals received less amount of subsidies but they had greater numbers of hospital admissions? Do public hospitals pass on the imbalance of subsidies and operating costs to patients, thus raising the burden for patients in healthcare expenditure?

Mr Khaw Boon Wan: The short answer is no. I think subvention has increased from $759 million in 1998 to $1.187 billion in 2002. This is the total quantum. As compared to volumes, I do not know. Healthcare is complicated because it is not just numbers. Every year, the case mix is different. Every patient is different. I witnessed my wife's three pregnancies and I was with her when the babies were delivered at the labour ward. Every delivery is different, although the same woman, the same husband. So let alone, illnesses. Yes, last year, we had 10,000 admissions; this year, 10,000 admissions, but if the case mix is different, the outcome and the resources needed would be different.