FPP Audit Shows How Rakan KKM Can Make Money: Get More Customers
KUALA LUMPUR, July 22 — A 2017 audit on the Ministry of Health’s (MOH) full-paying patient scheme (FPP) offers valuable lessons for its successor, Rakan KKM, on making revenue.
The national audit on FPP – as disclosed in the Auditor-General’s (AG) 2017 (Series 2) report – showed that FPP only generated RM20.3 million revenue in 2017 from 10 FPP hospitals, averaging at about RM2 million per hospital.
Over half of the RM20.3 million revenue went to participating specialist doctors at RM11.12 million (54.8 per cent), while the remaining RM9.16 million went to the government.
“Revenue from the implementation of the FPP scheme can be increased if patient arrivals increase at a higher rate,” said the AG’s 2017 report that was tabled in Parliament on December 3, 2018.
“The number of patient arrivals can increase if there is an increase in hospitals’ available facilities and the number of participating PPPs (specialist medical officers) in the scheme.”
The national audit found that the available facilities in FPP hospitals were limited at between six and 48 beds provided for the service.
“Besides that, the number of PPPs who joined the FPP scheme was also limited at between 13 and 61 people, resulting in an inability to increase the number of FPP patients – unless the percentage of participating PPPs also increases to cater to patient demand.”
According to the AG’s report, the number of FPP patients jumped 287 per cent in 2015 after the scheme added eight participating hospitals between 2015 and 2017, totalling 10 FPP hospitals. FPP patient numbers continued to increase by 42 per cent in 2016 and 11 per cent in 2017.
In 2017, the FPP scheme with 10 participating hospitals recorded 22,364 patients.
The AG’s report cited a cost and revenue analysis of the FPP service by the Health Management Institute in June 2017 that looked at three specialist services – obstetrics & gynaecology, ophthalmology, and orthopaedics – in Putrajaya Hospital and Selayang Hospital from 2014 to 2016.
Based on an average ratio of FPP revenue at 40 per cent to the government and 60 per cent to participating specialists, the study found that government expenditure (or subsidy) was reduced by between 19 per cent and 34 per cent for 144 cases reviewed.
“Overall, the FPP scheme received positive response from patients, based on the increasing trend in the number of patients seeking services. In addition, the increase in revenue from this FPP scheme can indirectly provide additional income to the government and subsequently help reduce the cost of health care services borne by the government,” said the AG’s report.
In a response to auditors in July and August 2018, the MOH said the objective of the FPP scheme was to reduce government subsidies for patients who could afford it, “not to generate income.”
“Although the performance of the service is assessed in terms of the increase in patient numbers and revenue collection, it must be balanced to ensure that the delivery of quality health care services to public patients is not compromised,” wrote the MOH.
Government auditors took issue with the MOH charging the same rates to patients under the FPP scheme without differentiating between Malaysian citizens and foreigners.
Ironically, foreign patients were charged less under FPP than the public service.
“Besides lower charges, non-citizen FPP patients could also enjoy various benefits offered, such as choice of specialist, priority while waiting for their turn, and First Class wards,” said the AG’s report.
The number of non-citizen FPP patients jumped about 337 per cent in 2015, before rising another 116 per cent in 2016.
In 2017, the FPP service recorded nearly 2,000 non-citizen patients. Foreigners comprised about 9 per cent of the total 22,364 FPP patients that year.
MOH responded in 2018 by saying that it has begun updating and coordinating charges for foreign patients between the FPP and public service.
The national audit found that although the MOH’s FPP guidelines state that specialist doctors can only treat a maximum of 30 per cent of FPP outpatients from total outpatient arrivals for each official clinic session, different hospitals interpreted this rule differently.
Participating hospitals also practised different methods of calculating payments for specialists’ claims.
Auditors found that at Queen Elizabeth II Hospital (HQE II), the days or sessions for treating FPP patients were separated from public patients, resulting in specialists “not being subject to the 30 per cent limit for treating FPP patients.”
The national audit looked at HQE II, Putrajaya Hospital, Selayang Hospital, and Ampang Hospital.
“The differing methods used by the four hospitals created a difference in the number of FPP outpatients who could be treated and the payments received by PPPs,” said the AG’s report.
“In the Audit’s opinion, the differing implementation of limiting FPP patient numbers and calculating payment for PPP claims caused inconsistent distribution of revenue between the government and PPP. This indirectly has the potential to hinder the objective of encouraging PPPs to continue serving in government hospitals from being fully achieved.”
Government auditors further found that the MOH took two to eight months to process 66 per cent of 369 claims by specialist doctors participating in the FPP scheme in four hospitals, involving payments totalling RM3.97 million, far longer than the 14 days in accordance with Treasury rules.
On the FPP scheme’s main goal of retaining specialist doctors, auditors found that the number of quitting specialists in FPP hospitals dropped from about 36 per cent of total specialists in MOH hospitals in 2015 to 29 per cent in 2016, before resignations rose to 31 per cent in 2017.
The Health Management Institute’s Evaluation of Full Paying Patient Service-Specialist Perspectives found the FPP scheme to be a good retention package, especially for specialists in surgery-related specialties, to remain in government service.
Auditors agreed that overall, the FPP scheme achieved its objective of reducing specialists’ attrition rate. “However, other factors also contributed to the retention of PPPs in the government sector, such as job security, professional medical indemnity, and support from more experienced PPPs.”
According to the AG’s report, the FPP scheme was introduced in 2007 as a pilot project in two specialist hospitals, Putrajaya Hospital and Selayang Hospital, three years after the scheme received Cabinet approval in 2004.
“The FPP Scheme is a non-subsidised medical treatment service for those who can afford it, and indirectly helps reduce the burden of health care subsidies borne by the government.
“Through the FPP Scheme, patients are given the advantage of choosing their specialist, priority in receiving treatment, and can enjoy certain amenities in executive wards, first-class wards, or equivalent facilities, depending on the available resources and facilities at the hospital.”
Eight years after the 2017 audit, it’s unclear how many of the 10 government hospitals still offer FPP and exactly which specialist services are offered today.
Analysis: Comparing FPP To Rakan KKM
Both FPP and Rakan KKM provide paying patients faster access to treatment. In 2017, the FPP scheme offered a slew of specialist services across 10 hospitals. Rakan KKM is planned for launch in four hospitals: Cyberjaya Hospital, Putrajaya Hospital, Sultan Idris Shah Serdang Hospital, and the National Cancer Institute (IKN).
Based on statements by Health Minister Dzulkefly Ahmad and various MOH officials, Rakan KKM has very different goals compared to the non-corporatised FPP scheme that focused on retaining specialists and, as a secondary objective, indirectly reducing government subsidies for health care services.
While the MOH (under the Pakatan Harapan administration, during which Dzulkefly was also health minister) explicitly told the National Audit Department in 2018 that the FPP scheme wasn’t intended to generate income, Dzulkefly in the Madani government has branded Rakan KKM as an “innovative” health financing reform.
The main objective of Rakan KKM – operated by Rakan KKM Sdn Bhd, with investments from government-linked investment companies (GLICs) – is to make profit from patients. User payments are supposed to help fund the public health care system; MOH received an RM45.3 billion budget this year.
Based on the RM20 million revenue generated from 10 FPP hospitals in 2017, with a 22,000-patient load, each patient brought in an average revenue of only RM909, which was split between specialists and the government.
Since Rakan KKM aims to remunerate all participating health care workers beyond specialists, including nurses and medical assistants, MOH’s new private service will likely have to charge patients a lot more.
Rakan KKM will also have to focus on high-margin operations like heart, cancer, or major orthopaedic surgery, instead of merely trigger finger procedures or daycare surgery.
CodeBlue previously reported that Rakan KKM’s business model plans to maximise profit by using MOH resources like medical supplies and assets at cost price and marking up components of a hospital bill like consumables at 100 per cent for patients.
Ironically, MOH now will likely have to heed the AG’s advice eight years ago to focus on generating revenue for Rakan KKM by getting as many patients as possible and providing the necessary resources to cater to customer demand, despite severe staff shortages.
“If it’s only break-even or making losses, how to pay specialists and health care workers with commensurate payment?” wrote MOH media officer Azrul Azimi on X. “Have you thought about that?”