2.2 Healthcare Industry in Malaysia

Transcription

1 CHAPTER TWO: Healthcare Industry Value Chain 2.1 Sector Analysis on Healthcare Industry Since independence until the early 1980s, primary healthcare was provided by the public sector with a few Christian Mission Hospitals and Chinese charity hospitals. With exception of the ubiquitous medical clinics, usually in the urban areas, health care is almost totally provided through the national budget by the federal government. With increasing income after 1980, particularly in the urban areas, the demand for private health care services increased. With international influences and government policy intervention, the health care sector grew in complexity with the growth of the private sector health care providers. During the mid-term review of the Sixth Malaysia Plan, there began a shift in the role of the Health Ministry towards more policy making and regulatory aspects as well as setting standards to ensure quality, affordability and appropriateness of care. Then in the 7 th Malaysia Plan ( ) the government will gradually reduce its role in the provision of health services and increase its regulatory and enforcement functions. The 7 th Plan clearly outlined the changing role of the government in health care, to reduce its provider role and increase its regulatory role. However, the objective of regulating the private health sector was not being realized due to insufficient legal framework. It was only with the passing of the Private Health Care Facilities and Services Act 1998 (Act 586) that provided this legal framework. However this Act 586 was only implemented in May 2006, after the Private Health Care Facilities and Services (Private Hospitals and Other Private Healthcare Facilities) Regulations 2006 (P.U. (A) 138/2006) was gazetted [1a]. The government s welfare policy of equitable and accessible health care for every Malaysian conflicts with some aspects of its promotion private investment in healthcare. An obvious example is that Section 9 of the Act 586 empowers the regulating authority to dictate the location for private healthcare facilities and services, in particular private hospitals. While the regulator tends to focus on improving equity of access to healthcare across the nation, businesses want to locate their hospitals where the greatest demand is. Often, this is where there is high population density and/or high-income earners reside. Hence the conflict, regulators often want to site new hospitals in remote areas while investors often want to site them in urban areas [2]. 8

2 2.2 Healthcare Industry in Malaysia The healthcare industry is complex one because there are multiple aspects to human health. To arrive at an adequate analysis it would be pragmatic to view the health sector in different perspectives, notably from the perspectives of products, the services and facilities, the human resources and the supporting services. As the industry has a direct impact on the human wellbeing, the industry tends to be highly regulated. Central to this regulatory environment is the people - the regulators, health professionals, patients and investors. From the products perspectives, there are three different aspects to healthcare products: pharmaceuticals, medical devices and food, each of these has its own regulatory requirements. Each of these three aspects has different product dimensions for regulatory control. The product perspective has three different aspects, pharmaceutical, medical device and food, each of these has its own regulatory requirements. Pharmaceuticals have been classified into drugs, cosmetics and traditional medicines. Medical devices are categorized into four classes, A to D depending on the impact on users. Food involves different production stages from the field to the plate: farming, manufacturing and processing of agricultural produce and food services (both selling of final food products and restaurants, etc). With regard to services.there are different types of services and service providers and operating with different types of facilities. The Health Ministry has classified services according to the different types facilities from which they operate: hospitals, homes, laboratories to clinics. Each of these has different regulatory requirements and controls, the most complex being the hospitals which provide multiple services and possess different types of facilities. Facilities which are closely tied to the services provided have their own control dimensions such as safety, operation and maintenance and final disposal. The provision of health care services crucially depends on specially qualified human resources. This, in turn, means that maintaining a good healthcare system in the country is crucially dependent on how well the training, assessment and accreditation of professional human resources are regulated. The current regulatory regimes for the key health professionals are provided for by the established Acts and Regulations, for example medical practitioners (medical doctors) come under the Medical Act 1971, nurses under the Nurses Act 1950, midwives under the Midwifery Act 1966 (Act 436), medical assistants under the Medical Assistants (Registration) Act 1977 (Act 180), dentists under Dental Act 1971 (Act 51) and pharmacists under the Registration of Pharmacists Act New bills are being drafted to regulate other categories of healthcare professionals such as allied health professionals (32 categories) and medical specialists (current registered with the National Specialist Register). 9

3 Supporting services include the financiers (insurance, employers, social security services), the logistics providers (for medical tourism) and the intermediaries which provide the links between the consumers/patients and the medical service providers (hospitals, clinics). An overview for the healthcare regulatory environment is as illustrated in Figure 2.1 below. Figure 2.1: Healthcare Regulatory Environment Human Resource Doctors Nurses Dentists Etc. REGULATORY ENVIRONMENT Supporting Services Finance/Insurance Intermediaries Others Public Consumer Patient Pharmaceutical Drugs Cosmetics TMC Medical Device 4 classes (A,B,C,D) Source: Author Facilities Surgical Cardiovascular Diagnostic imaging Etc. Services Hospitals Homes Laboratories Etc. Food Manufacturing Agriculture Services 2.3 Healthcare Industry Value Chain The value chains for products, service facilities, human resources and supporting services are illustrated in Figures 2.2. The theoretical bases for analysis for the product perspective will be the Value Chain Analysis, for the service facilities and that of human resources perspectives will be the Life Cycle Value Chain Analysis and that of the supporting services will be the Network Relationships Value Chain Analysis. These analytical approaches will enable a systematic and conceptual mapping of the businesses, regulators, the regulatory requirements and relevant regulatory issues. The conceptual value chain does not reflect the total health system of the country. It only considers the healthcare system, the businesses that are involved in providing the treatment and care to the human patients. For example, the food and other businesses are not included here. The food sector is itself highly complex and normally treated as a separate sector for analysis from that of the health care sector and will be so treated in this study. The food value chain can have serious impact on the health sector from various aspects. 10

4 From the diseases aspect we have seen the serious negative consequences on human health from Foot and Mouth disease, bird influenza (H1N1), swine fever, SARS, mad cow disease and the like. Food poisoning and contamination is another serious impact from the food chain that frequently causes mass poisoning from the like of Salmonella and E-coli. Another serious aspect is the use of banned substances and chemicals in food processing that may result in long-term consequences such cancers and birth defects. Figure 2.2: Healthcare Industry Value Chains Health Care Products Value Chain [3&4] Service Facilities Life-Cycle Value Chain Human Resources Life-Cycle Value Chain Supporting Services Relationships Value Chain Source: Author It would be pragmatic to combine the separate value chains in order to view the healthcare system holistically. The total healthcare system value chain would then 11

5 look like the illustration in Figure 2.3. The human resource dimension is not treated separately as it is incorporated within this total health care value chain. The types of businesses related to the total healthcare chain can be determined using the Malaysian Standard Industrial Classification 2008 (MISC2008) [5]. The list is given in Appendix 2.1. Figure 2.3: Concept of the Total Healthcare Value Chain Source: Author Table 2.1: MISC 2008 Classification of Hospitals and Related Activities [5] Class Item Description MSIC Hospital activities 8610 Hospital and maternity home activities Hospital activities 85110p Maternity home services (outside hospital) 85110p 862 Medical and Dental practice activities 8620 Medical and dental practice activities General medical services 85121p Specialized medical services 85121p Dental Services Other human health activities Dialysis Centres 85110p Medical laboratories 85121p Physiotherapy and occupational therapy service Acupuncture services 85199p Herbalist and homeopathy services Ambulance services Other human health services n.e.c p Source: Extract from MISC 2008 The intended focus of MPC has been on services liberalisation, and in this particular case, on healthcare services sub-sector, the study will target the healthcare services 12

6 (patient-focus) portion of the total healthcare system value chain. Even then, health care services involved many types of different businesses, from simple single operator general medical clinics, to specialist medical clinics, medical laboratories and testing services, nursing homes, until the most complex multi-discipline private hospitals. All these healthcare businesses are highly regulated under various Acts. For the healthcare service business, the healthcare regulatory regime tends to take business cycle perspectives; from business establishment to operation and maintenance to growth and expansion to closure or sale of the business, as illustrated in Figure 2.4 below. To establish a private hospital, for example, the interested party has to get the planning approval from the Ministry of Health first. The application of the private hospital license has to be made within three years of this approval. The operating license for private hospital is valid for a maximum of two years and the application for renewal has to be made at least six months before the expiry of the existing license. For expansion (alteration, improvement, addition, renovation, etc.) the hospital has to go through the planning approval, and submit the existing license for endorsement within 14 days upon completion of the expansion. For the closure or disposal of the hospital, the operator has to notify the regulator not less than 30 days of this intention and then surrender the license. Figure 2.4: Healthcare Services Regulatory Regime The study will focus specifically on private hospitals with the aim of reducing unnecessary regulatory burdens on them. The private hospital business is chosen because in order to narrow the study to a manageable scale. It is also the most complex business entity and the most regulated of healthcare services this is because it involves a variety of disciplines and functions in it operations. The MSIC2008 codes for hospitals and the related activities (up to 5-digit level) are summarized in Table 2.1 above. 13

7 Table 2.2: Analytical Framework PERSPECTIVE ANALYTIC REGULATORY DIMENSION DATA Products: Pharmaceutical Medical Device Value Chain Analysis Pre-Market Place-on Market Post Market Services & Facilities Human Resources Supporting services Source: Author Life-Cycle Value Chain Analysis Life Cycle Value Chain Analysis Relationships Network Value Chain Analysis Formation/Establishment Operation & Maintenance Expansion/Change ownership Pre Employment During Employment Post/Change Employment Intermediaries/Tour agencies Financing/Payers/Logistics Patients (Local/Foreign) Service Providers (Hospitals/Clinics) Business players & associations Regulators Acts & Regulations Standards & Guidelines Research & other Reports Interviews & Statistics Issues & complaints With the identification of the businesses of interest, the analytical framework can be formulated to guide the regulatory review process. This is illustrated in Table 2.2 above. 2.4 Macroeconomic Performance Traditionally Healthcare in the country is provided mainly by the government and this welfare-oriented policy has not changed, although in the Seventh Malaysia Plan the government made the move to promote private healthcare services in the country. The policy logic is that average income has improved and there are those who are prepared to pay out-of-pocket for better quality services by private healthcare providers. The escalating cost of healthcare on the government has also been a key factor to shift this burden to the private sectors. Generally, Malaysia has a growing and relatively competitive healthcare economy. However, key statistics showed that the country has much to do to reach the comparable healthcare status of a high income economy. The comparative indicators to compare Malaysia with the average performance of the world in general and the high income Organisation for Economic Co-operation and Development (OECD) countries in particular will give some indications of the country s standing. However, the global picture on healthcare expenditure tells a different story. Malaysia s health expenditure as a percent of GDP (3.6 percent of GDP for 2011) is relative low by the world average and lower still when compared to the high-income countries (see Figure 2.5). On the per capital basis, our indicator is even lower, about a third of the world average and only 6.3 percent of that of high-income OECD countries. This begs the question on whether the government is spending enough for healthcare. We can also interpret that the potential for future growth as our per capital income rises is very bright. 14

8 Figure 2.5: Health Expenditure as Percent of GDP Source: World Bank: Figure 2.6 tells us that the percentage of government expenditure to the total hovers around 55 percent but experienced an unusual drop to 45.7 percent in Probably, this is due to higher private sector investments in private hospitals. In any case, public expenditure on health is still lags behind that of the world in general and that of the high-income economies. Figure 2.6: Health Expenditure USD per Capital Source: World Bank: The hospital beds indicator (per 1,000 people) in Malaysia was last reported at 1.80 in 2010, according to a World Bank report published in Hospital beds include inpatient beds available in public, private, general, and specialized hospitals and rehabilitation centres. In most cases beds for both acute and chronic care are included (Figure 2.7). 15

9 Figure 2.7: Hospital beds per 1000 population in Malaysia Source: World Bank Report Although the government started to promote private healthcare sectors in the 7 th Malaysia Plan, the number of hospital beds per 1000 people indicator started to drop from the peak value of 2.56 in The indicator stabilised somewhat at about 1.8 since year Figure 2.8: Growth of Medical Professionals Growth rate % Doctors Dentists Pharmacists Nurses Source: MOH Health Fact * What can be concluded from these statistics is that the growth of healthcare services has not commensurate with economic growth of the country. On one hand this means that healthcare services growth is not meeting the demand of a growing higher-income population and perhaps also an aging population. On the other hand, 16

10 there is large potential for growth in healthcare services and in particular, the private hospital sector. Another aspect on the importance of the healthcare services industry is the contribution to employment of knowledge workers. These knowledge workers generally represent the higher income group, particularly the specialists or those with specialist skills. The growth of the number of medical professionals has been impressive over the last seven years. Figure 2.8 shows that the high six-year average growth rates for pharmacists at 20.8 percent, nurses at 13.1 percent, Doctors at 12.8 percent and dentists at 9.2 percent. On the medical professionals to population ratios, the rate of change has been improving across the four key professions over the last seven years as can be seen in Figure 2.9 below. The rate of change is highest for pharmacists at -7.7 percent followed by doctors (-5.8 percent) nurses (-5.1 percent) and dentists (-4.1 percent). For medical doctors and nurses, the trends look like reaching the plateau of a middle-income economy. Figure 2.9: Medical Professional to Population Ratio Rate of change Doctors Dentists Pharmacists Nurses Source: MOH Health Fact * However, further comparative analysis as in Table 2.3, the ratios are still far from satisfactory. The ratio for doctors at 1:835 (2010) is still below the world s average at 1:710 (2009). Here we are only nearly comparable to the middle-income economies at 1:806 (2009). We are still far from the high-income economies like Australia, United Kingdom and the United States of America. As for nurses, the ratio at 1:306 (2010) is better than the world s average at 1:351 (2009) and even better than the 17

11 middle-income economies at 1:449 (2009). Again when compared with high income economies, we are still a long distance away. Table 2.3: Doctor-to-Population & Nurse-to-Population Ratios Doctors Nurses MALAYSIA 1:835 1:306 World Average 1:710 1:351 High-income Countries 1:362 1:137 Middle-income Countries 1:806 1:449 Australia 1:260 1:104 United Kingdom 1:365 1:99 United States 1:412 1:102 Source: World Bank: In theory, we can improve up our supply capacity to produce more medical professionals. However, the supply has to match the demand side of the employment equation. Medical professionals such as doctors and dentists have the opportunity for self-employment but such is not so for nurses. The recent experience where many private institutions started producing nursing graduates has resulted in a glut of unemployed nursing graduates. The demand side will depend on the growth of hospitals in the country. 2.5 Growth of Private Hospital Sector In the earlier years from 1980 to 2000, the number of private medical facilities experienced the highest growth from 50 to 224. Although the figures include nursing and maternity homes, the bulk of these facilities were private hospitals. During the period the number of private hospital beds also grew from 5.8% share of total beds to 28.4 in The rapid grow of the sector has been fuelled primarily be the rapid rise in national income. [1b]. Over the last seven years from 2006 to 2012, the number of private hospital grew from 199 to 209 with an average growth rate of a mere 0.8 percent. For the same period, the number of private hospital beds grew from in 2006 to in 2012 with an average growth of 3.7 percent. The higher growth rate of beds is probably due to hospital expansion of existing hospitals and larger hospitals being established during the period. Although the physical growth rate has been positive, the growth rate has not been overly impressive (see Figures 2.10 and 2.11). 18

12 Figure 2.10: Registered and Licensed Private Hospitals 2006* Growth % Private Hospitals Source: MOH-Health Fact 2007 to 2013** [* Note: Estimated by deducting the number of nursing homes, maternity homes and hospice for year 2006] [**Note: Health Fact 2012 & 2013 statistics are for year 2011 & 2012 respectively] The relatively slow growth rate could be due to various reasons, the main being that it is a highly regulated business. For example, it takes more than four years to establish a new private hospital, from planning, to construction and final operation. The gestation period to breakeven for a new hospital can be long unless it is already an existing known brand name, such as the KPJ group or the Pantai group of hospitals. However, this slow and steady growth will continue and a few more private hospitals are expected to come into operation by The constitution of private hospitals has grown in complexity over the last few years with the emergence of large corporate groups like the IHH Healthcare, a holding company under Khazanah Nasional, which is listed in Bursa Malaysia or the KPJ Healthcare group under Johor Corporation, also listed in Bursa Malaysia. These large corporate groups managed chain of hospitals within the country and internationally. The significance of such corporate groups in the growth of private hospitals and in particular, the export of healthcare services will require a separate study. There are two generic aspects of private hospitals, the for-profit and the not-for-profit private hospitals. The not-for-profit hospitals are not investor-owned and they are usually governed by a board of directors who give their service voluntarily, or do so because they are part of a religious group. They generally operate on the same basis as any other for-profit private hospitals, except that they have a charitable mission. 19

13 Figure 2.11: Growth of Private Hospital Beds Growth % Beds Source: MOH-Health Fact 2007 to 2013** [**Note: Health Fact 2012 & 2013 statistics are for year 2011 & 2012 respectively] The not-for-profit hospitals have earlier origins than the for-profit hospitals. The Tung Shin Hospital and the Lam Wah Ee Hospital are firmly embedded in the history of the Chinese community, tracing their beginnings to the late nineteenth century. The Penang Adventist Hospital, run by Seventh Day Adventist Christians, was started before the Second World War, while Assunta Hospital, Hospital Fatimah and Mount Miriam Hospital were established by Christian missionaries in the post-war period. Recent growth in the number of non-profit hospitals is limited, particularly since the proliferation of for-profit hospitals [1b]. The majority of private hospitals are for-profit. Some of them were originally small ventures begun by a group of medical doctors, but have since been sold to large public-listed companies. Examples of this are the Penang Medical Centre (PMC), started by a group of doctors in 1973, later sold to the Gleneagles group, and Pantai Hospital, established in 1974, and later sold to the Pantai conglomerate. Other examples are the Tawakal Hospital, established in 1984 and the Ipoh Specialist Hospital, established in 1981in 1981, both eventually taken over by KPJ Healthcare [1b]. Some private hospitals were established in conjunction with the interests of property developers who developed housing estates as large townships. To make the township attractive as a residential centre, hospitals and colleges were also developed in the township. SJMC is owned and operated by Sime Darby, the conglomerate that also developed the Subang Jaya housing estate, while Sunway Medical Centre is managed by Sunway City Bhd., a corporation involved in housing development in Sunway [1b]. 20

14 Out of the 220 licensed private hospitals, 113 of them are listed as members of the Association of Private Hospitals Malaysia web-site ( The distribution of these hospitals across the country is illustrated in Table 2.4 above. Almost all of these hospitals are located in cities and major towns of the states. Table 2.4: Distribution of Private Hospitals in Malaysia State <50 beds beds beds >200 beds Total Johor Kedah Kelantan Melaka Negeri Sembilan Pahang Perak Pulau Pinang Sabah Sarawak Selangor Kuala Lumpur Total Source: Association of Private Hospital Malaysia (Membership list) Growth of Private Healthcare Professionals The private hospital sector has contributed significantly to the employment of knowledge workforce in the country. Figure 2.12 illustrates the private healthcare workforce for four critical professionals. It could be seen that the growth of employment for nurses has been large over the last three years with the 5-year average growth of 17.9 percent from 2006 to The growth for private medical practitioners has been steady at five percent. The growth of private sector dentists was a mere 2.9 percent while that of pharmacists, there was a dropped by 0.4 percent. Although the that macro-ratios do not place Malaysia at the level of the more developed and high-income economies, the country cannot rammed-up the production of medical professionals without balancing the demand side of employment, as discussed earlier. Apart from this balancing act, there is the issue of quality and specializations. The quest to produce more professionals must not be made at the expense of lowering the standards of medical education or the qualifying level of intake. The healthcare industry not only requires high quality workforce but also more with specialist skills, both for medical doctors and nurses. Specialist doctors and nurses with additional post-basic skills are in high demand. 21

15 Figure 2:12: Growth of Health Professionals in Private Hospitals Growth % Doctors Dentists Pharmacists Nurses Source: MOH-Health Fact 2007 to 2013** [**Note: Health Fact 2012 & 2013 statistics are for year 2011 & 2012 respectively] Exports of Healthcare Services Health Tourism Health services can be exported in three ways. Foreigners can seek treatment in the country, health professionals can temporarily move overseas to provide their services, or healthcare professionals based in the country can provide information and/or advice to clients located overseas [6]. In this study, we are concern with foreigners coming to Malaysia specially to seek treatment in the private hospitals here. We are not looking at our medical professionals who have moved overseas to practices (specialists, nurses and other health professionals), but rather to look at bring these professionals back to the country to practice here. Private hospitals early foray into serving foreign out-of-pocket paying patients went way back in There is great potential in health or medical tourism as many foreign countries are looking at other alternatives due to the rising medical costs in their home countries. In others like Indonesia, there are high-income individuals who are looking for better medical services which are not conveniently available their home countries [7]. Mahkota Medical Centre in Melaka, for example, was one of the early pioneers in health tourism. It has established itself well in the Indonesian market with six foreign offices there to cater for almost 30 percent of its current business. 22

16 Figure 2.13: Health Tourists Source: MTHC; Health tourism has grown quickly over the last five years after MOH established a health tourism promotion unit in MOH started the campaign to brand Malaysian health tourism with the launching of the Malaysia Healthcare logo and tagline "Quality Care for Your Peace of Mind' in June This led to the establishment of the Malaysia Health Tourism Council (MHTC) in 2009 under the ambit of MOH. The purpose of MHTC is to streamline healthcare travel service providers and industry players in both private and government sectors so as to drive the industry to greater heights [8]. Over the last five years ( ) the health tourists grew by an average of 19.4 per cent see Figure 2.13 above. The majority health tourists were from Indonesia which recorded 57 per cent in 2011 [7]. The health tourism revenue, although is only a small portion of the total tourism revenue of Malaysia, is a significant contribution to GDP and has grown by 30.1 per cent over the last five years ( ), see Figure 2.14 below. The total health tourism revenue is expected exceed RM600 million in The costs for medical procedures in Malaysia are relatively competitive with many countries, Table 2.5. Together with the good tourism infrastructure and being a relatively lower cost for many services, Malaysia is a competitive health tourist destination. Indonesian health tourists feel comfortable in Malaysia because of common language, foods, religions and the convenience of travel here. 23

17 Figure 2.14: Health Tourism Revenue Source: Penang Monthly: In general Malaysian private hospitals are well equipped and staffed adequately to serve the local and international needs. Malaysian healthcare providers, particularly those in health tourism, have quality health care accreditations. Most of the private hospitals and medical centres have local accreditation by the Malaysian Society for Quality in Health (MSQH) [10]. According to the Association of Private Hospitals Malaysia (APHM) who has 113 registered members, 33 of their members have the local MSQH accreditation and six have the Joint Commission International (JCI) quality accreditation. Table 2.5: Medical Tourism Procedure Cost Comparison in USD Malaysia USA India Thailand Singapore Korea Heart Bypass $12,000 $130,000 $9,300 $11,000 $16,500 $34,150 Heart Valve Replacement $15,000 $160,000 $9,000 $10,000 $12,500 $29,500 Angioplasty $8,000 $57,000 $7,500 $13,000 $11,200 $19,600 Hip Replacement $10,000 $43,000 $7,100 $12,000 $9,200 $11,400 Hysterectomy $4,000 $20,000 $6,000 $4,500 $6,000 $12,700 Knee Replacement $8,000 $40,000 $8,500 $10,000 $11,100 $24,100 Source: Wellness Visit: 24