Reward docs for keeping people healthy

By Jeremy Lim. Published TODAY, 11 Apr 2013

In a recent interview, Professor Philip Choo, Deputy Group CEO of the National Healthcare Group (Regional Health) shared his vision of a future where healthcare providers such as the National Healthcare Group (NHG) not only care for patients, but also reach out to the community to enable the population to live and age healthily.

Some of the NHG’s programmes today include engaging the elderly in the community, educating about better care of chronic conditions, falls prevention and the like. The NHG also partners nursing homes by providing consultancy services to nip medical problems in the bud and so prevent hospitalisations.

Prof Choo, a man I admire greatly for his vision and tenacity, let on in the interview that the NHG now diverts “almost a third of people who used to be admitted to Tan Tock Seng Hospital (TTSH) elsewhere to be cared for in other settings”. Hospital care is compacted from three days into one, and patients from the emergency department are admitted directly into community hospitals, freeing up TTSH beds for more acutely ill patients.

Prof Choo and the NHG are doing everything they should — focusing on health rather than healthcare, emphasising disease prevention, health promotion and caring for patients in the most appropriate and cost-effective setting, or what former Health Minister Khaw Boon Wan termed “right siting”.

There is only one problem: the NHG risks going bankrupt doing all this. Let me suggest four reasons why.

Firstly, patient fees. According to the NHG’s latest financial statements, 35 per cent, or S$527 million, of its total revenue comes from patient and patient-related revenues. Diverting a third of patients to more appropriate care settings is a wonderful thing from a societal perspective, but that means significant losses of patient revenue for the NHG.

Secondly, government funding to hospitals is at least in part based on patient volumes, and the NHG diverting patients elsewhere will do itself no favours financially.

This double whammy is worsened by the changing patient profile. If “simpler” cases are diverted, the consequent upward ratcheting of patient complexity, if not financially recognised by the Ministry of Health (MOH), will further hurt the NHG’s bottom line.

Finally, there is a cost to “Building Community Healthcare”, as the NHG’s latest annual report is titled, and I doubt at this stage anyone other than the NHG (with MOH grants) is paying.

PROFIT FROM HEALTH, NOT ILLNESS

Are there lessons from other health systems internationally?

Kaiser Permanente, one of America’s largest non-profit health plans, with over nine million members and almost 17,000 doctors, is one model to study closely. Kaiser is an integrated managed care consortium, comprising a health insurer, a facilities provider and a medical group.

Unlike many other healthcare providers, which depend on patients falling ill for revenue, Kaiser collects insurance premiums upfront and earns less if members consume more clinical services. I visited Kaiser a few years ago and one comment by a senior medical leader really struck me: “In Kaiser, hospitalisations are a cost; in other places, hospitalisations are revenue and profit.”

What does this business model translate into practically?

In 2011, US$1.8 billion (S$2.2 billion) was invested in Kaiser’s Community Benefits Program, under which Kaiser promotes the “health and well-being of our members and the communities we serve”. This means setting up free online health and wellness tools, supporting walking clubs and promoting healthier food.

Just last month, Kaiser announced the launch of Cities for Workforce Health and Fire Up Your Feet, a key programme under Mrs Michelle Obama’s Let’s Move! Active Schools initiative. In Fire up Your Feet, Kaiser provides an online physical activity programme that encourages teachers, students and their families to walk or bike to school and incorporate more physical activity in school.

Reducing care needs and reducing care in expensive settings that do not do patients any good can make good financial sense with the right business model. Kaiser has a palliative care programme where patients are supported in home settings, allowing terminally ill patients to die at home with loved ones around them.

As for standard care? An 11 percentage point drop in emergency department visits; a 23 percentage point fall in hospitalisations; and US$12,670 mean cost for the palliative care group, compared with US$20,222 for the usual care group. In its last reported financials, Kaiser reported US$1.6 billion in net income on a revenue base of US$47.9 billion.

It is timely that Health Minister Gan Kim Yong has announced a review of Singapore’s healthcare financing system. We need to create a financial model where doctors and hospitals are rewarded for keeping patients and the population healthy.

Jeremy Lim has held senior executive positions in both the public and private healthcare sectors. He visited Kaiser previously while working for the Ministry of Health.