Containing costs, enhancing quality, and improving access: A summary of the proposal for reforming Hong Kong’s healthcare system by the Healthcare Policy Forum

 In Healthcare, Healthcare & Its Provision, Healthcare Financing, Healthcare Regulation

Reform objectives

  • The Healthcare Policy Forum is of the view that policy or social reform should be guided by clear reform objectives.
  • We see the most important objectives for reforming Hong Kong’s healthcare system as:
    • containing the costs of care
    • enhancing the quality of care
    • improving access to care
  • Our vision is to build a healthcare system that provides equal access to healthcare and which possesses a built-in mechanism for containing cost and ensuring quality of care.


Right medicine for the right ailment

  • A healthcare system is a complex system involving at least three broad dimensions:
    • delivery (how and what healthcare is provided)
    • allocation (how money is allocated to healthcare providers)
    • financing (how healthcare is paid for and distributed)
  • Each of the dimensions has different bearings on a healthcare system’s accessibility, quality and cost. It is therefore important to recognize and delineate the impacts of changes along individual dimensions, for instance:
    • reform changes in the financing dimension will affect the system’s cost and accessibility but will have little direct impact on its quality
    • reform changes in the allocation and delivery dimensions will affect the system’s cost and quality but will have no impact on its accessibility


Diagnosing the genuine ailments

  • We believe that problems relating to the delivery and allocation of Hong Kong’s healthcare system are more pressing than those relating to its financing.
  • In delivery, the system is beset by:
    • compartmentalization between different levels of care and between sectors (private and public), adversely affecting the quality of care and inducing cost increases
    • the absence of an organized primary care network, resulting in suboptimal quality of care and a cost-ineffective healthcare system
    • supplier-domination and waning professionalism, jeopardizing the quality of care and patients’ interests
    • under-regulation of the private sector, resulting in highly varied fees and quality of care as well as insufficient protection of patients’ interests
  • In allocation, the system is beset by:
    • perverse incentives in the public sector as good performance is neither rewarded nor does it bring in more resources; in brief, the system does not possess the right incentive structure to enhance quality and efficiency of care
  • In financing, the system is beset by:
    • unequal access to primary care, inducing not only unnecessary cost increases but also poorer health outcomes


Dispelling the myth of a financial crisis

  • We have reservations about two views, namely, 1) that reforming the current financing mechanism of Hong Kong’s healthcare system should be the top priority because healthcare spending is projected to accelerate, and 2) that individual citizens should bear a greater share of their own healthcare spending through some form of private funding, such as saving accounts or private insurance.
  • Our reservations are based on the following grounds:
    • the purported cost drivers usually cited for advocating financing reform, namely, ageing, technological advancement, rising expectations and early occurrence of chronic illnesses are a lot less pressing or real than commonly believed and are far from being unmanageable
    • private funding already constitutes a very high portion of total healthcare spending in Hong Kong (about 43%)
    • public healthcare spending is substantially lower in Hong Kong compared to that in other advanced societies (about 3.1% of GDP in Hong Kong vs 5.7% of GDP in other countries)
    • any shift from public to private financing, by whatever means, will necessarily transfer costs from those with higher to those with lower incomes, and from the healthy to the ill
    • a shift from public to private financing will result in less equal access to care and may weaken the healthcare system’s ability to contain costs
    • expanding private financing may not contribute to enhancing the quality of care
  • Based on the above and the soundness of the government’s financial position, it is our opinion that its financial resources are more than adequate to make the necessary investment in the public healthcare system during the medium term without recourse to additional streams of revenue to the existing tax-based financing. Furthermore we would argue that the current tax-based system is not only viable but that it compares favourably with private financing in being a fairer system. Given the healthy prospects for the Hong Kong economy and the substantive reserves that have been accumulated, we take the view that the government could and should increase public spending on healthcare so that access and quality can be further enhanced, for example, through expanding primary healthcare and reducing the workloads of healthcare providers.


Our reform initiatives

  • Given our reform objectives, we propose six reform initiatives:
  • In delivery
    1. Introducing a territory-wide electronic medical records system (EMRS)
      • At present, the Hospital Authority possesses a very sophisticated inter-operable web-based electronic clinical management and patient record system, which allows real time online remote access through standard internet connection
      • We propose to make the HA system truly “territory-wide” by rendering it accessible to healthcare practitioners in the private sector
      • When the system becomes truly “territory-wide”, with patents’ authorization or other legitimate authorization, all healthcare providers will have access to their patients’ medical records at the point where care is provided
      • The record system will help alleviate the compartmentalization problem and related negative impacts on quality of care and healthcare expenditures; the record system does so by facilitating the transfer of patients’ comprehensive medical records across different levels of care as well as between different sectors of the system
      • In addition, the record system will constitute a mechanism to enhance professionalism in protecting patients’ interests
    2. Instituting a primary care system with primary care practitioners acting as gatekeepers
      • With a proper primary care system, we expect unnecessary or improper use of specialist/ hospital care to reduce, which will in turn help contain healthcare costs in the long run.
      • The primary care system can further contain costs and improve health outcomes through its emphasis on early detection and preventive care and its role in coordinating and monitoring care at different levels
      • Under the system, patients are required to register with a primary care practitioner of their own choice. Primary care practitioners play the role of gate-keeping for care at higher levels, i.e. without their referral, patients’ access to specialist care is not allowed
      • To ensure quality of care, physicians wishing to practise as primary care practitioners are required to register with related health authorities and to satisfy certain registration requirements, such as academic qualifications or practicing experiences
      • To further protect patients’ interests, a reference fee schedule will be negotiated
      • To avoid self-referral, once registered, primary care practitioners will not be allowed to practise as specialists at the same time, even if they possess specialist qualifications
      • With the above requirements, a primary care system may also function as a means to regulate the private healthcare sector
    3. Establishing a research institute for clinical excellence
      • As a continuous effort to enhance quality and contain costs of healthcare, we propose establishing a research institute to develop and disseminate best clinical practices
      • In the medium-term, the research agenda of the Institute can be expanded along the lines proposed in the 1999 Harvard Report; in addition to the “medical” dimension of healthcare, the Institute will also conduct research on the social and economic dimensions of healthcare. The Institute could also serve as a base to train health economists and policy analysts. To better capture the Institute’s expanded research agenda, it may be renamed as the “Institute for Health Research”
      • While the Institute would focus its work on the public health system, it could also undertake consultancy work for the private health system
    4. Instituting a new healthcare organizational structure
      • In order that reforms can be implemented on a sustained basis, that better care will be provided in the long run, we believe it is of great importance to put in place a new management structure. As a first step, we propose a new two-level organization structure:
        • Level 1 is responsible for “steering” the whole healthcare system (including the public and private sectors); the agency at this level may be called a Health Commission
        • Level 2 is responsible for “rowing”, i.e. the day-to-day operations of healthcare provision; the agency at this level may be called a Healthcare Services Authority. We intend to assemble all public healthcare provision facilities under one structure so that better operational coordination can be achieved. The delivery of private healthcare services would also be a part of the Level 2 structure
      • To ensure the new organization’s legitimacy and accountability, it will be supervised and managed by a broadly representative governing board with budgetary powers and chaired by the relevant Bureau Secretary
      • To accommodate this new two-level organizational structure, we propose that the existing healthcare provision facilities of the Department of Health be transferred to the new Healthcare Services Authority
      • The Healthcare Services Authority will be responsible for managing all public healthcare provision facilities as well as maintaining a territory-wide electronic medical records system
      • We propose that the Hospital Authority be expanded and renamed to assume the role of the Healthcare Services Authority
      • As a result of this restructuring, the Department of Health would be downsized and function as the operational arm of the Health Commission
  • In allocation
    1. Adopting the “money follows patient” principle and the prospective payment mechanism for funding hospital and specialist care
      • This is our suggestion for addressing the perverse incentives in the public sector’s allocation mechanism and to improve the system’s performance in terms of its quality, cost and accountability. It is also a means for arresting compartmentalization and regulating the private sector
      • At the initial stage of this initiative, the bulk (80%-85%) of the expenditure of public sector providers would continue to be funded through block grants with the remaining portions funded through the “money follows patient” principle. Depending on the experience with this new format, the block grant portion could be reduced progressively until an appropriate balance between “block grant” and “payment for services provided” is achieved
      • Hospital and specialist care providers in the private sector will be required to register with a related authority if they are to provide care to publicly-funded patients. They have to satisfy certain entry requirements and will be brought under the purview and coordination of the health authority
      • Healthcare providers receiving publicly-funded patients will not be allowed to reject patients – this is to preempt their incentive to select low-cost patients and avoid high-cost patients
      • Healthcare providers receiving publicly-funded patients will also not be allowed to extra-charge patients, i.e. charging extra payment, so as to prevent differential treatment of patients and discourage provision of unnecessary care
  • In financing
    1. Subsidizing low income groups’ primary care visits in the private sector
      • In view of unequal access to primary care and the limited capacity of the public sector’s general outpatient clinics, we propose subsidizing low income groups’ primary care visits in the private sector
      • As an initial step, subsidies may be limited to the poorest 20% of the population as they utilize about 37% of public inpatients and specialist/A&E services
      • If the subsidies succeed in reducing the rates of hospitalization and specialist care/A&E use of the lower income groups (this should be the primary objective of instituting a primary care-oriented system), the potential savings in healthcare costs would be substantial
      • In other words, the subsidies should also be considered as an initiative to contain healthcare costs in the long run
      • We propose that reform initiatives 1, 2, 5, 6 expounded above should have priority as they can be readily accommodated within the structure of the existing healthcare system.



Healthcare Policy Forum (醫療政策論壇)

2 June 2007





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