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New medical fee benchmarks a gamechanger if done right

The Ministry of Health’s announcement last week on the establishment of benchmarks for doctors’ fees for surgeries and other procedures represents the end of a decade of experimenting with ‘free markets’ and marks a retreat from this dogma which has failed to curb prices.

The effectiveness of a fee benchmark will depend on how well accepted it is by the public and the professional community, says the author. TODAY file photo

The effectiveness of a fee benchmark will depend on how well accepted it is by the public and the professional community, says the author. TODAY file photo

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The Ministry of Health’s announcement last week on the establishment of benchmarks for doctors’ fees for surgeries and other procedures represents the end of a decade of experimenting with ‘free markets’ and marks a retreat from this dogma which has failed to curb prices.

Why is this important? Put bluntly, rising healthcare costs are bad for society. Society has finite resources and excessive amounts spent on healthcare means there is less available for other societal needs such as education, public amenities and the like.

The fee benchmarks offer hope that healthcare costs will not balloon the way it has in the last decade and crowd out other essential spending.

Healthcare is a well-known example of how the marketplace can fail due to a lack of information.

Patients and payers of healthcare do not know enough about how much most medical treatments should cost and cannot be good rational customers which a ‘free market’ needs to function effectively.

We all seek value which I oversimplify here as quality/price. However, patients cannot determine quality without extraordinary efforts and so somewhat perversely, pricing becomes the market signal for quality.

“Higher prices = Higher quality” is the heuristic many patients use as a default and unfortunately in many instances, there is simply no evidence for this. What then ensues is an upward spiral of prices.

Fee benchmarks are hence intended to help all stakeholders in the healthcare ecosystem by providing a ‘pricing lighthouse’ - patients and payers know what range of fees to expect barring exceptional circumstances and doctors know what range of fees for a typical procedure would be appropriate.

What’s likely to happen then?

Medicine is a form of professional service much like one provided by lawyers, accountants or even models. There should rightly be a range, as the MOH intends, to reflect different levels of expertise and experience.

Doctors who believe their services to be so differentiated and unique can charge a premium beyond the upper limits of the fee benchmarks. However with the anchor that fee benchmarks provide, these doctors can and should be vigorously queried.

I am doubtful though that patients will pay very much attention to the fee benchmarks without accompanying measures of quality, which will be very difficult for lay persons to obtain.

Insurers on the other hand will be empowered and emboldened. Insurers legally can pay only for what is “reasonable and customary” which is the fine print in standard insurance contracts.

But without any benchmarks to help decide what is “reasonable and customary”, it is very hard for an insurer to reject claims.

A fee benchmark will change everything. We can expect insurers to use the benchmarks to challenge insurance claims and reject outlier pricing that doctors cannot justify.

If so, this has the potential to help bring down healthcare and insurance costs.

One in three Singapore residents now has riders with their Integrated Shield Plans that cover their entire hospital bills, no matter how much they cost.

There has been some concern that these riders would push up healthcare costs, especially as a study by the Life Insurance Association of Singapore has found that patients with such riders had bills that were 20-25 per cent higher than those of patients who had plans that required them to make some co-payments.

What about doctors? We are likely to see a narrowing of the variation in fee setting.

Yes, some of those on the low end or even below the fee benchmark ranges will undoubtedly increase their prices, but others will have to reduce theirs to retain patients.

Ultimately though, doctors should strive to provide patients and payers corresponding measures of clinical quality so that true ‘value’ can be determined. We should not begrudge doctors with truly exceptional expertise a pricing premium but the onus is on the doctors’ outcomes to warrant this.

Finally, the effectiveness of a fee benchmark will depend on how well accepted it is by the public and the professional community.

The process for establishing the fee benchmarks - from selecting members of the independent committee setting the benchmarks through to the way consultations are conducted to decision-making by the committee and subsequent annual or bi-annual reviews - are all critical.

I hope MOH pays due attention to the need for rigour and transparency in the processes.

Frankly there are formidable implementation challenges. MOH needs experts with the necessary knowledge to be on the fee benchmarks committee.

But these experts would most likely be practising doctors or experienced health insurers and arguably cannot be considered truly independent.

Perhaps healthcare should take a leaf from the unique tripartite relationship employers, workers and the government has and establish its own version of ‘tripartism’ in which payers, providers and the government work together for the long-term interests of Singapore and Singaporeans.

A permanent committee akin to the Singapore Tripartism Forum, jointly set up by the Ministry of Manpower, the National Trades Union Congress and the Singapore National Employers Federation, might be worth considering given the regular reviews of the benchmarks needed.

Done well, the proposed fee benchmarks can be a game-changer and an important piece in the overall efforts to manage healthcare costs nationally.

We owe it to ourselves to get this right this time.

 

ABOUT THE AUTHOR:

Dr Jeremy Lim is head of the Health and Life Sciences Practice in Asia at Oliver Wyman, the global consultancy.

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