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Will fee benchmarks stem S’pore’s rising tide of healthcare inflation?

Last month, the Ministry of Health (MOH) published fee benchmarks for private sector professional fees for over 200 common surgical procedures.

Last month, the Ministry of Health (MOH) published fee benchmarks for private sector professional fees for over 200 common surgical procedures.

The hope is that these benchmarks will encourage private sector providers not to overcharge third party payers such as insurers and patients for services while enabling both groups to make more informed decisions.

The benchmarks were developed by an Advisory Committee who set the ranges taking reference from past prices, past inflation, and complexity of procedures.

Both patients and private insurers are being encouraged to compare the benchmarks to the fees set by doctors and speak to their doctors to understand whether they are getting a good deal for their condition and to negotiate a better deal or look elsewhere if the fees cannot be satisfactorily justified.

This is part of a broader MOH objective to rein in rising health care costs, reduce pricing variation, and deliver better value to patients. The question is, will it work?

Before addressing that question, a bit of background is in order. It turns out that the Singapore Medical Association (SMA) used to publish Fee Guidelines.

At one point these guidelines listed fee ranges for over 1,500 procedures. However, in 2010 the then Competition Commission of Singapore (CCS) ruled they violated the Competition Act.

Whereas that may seem counterintuitive given the government is now pushing for transparency in pricing, publishing prices is not always an act of generosity. In fact, oil cartels do it to maximise profits.

Each member of the cartel publicly states a high price and, as long as everyone sticks to it, the cartel members enjoy monopoly profits. Clearly, the Commission must have worried about such behaviours.

Why then would the government promote such a policy now?

The answer is that since SMA stopped publishing its guidelines, surgical fees have risen dramatically.

Over the past decade the average inpatient bill size for Singapore citizens in the private sector has increased by almost twice as fast (9 per cent) as the bill increase (4.9 per cent) in the public sector. Surgical fees are one of the larger components of the bill.

The increase in bill size is due to many factors, one of which is greater access to increasingly generous health insurance that has reduced co-payments and therefore incentives for individuals to be good stewards of health services.

The number of providers has also increased. Although this reduces the likelihood of maintaining artificially high prices as in the oil cartel model, it also makes it harder for patients to figure out if they are getting a good deal.

To encourage price shopping, in March 2018, MOH introduced a requirement for new Integrated Shield Plan riders to have a minimum 5 per cent co-payment.

This should encourage individuals to be better stewards of health services, but it would be difficult to do so without easy access to fee information.

Therefore, the fee benchmarks is a welcome complement to such a policy. But will it work?

Published data from other countries reveals that fee schedules alone are unlikely to change the behaviour of most patients.

This is because the most cost conscious patients remain within the public sector, where fees are already available.

Moreover, even with the 5 per cent co-payment, out of pocket costs for those looking for care in the private sector are unlikely to be high enough to encourage significant price shopping, especially given that the fee for any particular surgeon is not known until after a diagnostic visit occurs.

High search costs, long wait times at the public sector, the potential for multiple diagnostic visits, and reputation of the doctor likely supersede marginal changes in out of pocket costs for these patients.

Price transparency for expensive tests, such as MRIs, or high cost medications that do not have a reputation aspect, would likely have a much larger impact on consumer behaviour.

I suspect insurers will be the greatest beneficiaries of the guidelines and will likely use them when negotiating reimbursement levels with clinicians.

However, assuming the ranges are set appropriately, in the short term it may have only a modest effect in containing prices but it likely will reduce fee variation.

I say this because if the ranges are set appropriately, then the majority of clinicians are already pricing within the range.

Those outside the high end may be forced by insurers to lower their prices if they want third party reimbursement but those on the low end may find that they can raise their fees.

This suggests average prices may not change but the variance will narrow.

In the longer term, physicians are likely to have a harder time negotiating prices if they wish to charge above the range.

This will have the intended effect on cost containment. However, upward pressure on prices will continue due to increasingly generous insurance coverage, an aging population, and rising rates of chronic disease, owing in large part to poor diets and inactivity.

Addressing these risk factors would be the surest way to contain rising medical costs.

ABOUT THE AUTHOR:

Dr Eric Finkelstein is Director, Lien Centre for Palliative Care and Professor, Health Services & Systems Research Programme at Duke NUS Medical School.

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