This blog was meant to be for an international audience, but by request from one of the blog’s avid followers, I am presenting the Malaysian equivalent of ‘blooper of the year’. Several candidates came to mind…the ex-Health Minister episode, the conviction and jail sentence of a doctor for noncompliance to the PHFS Act and the gaffe by the Deputy Minister in stating that doctors have a licence to kill.
But the winner is….the proposal to privatise the National Heart Institute by a Malaysian public-listed company.
For international readers, a quick 101 : Malaysia has a unique healthcare system – public and private. The two entities are separate and distinct so that staff cannot work in both sectors. The public hospitals are almost totally subsidised by tax-payers and is accessible by all citizens at practically no charge. The private sector is profit-orientated with approximately two-thirds of its patients funded by third-party payors while the rest pay out-of-pocket.
So what makes this deal unique? After all, this sounds similar to the extensive NHS privatisation exercise carried out since 2006 in the UK which drew much fanfare. Well, the National Heart Institute in Malaysia (NHIM) started life in 1992 as a corporatised entity. In essence, the government retained the physical assets (the balance sheet) and parceled out the operations (P&L- profit & loss accounts) to a state-owned entity, MOF Inc. The P&L has remained healthy and it is believed to have over USD 70 million in cash assets. In short, the Institute seems profitable.
So what’s wrong with the deal? Plenty..
1. When the NHIM started in 1992, its vision and mission was to be a centre of excellence with equal time devoted towards training and research & development(R&D) as towards service to patients. As it is, due to the busy patient service workload, NHIM has strayed away from its original objectives. Today, R&D is almost non-existent. Can privatisation remedy this? It is doubtful, as R&D is hardly profitable in the near-term.
2. Transferring a corporatised entity to a privatised entity means, amongst other things, looking for an alternative source of funding for the 85% of its patients who are now almost completely subsidised by tax-payers. This will cut into the P&L like a hot knife into butter and melt away the profits, especially in the absence of a comprehensive national health insurance scheme. Who is going to finance these group of patients under privatisation? Surely not the tax-payers! Otherwise,why privatise at all?
3. Unknown to many, NHIM is already classified as a private hospital under the 1998 Private Hospital Facilities and Services Act. This adds to the confusion as, in many ways, it works and runs like a public hospital despite its categorisation as a private hospital.
4. Despite the above misgivings, NHIM has been operationally viable and relatively successful. The privatisation proposers have not given solid reasons as to how the Institute will benefit should it be privatised.
5. It is clear that the views of all stakeholders were not obtained prior to the somewhat premature announcement of the takeover. I am given to understand that even top management were left in the dark.
The decision-makers in government have since sidelined the proposal; but there are many other ways that a public-listed company can work together with the Institute. One is to form a strategic partnership instead of a takeover. For instance, by establishing heart units country-wide funded by the public-listed company and using IJN technical expertise and training, the service workload can be minimised and the company hopefully achieve a decent profit in the medium term.