KUALA LUMPUR (Nov 13): Private hospital operators plan to expand an initiative that aims to standardise the costs of procedures after a pilot programme showed lower patient bill and hospital costs, said an industry association.

The planning and implementation of the so-called price assurance can take up to four years for data collection, calibration, and testing, according to a book launched on Wednesday by the Association of Private Hospitals Malaysia (APHM). The programme also needs multi-department support and doctors' buy-in, it said.

A major hospital group in the country implemented price assurance, currently in its six-month pilot phase, according to the APHM that represents more than 150 hospitals in the country. However, the name of the hospital group was not disclosed in the book.

The programme involves comprehensive data collection on clinical and cost indicators, analyzing individual patient and doctor billings to identify variances, and comparing prices for commonly used treatments.

Although the program is still in its pilot phase, APHM said the hospital has achieved a 3%-5% reduction in the total bill for colonoscopy — a procedure that allows doctors to examine the entire large intestine — resulting in a minimum savings of RM2,500 from the original cost.

As the hospital receives 120-150 patients per month, “the price reduction domino effect from one patient to another will be significant,” it said.

The price assurance programme aims to standardise prices of procedures such as colonoscopy, total knee replacement, anterior cruciate ligament reconstruction and hysterectomy, offering standardised treatment packages for patients.

Standardised packages have a positive impact on the patients, providing transparent prices while quality is maintained at a “reasonable” cost, it said. “Doctors are also impacted as they realise the need to calibrate their practice to exclude unnecessary procedures and drive value for the patients.”

Private hospitals do not rake in exorbitant profits, APHM said, noting profit-after-tax margins of 9%-11% which is modest relative to other industries.

The association pointed to capital-intensive sectors that typically report profit margins of around 12% while insurance companies average around 13%. “This context illustrates the operational challenges private hospitals face, leading to relatively lower profit margin,” it said.

In response to escalating cost pressures, private hospitals have implemented a range of strategies such as using evidence-based medicine to guide the adoption of cost-effective treatment options, minimizing medical wastage, and promoting efficient resource utilization, said APHM.

In addition, the private hospitals centralised procurement system for purchasing of medical supplies, drugs and equipment. By consolidating orders, APHM claims that operators can leverage higher volumes to negotiate better prices and pass on the lower costs to patients.

“The success factor in ensuring procurement excellence is securing long-term competitive contracts to ensure pricing stability and business security,” APHM added.