KUALA LUMPUR (May 27): IHH Healthcare Bhd (KL:IHH) group CEO Dr Prem Kumar Nair said the fixed-rate diagnostics-related group (DRG) system has been delayed due to challenges in applying it to private hospitals but the Health Ministry (MOH) has not ruled it out.
After the group's annual general meeting, Prem said that due to challenges, DRG will be tested first in selected government hospitals, based on talks with insurers, healthcare stakeholders and the MOH.
This confirms The Edge report from earlier this month that DRG will not be implemented at private hospitals for now but will start in public hospitals. Health Minister Dr Dzulkefly Ahmad had said that DRG implementation would be by year-end, focusing first on simple illnesses.
“DRG works well in the public sector, where there is standardisation of rooms, facilities and amenities. While the MOH has not ruled out implementing DRG in private hospitals, it has deferred the plan. More study is needed,” he told reporters.
Prem said implementing the fixed payment for care in private hospitals is difficult due to their varied service levels and pricing. DRG relies on standardised care and fixed payments, which suits public hospitals but clashes with the private sector’s tiered offerings.
The DRG model, used in countries like the UK, Japan and Korea, sets a fixed price for specific treatments (for example appendectomy), regardless of hospital stay or room type. While effective for controlling costs in public healthcare, it doesn't fit private hospitals where patients expect differentiated services and pricing.
IHH didn’t reveal how DRG might affect its profits. However, group chief financial officer Dilip Kadambi said the group is focusing on cost control by centralising procurement and switching to generic drugs.
In FY2024, IHH’s staff costs rose 21% to RM9.24 billion, finance costs increased 13% to RM1.07 billion, and depreciation and impairment costs grew 16% to RM1.25 billion.
The group’s chief medical officer Dr Keith Lim added that cutting waste, such as over-treatment and inefficiencies, is key to lowering costs while maintaining care quality.
IHH runs 18 private hospitals, including 11 under the Pantai brand, in Malaysia, with over 3,500 licensed beds.