Health Minister: Malaysia Will Not Fully Adopt US DRG Model

MALAYSIA: In a statement made during his New Year’s address to Ministry of Health (MOH) staff, Health Minister Dzulkefly Ahmad outlined Malaysia’s approach to introducing a diagnosis-related groups (DRG) payment system. Contrary to adopting the American DRG model entirely, Dzulkefly emphasized that Malaysia will develop a “customised hybrid” version for use in private hospitals. This approach is part of ongoing efforts to manage Malaysia’s high medical inflation rate and address concerns regarding rising health insurance premiums.

Customised DRG Model for Malaysia

Health Minister Dzulkefly Ahmad clarified that Malaysia would not adopt the American DRG model “wholesale.” Instead, the country is opting for a “customised hybrid” version specifically tailored to the local healthcare system. This announcement follows growing concerns over the financial sustainability of Malaysia’s health sector, especially given the rising medical inflation rate, which has reached 12.6 percent.

“We’ll have our own customised hybrid DRG or CRG,” Dzulkefly stated, referring to the clinical risk groups (CRG) reimbursement models. He further highlighted that the DRG model could only be implemented effectively with the support of comprehensive digital infrastructure, including data, electronic medical records (EMR), and proper disease classification.

“It’ll be a nightmare to practise DRG without digital support, data, classification of diseases, and reimbursement,” Dzulkefly remarked, underscoring the need for robust technological systems to enable the successful introduction of this model.

DRG Model Implementation Progress

As part of the gradual introduction of the DRG model, the Ministry of Health has initiated its Hospital Services Outsourcing Programme (HSOP), in which over 24,000 cases were outsourced to private hospitals last year for a total of RM66.5 million. According to Dzulkefly, private hospitals have become more familiar with the bundled payment system under this programme.

“When we first started, they [private hospitals] wanted to charge us like patients in their facilities. Now they understand how they will charge with our bundled payments, MOH’s sort of DRG,” Dzulkefly explained. He further noted that this process represents a step towards transitioning from DRG to CRG, a model aimed at categorizing hospital cases based on clinical risk.

Opposition from Medical Associations

Despite the Ministry’s efforts to move forward with a DRG payment model, the proposal has faced opposition from some medical groups, including the Association of Specialists in Private Medical Practice Malaysia (ASPMP) and the Malaysian Medical Association (MMA). Critics have expressed concerns over the viability of the model, particularly regarding the compensation for specialist doctors.

In response to the proposal, ASPMP has raised alarms about the potential for specialists to earn less under a DRG system. The association pointed out that the fixed payment rates established under DRG could result in specialists being paid less than professionals in other fields, such as hairdressers or electricians, due to the system’s fee caps.

The MMA has similarly voiced concerns, suggesting that specialists may avoid taking on complex cases if the reimbursement is not adequate. “Specialist doctors may avoid taking on complex cases if these are not adequately compensated in a DRG framework,” noted the association, indicating that the model may not fully reflect the intricacies of specialized medical care.

Town Hall to Discuss DRG Model

The Ministry of Health is set to hold a town hall discussion on the DRG model at its headquarters in Putrajaya on January 9, 2025. The event is expected to bring together key stakeholders in the healthcare sector, including representatives from the Association of Private Hospitals Malaysia (APHM), MMA, as well as insurance associations and think tanks. Notably, the invitation list also includes representatives from university and military hospitals.

The town hall aims to gather input and address concerns from various sectors regarding the implementation of the DRG system, particularly as it pertains to private healthcare providers and insurance companies.

Addressing Doctor Shortages

During his address, Minister Dzulkefly also touched on the ongoing issue of doctor shortages within the public healthcare sector. He acknowledged the challenges faced by healthcare workers, but emphasized his commitment to providing leadership and support to the MOH team.

Referring to the shortage of doctors, Dzulkefly remarked, “On the acute shortage of doctors and the like, they attack me, I attack back. Thank you for your service. I don’t run a hospital.” His comment appeared to reference a post made on social media in response to staffing shortages at a clinic in Sabah, which had been widely criticized by government doctors.

Despite the challenges, Dzulkefly highlighted that the MOH has taken steps to address staffing issues, including converting nearly 4,000 contract medical, dental, and pharmacy officers to permanent positions last year. Additionally, the on-call allowance for medical and dental officers was increased by RM55 to RM65 for active calls.

Plans for Health Care Workforce Retention

In his address, Dzulkefly also outlined plans for improving remuneration for healthcare workers, particularly through the Rakan KKM programme. The programme aims to create a “premium economy” wing within government hospitals, starting with Cyberjaya Hospital, in order to enhance compensation and retain skilled health professionals.

“Through Rakan KKM, we’ll get resources for better remuneration for health care staff, not just specialists,” Dzulkefly explained, emphasizing the importance of retaining specialists, nurses, and other healthcare workers. He reaffirmed his dedication to supporting the MOH’s senior leadership team, urging them to work together to address the challenges faced by the sector.

As Malaysia moves forward with healthcare reforms, the introduction of a hybrid DRG model and efforts to improve healthcare workforce retention will continue to be key areas of focus for the Ministry of Health in the coming years.