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Drive for Transparency in Private Medical Costs

Published on: 27 January 2014 by Michael Lamb

Private Healthcare Costs in Hong Kong ProhibitiveHong Kong, the freest economy on earth according to the Heritage Foundation, has long been home to extremely high private healthcare costs – second highest in the world after the USA. This has caused a number of issues for the city, including heightened costs of health insurance protection and placing a severe burden on publicly operated healthcare facilities due to the extreme costs associated with the private sector. However, according to a report in the South China Morning Post* this situation may be about to change.

On January 27th 2014 the paper revealed a proposal which would see private hospitals and doctors provide accurate pricing for treatments prior to a patient receiving treatment.

As part of Hong Kong’s ongoing discussion on healthcare reforms, designed to alleviate the burden on the government subsidized public healthcare system through the implementation of a range of reforms, a number of ideas have been proposed - including providing tax incentives for the purchase of standardized Hong Kong Health Insurance products. However, despite attempting to fix the major issues none of the reform proposals currently being considered have the ability to solve all the problems currently facing the larger healthcare system in Hong Kong.

Allowing patients to receive a clearer indication of the total cost they can expect to pay for their medical treatment at private hospitals and clinics throughout the city moves the government one step closer to an ultimate solution of a sustainable and cost-effective healthcare service in Hong Kong.

Pricing Transparency to Favour Healthcare Consumers

Under the proposal, expected to be introduced by the Food and Health Bureau in the second half of 2014, private hospitals and clinics would be required to give accurate estimates of healthcare costs prior to treating a patient. This would enable patients to have more options with regards to their healthcare, and allow individuals to make cost comparisons between healthcare providers – opening up the private healthcare market to true price-based competition.

Enabling consumers to choose private medical providers on price considerations will allow patients to better forecast their medical expenses and would reduce the high number of disputes revolving around billing at private medical institutions.

The proposal to give clearer cost indications at private hospitals in Hong Kong follows in the wake of Audit Commission criticism aimed at these for not providing patients with enough information on treatment pricing. In direct contrast to Public hospitals which have standardized costs set by the Hospital Authority, private hospital charges actually include two separate costs – a bill from the hospital and a bill from the doctor.

This has made it extremely difficult to estimate the cost of treatment at private hospitals in Hong Kong, and has meant that the cost of treatment for patients receiving the same type of care at the same medical facility can fluctuate wildly depending on a number of factors including their doctor’s fees and experience, the equipment used in their treatment, and even the room the patient is staying in.

Because of this confusion, there are no clear indications of the appropriate costs of treatment in Hong Kong – most expected costs (including those provided by Cooper Claridge-Ware) are nothing but best estimates. This has made it exceedingly difficult for patients to budget for treatment they may be receiving at Hong Kong’s private hospitals and has led to the 58 disputes received by the Department of Health in relation to price-related complaints from 2002 to 2012.

If the government intends on incentivizing the use of private healthcare facilities in Hong Kong in order to offset the pressure currently being felt by the city’s public hospitals then a lack of pricing data is a significant obstacle to the success of such a scheme – no matter what additional financial incentives are implemented.

Under the reform proposals announced in the report by the South China Morning Post both private hospitals and doctors would be required to provide a clear indication of the expected costs a patient will be paying, prior to treating the individual.

Range Pricing Under Consideration

Private healthcare costs in Hong KongWhilst the Food and Health Bureau has identified the need for pricing information at private hospitals and clinics in the city, opinions are still divided as to whether healthcare providers should be required to give patients a precise cost estimate, or provide a price range in which the expected cost would fall. Further questions are then raised as to the extent of the price range given, if that is the preferred pricing method, and whether there would be any exemptions for providing such information to patients.

Singapore currently uses a model where private hospitals and clinics are required to give patients two separate estimates for their bill. The first bill would be the median payment for the procedure – meaning that roughly 50 per cent of patients would pay more, while 50 per cent would pay less. The second pricing information would show the upper cost of a procedure, with only 10 per cent of all procedures to exceed this amount.

Of Hong Kong’s private hospitals currently only two offer comprehensive pricing data to patients in advance of their treatments – Union Hospital in Sha Tin and St. Teresa’s Hospital in Kowloon City.

As expected, Doctors and private healthcare practitioners are largely against providing pricing data to patients prior to their treatments; ostensibly under the argument of unexpected procedures which the patient may need during the course of their care. Private Doctor and Government Legislator, Dr Leung Ka-lau stated “people who propose the idea [for pricing data] should also suggest a way to accommodate these unexpected procedures.”

However, it is important to realize that unnecessary medical procedures, which can fall under the “unexpected” class highlighted by Dr Leung, are one of the main reasons for healthcare inflation in markets like the USA, and in Hong Kong’s private healthcare services unnecessary procedures can be used by medical practitioners to pad their own wallets at the expense of consumers and insurance providers. In fact, a strong correlation can be made between the prevalence of “unexpected procedures” and Hong Kong’s status as the world’s second most expensive market for private medical services as these treatments directly contribute to the high levels of medical inflation being seen throughout the city’s private medical market.

In direct contrast to the statements made by Dr Leung, Tim Pang Hung-cheong, a patient’s right advocate from the Society for Community Organization, said that private hospitals should implement a set of fixed cost package charges – much like the packages currently being offered in relation to Maternity Car at hospitals throughout the city – rather than look at a price range for treatment costs.

Overhaul Needed Before Costs Price Consumers out of Market

Whilst the government is continuing to encourage private hospitals and clinics in Hong Kong to offer fixed prices for medical treatments received in the city, to the extent that Gleneagles Hospital in Wong Chuk Hang (set to open in 2017) will be offering pricing data for 50 per cent of its services, a move towards greater transparency must be made sooner rather than later.

If no clear indication of the overall cost of treatment is provided by Hong Kong’s private hospitals then no move can be made to standardize locally available health insurance products in the city, which in turn means that all of the proposed healthcare reforms will fall by the wayside as residents continue to use an aging and overburdened public system – where the standard of care may not be as high, but the costs of treatment are stable and much more fair.

Additionally, without firm pricing data the cost of insurance coverage in the city will continue to increase with the annual inflation levels being levelled by private medical facilities – putting a comprehensive health insurance plan out of reach of most average residents due to the prohibitively expensive cost of care at private sector institutions.

While the move toward overall reform of the healthcare system should be welcomed by Hong Kong’s society at large, instituting mandatory pricing details for private medical facilities in the city is a much needed first step before further changes can be applied to the greater healthcare system. Whether such a scheme can be implemented, and receive buy-in from private healthcare providers remains to be seen.



Author: Michael Lamb

Michael is an insurance industry professional with many years of experience within the Hong Kong Insurance market. Focusing on APAC coverage issues, Michael is able to provide extensive analysis and insight to a range of pressing topics. Previously, Michael provided insurance broker Globalsurance.com with their most highly valued articles and was a key influence in the development of all the content on Pacificprime.com, Michael has a passion for insurance matched by few others in the region.

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