Impact on Patient Waiting Times and Service Standards with Shift to Capitation Model in Financing Public Healthcare Clusters

Mr Yip Hon Weng asked the Minister for Health with the shift towards the capitation model in financing public healthcare clusters, where each cluster gets a fixed sum of money per person living in an area within the cluster, whether the Ministry can update on its pilots of using other models to finance the clusters such as the pay-for-performance, which rewards good performance in key priority areas, and bundled payments, where funding is based on a patient's entire care episode.

Sir, my response will also cover the matters raised in the separate question filed by Ms Ng Ling Ling1 which is scheduled for a subsequent Sitting. I would invite Member to seek clarifications today, if need be. And if the question has been addressed, it may not be necessary for her to proceed with the question for future Sitting.

I will first provide some background on the different methods of funding for healthcare institutions. For various reasons – asymmetry of information between doctors and patients, the moral hazard of insurance, the anxiety of patients and their loved ones – healthcare is highly susceptible to funding wastage. Better funding methods can reduce such wastage, without affecting service quality.

For example, funding by workload, such as the number of procedures, surgeries, scans, hospital bed days, does not in itself incentivise hospitals to be more targeted and efficient in delivering healthcare services, because all activities will be funded anyway.

Bundled payments, which are commonly practised around the world, help to remove what are known as disease-level operational inefficiencies. This means that hospitals get funded per care episode, rather than based on a detailed breakdown of workload. We had implemented the bundled payments pilots, which allowed institutions to generate cost savings, for instance, by facilitating earlier transitions from acute hospitals to community hospitals, where appropriate.

As hospitals attend to patients with varying degrees of disease severity, some requiring more interventions than others, so, bundled payment rates are set at an average to cover the total cost of all care episodes. This provides an incentive for the hospital to be more efficient. Another model is pay-for-performance which provides financial incentives for clusters to perform well in key priority areas. Our pilot projects delivered positive results, leading to better health outcomes without compromising care.

However, these mechanisms, such as bundled payments by care episode, do not in themselves incentivise the reduction of what is known as population level wastage, that is, some patients should not become sick in the first place where preventive steps could have been taken in homes or communities to keep the residents healthy, before they become patients.

Capitation funding aims to incentivise healthcare providers to place a greater emphasis on preventive care. Under this funding model, healthcare providers are assigned a population base and are paid a pre-determined amount per resident under their charge. They will thus be encouraged to incur a lower cost by intervening upstream and early to keep the patient healthy, knowing that it will require them to spend more to treat or cure patients in hospitals after they fall sick. This method of funding is commonly practised around the world as well.

Different methods of funding for healthcare, be it bundled payments or capitation, if designed and implemented well, will not negatively affect the quality of service at hospitals. If wastage and unnecessary procedures can be removed, it will improve the effectiveness of our healthcare workers as well as their well-being, it will reduce the financing burden of healthcare and can improve the level of service.

From 1 April 2023, we transited to a capitation funding model for our three healthcare clusters. Each has a population of about 1.5 million residents assigned under them. Each cluster will be paid funding rates based on the age bands of their residents. The rates are designed so that there is no reduction – and in fact a slight increase, to the cluster budgets in previous years. As our population gets older, more residents will require higher capitation rates and the clusters will correspondingly receive higher budgets.

We maintain a flexible system where residents can continue to choose which hospitals they would like to go to and need not go to only the hospitals from the cluster that they are assigned to. Transfer payments between clusters will be made to take this into account.

With capitation funding, the Ministry of Health (MOH) sets priority areas and key indicators for the immediate, medium and long term, while the public healthcare clusters have the mandate and operational flexibility to decide the resource allocation across their institutions and services. These key indicators were outlined in the White Paper on Healthier SG.

Healthcare clusters will take into account various factors when deciding how to allocate their funds. These factors may include the cost of operations incurred by various healthcare institutions under their charge, the mix of residents that they serve and the performance management system under that cluster. It does not mean that cluster have to pass through the funding mechanism in the form of capitation funding to their individual health institutions, which may not be practical. However, with capitation at the cluster level, there is a strong incentive for the clusters to invest more in primary and preventive care, and to work with all community partners, to help their residents stay healthy or delay disease progression. We should expect many more initiatives in the preventive care space in the coming years.

Thank you, Mr Deputy Speaker and I thank the Senior Minister of State for his responses to my Parliamentary Questions (PQs). I have two supplementary questions to each of the PQs. First, under the capitation model, will there be a system in place to review the exceptional cases where patients outlive their prognosis or if their illness do not follow through the usual trajectory and ensure that care is not denied for these cases.

Second, given the rapid advancement in technology, especially in medical devices and pharmacology, how often are the care protocols reviewed, such that the capitation model and formulas are kept relevant with the most cost-effective treatments available?

Third, under the capitation model, will physicians be less incentivised to think out of the box to treat patients with complex clinical conditions as it may require costlier treatments.

And lastly, while it is part of the plan for Healthier SG to stick with one general practitioner (GP), will capitation restrict patient choices for tertiary care as they will now be covered under regional area and served by a particular hospital?

Sir, I thank Mr Yip for his four supplementary questions. The first was whether there would be an issue around exceptional cases that do not follow the usual trajectory for diseases and the short answer is that, this is not a problem. While the rates are set on the basis of a mean because they are covering a large population base, it does take into account the great variance on an individual basis around disease and disease progression where some patients will do very well, short stays, minimal intervention and some will require a lot more, and that has been factored in to the calculations around the funding mechanism. And it does not change the way in which the individual care decisions are made.

Will care protocols be reviewed? Yes. Capitation is a funding mechanism at a large population level. It does not remove the various other governance mechanisms that are in place across our healthcare system from the professional boards, the licensing boards, the interface with research and academia and the clinical review processes. All of these will continue to review care protocols to make sure the care that is delivered is entirely appropriate.

Mr Yip also asked if there is less incentive to innovate and think out the box? The answer is no. That the personal level or the individual level of the clinicians will of course continue to be driven by their professional desire to provide the best possible care, whether it is following a standard protocol well demonstrated or whether it is looking for innovative ways to deal with unusual and exceptional circumstances. At the system level, the idea is to put in place mechanisms that drive innovation and thinking to be able to derive efficiencies, but more importantly, better care through the resources that we have.

And as I explained in my main answer, the answer to his last question, it does not restrict the choice of where a resident or a patient can receive their care from. They can access care services from across the three clusters, even if they have been assigned as part of a population base for one cluster, MOH will work with the clusters and the administrative side of the healthcare system to do back-end transfer payments so that the residents do not have to worry about this and they will have that choice of where to receive their healthcare maintained.

Thank you, Deputy Speaker. I just have two supplementary questions for the Senior Minister of State. Thank you for the explanation on how capitation grant will be implemented. My first question is that, if capitation is a method of encouraging less wastage and more preventive and primary care, how is MOH monitoring that clusters even with operational flexibility given, is actually channelling more of their resources towards primary and preventive care.

The second question is, towards the health outcomes that the clusters are asked to work towards for the funding, can the Senior Minister of State give an example of how a cluster will be incentivised to shift the capitation funding towards where we are directionally moving, preventive and primary care, rather than what they are doing today, it could be just for volume.

Sir, I thank Ms Ng for the questions. On the first, how will we know that they are indeed channelling resources to primary and preventive care, well, we work very closely with the clusters on a day-to-day basis, with the clinicians at all levels of our healthcare ecosystem. The healthcare services have to interface with MOH on licensing decisions, on regulatory decisions, on the provision of resources. And so, we will indeed have very close feel of where manpower resources and effort across our healthcare system is being asserted and will then know whether or not these measures around funding and around governance are resulting in the operational changes and the service delivery changes that we are hoping for. And we will pay very close attention to this.

She asked for an example. I am a little hesitant because the whole idea is indeed to incentivise the clinicians and the service delivery teams to be able to think through what works best for their residents and their clinical service teams and their operational model. But a hypothetical example, let us say something like diabetes, if you wanted to institute some particular care around diabetic eye disease, for example, you may choose to do this essentially and through the Eye Centre, through the ophthalmologists; or you may choose to do this on a screening basis and perhaps increase the capability at the level of the polyclinics, in the GPs to be able to detect this early; or you could potentially even go into the community and explain how having good care around your diabetes can prevent eye disease from happening in the first place. And clearly, what we hope would be that the clusters and the professionals would do more of the third and prioritise the third and we should see that type of approach happening. That is an example, I do not know if that is the best example, but I think the examples and the specific clinical initiatives need to come from the professionals and the care teams that are involved.

Thank you, Mr Deputy Speaker. I have one question for the Senior Minister of State. Will the capitation payment include all charges that the GP will charge the patient, meaning the capitation payment will include both the consultation and the drug cost of each visit by the patient? Or is a drug cost excluded?

Sir, I thank Mr Leong for his question, but that is not what capitation payment is – which is, capitation is a mechanism to bundle the budget that is allocated at the cluster level and what he is asking about are the charges that are made available at the patient level, and potentially the subsidies associated with those charges and to offset those charges. Those are very, very different issues. When we talk about capitation, it is about how we take the budget that is available for healthcare and decide what are the allocations to each of the clusters, what are the allocations to each of the priority areas or the diseases or the care models, at a big picture level. So, the question that he is asking, in a way does not apply to the issue of capitation funding.

Yes, Mr Deputy Speaker. Can I ask the Senior Minister of State then, I think the issue that Singaporeans are most interested in is – I do not know whether MOH already got conclusion on that – is how will the outpatient patients be charged under the new Healthier SG scheme.

Sir, I thank Mr Leong for his question. The charging model for individual patients under Healthier SG is not what we are doing with capitation. Capitation is about how we assign our budget to the clusters. What he is asking about is how will patients be charged when they go and see their GP, whether you have a Healthier SG programme or whether you are going for a fee for service. That is not what we are talking about when we mean capitation funding, which is a way of deciding how to assign the MOH budget to the clusters, to hospitals and to different services.

I appreciate that he may indeed be reflecting the concern of resident citizens about how they are charged, I believe those issues have been discussed at some length and are available in a fairly transparent and documented way at a number of sites, but perhaps today is not the place or the time to debate them.