AmCham arrow Publications arrow Topics Archive arrow Topics Archive 2005 arrow Vol.35- No.12 arrow Advertorial: Eye on Public Health
Advertorial: Eye on Public Health PDF Print E-mail

The Impact of Individual Hospital-based Budgeting
A Message from the Pharmaceutical Committee of the American Chamber of Commerce in Taipei

 

The Department of Health (DOH) is preparing to implement a new policy initiative in 2006, designed to help ease the mounting financial pressure on the National Health Insurance (NHI) system. Called "Individual Hospital-based Budgeting," the new policy would allocate a specific budget to every hospital - a fixed negotiated amount with a set annual growth rate of somewhere between 4% and 5%. Healthcare providers would then be required to control all expenses within that pre-set budget. The new initiative would apply nationally in place of a voluntary arrangement started in 2004 in which only about half of the nation's hospitals participated.

Various healthcare advocacy groups are concerned about the potential impact of the new system on healthcare quality. Liu Mei-chin, CEO of the Taiwan Health Reform Foundation, for example, emphasizes that by focusing only on cost control, the proposed new system ignores the question of how to ensure that patients have access to more advanced, newer treatments and medications. The Taiwan Health Reform Foundation further notes that under Individual Hospital-based Budgeting, hospitals may be tempted to screen their patients - choosing less severely ill patients to gain quicker, easier income and to avoid consuming the set budget. That result would undermine another of the government's plans - establishing a referral system in which patients would first seek treatment at private clinics or community hospitals before being referred to the currently overloaded large medical centers for more specialized care. Based on experience last year when the limited global budget system was introduced, some hospitals may also respond to the new controls by limiting the number of patients allowed to register, restricting doctors' working hours, and switching to prescribing more profitable - rather than the most appropriate - drugs.

Such cost-containment measures will hardly be conducive to optimum patient care. Under the current NHI system, the opportunity for patients to obtain the benefit of new drugs or new technologies is already low. The situation would only worsen if decisions are determined by finances at the individual hospital level.

Other approaches to cost savings could yield far more effective results. Currently, Taiwan patients' and health providers' abuse of medical services has resulted in average annual doctor visits of nearly 15 times per person, with more than four medications per prescription - both figures much higher than the standard international practice. This systemic inefficiency is driven in part by hospitals' need for the revenue generated from doctors' consultation fees and from full reimbursement for high-priced generic drugs actually obtained at discount.

These inefficiencies could be eliminated through adoption of quality-oriented policies. For example, strict enforcement of the separation of prescribing and dispensing functions for pharmaceuticals (including the release of out-patient prescriptions to community pharmacies) would lead to a more responsible approach toward prescribing medications. Reducing the high rate of hospital visits and the number of drugs per prescription would remove the financial incentive for over-usage of drugs by the hospitals, and lowering the reimbursement prices and therefore the profit margin for discounted generic drugs would eliminate the incentive to over- prescribe less efficacious or duplicated medicines. In addition, establishing a co-payment scheme related to medicine quality indicators (such as the number of drug items or the type of disease) would make a broader selection of medications available to patients.

Although DOH appears committed to the early introduction of Individual Hospital-based Budgeting, many of the specifics of the program have yet to be worked out. This Committee is gratified that the government, recognizing that the pharmaceutical industry is a vital stakeholder in ensuring the success of the healthcare system, has recently been engaging in dialogue with industry representatives about the prospective revisions. We look forward to continuing communication with the authorities to help achieve our common objective - development of a healthcare environment that is not only financially stable but that provides Taiwan citizens with the same access to innovative and quality healthcare and medication as enjoyed by citizens of other advanced countries.
 
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