RECOMMENDATION REPORT PRIVATE HOSPITALS August 2014 i PUBLISHED BY: MALAYSIA PRODUCTIVITY CORPORATION Lorong Produktiviti, Off Jalan Sultan 46200 Petaling Jaya, Selangor Darul Ehsan, Malaysia. Tel : 603 – 7955 7266 / 7955 7050 / 7955 7085 Faks : 603 – 7957 8068 / 7955 1824 / 7954 0795 Emel : [email protected] Website : http://www.mpc.gov.my Perbadanan Produktiviti Malaysia 2014 All right reserved No part of this publication may be reproduced, stored in retrieval system or transmitted, in any form or any means, electronics, mechanical, photocopying, recording, or otherwise, without prior permission of Malaysia Productivity Corporation. Disclaimer This report has been prepared by Malaysia Productivity Corporation from sources believed to be reliable but no responsibility is accepted by Malaysia Productivity Corporation, its employees, consultants, contractors and/or agents in relation to the authenticity, origin, validity, accuracy or completeness of, or for any errors in or omission form, the information, statements, forecasts, misstatement of facts, opinion and comments contained here in. ISBN NO 978–983–2786–25–2 PRODUCTIVITY AND REGULATION Productivity is the only driver of income growth that is unlimited, as opposed to resource exploitation or increase in population and labour force participation, each of which faces natural limits. The potential for productivity growth to generate higher income for Malaysians makes it a natural and important consideration for decision makers. As such the continuing need to stimulate productivity rightly remains at the forefront of government policies. Regulation is the lifeblood of a modern, well-functioning economy. Almost all regulations have the potential to impact on productivity, either through the incentives which they provide to businesses to change operating and investment decisions, or more directly through their impacts on compliance costs. It is inconceivable to think of a modern economy functioning without regulation. However, poor regulation can cause frustration and unintended consequences, or simply add red tape that adds nothing useful to the economy, society or the environment. ii FOREWORD Through regulation the government can leverage its policy interests on businesses. Regulation can contribute to a range of social, environmental and economic goals. However, in practice, many regulations are not implemented efficiently or cost- effectively, and some regulations do not even adequately achieve the ends for which they are designed. Poor regulatory regimes invariably result in unnecessary regulatory burdens which will stifle business growth. In the 10th Malaysia Plan, the Malaysia Productivity Corporation (MPC) is mandated to review those regulations affecting the conduct of business in Malaysia with the view to modernize business regulations. This is crucial in order for the country to move towards its aspiration of becoming a high-income nation. Towards this, MPC has embarked on review of existing business regulations with the focus on the 12 National Key Economic Areas (NKEA) which have been identified as having high growth potential. In this study, the research team led by Mr. Goh Swee Seang has been asked to examine the regulatory regimes of the healthcare services sector with the aim of recommending options to remove unnecessary regulatory burdens. For this particular study, the focus is on the private hospital sector as this is deemed a high value added, high knowledge-based and growing sector. The study emulated the approach used by the Australian Government Productivity Commission (AGPC) and the team was guided by a regulatory expert previously from the AGPC, Ms. Sue Holmes. The team selected a sample of private hospitals across the country and carried out interviews with the senior management personnel to identify the issues of concern relating to the various regulations imposed upon the operation of private hospitals. From these issues and using principles of good regulatory practices, the team then formulated feasible options for further deliberation. These issues and options will be subjected to public consultation with relevant stakeholders in order to develop concrete recommendations to reduce unnecessary regulatory burdens on private hospitals. In the course of the study, MPC benefited greatly from discussions with some private hospitals, government officials and business organizations. Valuable input and feedback were received from the AGPC expert, members of the Healthcare Consultative Panel of MPC and other interested parties. MPC is grateful to all those who assisted it. The study was conducted in MPC Head Office by the Regulatory Review Directorate led by Mr. Zahid Ismail and overseen by me. Dato’ Mohd Razali Hussain Director General, MPC iii CONTENTS FOREWORD ........................................................................................................................................................................ iii ABBREVIATIONS ............................................................................................................................................................ viii GLOSSARY ............................................................................................................................................................................. x OVERVIEW ........................................................................................................................................................................ xiii RECOMMENDATIONS .................................................................................................................................................. xix CHAPTER ONE: ABOUT THE REVIEW ...................................................................................................................... 1 1.0 About the Review ......................................................................................................................................... 1 1.1 What MPC has been asked to do.................................................................................................... 1 1.2 The 10th Malaysia Plan: Modernising Business Regulation ............................................... 2 1.3 The approach and rationale of this review .................................................................................. 3 1.4 Conduct of the study .............................................................................................................................. 4 1.4 Structure of the report ........................................................................................................................... 1 CHAPTER TWO: HEALTHCARE INDUSTRY VALUE CHAIN ............................................................................. 3 2.0 Sector Analysis on Healthcare Industry ............................................................................................ 3 2.1 Healthcare Industry in Malaysia ............................................................................................................ 4 2.2 Healthcare Industry Value Chain .......................................................................................................... 5 2.3 Macroeconomic Performance .............................................................................................................. 10 2.4 Growth of Private Hospital Sector ...................................................................................................... 14 CHAPTER THREE: BEST PRACTICE REGULATIONS AND REGULATORY BURDENS .......................... 21 3.0 Cost of Regulation ..................................................................................................................................... 21 3.1 What are Unnecessary Regulatory Burdens? ............................................................................. 23 3.2 Regulation of the Private Hospitals ................................................................................................... 24 3.3 Sources of Unnecessary Regulatory Burden ............................................................................... 27 3.4 Best Practice Regulation ........................................................................................................................ 28 3.5 Regulatory approaches: Prescriptive-based, Performance-based, Principle-based and Process-based Approaches to Regulatory Design ....................................................................... 31 CHAPTER FOUR: HEALTHCARE REGULATIONS IN MALAYSIA .................................................................. 33 4.0 Regulatory Overview of Healthcare in Malaysia ......................................................................... 33 4.1 Historical development of the Existing Framework ................................................................... 33 4.2 Current Legislative Arrangements ..................................................................................................... 36 4.3 Regulators and Other Relevant Bodies........................................................................................... 41 CHAPTER FIVE: THE BURDENS OF LICENCE RENEWAL ............................................................................... 50 5.0 Regulatory Burdens in the Private Hospital Sector ................................................................... 50 5.1 Licence Renewal .......................................................................................................................................