Capitation

NOTICE PAPER NO. 1909 
NOTICE OF QUESTION FOR ORAL ANSWER
FOR THE SITTING OF PARLIAMENT ON OR AFTER 10 MAY 2023

Name and Constituency of Member of Parliament
Mr Yip Hon Weng
MP for Yio Chu Kang

Question No. 4596 

To ask the Minister for Health with the Ministry’s shift to 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 (a) whether this will result in longer waiting times for patients to receive treatments in our hospitals; (b) how will the Ministry ensure that service quality to patients is not compromised; and (c) what are the benchmarks and performances standards set out for service quality under this model.

NOTICE PAPER NO. 1909 
NOTICE OF QUESTION FOR ORAL ANSWER
FOR THE SITTING OF PARLIAMENT ON OR AFTER 10 MAY 2023

Name and Constituency of Member of Parliament
Mr Yip Hon Weng
MP for Yio Chu Kang

Question No. 4597

To ask 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.

NOTICE PAPER NO. 1915
NOTICE OF QUESTION FOR ORAL ANSWER
FOR THE SITTING OF PARLIAMENT ON OR AFTER 15 MAY 2023
 
Name and Constituency of Member of Parliament
Ms Ng Ling Ling
MP for Ang Mo Kio GRC
 
Question No. 4598

To ask the Minister for Health with capitation funding of the budgets of healthcare clusters based on a fixed sum of money per person living in an area within the healthcare cluster (a) how will the funds be distributed in the clusters among its tertiary hospitals, specialist outpatient clinics, regional health systems and polyclinics; and (b) how will the financing model enable polyclinics to play a role in the implementation of Healthier SG.

Answer

1        Mr Deputy Speaker Sir, may I have your permission to answer Questions 1 and 2 together? Sir, my response will also cover the matters raised in a separate question, number 4598, filed by Ms Ng Ling Ling scheduled for a subsequent sitting. I would invite the Member to seek clarifications today, if need be. If the question has been addressed, it may not be necessary for her to proceed with the Question for a future sitting.

2       Sir, there are  different methods of funding for healthcare institutions. For various reasons – the 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. 

3        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.  

4        Bundled payments, which are commonly practised around the world, help 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.  

5        Patients have 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.

6        However, these mechanisms, such as bundled payments by care episode, does not in themselves incentivise the reduction of population level wastage, i.e. 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.   

7        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. 

8        Different methods of funding for healthcare, be it bundled payments or capitation, if designed and implemented well, will not negatively affect 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. 

9        From 1 Apr 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, and 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 as compared to the previous years.  As our population gets older, more residents will require higher capitation rates, and the clusters will correspondingly receive higher budgets.

10        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 the clusters will be made to take this into account.    

11        With capitation funding, 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. 

12        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 the cluster has to pass through the funding mechanism  in the form of capitation funding to their individual healthcare 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.