Hospital Authority in Hong Kong Records Deficits in FY2005/06, Consolidates New Insurance Scheme

The Hospital Authority (HA)’s new chief executive, Australian Shane Solomon, yesterday presented Hong Kong’s annual report for fiscal year (FY) 2005/06, ending March 2006. The HA oversaw a leap in spend in FY2005/06, increasing by 2.5% year-on-year to HK$31.4 billion. Although the organisation has been successful in cutting internal staff costs (down by 8.1% to HK$23.0 billion from HK$25.1 billion in 2002—currently standing at 73.5% of total spend), the increase is largely due to a jump in spend on medical supplies and equipment, which rose by 6.7% to HK$3.1 billion—this stood at HK$2.6 billion back in 2002.

At the same time, income is steadily declining, down by 4.2% from HK$31.5 billion in 2002 to HK$30.1 billion (though roughly in line with income in 2005, which stood at HK$30.3 billion, or down by nearly 1%). The vast majority of the income (93.0%) still comes from government subvention, although this was down by 1.4% to HK$28.0 billion. The biggest gainer was income from medical fees net of waivers—this was up fully by 17.5% to HK$1.6 billion (5.4% of total income). In all, the overall decrease in income, coupled with the increase in spend, resulted in a major leap in deficit from HK$261, HK$220, HK$374 and HK$338 million in 2002-2005, to fully HK$1.231 billion in 2006.

Inventory spend on drugs and pharmaceuticals increased fully by 15.9% year-on-year to HK$482 million, due in large part to increased demand from the new insurance scheme. This is reflected in a significant increase in the average stock holding period, up by 7.2% to 11.9 weeks.

General cost for in-patient services also increased incrementally;, on a per-day basis this increased by 1% to HK$3,310, and per discharge it also increased by 1%, to HK$19,790. Specialist outpatient attendance charges stayed the same at HK$700..

Significant reforms are in place to combat the high average length of stay in Hong Kong’s cheap hospital beds, but these were too late for the period under examination in the HA report. Total average length of stay increased by 2.3% to 8.9, while total number of days increased from 7.2 million to 7.4 million. The increased cost of this service should begin to bite in FY2006/07 and FY2007/08.

Outlook and Implications

Hong Kong has only just fully implemented its new Drug Formulary (DF; introduced gradually from July to October 2005 but still being finalised) to standardise drug policy and utilisation, and the overall cost benefits from this will probably not begin to emerge until FY2006/07. Referral guidelines are currently being drawn up, and although the multinational drug industry is protesting that important, but expensive, drugs such as Gleevec (geftinib; Novartis (Switzerland)) are being excluded from the white list, the government is entrenched in its view of cost imperatives. At the same time, medical fees at public hospitals are being restructured to prevent citizens from using hospital beds as de facto “hotels” and shortening the average length of stay. Clearly, the major jump in the HA’s deficit in FY2005/06 will serve as a guideline for this position.