Taiwan s s Healthcare Industry. Taiwan Institute of Economic Research Dr. Julie C. L. SUN 16 January 2007
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1 Taiwan s s Healthcare Industry Taiwan Institute of Economic Research Dr. Julie C. L. SUN 16 January 2007
2 Content Taiwan s s Healthcare Industry Overview of National Health Insurance Global Budget Payment System Conclusions Taiwan Institute of Economic Research 1
3 Taiwan s s Healthcare Industry Taiwan Institute of Economic Research 2
4 Introduction Cross-section and cross-boarder analysis over time suggest over 90% of the differences in healthcare expenditure can be explained by the differences in national income (GDP). National income (GDP) is used to proxy potential healthcare development in Taiwan. As the 15th largest economy in the world, healthcare expenditure in Taiwan is low comparing to most of the industrialised nations. This also implies the healthcare industry in Taiwan stands to grow as income increases. Using the National Health Insurance as a proxy for the total value of the healthcare industry in Taiwan, the healthcare industry in Taiwan is worth some 6.2% of the national GDP, or NTD billions in 2004, in which the hospital industry takes up the lion s s share, some 40%, or NTD billions. Taiwan Institute of Economic Research 3
5 Taiwan s s GDP and Healthcare Expenditures GDP Healthcare expenditure Healthcare expenditure per capita Healthcare expenditure Country MillionUSD Million USD USD / GDP (%) Belgium 302,861 29,013 2, % Canada 857,199 84,543 2, % Denmark 211,928 19,050 3, % Finland 161,053 11,990 2, % France 1,749, ,341 2, % Germany 2,391, ,409 3, % Greece 171,961 17,044 1, % Iceland 10,570 1,108 3, % Italy 1,461, ,201 2, % Korea 605,354 33, % Netherlands 510,422 50,100 3, % New Zealand 80,108 6,459 1, % Norway 220,860 22,715 4, % Portugal 146,642 14,074 1, % Spain 836,802 64,271 1, % Taiwan 299,785 18, % United States 10,951,300 1,638,700 5, % Taiwan Institute of Economic Research 4
6 The Hospital Industry in Taiwan (1) The number of hospitals has increased from 272 to 913 between 1971 and 1988 and contracted to 556 in Despite the decline in hospital number, the number of beds has quadrupled to over 146,000 since Demographically, the number of bed per person has increased from 1.6 in 1971 to 6.4 beds per 1,000 persons in Furthermore, the sizes of hospitals have also been on the increase. The number of beds per hospital has more than tripled from 80 beds in 1971 to 263 beds in Taken as a whole, the healthcare market in Taiwan is expanding despite the decline in hospital numbers. Taiwan Institute of Economic Research 5
7 The Trend of Hospital Industry in Taiwan Year No. of Hospital No. of Bed No. of Bed per Hospital No. of Bed per 1, , , , , , , , , Taiwan Institute of Economic Research 6
8 The Hospital Industry in Taiwan (2) In 2005, there are: 22 Medical Centres, 65 Regional Hospitals, 352 District Hospitals, 38 Psychiatric Hospitals and 79 Hospitals Without Accreditation. Despite decline in hospital numbers, number of regional hospitals and larger has been on the increase. This also suggests that hospitals in Taiwan are increasing in size. The decline in hospital number where mainly due to the demise of private hospitals. Even the Taipei Municipal Hospitals have consolidated from 8 hospitals to just one. However, the number of consortiums has been on the increase. Taiwan Institute of Economic Research 7
9 The Structure of Hospital Industry in Taiwan Classification Total Public Hospital Private Hospital Medical Centre Regional Hospital District Hospital Psychiatric Hospital Hospital Without Accreditation No. of Hospital Taiwan Institute of Economic Research 8
10 The Hospital Industry in Taiwan (3) In order to better cope with the challenges facing the hospital industry in Taiwan, in terms of the changing market environment and the changes made in the National Health Insurance, hospitals have to increase scale and reduce operating costs to maintain their competitive edge. Forming conglomerates and strategic alliances would also reinforce hospitals competitiveness and brand. Taiwan Institute of Economic Research 9
11 Overview of National Health Insurance Taiwan Institute of Economic Research 10
12 Major Social Insurance in Taiwan 1950 Labor Insurance (40% pop.in 1994) 1958 Government Employee Insurance(8.1%) 1985 Farmer Insurance (8.2%) 1990 Low-income Household Insurance (0.55%) 1995 National Health Insurance (NHI) consolidate the existing health insurance programs into one Taiwan Institute of Economic Research 11
13 Characteristics of NHI Mandatory enrollment since 1995 Cover 96% population in 2001 Single-payer insurance system Government-run insurer (BNHI) Public Contract Model 94% hospitals, 90% clinics Comprehensive benefits coverage Financial responsibility shared by consumers and providers global budget payment system Taiwan Institute of Economic Research 12
14 NHI Revenue-Premium Receivable by Source NT$Billion Year The Insured The Employers Government Taiwan Institute of Economic Research 13
15 Public Satisfaction with NHI (May 29, 1995~December 27, 2001) 80% 70% 60% 50% 47.0% 50.2% 61.0% 65.4% 68.3% 66.5% 63.8% 65.6% 71.1% 67.2% 63.3% 40% 30% 20% 10% 0% 39.0% 36.5% 27.0% 22.5% 23.4% 22.0% 25.9% 24.5% 24.2% 20.1% Satisfied Unsatisfied 17.2% Taiwan Institute of Economic Research 14
16 Trends of NHI Financial Status 100 Million NT$ 280 (March, December, 2001) Healthcare Expenditures Average growth rate: 6.26% Premium revenue Average growth rate: 4.26% Taiwan Institute of Economic Research 15
17 Global Budget Payment System Taiwan Institute of Economic Research 16
18 Global Budget Payment System To enhance financial responsibility of the providers and payers by decentralization of power and responsibility thru negotiation and comanagement To sharp providers cost-effective behaviors by providing financial incentive Reallocate budget to maximize value of money Budget-driven delivery More health than health care Taiwan Institute of Economic Research 17
19 Strategies to Control Cost and to promote efficiency Macro strategies (decentralized power / responsibility) Set expenditure cap respectively (fixed budget floating conversion factor) through negotiation Allocate sector budget for different providers Set regional budget (money follow patients) Micro strategies (incentive for efficiency) Reform unit of payment (e.g. case payment) Reform fee schedules Reform utilization review strategies Taiwan Institute of Economic Research 18
20 Strategies to Control Cost and Improve Health under Global Budget Global Budget National Cost/health Target Capitation plan (carve-out) Regional budget Riskadjusted capitation Peer pressure Competition Integration Region Payment system Sector budget Division budget Payment reform FFS Case(capital Fee Schedule Guideline Provider Utilization Review Shaping behavior Taiwan Institute of Economic Research 19
21 Perspectives -Payment Reform Macro perspectives: Global budget payment for hospital Micro perspectives Quality-based payment system Case payment based on DRGs (Diagnosis Related Groups) FFS (price adjustment): Relative Value Fee Schedule Pharmaceutical Fee Schedule Taiwan Institute of Economic Research 20
22 Year Taiwan Growth Rate Medical Centre Growth Rate Regional Hospital Growth Rate District Hospital Impacts on the Hospital Industry Total Amounts (Million RVU) 407, , % 111, , % 97, , % 61,080 66,603 Cases (1,000) 342, , % 30,220 27, % 36,296 35, % 35,229 34,384 Ambulatory Amounts (Million RVU) 266, , % 51,699 51, % 48,027 51, % 34,241 36,536 Cases (1,000) 3,011 2, % -3.6% 1,185 1,221 9,575 30,067 Growth Rate 9.0% -2.4% 6.7% 8.1% 4.7% 12.0% Taiwan Institute of Economic Research % Inpatient Days (1,000)) 29,204 29, % 8,450 8, % 11,313 11, % 9,149 Amounts (Million RVU) 141, , % 59,573 59, % 49,618 54, % 26,839
23 Conclusions
24 Policy Implications (1) Taiwan National Health Insurance has dictated the development trend of the healthcare industry in Taiwan since its inception in Comparing to other OECD countries, Taiwan was able to produce a public satisfaction rate of 70% with a less than 7% GDP per person spending and 14 outpatients per person per year. In an attempt to eradicate the over-outpatients and the increasing costs burdens, the Bureau of National Health Insurance reformed the Global Budget Payment System in Taiwan Institute of Economic Research 23
25 Policy Implications (2) The Global Budget Payment System works by consultation with hospitals partake in the scheme to set an expenditure cap for the next fiscal year. The target is calculated based on the cost of services and the total service growth of the hospitals. Since the total cost of healthcare increases as national income increases, the Government has set a fixed annual increase of 4% for the National Health Insurance. Therefore, operating revenues for hospitals partake in the Global Budget Payment System are secured. Taiwan Institute of Economic Research 24
26 Thank you! Taiwan Institute of Economic Research Biotechnology Industry Study Centre Address: 5F, 16-8, Te-hui St., Taipei, 104, Taiwan. TEL: FAX:
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