Harmonizing Healthcare Financing for Health Equity: Case Studies of Cross-subsidization in Thai Public Hospitals. Presented in Joint Conference of Medical Sciences Chula-Rama-Siriraj (JCMS2015) 2015.6.6

1. Harmonizing Healthcare Financing for Health Equity:
Case Studies of Cross-subsidization in Thai Public Hospitals
Asst. Prof. Borwornsom Leerapan, MD PhD
JCMS2015: Health Equity Through Innovation and Collaboration
June 6th, 2015
Pix source: Jirapat Mobkhuntod “Treatment of human equality” (PMAC 2015 World Art Contest, 9-13 years old)

2. Special thanks to:
Ø Phatta Kirdruang, PhD
Ø Thaworn Sakulpanich, MD, MSc.
Ø Patchanee Thamwanna
Ø Utoomporn Wongsin
Ø Nutnitima Changprajuck
Ø Health Insurance System Research Office (HISRO) &
Health System Research Institute (HSRI)

3. ① Concept of cross-subsidization
– Who cross-subsidies what to whom?
② Case studies of Cross-subsidization in Thai
Public Hospitals
– Study objectives, methods, results
③ Implications for policy and practice
– What’s next for researchers & policymakers?
Presentation Outline
Pix source: online.wsj.com

4. Financing of Thai Healthcare Systems
CSMBS SSS UCS Motor Vehicle
Victim
Protection
Law
Private Health
Insurance
Feature State/Employer
welfare
Compulsory
heath insurance
with state
subsidies
State welfare Compulsory
heath insurance
for vehicle
owners
Voluntary health
insurance
Targeted groups
of beneficiaries
Civil servants,
state enterprise
employees and
dependents
Employees in
private sector and
temporary
employees in
public sector
Thai citizens
without the
coverage of
CSMBS & SSS
Victims of
vehicle accidents
General public
Source of
financing
Govt. budget Tri-party
(Employee,
employer and
govt. budget)
Govt. budget Vehicle owners Household
Method of
payment to
health facilities
Fee-for-service Capitation and
Fee-for-service
Capitation and
Fee-for-service
Fee-for-service Fee-for-service
Major problems Rapidly and
constantly rising
costs
Covering while
being employed
only
Inadequate
budget
Redundant
eligibility and
slow
disbursement
Redundant
eligibility and
slow
disbursement
Source: Adapted from Wibulpolprasert et al. (2011). Thailand Health Profile 2008-2010.

5. CGD
(CSMBS),
NHSO
(UCS)
Taxes Payers
Employer-based
private health
insurance
Individual &
Employer’s
private health
insurance
(Voluntary)
Hospitals
Medical
Specialists
Generalists
& PCPs
Patients paying out-of-pocket
Ambulatory
Facilities
Payment Mechanisms:
Salary, Fee-for-Service,
Global Budget,
Capitation, DRGs, etc.
Financing of Thai Healthcare Systems
Providers in
Public & Private Sector
Commercial
Insurance
Companies
Social
Security
Office (SSS)
Motor vehicle’s owners
(Mandatory by the Motor
Vehicle Victim Protection Law)

6. Study Rationale: High Expenditures?
Figure
source:
Benjaporn
(2007)
14
With respect to expenditure per patient, this study can merely consider the average in-
patient expenditure, because of data limitations. According to data from the electronic
payment system, the average in-patient expenditure in 2003-2006 increased over time as
shown in graph 2.6.
Graph 2.4: CSMBS expenditure during the fiscal years 1996-2007
Source: The Comptroller General’s Department and the Government Fiscal
Management Information System (GFMIS)
Note: 1 Euro = 49.4450 Baht, as of January 8, 2008
4,826 5,625 5,866 6,206 7,007 8,123
9,509
11,350 13,905
16,943
21,896
30,833
8,761 9,877 10,574 9,048
10,050 11,058 10,967
11,335 12,138 12,437 15,109
15,649
13,587 15,502
16,440
15,253
17,058 19,181
20,476 22,686
26,043
29,380
37,004
46,481
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
50,000
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
MillionBaht
Year
CSMBS Expenditure in the fiscal years 1996-2007
Out-patient In-patient Total
Ø Common assumptions of
what causes increasing
healthcare expenditures
of CSMBS:
• Overuse of NED drug?
• Overuse of brand-named
drugs?
• Limited EBM practices?
• Corruption in healthcare
sector?
Ø Cross-­‐subsidiza,on
can
be
a
missing
piece!

7. Study Rationale: Cross-subsidy?
Figure
source:
www.be2hand.com;
www.imdb.com;
workwithbrianandfelicia.com
Ø “Do hospitals use payments of a type of health services to
subsidize or support financing of other services?”
• If so, how?, at which level?, at what degree?

8. Literature Review
Ø Concepts of “cross-subsidization” or “cost-shifting” from
developed countries such as the U.S. (Morrisey 1994, Cutler 1998,
Dranove 1988, Feldman et al. 1998, Frakt 2010 & 2011).
Ø Such theorectical concepts might not be applicable in Thailand’s
healthcare systems, especially that Thai public hospitals do not
have the “ability to set prices” by themselves.
Ø There was no empirical study of cross-subsidization in the
contexts of Thai healthcare systems.

9. Study Objectives
1. To explore motivations and existing practices of the
administrators of Thai public hospitals that potentially can lead
to cross-subsidization (“to use payments of a type of health
services to support financing of other services”).
2. To demonstrate an empirical evidence related to cross-
subsidization at the hospital level, including the cost difference
and the difference of excess of revenues over expenses among
health schemes.

10. Methodology: Research Design
Ø No existing empirical studies of cross-subsidization in the
contexts of Thai healthcare system.
Ø Theoretical concepts developed in countries like the U.S. might
not be applicable in Thailand.
Ø Mixed-­‐methods
research
(MMR)
with
the
concurrent
embedded
research
design
(Creswell
et
al.,
2009).
Source: Creswell (2009). Research design: Qualitative, quantitative, and mixed methods approaches. 3rrd ed.
Ø Primarily,
the
QUAL
analysis.
Ø The
QUAN
analysis
is
used
to
compliment
the
QUAL
analysis.

11. Methodology: Source of Data
Ø Data was based on three selected public hospitals:
Ø Two medical centers with 1,000 and 1,134 beds
Ø One teaching hospital with 1,378 beds.
Ø Hospitals were purposefully selected, based on the
accessibility to the hospital administrators and the
availability of the datasets of unit cost, claims, and
reimbursement.

12. Methodology: Data Collection
Ø Qualitative data:
Ø Semi-structure interviews and focus-group interviews.
Ø 30 key informants who are responsible for the administration of
the three hospitals.
Ø Verbatim was transcribed and analyzed using ATLAS.ti 7.
Ø Quantitative data:
Ø Secondary data of inpatient care, collected at the patient level,
from the two medical centers.
Ø Unit-cost, charge, reimbursement, patient’s health scheme, DRG
codes, and basic demographic characteristics.
Ø Analysis was conducted using Stata 12.

13. Qualitative Analysis
Ø Constructivist grounded theory (Chamaz, 2005; 2006)
Ø Coding process (Strauss & Corbin 1990)

14. Ø Analyze the cost differences across health schemes
Ø By using descriptive statistics and a regression analysis.
Ø Compare the differences among charge, cost,
reimbursement, particularly ‘reimbursement-cost’ and
‘reimbursement-to-cost ratio’:
Ø Across health schemes
Ø Across MDC groups
Ø Across Age groups
Quantitative Analysis

15. Ø 13 sub-themes, categorized into 4 emerging themes.
Qualitative Findings
Sub-themes Themes
Varied understanding of cross-subsidization,
Unclear financing for non-healthcare missions
No mutual understanding or
attitudes toward concepts and
practices of cross-subsidization
Inadequate reimbursement, Non-performing
loan, Unequal negotiation power
Obstacles facing management
due to policies of the payers
Conflicting roles between quality & equity-focus
and efficiency-focus, Limited information to
manage prices and cost
Obstacles facing management
due to organizational limitations
To be missions-driven organization, To focus
more on efficiency than revenues, To do public
funds raising, To control the volume of certain
groups of patients when feasible, To advocate
changes of the payer’s policies
Organizational responses to
policies of the payers

16. #1 No Mutual Understanding or Attitudes

17. #1 No Mutual Understanding or Attitudes

18. #2 Obstacles of Financial Management

19. #2 Obstacles of Financial Management

20. #3 Responses Directly to Payer’s Policy

21. Quantitative Findings #1:
Cost Differences across Health Schemes
“Total Cost Across Health Schemes”
0
10,00020,00030,000
meanoftotalcost
CSMBS SSS UC Cash
Source:
Center
hospital
#1
Ø
The average costs per
visit vary across health
schemes, where CSMBS
patients have the highest
cost.
Ø After controlling for age,
gender, disease, LOS, the
regression analysis confirms
that the patient’s health
scheme has a significant
impact on the unit cost of
health services.

22. Quantitative Findings #2:
Profit or Loss across Health Schemes
“Difference between Reimbursement and Cost”
(by Health Scheme)
-10,000-5,000
05,000
meanofreimb_cost_diff
csmbs sss uc foreign cash Others
Source:
Center
hospital
#2
Ø
Assume that charge equals
reimbursement for foreign,
OOP, and ‘others’ groups.
Ø Reimbursement (or charge)
is much lower than the cost
for UC and foreign patients.
Ø Insufficient reimbursement
Ø Hospital’s burden to take
care of patients without health
insurance or rights (e.g. foreign
patients)

23. “Difference between Reimbursement and Cost”
(by DRG-MDC)
-30,000-20,000-10,000
0
10,000
meanofreimb_cost_diff
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 28
Source:
Center
hospital
#1
Ø
The hospital receives reimbursement more than the cost for only 5 MDC groups.
Ø Some major diagnostic categories create a large deficit for the hospital.
MDC
5
=
Diseases
&
disorders
of
the
circulatory
system
MDC
22
=
Burns
Quantitative Findings #2:
Profit or Loss across Health Schemes

24. Quantitative Findings #2:
Profit or Loss across Health Schemes
“Difference between Reimbursement and Cost”
(by Health Scheme and Age group)
-5,000
05,00010,000
<20 21-30 31-40 41-50 51-60 61-70 71+
mean of reimb_cost_diff_CS mean of reimb_cost_diff_SS
mean of reimb_cost_diff_UC mean of reimb_cost_diff_cash
Source:
Center
hospital
#1
Ø
‘Reimbursement-Cost’
is generally positive for
CSMBS, and the
difference is large for
elder patients.
Ø This difference is
negatives for almost all
age groups for UC
patients.

25. • Given our limited datasets, we found no direct evidence that
suggests hospitals cost-shift by increasing prices charged to
out-of-pocket payment (OPP) patients to compensate for the
loss.
• Yet, patterns of decision-making of hospital administrators
related to cross-subsidization were found.
• Therefore, financing policies of one health scheme also impact
other patients groups within the hospitals.
What Do Findings Tell Us?

26. Mental Models of Hospital Administrators

27. Implications for Policy and Practice
Ø To policymakers:
• Demonstrates an empirical evidence of
that current healthcare financing of
hospitals still inappropriate/inadequate.
• Suggests that payments from particular
payers potentially can be used as a
“buffer” for hospitals, potentially leading
to “passive cross-subsidization” and
inequity issues of healthcare access.
• Suggests the needs to “harmonize”
healthcare financing in a more efficient
and equitable fashion.

28. Q & A
borwornsom.lee@mahidol.ac.th
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