Going Private 2023

Recently I received in my email an EDM about a seminar organised by the SMA, “Taking the Plunge – Going Into Private Practice” which will be held on 26 Aug 2023. That set me on thinking of what it means to go into private practice in the post-Covid world of 2023.

Specialists

I was just chatting with some young surgeons the other day and was astonished to find out that apparently, at least 12 orthopaedic surgeons have left for the private sector in the first six months of 2023! From anecdotal evidence, this exodus is not just limited to orthopaedics but extends to other specialties as well.

There are several interesting new trends in the current round of private sector entrants in the specialist sector. For one, very senior people, including folks in their fifties are leaving when in the past, it was those in their late thirties and early forties who usually quit. You hardly if ever hear of a fifty-something year-old leaving. Secondly, folks now don’t leave one at a time from one department. They often leave in twos and threes.

This sudden surge in folks leaving for private can be another unwanted aftermath of the Covid-19 Pandemic. Few people dared to leave for private in the Covid years of 2020 to 2022, and so now there is a rebound, as in the number of people who normally would have left for private over three years have now been compressed into a one-year period.

Of course, when folks go private, they have to go somewhere in private. And this somewhere has translated into sky-high prices and rentals in popular private hospitals. Clinic space in a big freehold-lease private hospital have reached $12,000 to $13,000 per square foot. In another large hospital in town where only about 60 years remain of its 99-year lease, prices are going at about $9000 per square foot. Rentals in both these hospitals are now frequently in the $23 to $25 per square foot range.

All this may suggest that the environment is hunky-dory outside in the private sector but this cannot be further from the truth. Firstly, severe manpower constraints, especially in nursing, have meant that private hospitals often cannot be operating at full capacity. Wards and especially operating theatres are not infrequently closed. Unless absolutely urgent or it is an emergency, one frequently cannot find a bed to admit a patient. OT slots are even harder to find and many surgeons have told this hobbit that they consider themselves very lucky if they can find an elective OT slot within three weeks for their patients. So there are some serious capacity issues that limits one’s earnings in the private sector, even though demand for their services may remain high from both local patients with integrated shield plans (IPs) and overseas patients.

Which brings us to the next topic of the day, IPs. IP reimbursement remain parsimonious and clustered at the lower half of the MOH Fee Benchmarks. MOH has just released the second edition of the Benchmarks last month. It remains to be seen if the IP providers will revise their reimbursements upwards to keep pace with the newly-revised Benchmarks.

Another perhaps even more discouraging trend we are seeing is that IP providers are seemingly very reluctant to admit new specialists to their preferred panel of providers. The common lament of new private sector specialists we hear is that they find it extremely difficult to get into IP panels. Older and more established doctors may belong to four or five panels but newer ones consider themselves lucky to be in more than one panel.

Therefore, there is possibly a “dual ossification” happening here. The first ossification is that of reimbursement rates as IP providers drag their feet to pay more to be in line with the new benchmarks, resulting in specialists’ earnings per patient or per procedure unlikely to increase significantly anytime soon (if ever). The second ossification is of preferred provider panels where these panels are largely frozen in time with very limited number of new entrants resulting in new specialists being shut out. Frankly, this hobbit thinks that regulators should state some standards for preferred panels. The size of panels should be in line with the number of policyholders an IP provider has. For example, an IP provider with 1M policyholders should have 2x the number of preferred providers that another IP provider with only 500,000 policyholders has. And it should be stated that no matter how small the pool of policyholders are, every IP provider should have at least have  a bare minimum X number of preferred providers.

These two phenomena are actually known to the specialists who are contemplating going private.

If you think about it, a specialist going private now have to face up to a quintuple-whammy of:

1. Reimbursement rates by IPs not increasing fast enough or at all
2. Getting acceptance into an IP preferred provider panel is getting more and more difficult
3. Rapidly rising prices for purchase or rental or clinic space/medical suites
4. Workload constraints due to healthcare facility capacity limits and/or manpower shortage
5. Increased competition among increasing number of private sector specialists

Yet, they are still going private. Why is this so?

This hobbit thinks that this may have to do with expectations:- Things are bad, but if you are convinced that if things are not going to get better, then even if things are bad now, it is still better to leave sooner rather than later.

Will workload and waiting times in restructured hospitals get better? Will the EMR get easier to use? In a mistake-intolerant environment, will the trend to get consultants to do more and more work that were previously done by medical officers and residents reverse itself? Will private hospital clinic space get cheaper when no one knows when will land for a new private hospital be made available?

If the answer to the above questions is a consistent “No”, then people will still leave. In other words, whether the going is good or not is not as important as whether the going is going to get worse; i.e. staying on is not tenable.

A simple example of the importance of expectation is that of private hospital and private hospital clinic or medical suite space. The last private hospital land was released 15 years ago, around 2008. No one knows when the next piece of land will be released for building a private hospital. This is exacerbated by the precedent of sky high prices paid for the last private hospital land that was put up for sale. This leads to the current situation where specialists will pay an arm and an leg to secure medical suite space. The uncertainty of when new hospital co-located medical suites will be made available in the market leads to the persistent expectation that demand will outstrip supply which in turn feeds higher prices for such assets. This can been seen by the fact that 15 years after the last release of private hospital land here, the 2008 price for that piece of land is probably still the most expensive hospital land on this planet (on a per square foot built-up area basis) today!

Things would be different if the relevant authorities are publicly committed to releasing land for say, a 300-bed private hospital every 10 or 12 years. Specialists and hospital operators will then plan accordingly with that certainty in mind, instead of pushing up prices for land and medical suite which in turn leads to more and more expensive private healthcare.

Family Physicians (FPs)

On another note, let’s turn our attention to FPs. Healthier SG has been largely welcomed by the current generation of FPs. But among younger doctors still in the public sector, many are also thinking of going private as well; either to set up their own GP clinics or groups, or to join an existing group. The reasoning is quite simple – Enrolment under Healthier SG is truly underway now. However, in a few years, it is expected that everyone will be enrolled with a FP under Healthier SG. In fact, this is one of the stated aims of Healthier SG – Everyone should have a FP. Will there be many people who still need to be enrolled with a FP in five years’ time? The only folks that may require enrolling in the future may be new PRs and citizens, who did not enjoy Healthier SG benefits when they were  previously not residents in Singapore.

In other words, the Healthier SG pie for new FPs will be getting smaller rapidly as the pool of people without Healthier SG shrinks. It is also likely that future generations of Singaporeans will sign up with the same Healthier SG providers that their parents have enrolled with. Or rather, they may have already been signed up when they were kids, and they will likely continue with the same providers when they grow up. Not unlike why this old coot is still using the same POSB bank account that he has had since Primary 1 when some nice bank officer came and signed up practically everyone in the class.

In business school, they call this “first mover advantage”. Indeed, the first mover will almost always have an advantage. But it cannot be to the point that future generations of FPs will be existentially disadvantaged. Young FPs and FPs- to-be now in the public sector are right to worry about this and policymakers could pay attention to this so as to make Healthier SG attractive for future generations of FPs.