Hong Kong's Health System

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A Project of the Medical and Health Research Network
The University of Hong Kong
Hong Kong University Press
14/F Hing Wai Centre

7 Tin Wan Praya Road
Aberdeen
Hong Kong
www.hkupress.org
Hong Kong University Press 2006

First published in hardback 2006; reprinted 2008
This paperback edition first published 2012
ISBN 978-988-8139-55-2
All rights reserved. No portion of this publication may be reproduced or

transmitted in any form or by any means, electronic or mechanical, including
photocopy, recording, or any information storage or retrieval system, without
permission in writing from the publisher.
British Library Cataloguing-in-Publication Data

A catalogue record for this book is available from the British Library.
Printed and bound by Green Pagoda Press Ltd., Hong Kong, China
Contents
Foreword
ix
Preface
xi
List of Contributors
xv
PART I
Forces of Change
Part I Commentary
History, Ethics and Forces of Change
John Bacon-Shone and Gabriel M. Leung
1
3
1.
A Historical Review: The Colonial Legacy

Derek Gould
17
2.
Philosophy, Ethics and Societal Values in Health System Reform

Marc Roberts
27
3.
Confucian Care-Based Philosophical Foundation of Health Care

Julia Tao
41
4.
Implications of the Demographic Transition

Paul Yip, Joseph Lee and C.K. Law
61
5.
Changing Patient Expectations

Iris Chan and Mary Ann Benitez
81
6.
Comparative Health System Models in East Asia

Ruiping Fan and Ian Holliday
95
vi
Contents
7.
The Role of Public Health in Social Justice: The Next Steps in

Hong Kong
Anthony Hedley
PART II The Organisation and

Management of Health Care
109
135
Parts II & III Commentary

Organisational, Management and Quality of Care Issues
Gabriel M. Leung and John Bacon-Shone
137
8.
Operations Management in the Public Sector

Janice Johnston
187
9.
The Private-Public Interface

David Fang
199
10. The Emergence of Managed Care

Nelson Wong
209
11. Long-Term Care and Hospital Care for the Elderly

Chu Leung-Wing and Iris Chi
223
PART III Quality of Care
253
12. Quality of Care and Patient Redress: A Professional Perspective

Felice Lieh-Mak
255
13. Quality of Care and Patient Redress: A Patient Perspective

Chu Yiu-Ming
271
14. Nurses as Agents of Quality Improvement

Sophia Chan, David R. Thompson and Thomas Wong
291
15. Quality Indicators and Health Targets

Geoffrey Lieu
303
16. Clinical Governance and Quality Management

Vivian Wong, Liu Hing-Wing and Helen Poon
327
Contents
vii
PART IV The Financing of Health Care
337
Part IV Commentary
Health Financing Reform
339
17. Health Financing Trends in Greater China

Paul Gross
397
18. The Origins of Hong Kongs Domestic Health Accounts

Ravindra P. Rannan-Eliya
419
19. Health Financing in Hong Kong: The Current Status

Raymond Yeung and Chan Wai-Sum
435
20. A Systematic Approach to Reforming Hong Kongs Health Financing: 447

The Harvard Proposal
Winnie Yip and William Hsiao
21. Health Financing and Resources: New Government Proposals
Looi-Looi Low and Su-Vui Lo
461
22. The Challenges of Reforming Hong Kongs Health System

Alan Maynard
469
Epilogue
485
Notes
487
References
497
Index
535
Foreword
With the release of the Harvard Report in 1999, Hong Kong witnessed
unprecedented momentum in health care reform. A multidisciplinary group of
academic researchers at the University of Hong Kong decided to pool their
collective expertise and resources to contribute to this important policy change.
In particular, the group believes that reform must be data driven, and supported
by sound evidence. In 2000, the Medical and Health Research Network was
formed. Based at the University of Hong Kong, it comprises medical practitioners,
medical sociologists, health economists, health management specialists,
statisticians and actuarial scientists. Its objective is to offer an independent
perspective on health care issues by providing a focal point for health policy
research, analysis, advocacy and planning.
During the first year, the core group of the Network identified certain
insufficiencies of the Harvard Report and took note of the responses from the
Hong Kong community. Based on the strength of its members, study groups were
formed to examine eight different aspects, supported by postgraduate students,
postdoctoral researchers, research assistant professors and a secretariat.
Subsequently, regular meetings of the core group, workshops, debates and
seminars were organised and enthusiastically attended by a wide spectrum of
community leaders. Such activities gained recognition not only from professionals,
but also from the government and the University of Hong Kong, which decided
to provide seed funding to the Network for the first three years. At the same time,
an international network was developed so that experts from around the world
could contribute to the deliberation of these important issues. In 2002 and 2003,
for example, we held two joint workshops with the Harvard School of Public
Health for local and mainland Chinese health policy leaders. At the end of 2003,
we organised an Asia-Pacific regional research workshop on equity in health
financing across 14 jurisdictions. In July 2004, the Chinese Ministry of Health
commissioned the Network to undertake an Executive Training Programme in
Foreword
Public Health Crisis Management for mainland senior medical and health care
officials in Hong Kong.
With the economic downturn in recent years, the debate on health care policy
and health financing remained rather quiescent until 2002, when the government
started to levy a charge for patients who attend accident and emergency
departments. In line with our own strategic planning, the Network had also come
to a point where we decided to take stock of our understanding of the issues of
importance for health policy decision making. We decided to pool the expertise
and resources of the local community and of our international network. The core
group eventually endorsed the idea of a published document.
We hope that through the publication of this book we will be able to make
recommendations on issues in which we believe we have a good, evidence-based
understanding, and continue to research other important topics that we need to
know more about. It is also my sincere hope that this book will act as a stimulus
for our community to examine important areas that will eventually shape the
health care landscape in Hong Kong.
S.P. Chow
Convenor
Medical and Health Research Network
June 2006
Preface
This book began as we were searching for a compendium that discussed the
important changes to Hong Kongs health system in the wake of the Harvard
Report of 1999. Apart from the consolidation of the collective expertise and
experience of the Medical and Health Research Network and its partners, our
motivation was partly to satisfy policymakers and managers who were looking for
guidance and international best practice and experience in the vital work that
they do every day to improve the performance of the health system, and also in
response to the growing chorus of student demands for a comprehensive text
on issues in the local health system for use in masters and doctoral programmes.
Although there have already been several volumes published on the local health
sector, we found that there is a significant lack of evidence-driven documents
which take into account the multiplicity of perspectives that are required to reform
a system. In one sense, the book is best read as an anthology that covers a wide
spectrum of relevant areas and fields of enquiry. The intention is that this book
both serves as a useful local reference on Hong Kongs health system and health
services and stimulates new ideas about possible ways forward. Hence, we
deliberately do not cover the definition or derivation of concepts, the associated
underlying economic principles or other basic tenets of health reform. For these
areas, we refer readers to the references at the end of each chapter and to the
many excellent general texts that are already available, such as Getting Health Reform
Right: a Guide to Improving Performance and Equity by Marc Roberts et al. (2004) or
Milton Roemers National Health Systems of the World (1991). For a fuller treatment
of the relevant economic theory as it applies to health systems and policy, we
recommend The Economics of Health and Health Care (2003) by Folland et al., and
Handbook of Health Economics edited by Culyer and Newhouse (2000). We
concentrate on applying these general concepts and principles to the local
situation.
xii
Preface
The book is divided into four parts. Part I lays out the historical context of
health system reform in Hong Kong, and introduces the forces of change that
are shaping the new health care landscape. It then presents some of the generic
tools and perspectives that should be brought to bear in understanding and
studying the attendant problems and issues. Part II focuses on a myriad of
organisational and management issues that interest and perplex professionals and
students alike. Topics that range from long queues to the private-public interface,
from the emergence to spread of managed care concepts in the private medical
market, and from residential to tertiary care for the ever growing elderly
population make up the diverse matrix that health care managers regularly face
in our evolving system. Part III deals with a wide spectrum of issues under the
banner of quality of care. This is arguably the Achilles heel of most advanced
health systems which have been plagued by medical errors, attracting increasing
public and media scrutiny worldwide. Improving the total patient experience,
from safety to satisfaction, has become the next frontier for clinicians and
managers. Part IV is devoted to questions of macro-financing and payment
systems, with which health policy planners, system analysts and politicians often
wrestle. We also devote considerable space to debating the pros and cons of the
various reform proposals of the last decade. At the beginning of each major
section, an extended editorial commentary introduces the material that is covered
in that part of the book, and attempts to link the themed chapters to present a
gestalt that represents our collective views. JBS and GML wrote the commentary
on Part I, and GML led in the rest, with reciprocal critical comments and
subsequent revisions. The chapters at once reflect, discuss, predict and exhort a
multidisciplinary approach to finding solutions, and give a glimpse of what the
future may hold for Hong Kongs health system.
Because this book is grounded in empirical research conducted and
experience gained over the past six years made possible through the establishment
of and support from the Medical and Health Research Network, we thank first
and foremost the Vice Chancellors Fund for having the foresight and generosity
to sponsor our work. We thank S.P. Chow, the Convenor of the Network and
formerly Pro-Vice Chancellor and Dean of Medicine at the University of Hong
Kong, for initiating the project, for believing in us and for entrusting this book
to our stewardship. Both of us owe a debt of gratitude to the University of Hong
Kong, where we are on faculty. The opportunities to study, learn, write and teach
have been tremendous. The Department of Community Medicine, currently led
by Lam Tai-Hing and formerly by Anthony Hedley, has continued to be extremely
supportive of GMLs work. GML also gratefully acknowledges the Takemi program
of the Harvard School of Public Health which sponsored his sabbatical leave in
2005, during which much of the editorial commentaries and editing was
completed. There is perhaps no more fertile academic environment in which to
think, discuss and write. The Faculty of Social Sciences has continued to fund a
small part of JB-Ss salary. JB-S also learnt a great deal about how the government
Preface xiii
works in reality during his time with the Central Policy Unit from 19982001,
where he benefited greatly from the guidance of Gordon Siu and Edgar Cheng.
We would like to acknowledge institutional support from the Health, Welfare and
Food Bureau, Department of Health and Hospital Authority, which made some
of the chapters possible by helping the authors to contribute and by providing
data sources. To each of the authors who have contributed to the book, we salute
you for your wisdom and dedication to the local health system, and thank you
for sharing your views and visions for the future.
Of course, it takes a multidisciplinary team to carry out evidence-based health
policy analysis. Many people helped us with the completion of this book. First
and foremost, we thank Irene Wong, Keith Tin, Steve Chan, Pauline Woo and
Isaac Yip for their unfailing and first-class research support. GML would especially
like to acknowledge Jan Johnston, who has always been around whenever he needs
anything and is a true friend, confidante and colleague. A special vote of gratitude
goes to the dynamic duo of Cecilia Sie and Maggie Cheuk. Maggie and her
predecessor May Lam have provided exemplary administrative and logistical
support to the operation of the Network over the years. Cecilia patiently formatted
and reformatted successive drafts of the manuscript, chased after contributors and
literally put the book together. Our biggest debt of gratitude, however, must go
to our families. They patiently put up with the long hours that we spent squirreled
away editing and writing this manuscript, and without their love and
encouragement the timely completion of this work would not have been possible.
Hong Kong University Press, under the able leadership of its publisher Colin Day,
lent unstinting support to the book. Dennis Cheung is as gracious and patient
an editor as one could hope to meet. We also thank the two anonymous readers
who peer-reviewed the entire manuscript. Their critical and helpful feedback
substantially improved the content of individual chapters as well as gave the book
a much more coherent structure. All remaining errors remain ours alone. Finally,
we would like to thank the hundreds of undergraduates and postgraduates who
have participated in our courses on health and social policy over the years. Their
ideas, responses, comments and, above all, infectious enthusiasm, provided us with
the impetus and sustenance as we struggled with much of the content of the book
and translated our thoughts into words.
GML and JB-S

June 2006
John Bacon-Shone has been Director of the Social Sciences Research Centre at
the University of Hong Kong since 1990. He was previously a lecturer in the
Department of Statistics. He spent three years on secondment to the Central
Policy Unit of the Hong Kong government from 1998 to 2001. He has wide
interests in applied statistics including survey methodology, and also in policy
research, including medical, environmental and privacy policy.
Mary Ann Benitez, medical reporter at the South China Morning Post, is a long-time
Hong Kong resident and a veteran journalist interested in health care issues. She
is a graduate of the University of the Philippines.
Sophia S.C. Chan is Head of the Department of Nursing Studies, Assistant Dean
of the Faculty of Medicine and Deputy Director of the Public Health Research
Centre at the University of Hong Kong. She is a member of the Nursing Council
and advisor to many professional nursing organisations in Hong Kong. She
is a member of the Board of Trustees of the International Union for Health
Promotion and Education, and a visiting professor at many national and
international universities.
Iris Sui-Ching Chan is a social worker and former Chairman of the Alliance for
Patients Mutual Help Organisations. She has been a member of the Hospital
Authority Board and the Rehabilitation Advisory Committee since 1995. Chan
is also a member of the Committee on the Trust Fund for SARS. She was first
diagnosed with lupus erthymatosus when she was 13.
Chan Wai-Sum is Professor of Finance at the Chinese University of Hong Kong.
He holds a PhD in Applied Statistics from Temple University and is a Fellow of
the Society of Actuaries. His research interests include the modelling of actuarial
assumptions, actuarial evidence in courts, health financing, and the modelling of
long-term care insurance.
xvi
Iris Chi is the Chinese-American Golden Age Association/Frances Wu Chair for

the Chinese Elderly at the University of Southern California School of Social
Work. She has taught at the University of Hong Kong since 1987 and has served as
Director of the Sau Po Centre on Ageing since 1999. An expert in ageing health
and gerontology, Chi has participated in more than 50 studies and published more
than 150 articles.
Chu Leung-Wing is Consultant-in-Charge of the Hong Kong West Cluster Geriatrics
Service, which covers Queen Mary, Fung Yiu King, Tung Wah and Grantham
Hospitals. He is also Honorary Clinical Associate Professor at the Department of
Medicine, the University of Hong Kong and Associate Director of the Universitys
Sau Po Centre on Ageing.
Chu Yiu-Ming is the Principal Pastor of the Chai Wan Baptist Church and
Chairperson of the Hong Kong Democratic Development Network. Chu
worked tirelessly for the establishment of the Pamela Youde Nethersole Eastern
Hospital and is now Chairman of the Red Ribbon Centre Management Advisory
Committee, member of the Hong Kong Advisory Council on AIDS and was a
former member of the Public Complaints Committee of the Hospital Authority.
He is also an observer of the Independent Police Complaints Council and a board
member of many Christian organisations.
Ruiping Fan is an Assistant Professor in the Department of Public and Social
Administration at the City University of Hong Kong. His research focuses on
health policy and ethics, the philosophy of medicine and comparative philosophy.
David Fang is a private orthopaedic surgeon. He is currently medical
superintendent of St. Pauls Hospital and President of the Hong Kong Society
for Rehabilitation. He chairs the Ethics Committee of the Hong Kong Medical
Council, the Hospital Governing Committee of the MacLehose Medical
Rehabilitation Centre and the Committee on the Trust Fund for SARS. He is
Editor-in-Chief of the Journal of Orthopaedic Surgery. Fang was chairman of the
Governments Health and Medical Development Advisory Committee (1994
2002), President of the Hong Kong Academy of Medicine (19962000) and
President of the Hong Kong Medical Association (19921994).
Derek Gouldwas Principal Assistant Secretary for Health and Welfare in the Hong
Kong government from 1989 to 1998. Now retired, he works as a health care
consultant and academic, lecturing on health policy and public administration.
He is co-author (with Robin Gauld) of The Hong Kong Health Sector: Development
and Change (2002).
Paul Gross is Director of the Institute of Health Economics and Technology
Assessment in Australia and Greater China. He is a member of the editorial
advisory board of the Journal of Clinical Outcomes Management. He was also a
member of the National Health Advisory Committee of Australias National Health
List of Contributors xvii
and Medical Research Council up to 2000, and a member of the New South Wales
Health Council in its review of the New South Wales hospitals and health services
in 1999/2000.
Anthony J. Hedley was trained in the medical schools of Aberdeen and Edinburgh,
and formerly worked in endocrinology and internal medicine before moving to
the field of public health medicine. He has been an active researcher in chronic
disease epidemiology, health services research and tobacco control for nearly
40 years. In 1983 he was appointed Chair of Public Health at the University of
Glasgow, and since 1988 has been Professor of Community Medicine in Hong
Kong and Honorary Consultant to the Hospital Authority and the Hong Kong
Department of Health. He was the first Chief Censor of the Hong Kong College
of Community Medicine, and the first Chair of the Health Services Research
Grants Awards Committee. He was Chairman of the Hong Kong Council on
Smoking and Health from 1997 to 2002. In 1999 he was awarded a World Health
Organisation medal for outstanding contributions to public health.
Ian Holliday is Professor of Policy Studies and Dean of the Faculty of Humanities
and Social Sciences at the City University of Hong Kong. Part of his research
focuses on social policy in East Asia, with particular reference to health systems
and models of integration between modern scientific medicine and traditional
medicine.
William Hsiao is K. T. Li Professor of Economics at the Harvard School of Public
Health, and directs the Universitys Programme in Health Care Financing. He is a
leading authority on health system economics and devised an analytical framework
for diagnosing health system performance that has been widely applied around
the world in reforming national health systems.
Janice M. Johnston is Assistant Professor and Taught Course Coordinator at the
Department of Community Medicine of the University of Hong Kong. She
completed her Master of Health Services Administration at the University of
Alberta and PhD in health services research at the University of Hong Kong.Her
research interests include health services delivery, particularly in outpatient care,
health policy, primary care and health informatics, evidence-based practice and
medical education.
C. K. Law obtained his PhD in health financing and population projection from
the Centre of Asian Studies at the University of Hong Kong. He has worked on
population and fertility issues in Hong Kong, and has previous work experience
with the Hospital Authority, Civic Exchange and the World Health Organisation.
Joseph Lee is an honorary research fellow at the Centre of Asian Studies, University
of Hong Kong, former Deputy Commissioner of the Census and Statistics
Department of the Hong Kong Government and former Council member of
the Family Planning Association of Hong Kong. His expertise is in demography
xviii List of Contributors
and population projection. He has provided consultancy services for the

governments Central Policy Unit.
Gabriel M. Leung was appointed Director of the Chief Executives Office in 2011,
prior to which he had been Under Secretary for Food and Health since 2008.
Before joining the Hong Kong government, he was Professor in Translational
Public Health at the University of Hong Kong from 1999. He was Vice President
and Censor in Public Health Medicine of the Hong Kong College of Community
Medicine, and has served as consultant to various national and international
agencies including the World Health Organisation and World Bank. He is
inaugural Chair of the multilateral Asia Pacific Observatory on Health Systems
and Policies.
Felice Lieh-Mak was the Chair of Psychiatry at the University of Hong Kong until
she retired in 2001. She is currently the Chairperson of the Medical Council of
Hong Kong.
Geoffrey Lieu is Chairman of the Institute for Health Policy and Systems Research,
a voluntary non-profit think tank based in Hong Kong, and Chairman of the
Hong Kong Healthcare Corporation Limited, a private health care provider and
management consultancy group serving the Asia-Pacific region.
Su-Vui Lo is Head of Corporate Affairs at the Hong Kong Hospital Authority.
He was previously Head of the Research Office at the Health, Welfare and
Food Bureau. He was a former Vice-President of the Hong Kong College of
Community Medicine, and holds honorary appointments at both the University
of Hong Kong and the Chinese University of Hong Kong. His research portfolio
includes health financing, factors that influence health service utilisation,
population health status and chronic disease epidemiology.
Looi-Looi Low is a Senior Research Scientist at the Health, Welfare and Food
Bureau as well as a Research Associate at the University of Hong Kongs Sau Po
Centre on Ageing. She received her BA from the National University of Singapore
and her MSocSc (social work) from the University of Hong Kong. She has a
special interest in gerontology and policy research. Her research projects cover
issues of health financing, long-term care, social security, senior housing and
healthy ageing.
Alan Maynard is Professor of Health Economics at the University of York. He was
Founding Director of the Centre for Health Economics at York (19831995), and
is Chairman of the York Hospitals National Health Service Trust, a 700-bed acute
facility serving a population of 350,000. He teaches at the Hull-York Medical
School and the Department of Health Sciences at York, and has published
extensively in medical and health care economics journals.
xix
Ravindra P. Rannan-Eliya is Director of the Institute for Health Policy in Sri

Lanka. He qualified as a physician at Cambridge University, and holds a
doctoral degree in international health economics from Harvard University.
His research interests include health financing, health system equity, the socioeconomic implications of ageing, health expenditure measurement, social
security policy and public sector performance.
Marc Roberts, Professor of Political Economy at the Harvard School of Public
Health, has focused much of his work on health sector reform around the world.
Working with the World Bank, he has offered training sessions for senior leaders
and managers from many countries both in the US and overseas, culminating in
a multi-authored book Getting Health Reform Right in 2004. In the US, Roberts is
an active consultant helping organisations adjust to changing market conditions.
He also has continuing interest in the clinical and philosophical basis of health
policy.
Julia Tao is a Professor in the Department of Public and Social Administration
and Director of the Governance in Asia Research Centre at the City University
of Hong Kong. Her teaching and research interests are in the areas of applied
ethics, comparative social and political philosophy, Confucian philosophy and
comparative social policy. She has written and published on Confucian ethics,
bioethics, environmental issues, health care reform and virtues in government.
She is a member of the International Advisory Board of Journal of Medicine and
Philosophy, and a member of the Ethics Committee of the Hong Kong Medical
Council.
David R. Thompson has been Professor of Nursing and Director of the Nethersole
School of Nursing at the Chinese University of Hong Kong since 2002. He was
Professor of Nursing at the University of Hull (19941998), Foundation Professor
of Nursing at the University of York (19982002) and the first Professor of
Nursing Research and Development at the Department of Health in the UK, a
post he held on a part-time basis (19982001). He is also a visiting Professor at
the Universities of Queensland, Adelaide, Sheffield and Nottingham.
Nelson Wong received his medical education in England and co-founded the Allied
Medical Practices Guild, which became Hong Kongs dominant virtually integrated
group practice. He pioneered and implemented a unique intranet system with
eligibility checking of medical benefits and transaction capturing functions. Wong
has been Executive Director, CEO, Medical Director and Consultant of several
companies and Honorary Clinical Tutor of the Chinese University of Hong Kong.
He is currently the President of the Association of Group Medical Practitioners
and has served on two contract medicine committees of the Hong Kong Medical
Association. He has recently been lured out of retirement by a former competitor.
xx
Thomas K.S. Wong is Dean of the Faculty of Health and Social Sciences, Dean
of the College of Professional and Continuing Education and Chair Professor
of the School of Nursing at the Hong Kong Polytechnic University. He also
serves as a member of the Hospital Authority board, the Government Health
and Medical Development Advisory Committee, Sigma Theta Tau International
Futures Advisory Council and the World Health Organisations Regional Advisory
Committee on Health Research.
Vivian Wong was formerly a public health specialist with the World Bank,
Hospital Chief Executive of Queen Mary Hospital, and Chief Executive of the
Hospital Authority. She is currently Director (Professional Services and Medical
Development) at the Hospital Authority, where the co-authors Helen Poon,
Manager, Professional Services and Medical Development and Liu Hing-Wing,
Consultant, Clinical Effectiveness, are part of the team driving the use of Evidence
Based Medicine (EBM) in the Knowledge, Practice & Outcome approach to
deliver clinical governance throughout the organisation.
Raymond Yeung received his PhD in Economics at Queens University in Canada.
He was formerly a Programme Director at the School of Professional and
Continuing Education (SPACE) at the University of Hong Kong and continues to
serve as an Honorary Assistant Professor at the Faculties of Medicine and Social
Science of the University of Hong Kong. He was a member of the Health Care
Financing Study Group of the Government Health, Welfare and Food Bureau.
He is now a Senior Economist at Swiss Re.
Paul Yip is a Senior Lecturer in the Department of Statistics and Actuarial Science
at the University of Hong Kong and a Council Member of the Family Planning
Association of Hong Kong. His expertise is in population dynamics. He has
publishedextensively in the areas of statistics, medicine, suicide and public health.
He is also Director of the Hong Kong Jockey Club Centre for Suicide Research
and Prevention and an Executive Member of the Medical and Health Research
Network of the University of Hong Kong.
Winnie Yip is Associate Professor of International Health Economics and Policy
at the Harvard School of Public Health. She received her PhD in Economics
from the Massachusetts Institute of Technology. She has extensive experience
and has published widely on health system evaluations, especially for China,
Hong Kong and Taiwan. Her current research focuses on the effect of economic
development on health and subjective well-being in China.
PART
Forces of Change
Part I
Commentary
History, Ethics and Forces of Change

John Bacon-Shone and Gabriel M. Leung
Whenever the Hong Kong public is asked what the most important public policy
area is, the economy is usually the first priority and health care traditionally
appears a long way down the list, although it did appear in fourth position after
unemployment, governance and air pollution in the April 2005 survey that the
Chief Executive Donald Tsang quoted to illustrate that constitutional development
was not a priority (although governance clearly was!). Of course, health care
incorporates some very different elements, and it is true that immediately after
SARS hit Hong Kong with such a force, public health and hygiene has become a
much higher priority, at least for a while. In the surveys done for the Privacy
Commissioners Office in 2001 and 2004, health services and food hygiene jumped
in policy importance ratings from 7.2 to 8.0 and 7.2 to 8.3 respectively on a scale
of 0 to 10, which made them comparable in importance to unemployment, in
turn rated at 8.3 in 2004. However, public memory of problems is often shortlived, so that, for example, only about half of households still claimed to clean
their homes with 1:99 bleach solutions at least once a week in 2005. In this context,
it is easy to be cynical and conclude that unless bird flu or another infectious
disease hits Hong Kong with a vengeance, or the Hospital Authority debt reaches
the next crisis point or faces bankruptcy, health care is not an issue for the general
public. Hong Kong has some of the best health statistics in the world but the
public pay less for health care than almost any other developed society, at least
relative to GDP. It is therefore very hard to make a case for significant change,
particularly when the previous Secretary of Health, Welfare and Food had
repeatedly claimed that the funding issues were marginal. Of course, a policy
analyst should point out that when the public is asked which public policies most
need to change, the answers can be very different, and air pollution policy, for
example, which has profound public health implications, has been widely seen
as in need of urgent change by the community and rated as the third most
important policy area, just above health care, in the survey quoted above.
Hong Kongs Health System: Reflections, Perspectives and Visions
Unfortunately, even on this basis, health care has not risen to the top of public
concerns. Pollution as a public concern seems to be mainly related to vehicles
and visibility, and health care remains largely a personal concern for those
unfortunate individuals who face a long wait for medical treatment.
Although Hong Kong collectively has a very short memory, a historical
perspective often provides essential clues about the core of public policy problems.
In Chapter 1, Derek Gould revisits the history of health policy in Hong Kong and
persuasively makes the case that Hong Kong has never really had a public health
strategy, just a series of reluctant minor knee-jerk changes in response to repeated
major crises. It is fascinating to see how it seems to take bubonic plague, SARS
or camp beds in all the hospital wards before there is any structural change, with
a strong preference for tinkering, such as raising hospital fees from less than a
quarter to less than one third of median daily household income, regardless of
how high a patients income or assets are.
Arguably, when dealing with a policy that has such profound implications
for us all from the cradle to the grave, we need to start from first principles. Soon
after taking office, the Director-General of the World Health Organisation, Lee
Jong-wook, wrote that both technical excellence and political commitment have
no value unless they have an ethically sound purpose. (Lee, 2003) We strongly
endorse this call to action in articulating a coherent moral vision for health policy
formulation. Marc Roberts and Julia Taos echo for clarity in the moral basis for
health system reform (Chapters 2 and 3) should be treated seriously as Hong Kong
steps forward, once again, in 2006 to tackle the difficult task of improving its
health system after decades of inertia and political inaction. Current debates about
reform options are often confused and misguided, both intentionally for political
gain by vested interests and navely as policy makers and legislators have yet to
learn a common language of health economics and policy. There is much rhetoric
about rights, entitlement or self-responsibility, but little evidence of understanding
of the need to consider the consequences of action (or inaction) and little effort
to tease out the implications of preferring one approach to another. For instance,
is it more socially acceptable to Hong Kong residents if the Hospital Authority
charges thousands of dollars for lifesaving (or at least life-prolonging) cancer
treatment (such as Glivec for leukaemia) up to a limit of 40% of the net assets of
a patients household before the government-controlled Samaritan Fund picks
up the tab, but a general out-patient consultation for a common cold is 70%
subsidised, with an out-of-pocket outlay of only $40? We argue that such myopic
and reactive (to budgetary woes) policies are misguided at best and wrongly
discriminate against the sick. How does such a policy measure up to the
governments often touted liberal manifesto that no one shall be denied adequate
medical care due to a lack of means? Thus, moral clarity of purpose through
the systematic study of different ethical schools is of primary importance to all
who wish to engage usefully in the debate. A lead editorial in the Lancet (2004)
recently argued that:
Commentary: History, Ethics and Forces of Change
Modern public health is sadly bereft of such tough critical thinking. It

is so mired in the bureaucracy of health-service planning, so consumed
by fuelling often third-rate epidemiological research, that its true
revolutionary calling to improve the health of societies has been
all but abandoned. Todays public health community is more self-serving
than socially advancing.
Such hard-hitting criticism finds resonance in Chapter 7, in which Anthony

Hedley berates a sluggish public health bureaucracy that has changed little
substantively since the colonial days. He challenges all practitioners to renew and
reinvigorate their professional discipline as a collective whole. He points out that
vested and commercial interests have been allowed to override community benefit
and this can only change with collective action. One only needs to turn to the
current legislative debate over the banning of smoking in all public places for an
example. The government has once again yielded to the catering and
entertainment lobbies by considering exemptions to saunas, bars, mahjong
parlours and nightclubs, thereby creating an unequal competitive field for industry
operators and opening a floodgate down the slippery slope of further exemptions
and other loopholes. This Faustian bargain for apparent political expediency has
de facto traded off the health of catering and other workers as well as the attendant
economic and social costs, despite consistent overwhelming public support for a
complete ban and in contravention to the spirit of the international Framework
Convention on Tobacco Control ratified by China. However, it is hard to escape
the conclusion that only another public health catastrophe will lead to some of
the changes that he appeals for.
Contributors to this book hold different value systems and ethical
perspectives, which are apparent in their arguments and add much to the value
of this book in providing a well rounded picture. While we, as editors, do not
subscribe in a wholesale fashion to any one particular school of thought, we
believe that health has special moral importance because of its significant,
although limited, impact on opportunity (Rawls, 1972; Daniels, 1985) or a persons
set of capabilities (Sen, 2002). Hong Kong has always claimed to be a free market
economy (most famously publicised by Milton Friedmans television series).
However, that has always been balanced by very equitable education, housing and
health systems that allow significant social mobility, which enabled Hong Kong
to remain stable throughout the colonial and post handover years as well as
through economic downturns, despite the arguments about the pace of
democratic reform. In Hong Kongs low tax regime, this requires setting limits
on health spending given the important opportunity-promoting dimensions such
as education, and essential poverty protections such as social welfare and housing
that compete for limited resources (see Figure 11 in the Part IV commentary).
In other words, there are opportunity costs to investment in health and health
care that must be traded against other equally important aspects of opportunity
maximisation strategies more generally. Opponents of the scarcity or limit setting

argument often cite inefficient arrangement and claim that there is still fat to
be trimmed from the service delivery chain, which Yeoh Eng-kiong had been
noted for doing during his stewardship of the Hospital Authority and subsequently
the health policy bureau.
We highlight two theses about why some inefficiency may be unavoidable.
On the theoretical level, Nobel Laureate Kenneth J. Arrow (1963) has traced many
forms of inefficiency and market aberration to the presence of high levels of
uncertainty. This is perhaps most obvious in the health care setting where the
process of diagnosis, treatment and outcome is fraught with uncertainty and
randomness, not because of a deficiency in skill on the part of providers but due
to the inherent nature of health, illness and disease and the attendant choices
that patients and doctors make. For example, the attributable fractions of common
risk factors for major diseases are often less than 20% even though the relative
risk ratios may be quite large (say > 2), which means that the absolute explanatory
or predictive power of various risks is not strong and a substantial proportion of
observed disease remains to be explained after accounting for known risks. In
terms of treatment, the number of patients who would need to be given a
particular treatment for one adverse outcome to be avoided, or the number
needed to treat or NNT (mathematically equivalent to the reciprocal of the
absolute risk reduction), is often very large. Typically, a treatment that is
considered efficacious has an NNT of 20 to 100 and can be as high as several
hundred. Hence, usually only 1% to 5% of patients who are treated are expected
to benefit. This is because the absolute incidence of disease or bad outcome
that a treatment is supposed to prevent is generally very small: that is, most
patients, even if left untreated, will not develop the adverse effect. Until the
science of translational pharmacogenomics is perfected, and even then, it will
be impossible to predict who will or will not benefit from treatment. From an
empirical perspective, the main cost driver over time is the advance of medical
technology. Managed care in the United States has shown that although supply
and demand side strategies can temporarily ameliorate cost increases, the longrun positive rate of change has proved resilient to virtually all policy interventions.
Thus, we cannot avoid an open and frank discussion of how to set limits fairly in
any health system reform exercise.
Because the general principles of justice cannot resolve many moral
controversies regarding limit-setting decisions, Daniels and Sabin (1997) propose
that they should be supplemented with a fair process for making decisions subject
to four conditions defining accountability for reasonableness publicity,
relevance, revision and appeals, and regulative conditions. This ethical framework
has been operationalised as the benchmarks of fairness (Daniels et al., 1996) that
integrate ethical theory with the health system goals of equity, accountability and
efficiency. Marc Roberts gives his take on these and related issues in Chapter 2
from a general macro perspective, while in the following chapter, Julia Tao focuses
on the policy implications for health system reform when operating in a Confucian
society such as in Hong Kong. Often it is the assumptions that are taken for
granted highly Westernised Chinese family values which least seem to be
in need of any formal referencing that turn out to be not quite true on closer
examination and bear perhaps surprising corollaries. Coming from a Confucian
Ren perspective and buttressed by empirical survey data gathered over the recent
five years, Tao convincingly argues that health care should be seen as a positive
virtue that promotes connectedness and mutual responsibility, in contrast to the
negative Rawlsian virtue of justice as fairness that emphasises and protects
separateness between individuals according to Western traditions. While these
moral and ethical justifications may differ in their origins, their conclusions are
remarkably similar at the level of policy guidance and implementation.
Like every developed society around the world, Hong Kong is reaping the
benefits of improved public health through a continually increasing life
expectancy, which has the side effect of increasing the proportion of the elderly,
who as retirees no longer pay taxes and also require financial support and health
care. Also like most developed economies except the United States, fertility has
dropped far below replacement levels, leading the government to question where
our future labour force will come from. In Chapter 4, Paul Yip and his colleagues
explain the special twist of Hong Kongs situation, where most of the population
growth in recent years has not come from births, as Hong Kong women
increasingly marry later and only have one or two children if at all, but from family
reunions with mainland wives and children through the One Way Permit (OWP)
system. However, as shown in Figure 1, the profile of OWP holders has started to
change as the backlog of children aged under 15 has been nearly cleared up and
the yearly input of these children has dropped from a peak of 30,000 down to
10,000 in 2004. Together, these changes mean that the population growth rate
has dropped from over 3% per year, to well under 1% per year. Population size
is no longer the concern, and the focus is now on quality and age profiles. A
different perspective on Hong Kong people remaining unmarried throughout
life is shown in Figure 2, which illustrates clearly why Hong Kong men in the 1980s
needed to seek wives from the mainland as there was a large surplus of single
males who had come to Hong Kong under the touch-base policy of the 1970s,
and that the size of the pool of unmarried men and women of an age where
women are fertile seems to be finally stabilising and equalising.
The rapid integration of Hong Kong into the Pearl River Delta continues,
with the yearly number of trips across the border with the mainland exceeding
135 million for 2004, and with a mobile population of over 200,000. One major
unanswered question is how to handle medical and other public benefits for Hong
Kong permanent residents who live temporarily or permanently on the mainland.
Currently, only elderly welfare benefits are portable to the mainland, and then
only for those retiring to Guangdong, although legislators have called for an
extension to Fujian. An earlier evaluation of this scheme showed that many elderly
Figure 1 Age-sex breakdown for one way permit holders
Figure 2 Number of never married aged 2049 by sex
citizens declined this option because of their concerns about access to health care
on the mainland. Concern about elderly dependency is, of course, not unique
to Hong Kong, and the United States has introduced a gradual shift of retirement
age of one month per year, allowing people to plan for a later retirement, while
in the United Kingdom, a recent report by the Pensions Commission concludes
that increasing retirement age is an essential, but not sufficient, element of
pensions reform. Figure 3 shows what would be the effect of changing retirement
age in Hong Kong by one or two months per year on the elderly dependency
ratio. However, the public debate that is needed for such a change has not yet
taken place in Hong Kong. Although the Elderly Commission is now promoting
active ageing, much of the discussion about ageing and health care in Hong Kong
still assumes that health costs will rise dramatically as the proportion of those aged
65 and above increases. However, research elsewhere shows that this may need
some adjustment. A United States National Institutes of Health funded study on
the prevalence of severe dementia from 1982 to 1999 showed that prevalence in
1999 was only half of what was expected, given the 1982 rates and 1999 age profiles
(Corder and Manton (2001)). Conversely, as the number of wealthy elderly
citizens increases, we should expect drug companies and private health care
Figure 3 Elderly dependency ratios* under different retirement scenarios

* Defined as the number of persons aged 65 and over per 1,000 persons aged 1564.
10
providers to change focus to their needs. If drug companies are allowed to market
directly to consumers to the extent that it happens in, say, the United States, the
upward pressure on health expenditure will increase rapidly.
Concomitant with the demographic transition, there has been an
epidemiological shift away from acute diseases to more chronic health problems
in the last few decades. Hong Kong now also needs to deal with the emergence
and re-emergence of infectious diseases old and new, after decades of benign
neglect in the form of under-investment in the necessary public health
infrastructure. Human H5N1 influenza in 1997 and SARS in 2003 were loud wakeup calls to the potential human, health and economic burdens that communicable
conditions can impose on the local population. This double epidemiological
burden will stretch the capacity of the health system to its limits. The technological
and economic transitions will interact synergistically with these demographic and
epidemiological changes to compound the already heavy economic toll of meeting
the needs of the sick. In particular, the diffusion of new technology and
pharmaceuticals typically adds 1% to 2% annually to the health care budget,
although against a background of a diminishing marginal rate of return in terms
of health gains. Demand side measures that are imposed by the Hospital Authority
can only moderate this upward cost spiral to a certain extent until popular, and
perhaps ethical, concerns outweigh the negative financial consequences of
technology adoption. In parallel, as Hong Kong society becomes more
economically advanced, savvy consumers will increasingly demand more health
care and have higher expectations from the health system.
Under pressure from an increasingly vocal public buttressed by a swelling
patient rights movement (see Chapter 5 by Iris Chan and Mary Ann Benitez), in
particular since the 2003 SARS epidemic, health care processes must be seriously
rethought and reorientated to be able to climb higher along the quality gradient,
especially on the patient satisfaction scale. Two prerequisites as recommended
by the US Institute of Medicines 2001 report on quality are relevant here. First,
while health systems are designed to serve common interests that are applicable
to most patients, there must be enough flexibility to allow for individual needs
and preferences. Second, patients should have unfettered access to and control
over their own health records and relevant clinical knowledge. Care providers
should communicate effectively and share information. Fulfilling these two
conditions then places patients at the locus of control. They should be empowered
to make choices about health care decisions that affect them and share in the
decision-making process with providers. When the Personal Data Protection
Ordinance was first introduced in Hong Kong in the 1990s, there was considerable
initial resistance from health care providers to the concept that personal data
(such as health records) belonged to the patient, which has been largely
overcome, but recent complaints against private doctors make it clear that some
doctors still consider informed discussion with patients a nuisance, rather than a
means to reach negotiated decisions.
11
Patient-centred care is not a new concept, and has been a strategic priority
of the Hospital Authority almost since its establishment, at least on paper. It
initially arose out of the seminal work of Balint and colleagues (1970), who
contrasted it with illness-centred medicine. After that, this clinical concept
underwent numerous epistemological and philosophical transformations that were
eventually consolidated into a six-component set of clinical methods by Stewart
and colleagues (1995). This method stresses the importance of finding common
ground between the patient and provider, enhancing the patient-doctor
relationship while being realistic with time, resources and team building in
delivering care (Stewart et al., 1995). A comparison of this approach with the
Hospital Authoritys Patients Charter immediately points to deficiencies in the
latter. The Patients Charter outlines a series of rights and responsibilities of
individuals who attend the Hospital Authority for care. These clauses are more
reminiscent of bureaucratic legal documents than a sincere pledge to work as
partners in a positive and open relationship with a view to enhancing the
effectiveness of the health care process (Hospital Authority, 1999). Adopting a
patient-centred approach cannot be accomplished through rhetoric or public
relations alone; all care processes need to be designed from the perspective of
the consumer of health care rather than for administrative convenience and
convention. While some progress can be made in this direction with relatively
little new injection of resources, it is difficult to imagine how this can be
comprehensively realised with the financial constraints that the Hospital Authority
is currently facing and it will be likely to continue to be challenged for resources
unless radical changes in health care financing are introduced (see Part IV).
These quadruple forces for change demographic, epidemiological,
technological and economic spell out clearly that the impetus for reform is
overwhelming and unequivocal. However, before we perform major surgery on
the health system, we should take heed from the opening salvo of the Hippocratic
Oath: primum non nocere (first, do no harm). Efforts to reform health systems are
essentially large-scale social experiments that will affect millions of people. Their
impact will be more far-reaching and extend to every resident, compared to fairly
restricted disease-specific strata for the introduction of new treatment modalities
or drugs in the clinical setting. Thus, health system changes should be subjected
to the same or more rigorous standards of pre-implementation evaluation and
post-implementation monitoring. However, social experiments without systematic
review are the rule rather than the exception. Norman Daniels, a noted
philosopher and public health ethicist, contends that social experiments such as
health care reforms must require ethical and scientific review. Such a review
should include assessment of the goals and expected outcomes of reform, the
appropriateness of its design given the stated objectives and its governance
(Daniels, 2005). Furthermore an independent third-party should be accountable
for undertaking such reviews, as Anthony Hedley confirms in Chapter 7. Some
have objected to the analogy between clinical experiments and social or health
12
reforms. They claim that policy makers are already accountable through the
political process of democratic elections, via the justice system of tort law, or even
through negative market effects if private sector reforms prove harmful (Daniels,
2005). They fail to note that all of these consequences can only be realised in
retrospect when considerable harm may have already been inflicted. To make this
argument is tantamount to claiming that we can dispense with clinical trials before
drug approval and instead rely on post-marketing surveillance and the market
signals on Wall Street alone. Moreover, Hong Kong does not have fully democratic
elections via universal suffrage. Only half the seats in the Legislative Council are
returned by a one-person one-vote system and the Chief Executive is selected
by 800 representatives of vested interest groups. Bureau secretaries who are
unelected and hold major responsibility for formulating policy, are only
responsible to the Chief Executive, not directly accountable to the public.
Taking this analogy of social experiments with clinical trials further, each set
of health reforms can be thought of as an n-of-1 trial on a particular population.
In the clinical context, it is obvious that a trial with a single subject can hardly be
deemed conclusive or even credible in most cases. Usually, thousands of patients
are involved in the development and testing process of a new drug over many
years to satisfy vetting authorities of its safety and efficacy before a licence is issued.
We argue that the same line of reasoning should be extended to the evaluation
of important policy interventions. One way forward is to leverage the experience
gleaned from other health systems and to take stock of lessons learned from their
policy successes and failures to inform legislators about reform options. Studying
the health systems of other countries, or in Hong Kongs case those within China
in different settings (urban versus rural, special economic zones versus mid-size
cities and east/coastal versus west/inland), can provide other perspectives to
understand the local situation. Even if the solutions are not immediately
transferable, the commonality of experience can be highly instructive. For
instance, comparative study of health systems can scientifically generalise strategies
for achieving the end goals of equity and efficiency. The Equity in Asia-Pacific
Health Systems (EQUITAP) project that is examining equity in financing across
the Asia Pacific region is a prime example (www.equitap.org). It is a collaborative
effort of more than 15 research teams. The work involves both the development
of methodological tools and the actual assessment of the performance of health
systems in Bangladesh, China, Hong Kong, India, Indonesia, Japan, Korea,
Kyrgyzstan, Malaysia, Mongolia, Nepal, Sri Lanka, Taiwan, Thailand and Vietnam.
As Milton Roemer (1991) put it:
Thus health systems may be regarded as an array of experiments in a
global laboratory. Numerous different arrangements of resources,
activities, and interactions are being tested, and the results can be
compared. With careful control of the many variables, judgements can
be made on how well one or another system achieves equity or efficiency
or improved health status in the population.
13
Hong Kong has health financing characteristics that are similar to those of
other Asian tax-funded systems such as Bangladesh, Kyrgyzstan, India, Indonesia,
Nepal, the Philippines, Sri Lanka and Thailand, but it is the only high-income
territory in the region that relies predominantly on government general revenue
for health finance. The other major mode of financing regionally is social
insurance, which is popular with the other neighbouring high-income economies
including Japan, South Korea, Taiwan and in certain parts of mainland China.
Singapore is unique in that it collects all health finances through a major savings
vehicle called MediSave and then re-routes the money to financing instruments
that include compulsory social insurance (MediShield) and private insurance
schemes. Figure 4 summarises the financing modes and development indicators
of the EQUITAP territories. Although there are only a few major modes for
funding health care (with different consequences for any particular type
depending on other system characteristics), the service delivery systems in Asia
have a great deal more variety and consist of many permutations both within and
between countries. One prevailing feature, however, is the lack of a good primary
care-led system, in contrast to the more socialistic health systems in Europe (such
as in the UK) and Canada. The delineation of different levels of care is rather
haphazard and often reflects perverse economic incentives rather than being
based on best clinical arrangements. For instance, privately run in-patient facilities
with fewer than 10 beds are extremely common in Taiwan and Japan but are
completely absent in Hong Kong. Fan and Holliday provide an overview of
comparative health systems in China and Southeast Asia in Chapter 6, while Paul
Gross delves deeper into the particulars of health financing systems within the
Greater China region (mainland China, Hong Kong and Taiwan) in Chapter 17.
Fan and Holliday provide useful comparisons of the health systems in these
other societies that have some key values in common but have chosen radically
different solutions to the health financing problem. Japan, South Korea and
Taiwan have all chosen the social insurance route, reflecting the Japanese
influence over all three societies. Taiwan provides a particularly interesting
comparison given the involvement of William Hsiao (a contributor to Chapter
20) in recent developments in Taiwan and also in the Harvard Report in Hong
Kong. However, the experience of Japan with the impact of ageing on social
insurance suggests the need for caution, although Hong Kong has fortunately
never had the restrictions on immigration which make the Japanese ageing
problem so acute now, but the decreasing inflow of OWP holders mentioned
earlier suggests the need for Hong Kong to find new immigration strategies.
Singapore is often compared with Hong Kong as another small city-state that is
largely Chinese and indeed policy innovations are often shared with Hong Kong
in both directions. However, Fan and Holliday point out that despite Singapores
unarguably excellent performance in health care, whether measured by quality
or financial metrics, the major political differences suggest that their financing
model is not applicable in Hong Kong. While Hong Kong does now have a
14
Azertauan
Kazakistan
Uzbekistan
Iurkrnenistan
Iran
Mongolia $
North
Korea
Kyrgyztan $
Iaukistar
Afganistan
China
$$
Pakistan
Japan
$$$$
South
Korea
$$$
Nepal $
Taiwan $$$$
India
$
Hong Kong SAR $$$$
Myanmar Laoz
Bangladesh
Sri Lanka
$$
Philipines $$
Thailand
$$
Vietnam
Maiaysia
$$$
Indonesia $
Australia
Legend
$$$$ High income group
$$$ Upper-middle income group
Social insurance financed
$ Low income group
Tax financed
Life expectancy at birth (years)

Bangladesh
China
Hong Kong SAR
Indonesia
Japan
Kyrgyztan
Malaysia
Nepal
Philippines
Punjab, India
South Korea
Sri Lanka
Taiwan
Thailand
$$ Lower-middle income group
61.19
70.26
79.82
66.03
80.72
67.3
73
58.86
69.27
64.1
73.15
73.14
74.9
68.82
Infant mortality rate per 1000 live births

60
32
2.9
40.88
3.8
61
8
73.6
30.72
57.1
8.16
14.95
5.86
27.92
Figure 4 Financing modes and development indicators in EQUITAP territories
15
provident fund in place, it has a short history compared to Singapores system of

nearly 50 years. It is also hard to imagine Hong Kong approving of an increased
level of contributions to the Singaporean level of nearly 40%! While Chinas model
of combining social insurance and provident funds may seem attractive, many
Hong Kong people have direct experience of how inequitable the Chinese system
is in practice, and as noted earlier, it is precisely their experience of mainland
health care that makes most of Hong Kongs elderly people very reluctant to
consider retiring to the mainland, despite receiving the same welfare payments
as when they stay in Hong Kong. One last interesting point made by Fan and
Holliday regards the role of traditional medicine. They point out that it plays a
stronger role in South Korea and Taiwan as it is covered by social insurance.
A characteristic that underpins the present collection of chapters is the
multiplicity of perspectives and interdisciplinary input from different professions
within health care and beyond. We note that the health system of Hong Kong is
still very much driven and controlled by the medical profession, in particular
graduates of the University of Hong Kong, given its long history and monopolistic
production of doctors until 1986, when the first batch of students graduated from
the Chinese University of Hong Kong medical school . This pattern is at odds
with current trends in virtually all major advanced economies where public
administration experts and economists direct most policy and executive branches
of government, professional managers and business analysts run health care
organisations, and on the clinical patient-provider interface, there is much more
shared care between nurse consultants, rehabilitation specialists, other allied
health professionals and doctors. The recent appointment of Shane Solomon, a
non-local and non-medic, as Chief Executive of the Hospital Authority is a
refreshing and welcome change. We do not dispute that medics who are crosstrained in the various traditionally non-medical disciplines are probably the best
combination (Leung, 1998), given that they can straddle both worlds and feel
equally comfortable at the bedside and in the boardroom, but these individuals
comprise only a very small proportion of the required pool of workers. Indeed
there is a recognised sub-speciality of administrative medicine under the Hong
Kong College of Community Medicine and the Specialist Register of the Hong
Kong Medical Council. However, there are currently only 62 such fellows, only
five of whom had registered administrative medicine as their primary field with
the Medical Council by August 2006, serving Hong Kongs population of nearly
7 million. This anachronistic phenomenon harks back to the 1960s and 1970s in
the UK when Ivan Illich (1975), an Austrian-born former priest turned sociologist,
described the social, cultural and structural iatrogenesis of the modern medical
establishment. Illich followed up his sweeping, and perhaps excessively harsh,
condemnation of the increasing medicalisation of everyday life to infinite
minutiae with an insightful and impassioned review of how some professions
medicine, law and other helping disciplines have incapacitated the people
and issues that they set out to help in the first place, often through oligopolistical
16
behaviour that has led some to associate these observations with the Organisation
of the Petroleum Exporting Countries (OPEC) or Enron of today (Illich, 1977).
While not disciples of the Illich doctrine, we believe Hong Kong would be served
well if all those concerned reflect on these stinging and uncomfortable criticisms
because there is definitely room to be more inclusive in health policy formulation
and deliberation. In Chapter 14, Sophia Chan, David Thompson and Thomas
Wong, who head the nursing programmes at the three universities in Hong Kong
that offer training at the baccalaureate level and above, outline their vision of
what the evolving role of nurses may be and how nursing education and practice
could and should be a major defining force in the health system. However, doctors
have continued to attack the idea of a graduate nursing profession through letters
in the English media, so the battle is certainly not over.
We hope that the following chapters and commentaries will unsettle readers,
stimulate their creative thinking, make them question orthodoxies and inculcate
a new environment of social experimentation that is tightly sandwiched by
independent, comprehensive peer review and evaluation before and after reform
within an open and inclusive environment.
CHAPTER

Derek Gould
Derek Gould, previously Principal Assistant Secretary for Health and

Welfare, provides an essential background for understanding why
Hong Kong has the health system that it does. This short history takes
us from the early colonial days to the present, making it clear that
government policy has always been reactive rather than proactive.
Change has come in response to crisis, not as part of a broad social
agenda. Indeed, the Harvard Report is just one of a string of policy
proposals that have never been implemented once the perceived crisis
of the day passed. This raises the question of whether SARS and the
Hospital Authority deficit will lead to lasting change or more
incremental responses.
Introduction
If the history of Hong Kongs health system had to be summarised in one word,
that word would be expediency. Government policy in the area of health care
has been dominated by inactivity unless the government has been forced to act
in the direction of economic (or to a lesser extent, political) considerations. Little
has been done for purely social reasons. This can be attributed to public
indifference, which has reinforced the official philosophy of laissez-faire and
reliance on market forces.
Health is not one of Hong Kongs community values, and seldom impinges
on the collective consciousness. As with education, most people regard health as
a condition that is necessary for employment, not as a desirable end in itself. It
only becomes a personal concern when an individuals ill health interferes with
their ability to work or enjoy life. At the social level, it is an issue only when there
is a widespread threat to personal health from an epidemic or other extraneous
cause. The demand in either situation is for a symptomatic quick fix, with minimal
18
disruption and a return to normal as soon as possible. In a society that lives for
the present, there is little interest in long-term measures with benefits that cannot
be realised immediately. Emphasis is on curing now, rather than prevention for
the future. As a result of such episodic and generally indifferent public attitudes
towards health, the provision of health care has not assumed prominence on the
political agenda, either in political party manifestoes or in government
policymaking.
Government intervention has usually been forced by a crisis, rather than
being part of any long-term social strategy or policy. Even then, it has only
responded by doing the minimum necessary. In the private sector, the government
has allowed health care providers to operate largely without external regulation.
The first Medical Registration Ordinance of 1884 was only enacted after a group
of well-established doctors demanded that their monopoly be protected against
quacks with dubious qualifications. Subsequent amendments to the ordinance
enshrined the principle of professional self-regulation, absolving the government
of this responsibility. Citing promises in the Treaty of Nanking to respect Chinese
practices and customs, the government did nothing to regulate traditional Chinese
medicine until after the reversion of sovereignty. Even today, private hospitals
remain subject to minimal control, the emphasis instead being on privatelyarranged accreditation and the self-regulation of the professionals working in
them.
In the public sector, the creation of the Hospital Authority in 1990 was a
response to unbearable organisational strain, and a contemporary review of
primary care was largely confined to restructuring within the Department of
Health. Changes in the hospital fee-charging policy from 2002 only occurred in
response to serious budgetary shortfalls.
As a result of the governments general inaction, the health system as evolved
in response to economic and political influences, rather than being planned in
adherence to any social philosophy.
The Early Colonial Era (18421941)1

Consistent with its mandate to encourage free trade with minimum intervention
(Scott, 1989), the British colonial administration ran Hong Kong as a night
watchman state, providing only the barest minimum of public services that were
necessary to serve the economy. Among these was a pressing need to address the
problems of public health.
Early Hong Kong was not a healthy place in which to live. After a horrific
summer in 1843, during which one quarter of the garrison and one tenth of the
European traders died from malaria, Hong Kong Fever and other illnesses
(Endacott, 1973; Eitel, 1983; Choa, 1985), it was suggested that the colony be
abandoned in favour of a healthier location (Sayer, 1980). The governor decided
against this, but some prime residential locations were ordered to be abandoned,
19
and a nearby swamp was drained to eliminate mosquito breeding grounds

(Endacott, 1973). This reduced, but not entirely eliminated, the disease problem.
Scarcity of land led to overcrowded buildings and unsanitary living conditions.
The problem was exacerbated by primitive arrangements for water supply, waste
disposal and garbage removal. However, there was strong community resistance
to change (Endacott and Hinton, 1962; Endacott, 1964; Choa, 1985). Opposition
came not only from property owners who feared that better standards would mean
smaller profits, but also from tenants who were concerned about higher rents.
Even though the government had absolute power to enact the necessary
legislation, economic arguments prevailed over health needs, and few real changes
were made. Many continued to live in squalor, with the ever-present threat of
disease.
An outbreak of bubonic plague in 1894 prompted pressure from the
community for better public health and hygiene standards. The government
responded by appointing a Medical Officer of Health to advise on sanitation and
health matters. However, to avoid opposition from vested interests, it gave the
appointee no real authority or power (Wellington, 1930).
If the government did little to improve public hygiene during the nineteenth
century, it was similarly reluctant to become involved in the area of personal
health. The view in the Colonial Office at the time was that the provision of
medical services for the general public was not the responsibility of colonial
governments and should be left to market forces (Beaglehole and Bonita, 1997).
Public hospitals would only receive partial government funding for construction
(with money to be raised locally, and not in Britain) and had to operate selfsufficiently (Endacott, 1973). In response to pressure from the governor, the
Colonial Office had condescended to allow Hong Kong to have a colonial surgeon
(temporarily in 1843 and permanently from 1847) and a government Civil
Hospital (in borrowed accommodation, starting in 1848). However, these were
for use only by civil servants, the police and convicts (Endacott and Hinton, 1962).
Members of the public were expected to consult private practitioners for outpatient treatment (if European), traditional medicine practitioners (if Chinese)
or visit one of the private hospitals run by missionary societies. It was not until
after an expansion in 1859 that the Civil Hospital began to admit fee-paying
private patients, plus vagrants unable to obtain treatment elsewhere (Collins, 1952;
Endacott and Hinton, 1962; Choa, 1985). This decision to provide public services
to the indigent was to set the trend (policy would be too definite a word) for
the future.
The in-patient needs of the local population were largely overlooked.
Following a scandal in which it was revealed that Chinese who shunned Western
hospitals were being left to die untended in the streets and in the common
ancestral hall (I-Tsz) (Sinn, 1989), the governor proposed that a new type of
institution be built, funded jointly by the government and public subscriptions
(Collins, 1952). The outcome was the Tung Wah Hospital, which was founded in
20
1870 to provide free traditional Chinese medicine treatment. Thereafter, hospitals

came to be established separately by the government, Tung Wah and various
religious or charitable groups on an ad hoc basis in response to patient demand,
without any overall targets or coordination among providers.
The 1930s saw a split in functional responsibilities that would continue
basically unchanged for the next 50 years. Matters of environmental hygiene were
assigned to a Sanitation Department under the control of a newly established
Urban Council, while the Director of Medical Services retained responsibility for
public hospitals. However, funding, overcrowding and shortfalls in provision
continued to be problems for the Director of Medical Services (Wellington, 1937:
106, 110). Expansion plans were drawn up to address these, but were pre-empted
by the Japanese invasion in December 1941 (Endacott, 1978).
The Post-War Colonial Era (19451997)

The end of the war saw Hong Kongs health system in a shambles. Efforts to
restore public services even to their inadequate pre-war levels were overwhelmed
as returning residents and mainland refugees caused the population to quadruple
to around 2.5 million by the mid-1950s. Overcrowding and unsanitary living
conditions again predominated, leading to a surge in tuberculosis and other
communicable diseases. With under 5,000 beds available, public hospitals were
completely unable to cope. Wards were overcrowded and there were long queues
of patients waiting for treatment. To channel patients away from hospitals, the
government resorted to setting up out-patient clinics.
There was an acute shortage of qualified medical personnel. Coincidentally,
the civil war and revolution on the mainland caused an influx of refugee doctors
whose qualifications did not allow them to work here. The government
expediently solved both problems by allowing people with unregistrable medical
qualifications to practise as cheaper, second-class doctors, offering a restricted
range of treatments and services.
Although the UK defined its health care policy with the establishment of the
National Health Service in 1948, it took Hong Kong until 1962 to declare that
the policy of government is to provide, directly or indirectly, low cost or free
medical and personal health services to that large section of the community which
is unable to seek medical attention from other sources (Hong Kong Government,
1963; MacKenzie, 1962). An attempt to quantify the extent of public sector
commitment was made with the publication of a white paper entitled The
Development of Medical Services in Hong Kong (Hong Kong Government, 1964).
Subject to financial exigencies, this white paper set targets to provide public
facilities and services for the estimated 50% of the population who could not
afford to visit private practitioners and the 80% who could not afford private
hospitals. Unlike the UK, no attempt was made to integrate private sector
21
providers into the public funding or delivery system. The two sectors were to
continue to remain rigidly separated.
Although it could be argued that the 1964 white paper was driven by social
concerns, this is unlikely given the governments prevailing anti-welfare attitude.
A more economically oriented interpretation would be that the government
wanted to ensure a healthy workforce to feed Hong Kongs growing number of
factories and industrial undertakings. Whatever the motive, the expansion of
health care facilities and improvements in environmental hygiene (the latter partly
due to the introduction of a public housing programme in 1954) were successful
in reducing the incidence of infectious and communicable diseases and lowering
the infant mortality rate from third-world levels.
For the next 20 years, a booming economy enabled the government to pursue
a vigorous public hospital and clinic construction programme. However, no
substantive changes were made to the basic pre-war structure of the Medical and
Health Department, with the result that it had become increasingly monolithic
and unwieldy in terms of management and operations. Thus, despite a huge
expansion in beds, staff and finances, hospital wards remained overcrowded, with
long queues and poor services. These shortcomings were the subject of increasing
criticism by legislators and members of the public. However, the Departments
size had made it politically powerful and the Director was able to resist all calls
for change, both from within and from outside the government.
After the failure of earlier attempts, the Secretary for Health and Welfare
announced a further review in 1983. This led to publication of the Scott Report
(Scott, 1985), which recommended dissolution of the Department and its
replacement by a Hospital Authority. Years of negotiation and politicking followed.
In 1989, with the retirement of the previous Director who strenuously resisted
any change, a new Department of Health was created to take over responsibility
for public health and general out-patient clinics. The Hospital Authority was
established in 1990 and took over the operation of all government and subvented
hospitals and specialist out-patient clinics the following year.
The establishment of the Hospital Authority was a structural reorganisation
of the Medical and Health Department, not a reform of the health system as a
whole. Although it caused the improvement of hospital standards, facilities and
working conditions, it did nothing to create a better interface with private sector
providers. The splitting-off of primary care under the new Department of Health
was actually a retrograde step in terms of coordinating public sector services.
To address these and other inherited problems, the government appointed
a Working Party on Primary Health Care in 1989 (WPPHC, 1990). In its report,
published the following year, the Working Party urged the government to give
greater emphasis to primary care, which had hitherto been neglected in favour
of public hospitals. It also pointed to the confounding absence of a clearly
defined and up-to-date overall health care policy (ibid). Although the
government subsequently accepted most of the reports 102 recommendations,
22
the outcomes were internal improvements to the Department of Health, rather

than major changes to the health system as a whole.
Since the 1964 white paper first identified the target population for subsidised
health care, the standard of living in Hong Kong had greatly improved and people
had become far more affluent. Yet, in establishing the Hospital Authority and
reviewing primary health care, the government had failed to redefine the extent
of its financial responsibilities or the role of the public sector within the health
system. Was health care a form of welfare, to be offered only to the needy who
could not afford private treatment? Or, was it a service that all citizens were
entitled to use at subsidised rates? With a daily quota system that limited its services
to under 20% of all out-patient consultations, the Department of Healths
approach appeared to be catering only for the financially needy. Conversely, the
Hospital Authoritys no-turn away policy invited access by all and had resulted in
it capturing over 90% of total in-patient admissions. In addition, the government
still clung to a system of subsidising the provider, rather than identifying and
subsidising eligible patients. The result was that rich and poor alike paid the same
low, flat-rate charges at the point of use and perceived this as their entitlement.
The public sector accordingly continued to attract patients who could have
afforded to pay more or sought private treatment.
Although it had been the governments intention to increase fees to more
realistic levels in parallel with the provision of better services, it was concerned
not to do this until a system of fee waivers for the needy had been put in place
(Hong Kong Hansard, 4 April 1990; Wilson, 1990). This was fine in theory, but
failed in practice due to failure to coordinate the two component parts. The
government appointed a Medical Insurance Study Group in 1991, followed by a
committee to look at fees and waivers in 1992, both of which fed ideas into the
1993 consultation document Towards Better Health. This document proposed five
options for reforming health care financing: different fees for different types of
hospitals (acute/general, convalescent/infirmary and psychiatric) based on a fixed
percentage of their respective operating costs; charging by the standard of hospital
accommodation, plus new charges for hospital admission, drugs and accident/
emergency services; voluntary insurance; compulsory insurance; and an Oregon
Plan-type scheme to fund services according to a prioritised list (Hong Kong
Government, 1993). The problem was that by the time these proposals were made,
the Hospital Authority had already improved its services. With better services
already in place at the old prices, no one was prepared to pay more for what had
already become the expected standard. The options in the consultation document
accordingly failed to win public support. Although saying that it would be
regrettable for the reforms to be rejected (South China Morning Post, 17 August
1993), the government was not prepared to press ahead with reforms for their
own sake in the absence of any urgent financial need, and the proposals were
consequently shelved.
23
The Special Administrative Region Era (1997-Present)

The reversion of Hong Kong to Chinese sovereignty in 1997 was marked by
constitutional and political reorganisation, but no immediate change in the new
governments approach to health care. After being largely ignored by the colonial
administration, it was the Chinese medicine sector that showed the greatest
amount of activity. Under Article 148 of the Basic Law, the government undertook
to formulate policies on traditional Chinese medicine, with a view to raising it to
be on a par with Western medicine. This was to prove a long, drawn-out process.
The first step was taken in 1989, with the appointment of a Working Party on
Chinese Medicine. Its recommendations led, in 1995, to the appointment of a
Preparatory Committee that was given the task of drawing up the necessary
administrative and regulatory framework to create a parallel to the Medical
Registration Ordinance, the Pharmacy & Poisons Ordinance and the Antibiotics
Ordinance for traditional medicines and practitioners. The Committees 1997
report recommended gradual implementation, and it was reappointed for a
further two years to follow up on this. The enactment of the Chinese Medicine
Ordinance in 1999 was followed by a period of enrolling qualified practitioners
into the system. As with the Hong Kong Academy of Medicine a decade before,
the aim was to admit as many existing practitioners as possible, especially
grandfathers who were short on qualifications but long on experience. In
keeping with its doctrine of minimal involvement, the government was content
to be guided by the profession and to make policy at arms length through
surrogates on various working parties and committees.
As for the health system as a whole, the governments failure to implement
any of the options in Towards Better Health left it no closer to a solution than it
had been in 1993. Unable to come up with workable ideas in-house, the
government decided to seek outside help. It quietly approached consultants from
the Harvard School of Public Health and engaged their services to develop
financing, delivery and payment options that were better integrated than the
present ones (Information Services Department, 1998). The consultants
conclusion was that the governments policy of benign neglect had created a
defective system that was compartmentalised and dominated by the hospital sector,
with a highly variable quality of care and dubious financial sustainability (Hsiao
and Yip, 1999). If these were unwelcome truths that policy makers and providers
did not want to hear, then the proposed solution was even less palatable.
The Harvard Teams technically brilliant, but politically doomed, idea was
to dismantle the barriers between public and private sector providers and public
and private health care funding through the concept of money following the
patient. Initially, all employees and their employers would be required to
purchase health insurance and contribute to individual medical savings accounts.
Employees would pay for treatment for catastrophic and certain chronic illnesses
from either public or private providers at standard rates. Employers would be
24
commuted upon the employees retirement or disability to purchase a long-term

care plan. Ultimately, the Hospital Authority would be broken down into regional
groups. These groups would contract private practitioners and compete with
private hospital-based groups to provide enrolees with a defined package of health
care benefits in return for a prepaid fee.
Although elements of the scheme had been successfully adopted in various
countries, the idea as a whole was too radical (not to say incomprehensible) for
Hong Kong to accept. While the health system as a whole stood to benefit, each
stakeholder saw it in terms of what they would have to sacrifice to achieve it. This
was a price that they were not prepared to pay for the common good. Even with
a lack of understanding and support from key players, the government could still
have gone ahead if it had seen an overriding need to do so. However, despite a
deepening recession, the government perceived no imminent financial crisis.
Having rejected the proposals when he was Chief Executive of the Hospital
Authority, the new Secretary for Health and Welfare Dr E.K. Yeoh announced
that I dont think we need lots more money (Yeoh, 2000). With that, and the
pretext that the matter needed to be studied more, he shelved the Harvard Teams
proposals.
In 2000, the government revealed its own reform plans in a consultation
document entitled Lifelong Investment in Health. Unlike the Harvard Teams
integrated scheme, this contained discrete proposals to address the issues of health
care delivery, quality assurance and financing (Health and Welfare Bureau, 2000).
None of these were system-wide reforms. In keeping with the principle of minimal
economic intervention in the market, the financing solutions revolved mainly
around the public sector. This reflected the governments belief that raising fees
for public services to balance its own books was a more pressing need than tackling
the question of long-term health financing (South China Morning Post, 25 January
2000). The Harvard Teams doubts about financial sustainability were dismissed
on the basis that the situation may not turn out to be as predicted (Health and
Welfare Bureau, 2000), especially if proper supply-side controls on spending were
put in place.
With a greater degree of political savvy, the governments proposals appear
to have been drawn up in consultation with providers to reflect voluntary measures
for which support had already been secured. Not much was demanded of them,
and the reception from these groups in the subsequent public consultation
exercise was more positive. However, patient groups still objected to the idea of
paying higher charges to allow the public sector to prioritise our resources to
areas of greatest needs (ibid).
The Harvard Teams dire predictions started to materialise when the Hospital
Authority recorded its first in a series of annual deficits $225 million out of a
budget of $30 billion in 2001/02. This prompted the Authority Chairman to
warn that fees would be introduced in accident and emergency wards, charges
made for drugs and private bed rates raised. Links would also be improved with
25
the aim of shifting patients to the private sector (South China Morning Post, 25
January 2002).
The first of these measures a $100 fee for accident and emergency
treatment was introduced on 29 November 2002. This was followed by a general
increase in hospital and clinic charges on 1 April 2003, ending a five-year
government-wide recession-linked freeze. On the same date, several new charges
were also introduced a $10-per-item charge on dispensed drugs, a $50 hospital
admission charge and a $100 charge for first attendance at a specialist clinic. It
is worth noting (although the government did not mention it), that these new
charges had originally been proposed according to principles for targeting
financial subsidies contained in the long-abandoned 1993 consultation document
Towards Better Health (Hong Kong Government, 1993).
The proposal in the 2000 consultation document to forge better links with
the private sector was also a watered down version of what was originally outlined
in Towards Better Health. Instead of positive measures to direct the flow of patients
to either the public or private sector according to their financial status, it merely
consisted of doctors telling patients who complained of higher public charges or
long waiting times to visit a private practitioner instead. There was no sharing of
resources as envisaged in the Harvard Report, and certainly no system of money
following the patient.
The successive outbreaks of H5N1 avian influenza in 1997, enterovirus-71 in
1998, H5N1 again in 2001 and, most significantly, SARS in 2003 all showed the
weaknesses, fragmentation and lack of communication among Hong Kongs
health care providers. Remedial measures introduced after each outbreak had
failed to overcome these problems. A substantive solution was not found until
2004 when the Department of Health diverted $1 billion and 1,300 of its staff to
establish a new Centre for Health Protection that coordinated efforts across all
sectors with a unified command structure having responsibility, authority and
accountability for the prevention and control of communicable disease (SARS
Expert Committee, 2003).
The strain imposed on the Hospital Authoritys resources by the SARS
outbreak led to statements from the Secretary for Health, Welfare and Food that
a compensatory increase in medical fees could not be ruled out (South China
Morning Post, 26 October 2003) and that the fee for accident and emergency
treatment could soon rise by 50%, along with a drastic increase in in-patient
charges (South China Morning Post, 21 January 2005). Although the primary
purpose of this additional revenue would be to help the government to balance
its books, the move received surprising support from private hospital operators
(South China Morning Post, 26 January 2005). Theirs was undoubtedly the hope
that higher public fees might finally give effect to the governments repeatedly
made proposals to divert better-off patients from the over-utilised public hospitals
to the under-utilised private sector, which would solve the financial woes of both
sides in the process.
26
The remit of the Hospital Authority was, ostensibly, to treat the financially
needy. However, despite growing community affluence, the Authoritys market
share had been steadily increasing instead of decreasing. By 2005, it was treating
95% of all in-patients, only 15% of whom were actually poor (South China Morning
Post, 1 February 2005).
Matters came to a head at the end of January 2005 when the new Secretary
for Health, Welfare and Food, York Chow, admitted what his predecessor had
steadfastly refused to accept that it was financially unsustainable for the Hospital
Authority to provide everything to everyone. The clock would therefore be turned
back 40 years and the government would revert to the policy first outlined in the
1964 white paper. Henceforth, the Hospital Authority would treat only the needy
who could not obtain treatment from the private sector emergency cases, poor
people and high-risk/complicated cases. The government would begin
consultations on this proposal in 2007 (South China Morning Post, 7 June 2006).
Conclusion
Hong Kongs health system has come a long way in its 160-year history. However,
compared to developed countries, it still has a long way to go. Most of the advances
made to date have been in the area of facilities and technology, rather than in
overall organisation. Without a mechanism to properly coordinate providers,
patients and resources, what exists now can be called a system in name only.
The governments latest solutions are directed at solving immediate public sector
financial problems, and not at meeting the long-term needs of patients or of the
health system as a whole.
CHAPTER
Philosophy, Ethics and Societal Values in Health

System Reform
Marc Roberts
Marc Roberts, a political economist and international health reform

consultant, has extensive experience in Hong Kong and China, and
delivers courses for senior policy makers and trainers in the region. He
offers his take on how moral philosophy, ethics and politics collectively
determine the foundation on which key decisions about health system
changes are made. Roberts devotes considerable space to defining and
specifying the concept of equity as it relates to financing and providing
health care, and then considers the role of markets and risk protection
in the designing of health reform. He stresses that societal values are
the ultimate control knob of a health system. Through his ethical
prism, Roberts analyses the ramifications of different reform proposals
and concludes that a social insurance model best fits Hong Kongs
objective of universal access to care, and that competition through
regulated markets can improve quality and create long-term value.
Introduction
As Hong Kong reforms its health system, it will face difficult decisions about
burdens and benefits, priorities and responsibilities. These choices will and should
reflect Hong Kongs social values as processed by its political institutions. The
important ethical aspects of these decisions are, however, not always easy to see
amidst the noise and confusion of vigorous public debate.
Some of the issues that the territory will face are factual, for example, how
various kinds of health care markets would function in the Hong Kong context.
Others turn on questions of values, such as whether the government should try
to save individuals from the adverse consequences of their own ill-advised choices.
As much recent attention in Hong Kong has focused on factual questions, most
of the following discussion will be devoted to the ethical and value aspects of policy
28
choice. However, empirical and ethical issues are often so intertwined that some
attention to the facts is needed if sound policy recommendations are to be
formulated.
To begin with, I will review the economic and medical context for the current
debate. I will then explore alternative notions of equity and fairness and what
they imply for health financing and care provision. My attention will then turn
to the role and limits of patient choice in health care, especially in the context
of risk protection and health insurance. Finally, I will review some conclusions
that have been developed along the way.
Any suggestions that I offer will be deeply conditional: their acceptability
depends on whether or not the reader shares various specific ethical
commitments. Thus, the choices that Hong Kong makes in the years ahead will
necessarily reflect the value commitments of the choosers, for which they, and
they alone, will have to take responsibility.
Context
Recent debates in Hong Kong have raised concerns about the future cost and
quality of health care, and about how to best organise, finance and pay for that
care. To understand what is at stake, we have to review several aspects of the
context of that debate.
Health Care Costs

Hong Kong, like many countries around the world, is confronted with steadily
rising health care costs. The strongest driver here is new technology, including
new pharmaceuticals. Such new technology can improve outcomes, but at the
price of increasing costs, such as organ transplants. Even when new technology
lowers unit costs, its widespread adoption can increase total costs, and there is
every reason to believe that these trends will continue in the years ahead.
The forces on the demand side are also increasing costs, and include higher
incomes, rising expectations and an ageing population. People with more money
to spend typically want to spend some of it on better health care. In addition,
Hong Kong is firmly interconnected with global society. Many of its citizens expect
to get the latest and best care that is available. Ageing, too, raises costs. As body
parts wear out, clog up and lose their elasticity, populations exhibit increasing
rates of chronic disease. Those with hypertension, high cholesterol, depression
or diabetes offer great market opportunities to the pharmaceutical sector, because
they have to take their medications forever. Caring for the acute episodes that
these chronic conditions produce, such as heart attacks, adds greatly to the costs
of the health system.
29
In most advanced economies, such forces have increased health care costs
above the rate of inflation at 3% to 5% per year. Economic growth has led some
in Hong Kong to feel that its current health system will continue to be affordable
for the foreseeable future. However, given these cost drivers, even favourable
economic times will only postpone the financial crunch that inevitably lurks in
the territorys future.
The Nature of Medical Practice

Hong Kong, like other nations, must confront the problems that arise from the
fact that medicine is a craft that is informed by science. Much of what doctors do
has never been tested by careful scientific experiment. Instead, it is based on the
informed judgement of previous generations of physicians, passed down through
the apprenticeship system of medical training. As the recent experience with
hormone replacement therapy illustrates, even widely accepted treatments can
turn out to be useless (or even harmful) when studied carefully. Human beings
have a great capacity to recover from all but the most serious diseases without
medical aid. If it were otherwise, the planet could never have been populated
during the thousands of years in which there was no real medical science. As many
patients recover regardless of how they are treated, doctors conclude often
incorrectly that their treatment was the reason. Add in the placebo effect, which
means that even useless care makes many patients feel better, and one can see
how great the difficulties are of knowing whether medicine really works or not.
Large-scale, well-designed clinical trials, which are the only scientifically sound
way to establish clinical practice, have never been undertaken for many treatments.
In addition, patients vary enormously: anti-hypertensive medication that works
well on one individual will not necessarily be optimal for another. As a result,
doctors must rely on their own clinical judgement to fill in the gaps in the available
science, but all too often appeals to this judgement become an excuse for ignoring
the science altogether, and simply continuing to do what one has done in the
past. When faced with evidence that what they are doing is wrong, physicians often
feel it is a winning argument to reply, not in my experience, my patients are
different or my clinical judgement tells me otherwise.
The resistance of physicians to so-called evidence-based decision-making
also has its roots in their training and professional experience. Young doctors in
training encounter life or death decisions that have to be made quickly with little
or no guidance. To survive the resulting stress and guilt, trainees have to develop
confidence in their own judgement. Once they are in practice, however, doctors
discover that their colleagues, who may have had different training, make many
decisions differently. To preserve everyones autonomy, the profession has adopted
norms of mutual tolerance: you do it your way doctor, and Ill do it mine. As a
result, medical societies only discipline members in the most egregious cases, and
often not even then.
30
In Hong Kong, as in other parts of Asia, the co-existence of Western biomedical practice with traditional medical practice is important. Within each
tradition, there is a range of attitudes towards the alternative mode of practice,
from sympathy to scepticism. Interestingly enough, the traditions are increasingly
crossing over. Advanced imaging technology is now often used everywhere, and
some traditional Chinese practices have proven to be helpful in rigorous Westernstyle studies, especially for patients with chronic disease. Nevertheless, these
divisions make it that much more difficult to reach an agreement on appropriate
patterns of care, funding and payment.
These limits on medical science make quality control and rational resource
use noticeably more difficult. If doctors disagree on the best care, then should
we rely on a government regulator or on patients to make clinical decisions in
their stead? If the consequences of care are unclear, then how can health system
managers decide which activities to fund? If medical culture places a high
premium on autonomy, then how can regulation be used to insure high quality
care, including policies that cut across the dividing line of different practice
traditions? These are some of the difficult issues with which Hong Kong will have
to grapple in the coming decade.
Conflicting Views of the Role of Markets

Future health policy in Hong Kong will also be shaped by conflicting views about
the appropriate role of markets. Economists claim that a system of well-functioning
markets will achieve what is called allocative efficiency, in which consumers will
only receive goods when their willingness to pay exceeds the costs of production.
This is a good thing if the goal of public policy is to make people happy by
responding to demands in the marketplace, but buyers who arent willing or able
to purchase something (because they are confused, poor, or want something else)
do without.
However, the political world is far from unanimous that in areas such as health
care the goal should be to give people what they want, as opposed, for example,
to what experts determine will most improve health or advance social priorities.
There is also great dispute about whether health care buyers are able to choose
wisely enough to advance their own happiness. In addition, as doctors often decide
for the patient, it is possible that markets will respond less to the patients wishes
and more to the doctors financial interests.
Markets have other virtues besides allocative efficiency. Competition can force
managers to be efficient and to seek ways to lower costs and improve quality. It
can also encourage innovation, as firms vie for competitive advantage. The rapid
innovation in pharmaceuticals and medical technology are examples of just such
a process.
31
The challenge for health care policy in Hong Kong will be to capture the
long run benefits of markets while avoiding some of their undesirable short-term
consequences. When consumers have to pay for medical care, their first response
is often to go without preventive services. Moreover, in the face of rising prices,
the people reduce their consumption more than the rich. Hence, if the
government wants to raise prices to encourage more sensible resource use, ways
need to be found to do so without hurting the poor, assuming, of course, that
there is a commitment to certain views about equity in health care delivery.
Equity Considerations in Health Reform in Hong Kong

The last point makes it clear that in pursuing health system reform, Hong Kong
will confront serious choices about how much attention to pay to the equity
consequences of various policy options. How important is it to Hong Kong to
provide minimum levels of service to all, and what should that minimum level
include? What distribution of costs would be seen as fair? These are obviously
ethical as much as, or even more so than, they are technical decisions.
Philosophical Perspectives on Equity

Philosophers are far from unanimous about what constitutes an equitable
outcome. So-called egalitarian liberals make the strongest arguments in favour
of helping those who are the poorest. Basing their ideas on the works of the
German philosopher Immanuel Kant, they argue that all individuals are entitled
to a certain level of respect based on the shared capacity for reasoned action and
moral conduct. To express that respect, these writers argue, we are obliged to
provide everyone with a minimum range of rights and opportunities, because if
that was not the case others would not have a chance to make choices and live
out their lives in ways that express their human potential.
Egalitarian liberals disagree over what exactly is needed to provide for
everyone in the health care arena, and in particular over whether everyone should
have a right to exactly the same care (the so-called relative equity view). Even
some egalitarians say that such a view goes too far, and that as long as the
conditions of the poor meet a minimum standard, it is acceptable for the rich to
receive more than the poor, which is the so-called absolute equity perspective.
Another way to put the same point is to say that some egalitarians are more
egalitarian than others. The followers of the American philosopher John Rawls,
for example, favour very extensive redistribution because society has a special
obligation to help its poorest members, but not all egalitarians would go that far.
Health policy makers who rely on other philosophical traditions are not
especially concerned about equity. Some economists argue, for example, that it
32
does not make sense to give priority to helping the poorest if doing so is not cost
effective. Instead, money should be spent where it does the most good in terms
of the overall health status of the population. This perspective (called
utilitarianism by philosophers) advocates pursuing the greatest good for the
greatest number, and those whom it is too expensive to help get left out or left
behind.
Another distinct philosophical perspective is embodied in the neo-Confucian
ethic that is prevalent in parts of Asia, including Hong Kong. This philosophy
emphasises the five relationships, which cover the development of a persons
moral character and individual and family responsibility. It is notably less
orientated towards a reliance on state action to solve social problems than the
social democratic policies that are advocated in the West. How then do these
various attitudes towards equity play out in Hong Kongs health policy choices?
Equity in Health Care Provision

To be explicit, in the years ahead Hong Kong will have to decide what differences
in health care services are ethically acceptable. There are many complexities here.
Are equity concerns the same for all of the conditions for which people seek
medical help, from coronary artery disease to HIV, and from traumatic injury to
unhappiness with the shape of various parts of the body? Suppose that someone
were to argue that trauma care should be exactly the same for all, that for coronary
artery disease everyone should get some minimum level of care and that when it
comes to cosmetic surgery, there should be no entitlement whatsoever. How could
such distinctions be justified? Does the seriousness of the conditions matter, and
if so in whose eyes? Does it matter if the best care for a condition provides only
small gains over fairly good care, but is much more expensive? Should a citizens
entitlement increase as the nations economy improves?
The practical issue here is the services that the public system in Hong Kong
should make available to all of its citizens. Suppose that two drugs are available
for treating a condition, and that the new and more popular drug is much more
expensive but is not noticeably better than a proven older alternative. Which drug
should the public system provide, given that people in the upper income bracket
are likely to demand (and pay for) the new expensive compound in the private
sector? If Hong Kong were to explicitly embrace an absolute equity view, then
it might conclude that the older drug met the minimum requirements of fairness,
even though that policy would result in some differences in care between rich
and poor.
An equally important and difficult set of issues arises, because there are
multiple dimensions to each encounter between the patient and the health care
system. On the service side, there are issues of amenity, convenience and interpersonal treatment. On the clinical side, quality depends upon physician decision
33
making and skill, on the availability of needed input and on how the overall care
process is organised.
Are Hong Kongs obligations to provide equitable care the same across all
of these dimensions? Singapore, for example, has clearly answered that question
in the negative. In its public system, the amenity level and cost of different classes
of service varies considerably, from eight-bed wards to luxurious private rooms.
At the same time, the announced policy is that the clinical quality of these various
services should be uniform.
In contrast, some countries with strong egalitarian commitments, such as
Germany and Australia, allow patients who pay for supplemental private insurance
to have a preferential choice of doctors. They then get better access to the most
senior practitioners and often better quality care.
Here again, Hong Kong has difficult choices to make. How important is it
to ensure that all patients have equal access to all hospitals, public and private
alike? Should the poor be asked to wait longer to be seen, or to sit on harder
chairs, or to be treated less considerately or to have less privacy in their hospital
beds? Should patients who cannot afford to pay be practised upon only by young
doctors in training? Saying that Hong Kong has a commitment to an idea such
as equal access only raises a whole series of difficult questions that will have to be
answered as new policies unfold.
Equity in Financing
In addition to questions of equity in service provision, Hong Kong also faces
serious equity choices in deciding how to finance its health system. When
discussing tax equity, economists focus on whether or not a tax is progressive. A
progressive tax takes a higher proportion of the income of higher income
households. In contrast, a regressive tax takes a higher proportion of the income
of low-income households. (A proportional tax does neither it takes the same
proportion from all.) Even regressive taxes, however, can require upper income
families to pay more than lower income families; it is just that in percentage terms
they pay less. Thus, a health system financed by regressive taxes could still be
redistributive in the sense that poor people might get more in services than they
have paid for, and rich people less.
User fees or private insurance premiums that do not depend on income are
extremely regressive: as everyone pays the same, they take a much higher
percentage of the income of those who have lower income levels. Health systems
that are financed from such sources are generally not redistributive, as payment
varies with use (or risk) but not with income. The United States has such a private
insurance system for the non-aged population. This leaves many of the poor
without insurance coverage, simply because they cannot afford it. Thus, any system
that wants to offer a minimum level of care to all must be financed in other ways.
34
From an egalitarian perspective, it is very important that financing

arrangements do not put too much of a burden on the poor, because a loss of
income to those with little income has the effect of depriving them of their
essential opportunities. Thus, egalitarians argue that out of pocket costs should
neither be so high that they lead to the poor avoiding necessary medical care,
nor should such costs deprive low-income households of the funds that they need
to acquire other necessities, such as food and shelter. From an egalitarian
perspective, the greater the use that Hong Kong makes of user fees or private
insurance, the greater is the risk of these undesirable consequences.
Many egalitarian liberals go even further, and favour using the most
progressive financing sources possible to achieve the maximum amount of
redistribution. For such advocates, even a payroll tax is a mixed blessing. Economic
evidence suggests that most of the burden of such taxes is shifted to workers
regardless of who sends the cheque to the Ministry of Finance. In addition, upper
income individuals often receive substantial portions of their income from nonwage sources such as dividends, interest and profit, which escape payroll taxation.
This makes payroll taxes mildly regressive relative to overall income, especially
in countries in which the total contributions by any one individual are capped.
Nevertheless, because such a financing arrangement places a higher total burden
on the rich, it does make some redistribution possible, unlike user fees or
premium-based private insurance.
The Role of Markets

A closely related set of ethical issues involves questions about the appropriate role
of the market in the health system. The key questions here revolve around how
well or badly consumers are able to choose in the health arena, and on the
incentive effects that such choice generates for providers.
Patient Choice and Health Care Quality

This discussion of the nature of medical practice helps to explain why even
physicians often disagree about what type of care is best. Indeed, even after
treatment, whether the patient gets well or not may reflect random chance rather
than the appropriateness of the care that they received. As they generally cannot
judge clinical quality, patients rely instead on various proxy measures, such as
reputation, credentials, service quality or the availability of input, such as an
impressive physical plant. These can be very poorly correlated with clinical
excellence just consider the much respected doctor in England who killed over
200 patients. Indeed, there are many situations in which patients inappropriately
judge quality, such as when they become unhappy with a doctor who refuses to
supply useless antibiotics to treat a viral infection.
35
The lesson here for Hong Kong is that it is very risky to rely on an unfettered
market to ensure clinical quality. Unfortunately, using regulation to improve
clinical quality is quite difficult, given the resistance of physicians to the external
control of their clinical practice. International experience suggests that
programmes which are developed cooperatively amongst groups of physicians are
more likely to influence their clinical behaviour. This gives providers some sense
that they have participated in, and have had some control over, the rules that
they now have to obey.
If, in addition, consumer choice is to discipline providers, then there must
be significant public effort to evaluate care and publish data on the results of
care, or patients will have nothing upon which to base their choices. However,
even in the United States, experience with such effort is equivocal. For example,
the publication of mortality rates for cardiac surgery by hospitals in several states
has had only a modest effect on utilisation.
One way for Hong Kong to increase the incentives for providers to engage
in quality improvement would be to create an expert buyer who could judge
quality and shop accordingly. There is some experience with this option in the
United States in the Medicare programme and with the regional health authorities
in the United Kingdom. Some employers in the United States have also tried to
become quality-sensitive purchasers. Such a strategy in turn is more effective if
sellers (i.e. doctors) are organised into groups so that there are a manageably
moderate number of meaningful supply options from which buyers can choose.
Patient Choice and the Quantity of Health Care

Economists are concerned that when health care is free, patients demand too
much of it. The resources that are being consumed could produce output that
consumers would value more than they value the free health care they receive.
Economists claim that free choice together with market prices allows consumers
to buy varying amounts of care (or insurance) depending on their individual
preferences.
I noted above that user fees, which are designed to discourage low-value use,
fall much more heavily on the poor. This suggests a need to find ways to exempt
the poor from any user fees that are imposed, and to avoid imposing such fees
on cost-effective preventive care.
User fees also raise the possibility of offsetting the effects of changes in
provider behaviour. Once patients pay something for each unit of service, doctors
have an incentive to get them to consume more. This can occur even if doctors
do not personally keep the payments, but pass them on to the group or hospital
of which they are a part. Thus, a policy that is designed to lower use may actually
increase supplier-induced demand. Given the limited capacity of regulatory
processes to control physicians, this should be a serious concern for policy makers
in Hong Kong.
36
For egalitarians who want to ensure that everyone has a minimum quality
and quantity of life, there is little reason to be concerned about markets for
services that are not part of producing that health status minimum. Cosmetic
surgery, elaborate dental implants, or in vitro fertilisation for couples that
voluntarily delay conception may not be seen as procedures that carry special,
philosophically-based access protection.
Market Structures and Incentive Effects

If Hong Kong is to benefit from the long-term incentive effects of competitive
markets, then it must ensure that enough sellers produce the necessary rivalry.
This places at centre stage the whole question of the future of the Hospital
Authority.
I have noted that one way to deal with quality issues is to have an expert buyer
confront a set of competitive sellers. To do this, the United Kingdom and New
Zealand have both pursued what is called purchaser-provider separation, which
entails the division of public health services into buying and selling entities. In
Hong Kong, one way to do this would be to create a new health insurance system
that could play the purchaser role. The Hospital Authority could then be divided
into competing selling units, which would compete both with each other and with
the private sector for contracts from the new purchasing agency.
Such an arrangement would not allow individuals to vary the amount or type
of health insurance that they purchase in response to their own circumstances
and preferences, but it would introduce substantial competitive pressures on
health care providers, which would represent an important change in incentives
given the continuing cost increases.
Risk Protection as a Critical Issue

Concerns about equity and the proper role of the market come into sharp focus
when the issue of risk protection in Hong Kong is considered. Risk protection
means ensuring that citizens, and especially poor citizens, do not face a choice
between either impoverishment or insufficient care when serious illness strikes.
This issue takes on special meaning in Hong Kong, with its strong cultural
traditions of individual thrift and family responsibility, which are, after all,
mechanisms for citizens to deal with risk outside the purview of public policy.
Consumer Choice in Insurance Markets

Economists who favour the use of markets for insurance contend that the right
degree of risk protection is simply that which individuals and families provide
37
for themselves through savings and private insurance purchases. Egalitarians, in

contrast, typically argue for social insurance with redistributive financing and
uniform benefits, exactly because premium-based insurance imposes a very
regressive burden and excludes the poor from the insurance system. As a result,
the financially vulnerable are left without risk protection.
Critics of private insurance say it is not only unfair, but also difficult to
organise because real health insurance markets do not closely follow the
economists idealised image. One particular problem revolves around the
prevalence of chronic disease in relatively affluent societies, including Hong Kong.
In such situations, health insurance companies have a great incentive to either
refuse to sell policies to the sick, or to charge them such high rates as to make
insurance unaffordable. If the government responds by setting uniform rates, then
healthy people begin to shun insurance as a bad deal. Only the ill then purchase
insurance, and the resulting adverse selection raises costs and rates ever higher.
Sellers can be expected to respond by cancelling the policies of the sick, not
renewing them, or not selling them in the first place, which are practices known
as cream skimming.
In addition, health insurance purchasing decisions are extremely difficult for
an individual to make rationally, as they involve risks and costs that are difficult
to calibrate. The extensive literature on individual choices in conditions of
uncertainty reveals that such decisions are often flawed and inconsistent. Critics
of private insurance argue that the administrative costs of such a system (known
as transaction costs) are high, and that the customer choices it produces are
imperfect.
In the United States, most insurance is purchased for groups of employees
by large employers. This diminishes some of these operational problems, but also
means that individuals have little real choice about their insurance coverage,
which is exactly the type of choice that advocates of private markets want.
Moreover, the market for small group and individual policies in many states in
the US exhibits just the undesirable dynamics that have been discussed. Add in
the potential loss of risk pooling and lack of equity on the financing side, and
one can see why many nations have adopted social insurance that is supported
by payroll tax instead.
Savings Accounts
An alternative to insurance that is under active consideration in Hong Kong is a
system called the medical savings account. Under this system, citizens contribute
a fixed percentage of their income to individual accounts during their working
years. These accounts, in turn, are used to pay for their own health care expenses
once citizens reach old age and their medical expenses increase. Part of the
argument for a savings account system is that patients will eventually have to spend
38
their own money on care and will be more careful about their purchasing
decisions.
The first point about such a system is that it does not provide either risk
pooling or redistribution. The healthy do not pay for the sick, and the rich do
not pay for the poor. Instead, as the name suggests, it is simply a compulsory
savings system that forces individuals to consume less when they are young so they
are able to purchase more health care when they are old. Such a plan is clearly
not based on the kind of egalitarianism that has been behind Hong Kongs
extensive free public system in the past, but seems to be more informed by neoConfucian ideas of individual and family responsibility.
The experience in Singapore makes it clear that medical savings accounts
cannot cover high-cost medical care for the many middle-aged who suffer from
acute events such as heart attacks, trauma or strokes. This is simply because many
individuals will not have built up sufficient account balances. Similarly, even
amongst the old, such accounts cannot fully fund care for many of those who
develop extremely costly long-term conditions, such as many neurological
disorders, precisely because they provide no risk pooling. Such conditions are so
expensive that even substantial account balances are all too quickly exhausted.
The lack of risk protection is especially serious for low-income individuals, because
their account balances grow more slowly and never accumulate to the levels
achieved by the accounts of individuals with higher incomes.
In addition, for the kinds of serious illnesses that such accounts are designed
to cover, there is little evidence that consumption decisions are highly price
sensitive, and so it is not clear how much they would lead to less wasteful care.
Moreover, any effect that there is on consumption will be noticeably greater for
lower income individuals because they will fear exhausting, or will have already
exhausted, their modest account balances. From an egalitarian perspective, such
effects raise serious concerns.
Long-Term Care Insurance

The market for long-term care insurance is different from the market for
insurance that is designed to cover acute health care costs, at least if one thinks
in the long term. When workers are young, the answer to the question of whether
they will need such benefits is many years in the future, and is very difficult to
foresee. This avoids many of the problems that are caused by the predictability
of health care costs due to chronic diseases in annual health insurance purchasing.
Hence, there is much less room for cream skimming and adverse selection.
However, the short-sightedness of many consumers makes it difficult to believe
that they will make wise decisions about such insurance purchases.
39
One solution that has been discussed in Hong Kong is compulsory long-term
care insurance. Compared with private savings, such a scheme affords much better
risk pooling and risk protection. Moreover, if premiums are paid by payroll taxes,
then it is possible to ensure that some aspects of the benefit package vary with
income. In parallel with Singapores acute care scheme, amenity levels for those
with such insurance could vary depending on contributions, which would help
the scheme to respond to community values of self reliance.
Implications
I have noted many of the implications of this analysis. I have ranged quite broadly
across philosophy and values, and also over the economics, politics, sociology and
science of medical care. For better or worse, all of these elements need to be
taken into account to derive what I believe is the most critical lessons of our
discussion thus far.
Universal Coverage Requires Redistributive Financing

The poor cannot afford to pay for their own health care. As costs continue to
increase, for all the reasons that were discussed initially, this problem will only
get worse. If Hong Kong is to maintain its existing egalitarian commitments, then
financing alternatives other than ever increasing out of pocket payments must
be found.
Social Insurance Has Much to Recommend It

A scheme that is financed by payroll tax may be regressive, but can still be quite
redistributive. Compared with private insurance, such a system improves equity,
lowers transaction costs, provides risk protection and avoids complex and difficult
government regulation. The gains of having a choice between multiple insurance
plans seem negligible by comparison.
Savings Account Schemes for Acute Care Do Not Meet Important Goals
Such schemes offer no redistribution or risk protection, and leave many
individuals quite vulnerable to high costs early in life or to the costs of serious
long-term illness.
40
Competition and Markets Have Some Long-Term Value

Competition can make a contribution to efficiency and innovation in health care.
An efficient system is desirable, because it does more with whatever resources it
has and imposes less of a burden on society. In Hong Kong, one way to obtain
these gains would be to create a new expert purchaser (such as a social insurance
fund) so that providers would feel more market pressure to improve quality and
lower costs.
Quality Is Often Best Managed Internally by Provider Organisations

Given the nature of medical science and the sociology of professional autonomy,
the external regulation of the clinical practice of physicians is very difficult, and
customer choice cannot be relied upon to ensure quality. One alternative would
be to entice physicians to come together in groups and have those groups compete
for business on the basis of quality. If Hong Kong had an expert purchaser, as
described above, then various physician or hospital groups could compete for
patients and be paid on a per capita basis.
Conclusion
To close, let me reiterate a point made initially. Any societys health policy is an
exercise in applied moral philosophy. The decisions that Hong Kong makes about
equity, choice, responsibility and reciprocity will both reflect and shape the social
values of the territory for years to come. These decisions are not purely technical,
although they do involve a significant technical component. However, if the ethical
and value basis is to be widely accepted by Hong Kongs citizens, then the process
for making these choices will have to be, and be seen to be, transparent and
legitimate. Only then will it be clear what philosophical commitments lie behind
key choices, and only then will those choices command widespread respect. No
outsider like me can tell the citizens of Hong Kong what it is that they should
value that is up to them.
CHAPTER
Confucian Care-Based Philosophical Foundation of

1
Health Care
Julia Tao
Philosopher Julia Tao offers a Confucian alternative to Marc Roberts

observations which were mostly based on Western ethical theory. She
argues that the basic principles of a benevolent state, a moral duty of
care, and an emphasis on recognition for individual efforts and selfreliance are core values underpinning the Hong Kong system of health
care. She draws from Chinese Ren-based ethics of care perspective
and emphasises the primacy of a socio-culturally determined,
relatedness moral ideal of care as opposed to the separateness
virtues of social justice, utility or freedom of choice in the Western
tradition. The chapter concludes with a reconciliation of the major
philosophical schools of thought from both the East and the West as
they relate to the financing and delivery of health care in Hong Kong.
Introduction
Health Systems in Advanced Industrial Democracies
In most advanced industrial democracies in the world today, it is established that
there is a legal right to health care or society has a moral duty to provide
medically necessary services to ensure that everyone has access to needed services
regardless of ability to pay.
With the notable exception of the United States, where employment-based
health insurance is purchased from private companies, the legal right to health
care is embodied in a wide variety of types of health systems. These range from
nationalised health care, where the government is the funder and provider of
services, as in Great Britain, to public insurance schemes, where the government
finances services, as in Canada, to mixed public and private insurance schemes,
as in Germany and the Netherlands.
42
In these countries where there is an established right to health care, most of

their health systems cover medically necessary services, including a broad range
of preventive, curative, rehabilitative and long-term care for physical and mental
diseases, disorders and disabilities. However, most of them exclude uses of medical
technologies that enhance otherwise normal functioning or appearance, such as
purely cosmetic surgery. But there is also great variation, for example, with regard
to the degree to which health care rights cover new reproductive technologies,
or the types of mental health and long-term care services that are offered. There
is at the same time growing debate in all these countries about how to set limits
on the scope of a right to health care, and how financing is to be provided.
In the United States, which does not recognise any legal right to health care,
public health care or public insurance schemes are non-existent. With the
exceptions of Medicare, Mediaid and the Veteran Affairs system, health care is
largely considered a matter of personal consumption to be satisfied through the
market and private insurance. It is generally neither provided nor financed by
the government. Government responsibility is limited to emergency treatment and
a safety net for the poor and the elderly.
The Hong Kong Health System

Hong Kong is another exception but in a different sense from the case in the
United States. There is no established or accepted legal right to health care,
but there is a well-established and well-accepted duty of care in society to ensure
that no one is denied adequate medical treatment through lack of means (Hong
Kong Government, 1974). This has been the guiding principle for the
organisation and provision of health care in Hong Kong since it was first
enunciated in the White Paper on the Further Development of Medical and Health Services
in Hong Kong in July 1974. Since then, the government has taken upon itself to
safeguard and promote the general public health of the community as a whole
and to ensure the provision of medical and health services to all. Currently, public
health care services are delivered mainly by the Hospital Authority under a heavily
subsidised public fee structure.
Two distinctive features characterise the local health care system: strong ethos
of care (Tao, 1999) and strong equity in access (Harvard Report, 1999). It
emphasises caring responsibility rather than individual rights in the provision of
public health care. It is also committed to upholding equal access to adequate
services across different income groups in society. The system is supported by a
strong consensus that society has a positive duty to look after the old, the sick
and the disabled through a public health care system which is accessible to all,
regardless of means. Notwithstanding growing pressure to review and reform the
system due to concerns about its financial sustainability and the serious imbalance
between the public/private interface, this moral principle of care continues to
43
constitute the dominant ethical framework within which the discourse and the
debate on health system reform is conducted.
Western Philosophical Perspectives on Health Care

Among Western advanced industrial democracies, health care discourse and
debate are largely carried out within the ethical framework of rights and
autonomy. One way to analyse the debate is in terms of three major
philosophical perspectives on the role of the state in health care provision. These
are the classical libertarian, the utilitarian and the egalitarian liberal perspectives.
The Libertarians
From the libertarian perspective, individuals should be responsible for their health
care needs. Everyone should be free to purchase what and how much health care
they like in the market. No one should be compelled to take care of the health
of others. No government intervention is justified. Costs of health care services
should be borne by private insurance, direct payment or charity (see for example
Gordon Graham).
The libertarians objection to a right to health care is based on the argument
that it is not compatible with the ideal of a minimal state to ensure the nonviolation of individual rights to liberty and property. They warn that such a right
is a bottomless pit, since new technologies continuously expand the scope of
medical need and such an expansive right to health care would give rise to
unlimited claims on the resources of others (see for example Engelhardt, 1986).
They generally hold the view that governments are created by a social contract
made by rational and otherwise unrelated individuals to secure the better
protection of individual liberty and property.
Hence, citizens should not be coerced to make sacrifices for others since this
implies violating the moral zone of individual autonomy and permitting the use
of the individual as a means to someone elses ends (Nozick, 1974). Assistance
for the poor and the sick should be left to private charity. People who are denied
charity have no right to it nor can they make any complaints. The only rights
that libertarians recognise are forbearance rights or negative rights, the rights
to non-interference or to be left alone. They reject any notion of positive rights,
whether in the form of welfare rights or health care rights, because they are unjust
and they undermine autonomy. In addition, they believe that market forces are
crucial not only for the efficient distribution of goods and services, including
medical goods and services, but are essential as well to spurring medical
innovations.
44
An important insight of the libertarian perspective is the importance of the

values of freedom and choice in the organisation of health care. It reminds us
that upholding personal autonomy should be an important goal, albeit not the
only single most important goal of a health system.
The Utilitarians
From the utilitarian perspective, whether the state should provide public health
care is a matter of social utility consideration. What constitutes adequate health
care without excessive burdens is determined by cost-benefit analysis. But
utilitarians can still favour governments ensuring access to at least some broad
range of effective medical services. A powerful argument is that preventing or
curing disease or disability reduces suffering and enables people to function in
ways that contribute to aggregate welfare. Importantly, it can enhance the
productivity of the workforce as a whole. In addition, the principle of decreasing
marginal utility of money supports progressive financing of health care services.
But the utilitarian perspective cannot provide justification for investing
resources in health if those resources would produce more net welfare when
invested in other things, e.g. education. Similarly, it is difficult to defend on
utilitarian grounds many forms of long-term care, especially those provided to
patients who cannot be restored to productive social activity. Therefore, from the
utilitarian perspective, health care rights, where they exist, are derivative rights
only. They can be constrained or overridden, if doing so would produce more
aggregate welfare for society as a whole.
The utilitarian framework enables us to recognise that a right to health care
is not incompatible with recognising limits on entitlements. These limits can result
from resource scarcity and the fact that there are competing uses of those
resources. Recognising a right to health care need not open a bottomless pit.
Second, it reminds us that the entitlements to services which should follow from
a right to health care are system-relative, i.e. relative to the ability of the health
system to promote aggregate utility in society.
The Egalitarian Liberals

From the egalitarian liberal perspective, state provision of health care is a
requirement of social justice, and justice is the highest virtue of a society. On the
justice account, health care rights are rights to equality of opportunity. They are
regarded as a positive right. This is because diseases and disabilities can impair
normal species functioning as human beings, reducing as a consequence the
range of opportunities enjoyed by individuals to construct plans of life or
conceptions of the good. Such impacts often go beyond access to jobs or offices,
in ways that affect family life or the opportunity to pursue and complete important
vocational projects.
45
Health care aims to keep people functioning as close to normal as possible.

A right to health care is justified since disease and disability restrict the range of
opportunities that would otherwise be open to individuals. Health care is a
special good in this sense, according to Norman Daniels (1985). It should not
be assimilated with other commodities, like cars or personal computers. Neither
should we allow its distribution to be governed by market exchange because
market distribution of health care can result in unequal access among economic
unequals. Health care provision should be committed to the removal of impairing
conditions and the enhancement of autonomy of the individual person as such.
From the justice perspective, egalitarian liberals argue that John Rawlss A
Theory of Justice (1971) should be extended to include health care among the basic
institutions to provide for fair equality of opportunity in society to counter the
natural disadvantages induced by disease.
Freedom of Choice, Social Utility and Social Justice

To sum up, the three philosophical perspectives support different theoretical
approaches to the provision of health care. They include the freedom of choice
framework of the libertarians, the social utility framework of the utilitarians and
the social justice framework of the egalitarian liberals. Despite their different
moral perspectives, the three philosophies share certain common assumptions
in their basic understanding of the nature of the self of the individual and the
relationship between the individual and society.
A common thread running through these three philosophical perspectives
is an instrumental view of society which is considered primarily as an association
of free and unrelated actors for social cooperation in order to pursue
maximisation of self-interests. Individuals are conceived as isolated, self-interested,
rational egoists who are motivated by self-centred concerns. Society is created
through a voluntary agreement or contract for mutual benefit.
The assumption that individuals are rational self-interested egoists does not
necessarily mean selfishness or denial of human relationships. What it does imply
is the legitimisation of the pursuit of self-interest by individuals and the role of
social and political institutions to guarantee justice and equality of opportunity
for the pursuit. Such an assumption of human nature places a high premium on
the separateness, rationality and autonomy of individuals. To accept the humanity
of individuals is to respect their separateness, to recognise their rationality and
to promote their autonomy. Separateness, rationality and autonomy are the basis
of human worth and dignity. They represent the abilities of human beings to
choose, to deliberate and to pursue independent life plans and goals as free and
separate individuals. All three philosophical approaches provide justification for
the provision of health care to sustain these three essential abilities which define
basic humanity.
46
Empirical Observations of a Care-Based Approach to Health Care in

Hong Kong
In contrast, public health care provision in Hong Kong has been characterised
by a care-based approach, which emphasises the moral ideal of care rather than
the ideals of freedom of choice, social utility or social justice. Such a care-based
approach is distinguished by the priority of care over considerations of free choice
or cost-effectiveness calculations in the delivery of health care. The moral
imperative to care is grounded in a general sympathy and concern in society
towards the poor, the chronically ill and the old, rather than grounded in justice
or equality of opportunity considerations. In three empirical studies conducted
from 2000 to 2004, our findings consistently revealed a very strong ethos of care
in Hong Kong society (Tao et al., 2000, 2001,2005). The public health care system
is one manifestation of such an ethos of care.
Our most recent study in 2004 on public health care resource allocation in
Hong Kong confirms that there is within society overwhelming endorsement of
the 1974 principle that it is the responsibility of the government to ensure that
no one is denied adequate health care through lack of means. Over 90% of the
respondents agreed that public health care resources should target those who
have the most need for services, while 88% held the view that those who could
afford it should pay more.
Moreover, the respondents were not in favour of using cost-effectiveness
calculations as the main criterion for rationing health care resources in Hong
Kong. The inclusion of non-cost-effective new technologies in the public health
care system was also favoured by a substantial number of respondents, although
the support was less pervasive when compared with support for cost-effective new
technologies. In both cases, the majority favoured the view that those who had
the means should bear the cost of the services based on the affordability principle,
while public funds should be channelled to assist those who are without the
necessary means to pay. They also demonstrated clear reluctance to deny certain
patient groups the right to equal treatment which could be the outcome if costeffectiveness analysis was adopted as the main criterion for health care resource
rationing. Since the maximisation of cost-effectiveness in health care is often
measured in terms of gains in quality-adjusted life years (QALYs), this may
perversely result in the prioritisation of inexpensive but minor interventions over
expensive but lifesaving ones. When treatment is denied because a service is not
cost effective, this will create unjust discrimination and lack of caring for certain
individuals. Such a lack of caring for those faced with a life-threatening health
conditions is unacceptable to Hong Kong society because it violates the principle
that no one should be denied adequate health care through lack of means; it
goes against the care ethics which underpins Hong Kongs universal health care
system.
47
In our 2000 study on health care financing, we were able to demonstrate that
there was strong endorsement of the Confucian values of humaneness, mutual
responsibility and caring relationships in Hong Kong society. Endorsement of
these Confucian values had a pervasive influence on shaping public opinion in
support of government provision of health care to everyone who is in need. In
terms of financing strategies, those which target health care subsidies for the poor,
the chronically ill and the old also received the highest support from the public.
There was little support for the strategies of reducing or withholding public
subsidies to health care.
In another study carried out in 2001, we examined the publics preference
regarding rationing in health care services in Hong Kong. The findings revealed
that although the Hong Kong public regarded the ability to benefit to be an
important criterion for allocating health care resources, this was however not the
most important or the overriding criterion. Instead, they considered that priority
should be given to those who are frail and weak in health or suffering from life
threatening illnesses. They preferred to adopt the principle of frailty as the top
criterion for rationing health care resources. Under the care ethos, suffering from
chronic impairment, being elderly or in poor health is no justification for the
denial of care or the withdrawal of public health care resources.
In the remaining part of this chapter, I attempt an interpretation of the
choices and developments of the Hong Kong health care system in terms of the
traditional moral commitments embedded in the Confucian moral philosophy
of Ren or humaneness. The interpretation is based on two assumptions. First, one
cannot understand the development and function of a health care system outside
the cultural environment within which it is provided. Second, Confucian tradition
is still a primary source of moral commitment in Hong Kong society. Instead of
re-casting Chinese views in Western moral assumptions, I propose to begin my
interpretation with an analysis of three central tenets in Confucian philosophy
regarding:
(1) View of Self,
(2) Perspective on Relationship between Self and Others, and
(3) Conception of the Common Good.
Based on this analysis, I argue that the three perspectives are linked together
in a theory of human dignity which constitute the basis of care ethics in the
Confucian moral tradition.
I further argue that in Hong Kong, social policy development in general, and
the organisation of health services in particular, have shown a high level of
consistency with Confucian care ethics. A care-based approach in the organisation
and delivery of health care is characterised by:
(1) an emphasis on equal access to health care for everyone, regardless of means;
(2) a positive duty of the government to look after the basic welfare of the people,
especially the weak, the old and the vulnerable;
48
(3) a belief in the intrinsic value of a human being which cannot be measured
in terms of utility calculations or cost-benefit analysis;
(4) a perception of health care as a common good which expresses our moral
nature rather than as a mere commodity for personal consumption; and
(5) a conviction that the government should uphold the common good and
support moral development as human beings.
I conclude by offering some further observations on how we can draw on
the moral and intellectual resources of the Confucian philosophical tradition for
reassessing our approach to health care and for reconstructing a guiding
framework for health care reform in the twenty-first century.
Confucian Ren Moral Philosophy and Health Care

The Confucian View of Self
The Confucian moral tradition is often characterised as the Ren philosophy, or
the philosophy of humaneness. It signifies the moral faculty that distinguishes a
person from mere animals. In this sense, a human being is defined in terms of
the moral faculty of Ren rather than in terms of the capacities for rationality or
autonomy which characterise mainstream Western moral theories. Mencius
explains the difference between humankind and other animals in this way:
Slight is the difference between man and brutes. The common person
loses this distinguishing feature, while the gentleman (moral person)
retains it. Shun (ancient sage king) understood the ways of things and
had a keen insight into human relationships. He followed the path of
morality.
(Mencius 4B:19)
Human beings may differ from other animals only slightly, yet it is precisely
such a difference that makes them unique and valuable. It is this moral nature
defined in terms of the capacity to follow morality in human relationships which
distinguishes humans from animals. This is the essence of common humanity.
Self-awareness of, and a keen insight into, a human beings potential capacity for
making relationships and for following morality is the moral excellence which
marks the distinction between human beings and beasts.
Mencius further argues that this moral nature, which is innate in every human
being, is derived directly from Heaven. We are told in the Analects that:
49
Heaven is the author of the virtue that is in me.

Yao and Shun (ancient sage kings) and I are of the same kind.
(The Analects, 7:23)
Our potential to develop into moral persons with virtues constitute the source
of natural nobility and dignity. It is a natural endowment that all human beings
share. Mencius further distinguishes between natural nobility and human
nobility in this way:
There is the nobility of Heaven [or natural nobility, tianjue] and the
nobility of man [renjue]. Humaneness, rightness, loyalty, and
truthfulness and taking pleasure in doing good, without wearing of
it this is the nobility of Heavens. The ranks of duke, minister, or
high official this is the nobility of man.
(Mencius 6A:16)
He reminds us to pursue natural nobility to realise our potential as a moral

person. He warns that those who sacrifice the nobility of Heaven on the belief
that the nobility of man is sufficient are delusional because in the end they must
lose everything.
Based on this theory of human nature, Mencius derives a positive doctrine
of human value. It is also a doctrine of equal moral worth of human beings. What
is being implied is that human beings have intrinsic value and deserve to be
treated with respect because of their dignity derived from their natural nobility.
Their value cannot be measured in terms of utility calculation or benefit gains.
Mencius doctrine of natural nobility is comparable to the Kantian doctrine of
human dignity in the West which requires that each individual be treated as an
end, and never merely as a means to someone elses end.
The notion of moral worth and dignity equally possessed by all in Mencius
theory supports a Confucian view of the self, who even in the most adverse
circumstances, will hold onto its sense of dignity and will not accept undignified
treatment by others, as Mencius reminds us in this way:
Here is a basketful of rice and a bowlful of soup. Getting them will mean
life; not getting them will mean death. When these are given with abuse,
50
even a wayfarer would not accept them; when these are given after being
trampled upon, even a beggar would not accept them.
(Mencius 6A:10)
Such a conviction about equal moral worth and the emphasis on respect can
help to explain why the majority of the respondents in our 2001 study refused to
consider those who were frail or elderly or severely ill as having less priority or
less value for the allocation of health care resources, when compared with those
who were young and strong and who could generate more benefits from the same
amount of resources. In fact they indicated that those who are suffering from
chronic illness, or disability or those who are elderly or are psychiatric patients,
should receive preferential treatment in the rationing process. Health care
resources allocation should give higher priority to the principle of need than the
principle of benefit (Tao, 2001, 9). Responding to the needs of the frail and the
weak should have priority over the goals of gaining benefits or achieving costeffectiveness. The respondents demonstrated their conviction that the value of
an individual should be beyond simple cost-benefit calculations. They showed
support for the Confucian objection against using benefit or utility as a metric
for choosing or judging appropriate human action.
Confucian Relational Perspective of Self and Others

The virtue of Ren is the central concept in Confucian moral philosophy. It is the
cardinal virtue which encompasses all other subordinate virtues in the Confucian
ethical system. It is the highest moral ideal and this explains why Confucian
philosophy is characterised as the Ren philosophy.
In the Confucian Analects, the central meaning of Ren is general love for
humankind (Analects 12:22). It is a radiating process of love which starts naturally
from within ones family, and extends to more remote social relationships, to
include friends, other members of society, and strangers in general.
The notion of general love however does not mean universal love. It is not a
requirement to love every one equally or a demand to assume the same caring
responsibility for all people at all times. The requirement of general love is to be
actively concerned about the well-being of others in addition to ones own. In
the process of Ren cultivation:
Those who are humane, beginning with what they [naturally] love,
proceed to what they do not [naturally] love.
(Mencius 7B:1).
51
Moreover, the notion of general love means more than the mere provision
of benefits. What is being emphasised is an underlying attitude of respect and
caring for others. To treat someone with Ren, it is not enough merely to satisfy
his or her basic needs. There must also be love and respect for the other person,
which Mencius puts in this way:
To feed a person without love is to treat him as a pig; to love him
without respect, is to keep him as a domestic animal.
(Mencius 7A:37).
Mencius further explains a human beings innate potential to have

compassion and caring for others by inviting people to engage in this thought
experiment:
When I say that all men have a heart which cannot bear to see the
sufferings of others, my meaning may be illustrated thus: suppose a man
were all of a sudden to see a child about to fall into a well, he will
without exception experience a feeling of alarm and distress. He will
feel as so, not because he wants to gain the favour of the childs parents,
nor to seek the praise of their neighbours and friends, nor from a
dislike of the cry of the child. The heart of compassion is the sprout
of Ren.
(Mencius 2A:6)
Compassion is important because it signifies attentiveness to and engagement

with others. It is the sprout of Ren. It enables one to know about others and to
be other-directed. The development of ones heart of compassion is the route to
become a person of humaneness, or Ren, the passage to humanity. The way to
achieve this ideal is through a process of constant self-cultivation and moral
transformation to realise Ren.
Two basic principles have been identified as essential to this process of moral
development: Zhong (sincerity) and Shu (empathy). They are often referred to as
the methods of Ren. They form a unifying thread which runs through the Confucian
Ren philosophy. Shu is expressed by Confucius in the Analects in this way: Do not
52
do unto others what you do not want others to do unto you (The Analects 15:24)
. It is sometimes
referred to as the Golden Rule of Confucius. It emphasises taking a relational
perspective which underscores a reciprocal relationship between self and others.
It enlarges moral sensibility and enables one to develop an empathetic point of
view of the needs and interests of others. Zhong is expressed as Help others to be
established the way you wish to be established, and help others to advance the way
you wish to advance yourself (The Analects 6:30)
. It involves assuming a positive duty of
active concern about the welfare of others in addition to ones own. Zhong has the
meaning of exhausting oneself. It echoes the point made by Mencius earlier when
he observes that a person of Ren will take pleasure in doing good, without wearing
of it. Together with Shu, they constitute the rule of reciprocity in Confucianism.
The rule of reciprocity emphasises a relational point of view of human needs
and interests which is not merely self-directed, but is also other-directed. The
moral basis of such a notion of reciprocity is neither a social contract, nor is it
based upon calculations for mutual gain. Reciprocity in the Confucian moral
tradition implies empathy and relatedness, rather than quid pro quo or fair
exchange. From this relational perspective, individuals are under a positive moral
obligation to respect and care about others. What is being emphasised is the
relatedness between self and others, rather than separateness and independence.
Moreover, this caring for all others is not to be only a personal excellence
to be nurtured in individuals alone. It is also to be institutionalised as well. The
demand for institutionalisation was expressed explicitly by Xunzi (298234 B.C.),
another influential classical Confucian scholar, in Wang Zhi Pian in this way:
In the case of the Five incapacitated groups, the government should
gather them together, look after them, and give them whatever work
they are able to do. Employ them, provide them with food and clothing,
and take care to see that none are left out [L]ook after widows and
orphans, and assist the poor.
(Hsun Tzu: Basic Writings, Burton Watson trans. 1963, pp.3437).
As Henry Rosemont observes (2004), here Xunzi is clearly advocating the

establishment of basic welfare institutions in ancient China which would be the
modern Western functional equivalent of job training programmes, aid to families
with dependent children, welfare, and Medicare for the Chinese people. But what
is all the more impressive about this advocacy is that it requires the state to
provide many goods and services to groups of people who cannot possibly pose
a threat to that states power: Machiavellian it is not.
53
From the Confucian perspective, the purpose of government is the welfare

of the people. Such a view is in sharp contrast to Machiavellis doctrine of
government in the West. The welfare of the people stands at the heart of the
Confucian political doctrine of Renzhen (benevolent government). According to
this doctrine:
The people are the most important; the goods of the land and grain is
the next; the ruler is of the least importance.
(Mencius 7B:14)
Taking care of the welfare of the people, assisting their moral development
and upholding common humanity, are considered to be the foundation of
benevolent government. Although protecting the welfare of the people is
important, this is not the final goal of government. Caring in Confucian ethics
does not only just refer to the provision of benefits and services, the final goal of
government should aim at aiding the people to realise their moral nature and to
develop concern about the welfare of others in addition to ones own. This explains
the following observation made by Mencius:
According to the way of man, if they are well-fed, warmly clothed, and
comfortably lodged but without education, they will become almost
like animals. The Sage emperor Shun worried about it and he
appointed Xie to be minister of education and teach people human
relations . Emperor Yao said, Encourage them, lead them on,
rectify them, straighten them, help them, aid them, so that they
discover for themselves [their moral nature], and in addition,
stimulate them and confer kindness on them.
(Mencius 3A:4)
Every human society is a care giving and care receiving society, and must
therefore discover ways of coping with these facts of human neediness and
dependency that are compatible with the self-respect and dignity of the recipient
(Nussbaum, 2002). The Confucian moral tradition is deeply grounded in moral
intuitions about respect and reciprocity, insights that are crucial to any good
account of how societys basic institutions should provide care for the elderly, the
lifelong disabled, and those others in a state of asymmetrical dependency.
54
Confucian Conception of the Common Good

Confucian Ren philosophy argues that as human beings, we can act morally,
beyond self-centred or benefit-seeking motives. Ren is the basis of shared humanity
which binds one another. It is the highest moral principle which pervades all
human relationships, including state-society relationships, family relationships and
patient-doctor relationships. Humaneness is widely accepted as the foundation
of medicine. It is no coincidence that medicine in the Chinese context is often
referred to as the Art of Humaneness (Qiu, 2002).
When Confucians argue the thesis of humaneness as the art of medicine,
they emphasise the principle of medicine as the principle of humaneness. They
are noted to have said, Whoever has no chance to work as a good prime minister,
may work as a good physician (Unschuld, 1979). The reason is that both a prime
minister and a physician are expected to practise humaneness or Ren. As the
Chinese saying goes, Physicians have the heart of parents, suggesting that
physicians should be as caring and as committed to their patients as parents.
From the Confucian Ren perspective, a public health care system is a common
good. It is the commonness that constitutes its value; it is the caring for others
that establishes its good. It is not just a commodity or a bundle of services or
benefits. It has intrinsic value beyond the instrumental value of the concrete
services that it offers. It has common meaning. It expresses our commitment to
a shared humanity. It explains why the majority of our respondents in the 2004
study were in favour of maintaining a public health care system to ensure that
no one is denied adequate health care because of lack of means.
In the face of increasing financial pressures and concerns about system
sustainability, our respondents in the two independent studies in 2000 and 2001
indicated preference for the options of raising charges or revamping the fee
structure as the more viable strategies to address the problem. There is also wide
acceptance within the Hong Kong community that a differential fee structure
should be introduced in the public health care system based upon ability to pay.
Discrimination for the purpose of differential fee charging should be based on
income and affordability. Those who can afford it should contribute more towards
their own treatment cost. But there should be no discrimination on the basis of
the nature of illness or patient characteristics since this violates the ethics of care
in Confucianism.
Although Confucian moral teaching emphasises extension of caring, it does
not however demand universal love. There is no requirement that one should
love all humans equally or similarly. Under the notion of graded love,
Confucianism accepts distinction and differentiation in the application of love
(Chan, 1955). Equality understood in terms of an equal share of primary social
goods or equality defined as the same treatment or outcome for everyone is not
a primary value in the Confucian tradition. It recognises that inequalities and
asymmetries are important features of human relationships and social life. But it
55
is profoundly committed to upholding respect and reciprocity, caring and

relatedness in human relationships and social life.
By this reckoning, a Confucian care-based approach to health care makes
no requirement for absolute equality as the ultimate goal of service delivery in
the sense that everyone must be provided with the same level of service or that
everyone must be treated in exactly the same way for resource allocation purposes.
Neither does it require that all services must be supplied by a single public
provider to ensure equality of consumption across different social groups or that
there should be only one standard package of care for all to guarantee uniformity
of outcome. A multi-tiered health care system based upon a graded care model
can still be highly compatible with Confucian care ethics, so long as no one is
denied adequate care through lack of means.
Although Confucian moral philosophy recognises that we are born with the
same moral potential, it also recognises that we can end up with very different
achievements. It is human effort in self-cultivation which determines final
achievements. This explains why Confucius himself observes that:
By nature, humans are nearly alike; by practice, they become very
different.
(The Analects 17:2).
Becoming a person and realising our full moral potential depend upon the
deliberating, choosing, will and acting of individual actors. Despite the emphasis
on the common good and on equal moral worth, Confucian moral philosophy
also shows strong recognition for individual differences and personal efforts in
the enjoyment of achievements and in the assessment of merits. Freedom of
choice, personal responsibility and autonomy are also recognised as important
values within the Confucian system. Mencius states that a great person, or a moral
person, is someone who:
When he achieves his ambition he shares these with the people; when
he fails to do so he practises the Way alone. He cannot be led into
excesses when wealthy and honoured or deflected from his purpose
when poor and obscure, nor can he be made to bow before superior
force. This is what I would call a great man.
One can appreciate from this forceful statement on the moral autonomy of the
self, the importance of dignity and self-respect in the self-understanding of the
56
Chinese under the Confucian tradition. The moral imperative is to uphold dignity
and to achieve respect for both self and others, whether in ones choices, in
fulfilling personal responsibility or in exercising individual autonomy.
Neither is the promotion of private interest conceived to be necessarily in
competition or in conflict with supporting the common good, from the Confucian
perspective. Drawing on the principle of extension of care, Mencius, more than
two thousand years ago, articulated a vision of how institutions of the state can
serve to harmonise the relationship between private interest and the common
good, when he put forward a proposal for the ching-field system, commonly
translated as the well-field system. It is a system which divides a piece of land
into nine plots. When a piece of land is divided into nine plots, it looks like the
Chinese character ching for a well. Hence, the system is known as ching field
. Under this system, eight of the nine plots of land are owned by eight
individual families while the ninth plot communal and its produce belongs to
the state for aiding the poor, the sick and the elderly. Every day, each of the eight
families are required to contribute their labour to cultivate the communal plot
first before they are allowed to turn to attend to their private lot. As Mencius
explains:
A ching is a piece of land measuring one li square, and each ching
consists of 900 mu. Of these the central plot of 100 mu belongs to the
state, while the other eight plots of 100 mu each are held by eight
families who share the duty of caring for the plot owned by the state.
Only when they have done this duty dare they turn to their own affairs.
(Mencius 3A:3)
Mencius well-field system tells a story of how one is able to support the
common good while at the same time promoting ones private interest and wellbeing. It shows how well designed state institutions can support altruism for the
nurturance of care and reciprocity in the community while at the same time give
recognition to the values of individual efforts and private property.
Being able to see oneself as part of a shared humanity, being able to develop
a relational view of the relationship between the self and others, and being able
to extend ones caring from those who are naturally related to oneself to those
who are unrelated or are strangers through taking action to support the common
good, these are the key insights of a Confucian Renbased moral philosophy. They
provide the moral commitments to establish well designed institutions for both
the promotion of the common good and the enhancement of private interests
and well-being which stand at the heart of any account of good governance.
57
Conclusion
Care, Justice and Utility
Social policy theory on human need and social welfare in the West in the twentieth
century has been largely grounded in the major principles of rights, utility
and justice. These principles provide the ethical framework for shaping public
decision-making and social legislation, particularly in welfare choices and health
care policies. But there are also increasing concerns about the dominance of the
rights discourse and the primacy of the values of personal autonomy and
individual interests in public policy decision-making because they fail to take
adequate account of the values of caring, relationship, mutual responsibility and
the common good.
Confucian moral resources can help us bring relatedness back into our
conception of basic human nature without having to abandon autonomy and
individuality. It is this recognition of relatedness which can foster an altruistic
point of view of concern about the welfare of others in addition to ones own.
Awareness of the relatedness and bonds between self and others leads to the
further recognition of interdependency, mutual responsibility and promotion of
the common good.
The relational perspective in Confucian moral philosophy can lend support
to a care-based approach to social policy, as a viable alternative to the dominant
rights-based approach. Under the rights-based model, the individual and the state
are conveniently and visibly defined as beneficiaries and providers. But roles and
responsibilities can become misleadingly and mistakenly dichotomised and
polarised under such an approach. It can also lead to an inflation of rights and
the increasing individualisation of interests.
In reality, there is also a high level of congruence between the governments
social policy and public opinion as borne out by findings from many surveys and
studies, similar to the three quoted herein. These studies have consistently
revealed that an overwhelming majority of Hong Kong people also strongly
endorse holding the government responsible for providing for those who are
unable to fend for themselves, including providing medical care for the sick (see
for example Lau et al., 1992, 1995).
At the same time, local official publications have consistently declared that
Hong Kong is not a welfare state but the community cares deeply about the state
of its welfare (Hong Kong Government, 1996, 1997). Under the care ethos, the
guiding principle that has shaped government policy and planning is that social
welfare should not be regarded as some form of charity, confined to the socially
and financially disadvantaged. The services are, and should be made available to
all who need them (Hong Kong Government, 1991).
58
A relationally-oriented, care-based approach locates the importance of

individual welfare within the larger context of a common good. The individuals
good and the common good are inextricably linked. Moreover, from the
Confucian perspective, the state is not only responsible for providing the essential
conditions for economic development and the promotion of individual interest.
It is also a key agent with the responsibility for nurturing civic virtues and
development of the common good. It requires that, first of all, we ought to
develop in everyone the capacity for and the practice of caring before we can
ensure that rights will be respected and needs met.
Accepting that the government has the obligation to provide care and support
to those who are in need does not, however, mean that government has unlimited
obligations to meet all kinds and all levels of need for all individuals at all times.
Under the care-based model, the individual, the family, society and the state are
all active agents in an overlapping network of care for the satisfaction of human
basic needs. The roles may be different and the responsibilities may vary, but the
duty of care is normatively prior to, and has priority over, an acknowledgement
of rights.
Care-based, Justice-based and Utility-Based Health Care

Health systems in the world are beset by a common problem. At issue is the need
to frame a moral basis for health policy that provides all citizens with basic
coverage, encourages innovation, contains costs and supports commitment to care
and responsibility which can guarantee the reliable functioning of the system and
the ethical behaviour of health care professionals.
A public health care system which guarantees a basic level of medical care
to all those in need is an embodiment of care and mutual commitment in the
symbolic sense. What gives a common good a special sort of value distinct from
the functional value of other kinds of good is the commonness that constitutes its
value, the value of the good.
Under an ethics of care framework, market forces can be harnessed to effect
the efficient distribution of medical goods and services, and to spur medical
innovation in a medical market, if an appropriate balance is achieved between
the roles of the government, private investment and the market, without
undermining the common good.
To achieve this, we need a robust sense of civic citizenship to underpin
autonomy and rights, which is not merely based upon non-interference, mutual
tolerance or the free pursuance of private interests. We need mutual engagement
and mutual concern based on a vision of common humanity, to remind us of
our shared fate and mutual responsibility, both at the local level as well as at the
global level.
59
The financing and organisation of health care are different for each country.
Each countrys history, culture and wealth affect the design of health services and
the means by which these services are financed (Sanders, 2002). The difference
in funding and organisation among countries of similar wealth, points to the
overarching importance of national character defined by each countrys political
culture and tradition of moral commitments in shaping its own health system.
In rethinking our health system and in reassessing our approach to financing
and delivery in Hong Kong, we should not lose sight of the virtue of care which
is essential to the robust development of medicine as a common good in society.
Confucian Chinese believe that humaneness is the essence of medicine. There
can be no medicine in the absence of this ideal of care. In seeking to balance
Hong Kongs health accounts and in trying to promote cost-effectiveness, we
should at the same time try to uphold and to strengthen the value of care while
protecting at the same time the value of justice.
Traditional Confucian moral philosophy holds a view of human beings as
relational beings. Such a view is also strongly advocated by contemporary
feminists in the West who are highly critical of liberal theories of justice for being
an ethics of strangers because of their failure to recognise human relatedness and
dependency (Tao, 2000). One should of course avoid over-emphasising the
commonalities shared by the feminists and Confucianism. Suffice it to note
however that both traditions offer an alternative understanding of the nature of
the self and the source of identity without positing a radical individualism.
As Stuart Hampshire observes, justice, whether distributive or procedural, is
a negative virtue (1989). It emphasises and protects separateness between
individuals as strangers. Distributive justice requires the equal distribution of
primary goods among separate individuals to ensure equal opportunity for selfdevelopment and self-fulfilment. Procedural justice requires the use of rational
arguments and open procedures to settle conflicts among discrete individuals who
do not share any common conceptions of the good and live different ways of life.
In contrast, care is a positive virtue. It emphasises and promotes connection and
relatedness as essential aspects of human experience. It recognises common good
and shared human dependence as an important source of our self-identity and
our moral commitment, in addition to individual separateness and independence.
The valuable insight of the Confucian moral tradition is that it enables us to
see relatedness, in addition to separateness, as essential conditions of human
existence. In recognising the common good and the importance of communal
bonding and obligations, Confucianism also takes great pains to underscore our
moral autonomy as self-reflective agents, instead of being mere blind followers
of traditions or communal norms. But unlike Western liberal theoretical
perspectives, Confucianism is able to advocate the moral autonomy of the
individual person without positing a radical individualism. The Confucian view
of the self is also a salutary reminder to Western utilitarians that each has a dignity
60
and none has merely a price in the market (Nussbaum, 2002). Such a relational
perspective enables us to appreciate that caring as a virtue is human excellence
in response to our shared humanity.
Care and justice are the core virtues foundational to a modern democracy.
They constitute the moral fabric of a robust democratic society which supports
self-rule and the common good. They should be enhanced and strengthened as
we try to reform the financing and delivery strategies of our health system. We
must bear in mind that both care and justice cannot be merely due to efficient
control or strategic calculations. Nor are they mere personal virtues to be nurtured
in individuals alone. Societies can become destabilised if the elementary resources
of care and justice are not protected, or if its common goods are no longer
symbolic expressions of common values which connect people to one another.
CHAPTER

Paul Yip, Joseph Lee and C.K. Law
In this chapter Paul Yip, Joseph Lee and C.K. Law summarise their long
track record of work on the Hong Kong demographic transition. They
explore the underlying forces that shape the present demographic
distribution from a womb to tomb perspective. They warn that
insufficient attention has thus far been directed at dissecting the factors
responsible for the discordant child versus elderly dependency ratios,
marriage trends and bi-directional migration patterns with the
mainland. They make an urgent plea to policy makers to reconsider
strategies for health and social care in the coming decades as Hong
Kong passes through a narrow demographic window where
enlightened, evidence-driven policies can make a real difference.
Introduction
Hong Kong has experienced rapid change in demographic structures over the
last several decades. Although life expectancy at birth is now 78 and 85 years for
men and women respectively (Census and Statistics Department, 2002), the total
fertility rate (TFR) has reached a world record low of 0.8, which is well below
the replacement level (that is, two children per woman).1 In this chapter, we
provide an overview of Hong Kongs demographic trends and characteristics
population, fertility, marriage, mortality, migration and hospitalisation patterns.
Longer life expectancy and prolonged declines in fertility result in an expanding
aged population. Fast and intense population ageing has far-reaching implications
for the community. It imposes a great strain on the capacity of society to make
the necessary profound and dynamic adjustments to social and health care
infrastructure.
62
Demographic Trends: Past and Present

Population Growth and Age Structure
Population growth in Hong Kong moderated significantly during the 1980s. The
population increased at a rate of 1.3% per year from 1981 to 1986 and 0.8% per
year from 1986 to 1991. The exodus of Hong Kong residents in the late 1980s due
to uncertainties that surrounded the 1997 return of sovereignty to China might
have led to slower population growth. The population grew strongly again from
1991 to 1995 due to a substantial rise in net immigration. The sluggish economy
in Western countries, and the relatively buoyant economy in Hong Kong in the
early 1990s, coupled with the further opening up of mainland China enticed
emigrants to return to Hong Kong. Inflow of migrants peaked in 1995 and 1996.
However, net migration maintained a strong position. There has been an increase
in the daily quota (the number of mainland residents admitted under the One
Way Permit Scheme) since 1995. Concurrently, natural increase (births minus
deaths) fell considerably because of prolonged fertility declines and a greater
proportion of people aged 65 and over. As a result, natural increase contributed
to no more than 40% of population growth in the 1990s, whereas it was 87% in
the 1980s. Migration has become a major population-growth determinant.
The combined effects of longer life expectancy and below-replacement
fertility have made Hong Kong an ageing society. The median age increased from
26 to 37, a rise of some 11 years, in just two decades. The proportion of people
aged 65 and over was 11% in 2001, whereas it was 7% 20 years before. In 1981,
25% of the population was below 15 years of age; in 2001, the figure was 16%
(Table 1). As a result, the proportion of the population of working age (1564
years) increased modestly from 69% to 72%. The child dependency ratio fell by
more than one-third while the elderly dependency ratio continued to rise strongly
and steadily. The effect of changes in the age structure was a fall in the overall
dependency ratio. At present, there is a larger working age population. This
creates a unique opportunity, a demographic window, to implement social and
public policies to achieve sustainable development before inevitable and rapid
population ageing occurs.
Reduction in Fertility Rates

Hong Kong has experienced steep declines in fertility (Figure 1). The total fertility
rate fell from the replacement level in 1980 to an all-time low of 0.8 in 2001 (the
rate excluded children born to two-way permit holders and illegal entrants, which
accounted for some 15 % of total births). According to an empirically based
hypothesis, a total fertility rate of between 0.7 and 0.8 can be taken as a fertility
floor that approximates the lower bound of cohort fertility (Golini, 1998). Hong
Kongs total fertility rate has actually fallen to that level.
63
Table 1
Significant Characteristics of the Population: 19812001
Characteristic
Average annual growth rate

Growth (000)
Natural increase (000)
As % of growth
Net migration (000)
As % of growth
014 (%)
1564 (%)
65+ (%)
Child DR
Elderly DR
Total DR
Median age
Mid-1981
1986
1991
1995
Population (000)
5,183.4
5,524.6
5752.0
6,156.1
24.6
68.7
6.6
358
97
455
26
1.3
341.2
278.1
81.5
63.1
18.5
23.1
69.3
7.7
332
111
443
29
0.8
227.4
219.4
96.5
8.0
3.5
20.8
70.4
8.7
295
125
420
32
1.7
404.1
166.0
41.1
238.1
58.9
19.4
70.8
9.8
274
138
412
34
1996
2001
6,435.5
6,724.9
18.7
71.1
10.2
263
143
406
0.9
289.4
112.0
38.7
177.4
61.3
16.4
72.4
11.2
227
155
382
37
Notes
(a) The average annual growth rate over a 4-year period (19911995) is computed for
comparison with the rates of a 10-year period (19811991) because a different method of
estimation was used to compile population estimates for 19962001.
(b) The child dependency ratio (DR) is expressed as children under 15 per 1,000 people of
working age (1564). The elderly DR is expressed as persons aged 65 years or older per
1,000 persons of working age.
Source: Census and Statistics Department (19872002)
The specific fertility rates in most childbearing ages fell substantially from
1981 to 2001 (Figure 2). As approximately 99% of births occur within marriage,
the fertility rates for married women more precisely represent womens propensity
to have children (Table 2). Changes in the pattern of fertility rates from 1981 to
1986 reflected a postponement of the onset of childbearing, and a decline in highorder births. The period from 1986 to 1991 depicted a different pattern. The
fertility rates of younger aged people fell marginally, but there was a significant
rise in the number of elderly people in the population. The period from 1991 to
1996, however, recorded an 11% increase in people in the 2024 year age group.
The patterns for the periods from 1986 to 1991 and 1991 to 1996 were probably
a result of women marrying at a younger age, a shorter interval between marriage
and the first child, and pregnancies deferred from earlier years.
The pattern was different again from 1996 to 2001. The fertility rates in
younger ages continued to rise but fell significantly in older ages. The
postponement of second births and the effect of delayed marriage on first births
64
Live births per woman

2.5
2
TFR = 2.1
1.5
1.0
0.5
0
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
Year
Note:
The break in the total fertility rate trend is due to the different methods that are used to compile population
estimates for different periods: the extended de facto approach for 198195 and the resident population
approach for 19962001.
Census and Statistic Department (2002)
Source:
Figure 1 Total fertility rate: 19812001
Live births per 1000 woman

200
150
100
50
0
15
20
25
30
1981
35
1986
40
1991
Source: Census and Statistic Department (2002)
Figure 2 Age-specific fertility rates: 19812001
45
1996
Age
2001
65
Table 2
Age-Specific Marital Fertility Rates: 19812001
Year
1981
1986
1991
1996
1996@
2001@
Age Group
1519
2024
2529
3034
3539
4044
345
336
405
348
493
653
299
229
228
252
188
204
220
179
178
171
161
120
109
92
101
105
101
81
36
29
34
36
35
33
7
4
5
5
5
5
TMFR*
TFR#
3.36
2.67
2.73
2.85
2.45
2.03
1.93
1.37
1.28
1.19
1.09
0.80
* TMFR: total marital fertility rate.

# TFR: total fertility rate.
@ The total fertility rates in 1996 and 2001 as released by the Census and Statistics Department
were 1.17 and 0.93 respectively. The rates of 1.09 and 0.80 that are shown in this table
exclude births given by two-way permit holders and illegal entrants, but include children
born to Hong Kong women overseas.
Sources: Census and Statistics Department (1997) marital fertility rates in 1981, 1986, 1991
and 1996
Census and Statistics Department (2002) data on children born in Hong Kong
to two-way permit holders and illegal entrants and children born to Hong Kong
women living abroad.
women who marry at an older age have a reduced ability to conceive might
have led to these changes.
Fertility of the young (1519 years) is almost always extremely high as it is
grossly inflated by premarital conceptions. Nonetheless, there was a significant
increase in fertility in this age group. Nowadays, young people are more open in
attitude towards sexuality (Family Planning Association of Hong Kong, 2000).
The Change in Nuptials

The marital structure of Hong Kong has changed radically (Figure 3). Important
changes in the age at which men and women first marry and major changes in
the marital status distribution have occurred. The median age of women at first
marriage has increased from 24 to 28 years and of men from 27 to 30 years
(Table 3). The difference in the median age at marriage between bride and groom
has decreased from 3.1 to 2.7 years, indicating a greater tendency among women
to marry later. The fall in the proportion of the population who are married is
more significant in younger ages than in older ages and for women than for men.
The proportion of men who are married fluctuated around 94% by the end of
the marriageable period, but the proportion of women married still fell from 97
to 92%.
66

1981
Age
85+
75
65
55
45
35
25
25
15
80
60
40
20
Age
85+
Thoudand
20
40
60
80 persons
20
40
60
80 persons
20
40
60
80 persons
1991
75
65
55
45
35
25
25
15
80
60
40
20
Age
85+
Thoudand
2001
75
65
55
45
35
25
25
15
80
60
40
Neve
married
20
0
Now
married
Widowed/
divorced/separated
Figure 3 Distribution of population aged 15 and over by age,

sex and marital status: 1981, 1991 and 2001
Thoudand
67
Table 3
Age at First Marriage and the Proportion Married by Age: 19812001
Selected
measure
Age
group
Age at first marriage

Bride
Groom
Proportion married
Men
Women
Number single (000)

Men
Women
Surplus of single
women (000)
Ratio of single men
to single women
Mid-1981
1986
23.9
27.0
2534
3544
4554
2029
3039
4049
2554
2049
56.3
86.5
91.7
47.3
91.9
97.7
1991
1996
26.2
29.1
52.8
88.0
92.8
43.0
89.6
97.4
50.5
86.8
93.8
39.7
85.8
95.1
2001
27.5
30.2
44.2
85.3
94.6
31.6
80.8
93.9
37.7
82.9
94.4
25.4
77.7
92.0
282
304
339
372
384
391
423
466
447
510
22
33
43
63
0.930
0.911
0.984
0.908
0.877
Note: The proportion married for 1981, 1986 and 1991 is derived from census data on
marital status excluding foreign domestic helpers. The proportion married for 1996 and
2001 is estimated using marital status data (excluding foreign domestic helpers) obtained
from the General Household Survey.
Sources: Census and Statistics Department (19812001)
Census and Statistics Department (19872002)
Data on successful applicants for certificates of absence of marriage records

available from the Immigration Department indicate that a total of 200,000 Hong
Kong men married in mainland China. This might have led to a situation in which
Hong Kong women of marriageable age were unable to find suitable partners.
The proportion of women who married at a younger age actually fell more rapidly
between 1991 and 2001. To show how these changes affect the number of women
who will never marry, it is assumed, for simplicity, that all single men of 25 to 54
years and all single women of 20 to 49 years (5 years being roughly the age
difference at marriage between bride and groom) will eventually marry. With the
marital conditions of the period from 1981 to 2001, and if this assumption
approximates the real demographic situation, there will be a surplus of single
women. In addition the proportion of single women in the community will rise
steadily. The ratio of single men to single women will fall consistently below 1.
68
Marriage rates in Hong Kong have continued to fall since 1981. With the
marriage rates of 1999, and if these probabilities had remained constant, the
proportion never married at age 50 would have been about 22% for men and
23% for women (Yip and Lee, 2002). If, instead, the 1981 marriage rates were to
remain constant, the same proportion would be 4.4% for men and 0.7% for
women. The hypothetical situation of an accelerated increase in the proportion
of women never married at age 50 from 0.7% to 23% highlights the potential
effect of changes in marriage habits. As a result of an ongoing tendency among
Hong Kong men to marry in mainland China, the 1999 marriage rates no longer
represent mens propensity to marry. The proportion never married at age 50
for men would probably remain at about 4% (in accordance with 1981 marriage
rates). More recently, there is also an increased tendency among Hong Kong
women to marry in mainland China.
The Effect of Changes in Marital Structure

The dramatic decline in Hong Kongs total fertility rate cannot be fully explained
by the decline in fertility of married women. Changes in marriage habits have an
important effect on fertility trends. The decline in the total fertility rate from the
replacement level to 0.8 is largely because there are fewer married women of
productive childbearing age, arising from a tendency for late marriage and fewer
marriage (Yip and Lee, 2002). In most Asian countries, the existence of tempo
effects (changes in the age of childbirth), which tends to distort the trend, is
strongly suggested by a shift to late marriage (Bongaarts, 1990a, 1999b). Coale,
Wang, Riley and Lin (1991) observed that a persistent rise in the mean age at
first marriage of women in mainland China from 1950 to 1981 resulted in a
reduction of about 100 million births compared with what would have occurred
when age at marriage remained unchanged.
Trends in the total marital fertility rate and total fertility rate compare
differently for Hong Kong. Although the total marital fertility rate is falling, its
level is not consistent. After reaching a new low following an earlier fall it
subsequently rose to a higher level. In contrast, the total fertility rate has declined
continually with the fall in total marital fertility rate, and has gathered momentum
in recent years. More importantly, the total marital fertility rate has not fallen as
significantly as the total fertility rate: a decrease of 40% compared with 60% (Table
2). Yip and Lee (2002) analysed the total fertility rate compared with the
standardised total fertility rate and observed that changes in the marital structure
accounted for a significant proportion of the total fertility rate decline.
There has been a steady decline in the underlying level of fertility in Hong
Kong. Fewer women now have more than two children. Changes in attitudes
towards small families have been triggered by transformations in the social
environment and outlook in Hong Kong that have taken place since the late
69
1970s. In the Hong Kong population development process, a change in the status
of women fostered the growth of new individualistic aspirations and personal
independence, which together brought about a change in attitudes. High
prevalence of contraceptive practice contributes to the fertility decline of married
women. It is remarkable that in a city as large as Hong Kong, 86% of married
women of childbearing age practise family planning (Family Planning Association
of Hong Kong, 2003). Furthermore, the number of abortions registered with the
Department of Health is in the order of 20,000 per year (Department of Health,
2002). In 2002, there were only 46,000 live births. Taking illegal abortions into
account, the abortion rate in Hong Kong is high (Family Planning Association
of Hong Kong, 2003; Henshaw, Singh and Haas, 1999).
Improvements in Mortality Rate

At the other end of the life course, Hong Kong has experienced further
improvements in its mortality rate. The infant mortality rate has fallen by almost
three quarters since 1981 (Table 4). Mortality of newborn babies improved more
substantially for boys than for girls, a decrease of 40% in the 1980s and a decrease
of 65% in the 1990s. Despite these different rates of decline, mortality of newborn
babies remained lower for girls than for boys at 2.3 versus 2.8 per 1,000 live births.
Apart from the infant mortality rate, the expectation of life at birth is a useful
indicator for measuring health performance and well-being. At the death rates
of 1981 the average life expectancy of men was 72.3 years, and at the 2001 death
rates it was 78.4 years. Similarly, the life expectancy of women was 78.5 and 84.6
years respectively (Table 5). For both men and women, there was an increase of
some 6 years of life, which indicates the continual improvement of peoples health
status. Hong Kong is rated as one of the highest life expectancy economies in
the world (Law and Yip, 2003).
Age-Specific Hospitalisation Rates

An ageing population gradually raises the overall demand on health care, which
directly threatens financial sustainability of the medical and health care system
under the current mode of financing. Figure 4 gives the utilisation pattern of inpatient care for 1996 and 2001 based on data provided by the Hospital Authority.
There was a substantial increase in the hospitalisation rate for the elderly
population (both males and females, 60 or above) in Hong Kong from 1996 to
2001. This indicates that the hospitalisation risk for elderly people increased rather
than decreased. If the current trend continues, this will raise the total number
of patient admissions in a continuously ageing population (Yip and Law, 2002).
70

Table 4
Infant Mortality Rate: 19812001
Year
Male
Female
Overall
1981
1986
1991
1996
2001
Period
10.3
8.0
6.2
4.5
2.8
9.0
7.5
6.6
3.7
2.3
% decrease
9.7
7.7
6.4
4.1
2.6
19811991
19912001
39.8
54.8
26.7
65.2
34.0
59.4
Table 5
Life Expectancy of Men and Women at Selected Ages: 19812001
Age
1981
1986
1991
1996
2001
Increase
Increase
198191
199101
Men
0
20
40
60
80
72.3
53.6
34.5
17.7
6.4
74.1
55.0
35.7
18.5
6.6
75.2
56.0
36.7
19.3
7.0
76.7
57.4
38.2
20.4
7.6
78.4
58.8
39.6
21.7
8.4
2.9
2.4
2.2
1.6
0.6
3.2
2.8
2.9
2.4
1.4
Women
0
20
40
60
80
78.5
59.6
40.3
22.3
8.5
79.4
60.4
40.9
22.6
8.3
80.7
61.5
41.9
23.4
8.9
82.7
63.2
43.7
24.9
9.8
84.6
65.0
45.4
26.5
11.0
2.2
1.9
1.6
1.1
0.4
3.9
3.5
3.5
3.1
2.1
The Effect of Migration

Population growth in Hong Kong has always been affected by inflows of migrants.
From 1978 to 1981, the influx of legal and illegal immigrants from mainland
China totalled 600,000. With the abolition of the touch base policy in 1981,
the inflow of illegal immigrants subsided and the number of legal immigrants
was regulated to approximately 75 people per day.
71
500
450
Patients per 1,000 persons
400
350
300
250
200
150
100
50
0
0
10
Male (2001)
20
30
40
Male (1996)
Age
50
60
Female (2001)
70
80
90
Female (1996)
Figure 4 Age-sex-specific hospitalisation rates of Hong Kong,

Hospital Authority, 1996 and 2001
The migration scene has altered tremendously since the 1980s. The daily
quota was increased to 105 in 1993 and subsequently to 150 in 1995. From 1983
to 2001, inflow under this category totalled more than 720,000 (Task Force on
Population Policy, 2003). A level of migration of this order was equivalent to some
11% of the population at 6.7 million in 2001. Concurrently, large outflows
occurred in the late 1980s. A total of more than half a million people left Hong
Kong. The further opening up of mainland China and the strong economy of
Hong Kong in the years leading up to 1997 encouraged emigrants to return.
Inflows of migrants from the mainland and returning emigrants sufficiently offset
the effect of sustained below-replacement fertility and maintained an appreciable
population growth.
Chinese immigrants are predominantly younger, as observed from past data.
They tend to have more children (Family Planning Association of Hong Kong,
1998). Over one-third of women immigrants, and just one-quarter of Hong Kong
women, have three or more children. The desired family size is 2.1 for immigrants
versus 1.8 for locals. Migration helps, although to a limited degree, to rejuvenate
the population, and plays a positive role in the relief of population ageing (Yip
and Lee, 2002). However, recent data suggest a slower increase in net migration
from mainland China. Additionally, there has been a surge in the number of births
from non-Hong Kong residents.
72
Possible Future Trends

The Proportion of People Marrying Will Continue to Fall
Increasingly, men and women defer marriage, and a significant number of Hong
Kong men prefer to marry in mainland China. Both of these tendencies have a
dampening effect on the marriage rate. The general downward trend in the
marriage rate is most likely to continue for a number of years. Yip and Lee (2002)
anticipate that the proportion of people who are married will fall further.
The Total Fertility Rate Is Likely to Remain Below One

The total fertility rate has continued to fall below the replacement level since 1980.
Change in the marital structure is the driving force for the decline. Yip and Lee
(2002) expect that this downward trend will continue, which implies that the total
fertility rate (0.8 in 2001) is likely to remain below one for some time. This
contradicts population projections that the total fertility rate will return to one
by no later than 2013 (Census and Statistics Department, 2004). The fertility rate
will neither go back to 1 in the short and medium term nor rise above one in
the longer term unless there is a significant fertility rebound, or a substantial
increase in the number of births out of wedlock, or a consistent rise in the
proportion of married people. Judging by the past reproductive behaviour and
marriage habits, it is most unlikely that these prerequisite conditions will occur.
As a result, the population will age at a pace even faster than that predicted by
official projections.
Slower Population Growth and Ageing Will Gather Momentum

The population will increase, although at a declining rate, from 6.8 million to
8.4 million in the next 30 years (Census and Statistics Department, 2004). The
number of deaths will rise steadily owing to population ageing, and eventually
overtake the number of births, resulting in negative natural increase. The total
number of births will fall from 49,000 to 43,000 per annum but the total number
of deaths will double from 35,000 to 71,000 per annum. Net migration is expected
to peak at 63,000 in 2011, then fall marginally to 60,000. The fall in total births
and rise in net migration will contribute to a moderate increase in the supply of
the potential labour force. The population of persons of working age will rise by
just 6% (Table 6). The population of 65 and over will increase almost threefold,
from less than one to more than two million. More importantly, the old-old
population (7079 years) will surge from 379,000 to more than one million and
the oldest-old population (80 years or older) from 167,000 to over half a million.
73
This is an inevitable outcome of large cohorts of births in the 1950s and 1960s,
the children from which will reach old age over the next 30-year period.
Population ageing will gather momentum as the total fertility rate remains
at half the replacement level and life expectancy continues to lengthen. The
median age of the population will rise from 38 to 49. The proportion of people
aged 65 and over will more than double from 12% to 27%. The proportion under
15 will fall to a new low of 11%. Consequently, the child dependency ratio will
fall from 216 to 171 and the elderly dependency ratio rise from 161 to 428. Despite
significant increases in dependency of the elderly, the general downward trend
of the overall dependency ratio will continue until around 2013. Subsequently,
the trend will revert and the ratio will continue to rise. The point at which the
number of older persons overtakes the number of younger persons will be reached
by approximately 2011. The ageing ratio (100) of over-65s to under-15s will more
than treble from 74 to 251 by the end of 20032033. Concerns about an ageing
society often arise not only from increased numbers of elderly people, but also
from a rapid change in the ratio of the working-age population (1559 years) to
the retirement-age population (60 years or older). This ratio will fall sharply from
4.6 to 1.6. Taking into account both dependency of the young and retirees, this
ratio will fall from more than two potential workers to just over one (Table 6).
Increasing Demands on Hong Kongs Health System

Table 7 gives projections of in-patient admissions and total hospital in-patient days
with the use of population-based data from the Census and Statistics Department
(2004a). The total projected number of future hospital in-patient days of a period
is equal to the sum of the aggregate hospitalisation needs of all age-sex groups
(Yip and Law, 2002). In 2001, there were 606,958 patients admitted to the Hospital
Authority administered hospitals, and they accounted for 9,456,459 hospital inpatient days. According to the figures, patients aged 65 and over constituted
4,275,081 in-patient days, (or 45.2%) under the public in-patient system. By the
end of the projection period in 2033, the total number of hospital in-patient days
that have been utilised for elderly patients (65 or above) will increase to 135
million, which will constitute around 69.4% of the total projected in-patient days
for the corresponding period.
Table 8 shows the projected cumulative number of hospital in-patient days
for an elderly person from the age of 65 to death according to the official Hong
Kong life table (Census and Statistics Department 2004b). According to the life
table figures, improvements in health have led to increased longevity. It was
projected that the remaining life span for a 65-year-old man would increase from
17.9 years in 2003 to 20.5 years in 2033, and the corresponding figure for a 65year-old woman would increase from 21.7 years to 24.6 over the same period
(Census and Statistics Department, 2004b).
74

Table 6
Significant Characteristics of the Population: 20032033
Mid-2003
2008
2013
2023
2028
2033
6,803.1
7,058.9
7,386.9
7,691.8
7,970.2
8,202.2
8,384.1
0.8
0.7
0.9
0.8
0.7
0.6
0.4
No. (000) 1,069.2

%
15.7
956.0
13.6
899.6
12.2
909.0
11.8
922.6
11.6
916.4
11.2
895.3
10.7
1564 No. (000) 4,938.4

%
72.6
5,245.8
74.3
5,509.3
74.6
5,561.9
72.3
5,499.1
69.0
5,349.4
65.2
5,245.7
62.6
857.1
12.1
978.0
13.2
1,220.9
15.9
1,548.5
19.4
1,936.4
23.6
2,243.1
26.7
Population (000)
Average annual
growth rate (%)
014
65+
No. (000)
%
795.5
11.7
2018
1559 No. (000) 4,706.4
4,941.2
5,058.4
4,997.7
4,839.6
4,729.0
4,642.7
60+
1,161.7
1,428.9
1,785.1
2,208.0
2,556.8
2,846.1
No. (000) 1,027.5
Median age
38
40
42
44
46
47
49
Ageing ratio* (100)
74
90
109
134
168
211
251
Child DR (a)
216
182
163
163
168
171
171
Elderly DR (a)
161
163
178
219
282
362
428
Total DR
377
345
341
382
450
533
599
Support ratio#
4.6
4.3
3.5
2.8
2.2
1.8
1.6
* The ratio of over-65s to under-15s.

# The ratio of the working-age population (1559) to the retirement-age population (60+).
(a) The child dependency ratio (DR) is expressed as children under 15 per 1,000 persons of
working age (1564). The elderly DR is expressed as persons aged 65 years or older per
1,000 persons of working age.
If the constant morbidity rate assumption is adopted, then it is certain that

the aggregate hospital stay will increase due to increased longevity of the elderly.
The cumulative hospital stay for a 65-year-old man will increase by 24.6% from
120 in the 2001 cohort to 150 in 2033, and the total stay for an elderly woman
will rise by 32.3% from 136 to 180 over their remaining life span.
Implications
The Role of Fertility in the Decline of Population Growth
The demographic scene in Hong Kong changed dramatically from 1981 to 2001.
Fertility fell sharply and the marital structure underwent major changes with many
women of marriageable age remaining unmarried. With the prospect that these
75
Table 7
Projected Number of In-patient Admissions, Total Hospital In-patient Days at Hospital
Authority Administered Hospitals in Hong Kong, 20012033
Year of projection
Number
Index
2001
2003
2008
2013
2018
2023
2028
2033
2001
2003
2008
2013
2018
2023
2028
2033
Patient headcount
(Actual)
(Estimated)
607,000
624,600
677,200
743,400
815,000
891,900
974,300
1,063,800
100
103
112
122
134
147
161
175
(Actual)
(Estimated)
Patient days
9,456,500
9,902,200
11,075,800
12,429,300
13,901,000
15,462,400
17,298,000
19,500,200
100
105
117
131
147
164
183
206
Data source for Year 2001: Hospital Authority (20012002)
Table 8
Projected Cumulative Hospital In-patient Days for an Elderly Person
from the Age of 65 to Death, 20032033
65-year-old man
Year
e(65)*
Cumulative
in-patient days
2003
2008
2013
2018
2023
2028
2033
17.9
18.4
18.9
19.4
19.8
20.1
20.5
120
126
131
137
142
145
150
65-year-old woman
e(65)*
Cumulative
in-patient days
21.7
22.5
23.1
23.6
24
24.3
24.6
136
147
156
163
169
175
180
Source: Census and Statistics Department (2004b)

*e(65) = remaining life span for a 65-year-old male/female in different calendar years
76
demographic trends will continue, the number of births is likely to average about
46,000 per annum. Net migration is expected to continue to follow past trends
and average 56,000 per annum. Migration will take over the role of fertility and
become a major population-growth determinant (Yip and Lee, 2002; Census and
Statistics Department, 2004). Dependence on migration for population growth,
however, gives serious cause for concern, and in particular raises questions
regarding its long-term effect on the socio-economic profile of the population.
The Shrinking Labour Force

Fewer married women of productive childbearing age automatically leads to a
fall in births. If the tendency for late and fewer marriages persists, the
demographic consequences will result in insufficient replenishment of the labour
force. Furthermore, persistent below-replacement fertility will inevitably result in
continued ageing of the labour force. A slow growing and ageing labour force
has far-reaching implications for the economic vitality of Hong Kong. In the
medium to longer term, the shortage of labour supply due to a reduced
proportion of working age people in the population can be alleviated through
an increase in the mandatory retirement age, an increase in labour productivity
and a modified policy on imported workers (Bluestone, Montgomery and John,
1990). A growing tendency among women, particularly married women, to
participate in the work force helps boost labour supply. Due to the socio-economic
development of Hong Kong in the 1970s and 1980s, the soon to be old (4559
years) and the young-old (6069 years) cohorts are more educated and have better
skills. With substantial improvements in environmental conditions and health
status over the past years, the soon to be old and young-old population are, at
the present time, fitter and healthier. Their potential ability to remain in the
workforce for a number of years after the usual retirement age is beyond question.
Lengthening the working life of retirees is a practical and feasible option to
alleviate the labour supply shortage that results from expansion of an ageing
population.
Lifetime Celibacy Among Women Is Rising

The preference among Hong Kong men for cross-border marriage is a cause for
concern. It is possible that more and more women of marriageable age will remain
unmarried. The consequence is a rise in lifetime celibacy among Hong Kong
women. Using a theoretical construct, Yip and Lee (2002) demonstrated that the
proportion never married at age 50 would have been 23% if the 1999 marriage
rates had remained constant. Growing older has a different significance for
women and men (Arber and Ginn, 1991). This may be a consequence of
77
differences between the age status of men and women. The first hinges on
employment and the second on the reproductive role. The life experience of
never married women in later life may pose unique problems. The implications
of expanded cohorts of never married women of older age have yet to be
explored.
A Surge in Health Care Expenditure

The proportion of the population aged 65 years and over will more than double,
from 12% to 27%, as a result of an unprecedented pace of ageing. A greater
proportion of older people has significant repercussions on the health care system
in Hong Kong. The elderly have a higher risk of hospitalisation. It is almost certain
that hospitalisation usage will increase substantially. Yip and Law (2002) predict
that the total hospital in-patient days that are utilised by patients in Hospital
Authority hospitals will increase at an annual rate twice as fast as the population
growth rate. The latest figures suggest a deterioration of the situation due to the
slow population growth and longer life expectancy. It is estimated that the total
number of hospital in-patient days will rise from 8.5 to 15.3 million in the next
30 years. The elderly accounted for 47% of in-patient day utilisation in Hospital
Authority hospitals in 2000, and this will rise to nearly 70% by 2029. As people
live longer, there is an increased demand for health care related to conditions
such as cardiovascular and cerebrovascular diseases, malignant neoplasms, chronic
obstructive pulmonary disease, osteoporosis and dementia. Medical treatment for
these diseases is costly. Health care expenditure has increased substantially as a
result of continued improvement in the delivery of medical services and the effects
of population growth and ageing. Health care expenditure increased by 150%
from 13.6 billion in 19921993 to 34.0 billion in 20012002 (Census and Statistics
Department, 19872002). Without government budgetary constraints, a continued
surge in health care expenditure is more than likely expected with rapid ageing
of the population in the pipeline. It is essential that the government implements
financially viable options to maintain a sustainable health care service for the
community (Law and Yip, 2002a, b).
Growth in Demand for Social Care Services

As the ageing process of the population accelerates, an unstoppable rise in the
proportion of the elderly is expected. Since older persons often live by themselves
as a result of dissolution of extended nuclear families, demand for social care
services will increase. The governments commitment to social security will be
under great strain. Total government expenditure on financial assistance for the
elderly was estimated at 11.8 billion in 20022003, which accounted for 5.4% of
78
recurrent public expenditure and represented a 50% increase over the $7.8 billion
allocated in 19971998. This expenditure will rise to over $31 billion by 2031 (Task
Force on Population Policy, 2003). With the huge financial burden of providing
assistance to the elderly looming on the horizon, the government must make early
plans and take prompt action to tackle these social challenges.
Conclusion
Population ageing is the consequence of persistent, below-replacement fertility
and extended longevity. If the total fertility rate falls sharply below the replacement
level over a short period, then population ageing will inevitably be faster than
ever. Hong Kong will enter this difficult demographic situation. It makes
management of the ageing process extremely complicated, as greater adaptability
and flexibility of the social, economic and health care infrastructure is required.
Facing a pace of population ageing that is without precedent in human history,
the government must tackle important policy challenges and look further ahead
to determine viable and practical means of financing long-term care of an
expanding aged population. Workable plans and sustainable financial support
systems must be in place within a short time frame. There is no doubt that other
low fertility countries have population ageing problems. However, the ageing
process in these countries is slow. They can take time to prepare for the population
transformation, identify challenges arising from the issues and find feasible and
practical solutions. Population ageing in Hong Kong is unique and more
formidable because of its intensity and foreshortened timescale. It imposes a great
strain on the capacities of society in the short term.
Due to the prospect of alterations in the age structure, the overall dependency
ratio will continue to fall until around 2013. This provides a demographic window,
a unique opportunity to implement health and social policies through diversion
of available resources from other services. The aim is to achieve sustainable socioeconomic development in due course before inevitable and rapid population
ageing. However, the window is closing fast, and the need for action has never
been more urgent. The consequences of population ageing will become very
serious from 2011 onwards. That Hong Kong is going through this striking
demographic transformation will have widespread ramifications and far-reaching
economic and health implications. The government needs to make a concerted
effort to meet these challenges. This must be done sooner rather than later.
79
Appendix Data and Definitions

This chapter uses data on births, deaths, marriage and migration from 1981 to 2001 that is
available from the Census and Statistics Department of the Hong Kong government, and the
Hong Kong population projections for 20042033. Various concepts are referred to that are
defined below.
Fertility Rate
This rate represents the number of births per 1,000 women, per year, in a given community.
The fertility rate is age-specific if its denominator contains women in a particular age group,
and is age-marital-specific if its denominator contains only married women in a particular age
group.
Total Fertility Rate

This rate can be understood as expressing how many children can be expected from 1,000
women who survive their reproductive lives (from 15 to 49), provided that, at different ages,
they reproduce themselves at the rate experienced in a given year. For convenience, the total
fertility rate can be expressed as the number of children born per woman. A total fertility
rate of 2.1 is equivalent to the replacement rate of 1, which means that on average one woman
in a given community will produce one girl (to replace her mother) throughout her
reproductive life. This is the replacement level of fertility because it is from its women that a
community replaces itself.
The Census and Statistics Department of the Hong Kong government uses a different
method of computation. The opinion is that children born in Hong Kong to two-way permit
holders and illegal entrants should be excluded from the measurement of the fertility of women
in the community. Otherwise, the total fertility rate is not representative of the number of
births that would occur to 1,000 Hong Kong women of childbearing age who survive the whole
of their reproductive lives.
Total Marital Fertility Rate

This rate expresses the number of children who can be expected from 1,000 women who marry
at age 20, survive their reproductive life span, provided that, at different ages, they reproduce
themselves at the rates experienced in a given year. For convenience, the total marital fertility
rate can be expressed as the number of children born per married woman.
Proportion Never Married at Age 50

This figure expresses the number of women who never marry that could be expected by a
birth cohort who survive the marriageable period, provided that, at different ages, they marry
at the marriage rates experienced in a given year. The number is expressed as the proportion
never married at age 50.
80
Infant Mortality Rate

This rate represents the number of deaths under one year of age per 1,000 live births that
occur in a year.
Expectation of Life or Life Expectancy

This figure expresses the average number of years lived beyond any age by the survivors at
that age when exposed to selected mortality rates in a given year.
Dependency Ratio
This demographic indicator is defined as the number of persons aged under 15 and 65 &
over per 1,000 persons aged 1564.
Touch Base Policy

This was an immigration policy (applicable from 1974 to 1980) that granted the right of
residence to illegal immigrants from China who entered Hong Kong and successfully reached
the southern part of Kowloon or Hong Kong Island.
One-Way Permit
This refers to the immigrant visas issued to mainland Chinese moving to Hong Kong.
CHAPTER

Iris Chan and Mary Ann Benitez
Iris Chan, a long-time advocate and leader of the patients rights

movement teams up with Mary Ann Benitez, a health journalist at the
South China Morning Post, to trace the evolution of patients as consumers
and the coming of age of the consumerism movement as a force for
system change in Hong Kong. They cover the milestones that have been
reached in this long journey since the 1980s, and describe the critical
role in the levelling of provider and patient interests that the Hong
Kong Patients Rights Association and other special interests groups
have played. With specific examples, such as the liver transplant saga
in 2002 and the 2003 SARS outbreak, they illustrate how Illichs
indictment of an over-medicalised paradigm plays out in Hong Kong.
The chapter provides rich material for reflection on the true meaning
of professionalism among health care providers, and how to strike the
optimal balance between patient rights and responsibilities as Hong
Kong anticipates future system reforms.
Introduction
It was not until the turn of the new millennium that people became more vocal
about what they expected of health care in Hong Kong, and they now demand
better services. The major outbreak of SARS provided an awakening for the public.
As the health system in Hong Kong moves into the next phase of its development,
so too will patients rights be given the priority they seek. This chapter looks at
the development of patients rights and how community mobilisation is necessary
for patients to gain equal partner status in the management of their health.
82
The 1970s and 1980s

In March 1973, a new Medical Development Advisory Committee was established
to improve and expand health services over the next 10 years (South China Morning
Post, 27 March 1973). The Committee released a Medical Green Paper in January
1974 and proposed a blueprint for the development of hospital services, including
an increase in the number of hospital beds, the setting up of four hospital regions
and the establishment of a second medical school. A White Paper followed in
July of that year (South China Morning Post, December 1973 to July 1974).
Patients groups began to emerge in Hong Kong in the late 1970s in the form
of self-help groups, in which patients who were suffering from specific chronic
illness banded together to find out more about their diseases, share experiences
and offer each other support. More practical advice was also shared, such as how
to apply for charitable funds and tax exemptions. Among the first patients groups
set up in Hong Kong were the New Voice Club, the Hong Kong Stoma Association
and the Thalassaemia Foundation, each of which offered hope and often a useful
diversion from illness. For most of the 1980s the patients groups were disparate,
and their members were concerned more with understanding and coping with
their disease than with the wider questions of access to medical services and
changing health policies. However, at least a couple of these groups took on the
then Medical and Health Department.
The Hong Kong Kidney Patients Trust Fund was established in 1984 in
memory of a teenage boy who died because he was not eligible for the limited
haemodialysis programme. A new continuous ambulatory peritoneal dialysis
treatment was beyond the reach of most of the destitute, including the boy, at a
cost of HK$3,000 a month. The fund was set up to raise the monthly sum that
would be needed for renal failure patients who, because of age and circumstances,
could not be provided with the almost-free dialysis treatment in hospitals.
Although not as militant, the Hong Kong Cancer Fund was set up by socialite
Sally Lo four years later to provide support and information to people living with
cancer, fund groundbreaking research and educate the public on the prevention
and early detection of cancer. Although the number of patients groups grew,
medical and health services remained firmly in the colonial era. Much emphasis
was placed on public health measures, such as making the water supply safe,
immunising children and controlling epidemics (Ng, 1989).
Coming into Their Own in the 1990s

A special characteristic of Hong Kong patients is that they are prone to doctor
shopping and over-dependence on medication. Patients often subscribe to more
than one form of healing practice at a time, i.e. they take traditional Chinese
medicine and spiritual advice in conjunction with Western medicine. (Gauld and
83
Gould, 2002). This attitude has been partly addressed by patients groups in the
promotion of health education through the dissemination of basic information
on diseases and their symptoms. Doctors have been perceived to be in a position
of power, with patients usually taking a passive role in the decision making. This
is partly fed by the professions restrictions on the number of medical students,
and hence the supply. Although their image has been tarnished by high-profile
medical blunders, by the nature of their profession doctors remain a respected
group with a reputation that has not been eroded by image problems. A closedshop medical profession that fights tooth and nail to preserve its domain and a
population that shows little interest in promoting good health make for a
combustible combination, such as the situation in Hong Kong.
The formation in 1989 of the Provisional Hospital Authority, the precursor
to the Hospital Authority, triggered a debate in the community, and provided the
impetus for the active participation of more socially aware patients in the
management of disease and general health policies. In March 1989, the
government split the Medical and Health Department into the Hospital Services
Department and the Department of Health. The Hospital Services Department
was eventually disbanded after it completed its task of offering a bridging
arrangement for civil servants to move over to the Hospital Authority. The
Department of Health, headed by Dr Lee Shui-Hung, shrank to a tenth of its
former size, as the government and subvented hospitals were taken over by the
Provisional Hospital Authority. This provisional agency set the groundwork for
the Hospital Authority, which was established in 1990. With this new arrangement,
doctors gained the upper hand not only in crafting public health policy, but also
in dictating the personal health of the individual. Because the Hospital Authority
is perceived to be part of the government and receives a big proportion of the
annual government budget, it is an easy and obvious target when things go wrong.
With this major structural change, two types of patients groups, both more vocal
and more organised, began to emerge.
Rights in the West

The patients rights movement in Hong Kong during the 1990s was at the same
stage as those in the United States and most Western countries during the 1970s.
Patients rights can be considered to be immutable abstractions that can be
influenced by circumstances, including legal and financial factors, but specifying
patients rights does not ensure them. Neither does the passage of regulations
or laws (Cataldo and Ventura, 1981). Patients are expected to be smart
customers in the health care marketplace, in which different types of health
plans compete for attention and information is essential (New York Statewide
Senior Action Council, 2003). In 1973, the American Hospital Association
formalised a list of hospital patients rights, known as the Patients Bill of Rights.
It was revised in 1992 with the expectation that it will contribute to more effective
84
patient care. One of the earliest grassroots advocacy groups to be set up was the
New York Statewide Senior Action Council, which was established in 1972 to
ensure that the rights of older patients were protected.
In 2001, the US Senate approved legislation to extend these rights to all
Americans in managed-care health plans. The legislation makes it easier for
patients to secure a wide variety of services, including coverage for visits to the
nearest emergency room, direct access to medical specialists, medically necessary
prescription drugs and clinical trials for experimental treatments. The bill itself
applies to Americans who have private health insurance through their employers,
or who buy coverage on their own. It does not improve access to insurance or
medical care for the 44 million uninsured Americans (Washington Post, 30 June
2001). In the UK, patients rights within the National Health Service are set out
in charters, which also state the standard of service that patients can expect. There
are separate charters for England, Wales, Scotland and Northern Ireland. The
charters explain what health services a patient is entitled to receive, and how they
should be provided (National Health Service, 2003). In November 1992 in Rome,
the European Charter of Patients Rights was promulgated. The Charter of
Fundamental Rights is part of the new European constitution, and is the basis of
the declaration of the 14 concrete patients rights that are at risk: rights to
preventive measures, access, information, consent, free choice, privacy and
confidentiality, respect of patients time, observance of quality standards, safety,
innovation, avoidance of unnecessary suffering and pain, personalised treatment,
the right to complain and the right to receive compensation. These rights are
also linked to several international declarations and recommendations that have
been issued both by the WHO and the Council of Europe.
Patients Charters in Hong Kong

By the beginning of the 1990s, when the public began to expect quality medical
services with the establishment of the Hospital Authority, it had become
increasingly apparent that the health authorities and medical leaders needed to
show that they were concerned about patients rights. The Hong Kong Medical
Association responded by producing a seven-point list of patients rights in 1990.
However, it was not generally known that the charter existed (Gauld and Gould,
2002). The issue of patients rights was debated in the Legislative Council in July
1992, but has not been revisited since. The Association, in conjunction with the
Consumer Council, produced a pamphlet on patients rights, but it was not widely
disseminated (Gauld and Gould, 2002). Only several years later, in May 1999, did
the Hospital Authority introduce an official Patients Charter, the purpose of
which was to explain both patients rights and their responsibilities when using
the services of public hospitals with the aim of enhancing the effectiveness of the
health care process. Patients groups, however, see the Charter as merely paying
85
lip service to their rights, as doctors and hospitals are not duty bound to follow
the charter. One of the most vocal groups, the Patients Rights Association, sees
it is as abstract, unsubstantial and difficult to implement in daily practice (interview
with Tim Pang, spokesman). With a huge conglomerate like the Hospital
Authority which is second only to the civil service as Hong Kongs biggest
employer and mostly uses taxpayers money to develop hospitals and expand its
services it was only a matter of time before it, with all the high expectations it
had generated in terms of delivering quality hospital care, came under closer
public scrutiny. Medical blunders fuelled much of the discontent.
Patients Groups in the New Millennium

Patients groups have evolved into two major categories. The first, which is the
dominant form, are mutual help groups for patients with specific diseases. The
other category comprises groups that advocate policy issues. Expatriates, who have
long been considered to be insignificant clients of the public health care system,
have also found a voice. The first category of patients groups has been
amalgamated under the Alliance for Patients Mutual Help Organisations, which
was registered in November 1992 and comprises the majority of self-help groups,
with 37 members. The second category is solely represented by the Patients Rights
Association, which was formed under the Society for Community Organisation
in 1992.
Patients Rights Association

In 1989, an imprecise government policy about medical charges for the longawaited Hospital Authority prompted the Society for Community Organisation
to start a concern group to focus on medical policies. The concern group latched
on to the growing public worry that a new Hospital Authority would drastically
raise public hospital fees and charges. Later, the Association took on the broader
issue of the protection of patients rights (interview with Tim Pang, spokesman
of the Association). In 1992 the Patients Rights Association was formally set up
with the aim of advocating patients rights in Hong Kong while helping the victims
of medical blunders to launch complaints and proceed with legal claims.
The Association has been calling for the setting up of an independent
ombudsman to investigate medical complaints since 1993. In 1996, it promoted
better understanding of the new Personal Data (Privacy) Ordinance that was
enacted in December 1995, which allows patients to access their medical records.
It was also instrumental in making the labelling of all dispensed drugs compulsory.
This was enshrined in the doctors code of practice in January 1995. In 1999, the
Association participated in public consultations that led to the publication of the
86
government-commissioned Harvard Report, which outlined five strategic options

for health care financing. Two years later, when the Health and Welfare Bureau
released a Green Paper that proposed another model of health care financing,
the Association and other patients groups voiced their positions. Hong Kong has
yet to decide on health financing reforms at the time of writing.
Adopting the motto of its parent organisation, for people we care, for justice
we act, the Patients Rights Association mobilises groups of patients to take up
health issues when patients interests are being jeopardised. With accumulating
social pressure, the Association has become a potent voice for better services for
patients, and regularly makes known its positions on health issues through the
mass media and meetings with members of the Legislative Council and the
Hospital Authority. Its core activity is the provision of advice to patients who
complain about hospital treatment. The Association handles telephone inquiries,
documents complaints, helps patients to gather relevant information, assists them
with legal and medical opinion, and helps them to launch a complaint, usually
after securing legal aid. The number of inquiries and complaints that the
Association handled grew from 120 in 1996 to 561 in 2003 (Table 2). The majority
of the 2,621 complaints that have been received by the Association are related to
medical blunders (859). Other major complaints are related to breaches of privacy
(433 complaints) and fees and charges (337) (Table 1). The proportion of
successful outcomes, however, leaves much to be desired. Of 182 cases launched
by the Association from 1992 to 2003, only 31 were successful and resulted in
$14 million being paid to the claimants. Fifty-four cases are still being pursued
(Table 1). Only during the SARS outbreak in 2003 did the Association leave an
Table 1
Resolution of Cases and Successful Claims 19922003
Year
Total number
of cases*
Successful
complaint/
claim
Unsuccessful
complaint/
claim
Others
Cases to be
followed
199294
18
199596
14
Amount of
claims
(,000)
1600
10
800
1997
13
2450
1998
13
1650
1999
14
4350
2000
17
10
1200
2001
26
15
1230
2002
29
1700
2003
31
18
60
2004
32
20
1150
Total
207
29
72
45
67
16190
* May not equal the sum of the other columns due to inter-year cases.
Source: The Society for Community Organizations Patients Rights Association
100
13.3
8.3
1.7
6.7
5.0
20.8
14.2
30.0
144
25
10
33
27
34
23.6
100
17.4
6.3
0.7
3.5
6.9
22.9
18.8
48
186
30
24
34
52
23.1
100
14.1
3.4
3.8
2.4
11.5
16.3
25.0
304
38
12
18
32
63
73
105
100
11.0
3.5
1.4
5.2
9.2
18.2
21.1
30.3
377
12
28
35
35
81
76
101
100
3.2
7.4
2.4
9.3
9.3
21.5
20.2
26.8
485
49
104
20
47
72
52
138
100
10.1
21.4
0.6
4.1
9.7
14.8
10.7
28.5
444
58
40
73
12
38
55
19
149
100
13.1
9.0
16.4
2.7
8.6
12.4
4.3
33.6
561
46
76
65
27
70
21
248
100
8.2
13.5
11.6
1.4
4.8
12.5
3.7
44.2
Source: The Society for Community Organizations Patients Rights Association
Latest available data shows the total number of complaints in 2004 was 588. There were nine unsuccessful claims in the year. Twenty cases were
still being pursued.
120
Total number of
complaints
Note:
16
Others
Prescription and
labels
Conduct of medical
professionals
10
25
Privacy and patient

records
Medical identity
17
Administration
36
Medical negligence
1996
1997
1998
1999
2000
2001
2002
2003
Cases Percent Cases Percent Cases Percent Cases Percent Cases Percent Cases Percent Cases Percent Cases Percent
Fees and charges
Year/
Enquiries
Table 2
Breakdown of Patients Complaints Received 19962003

87
88
indelible mark. It monitored government performance and was among the first
groups to call for protective equipment, such as masks and gowns, to be
distributed to frontline hospital workers. The Association was also consistent in
asking for the principal officials to be held accountable, and fought for benefits
for SARS victims. This has led a group of recovered SARS patients and relatives
of those who died to seek compensation through the courts.
Alliance for Patients Mutual Help Organisations

The Alliance for Patients Mutual Help Organisations was formed by various
patients self-help groups with the aim of sharing experiences, promoting mutual
help among patients and joining in efforts to strive for patients welfare and rights.
The alliance was registered in November 1992 and officially established on 27
February 1993. It relies mostly on volunteers, and receives part of its funding from
the Hong Kong Council of Social Services. It now includes 37 agency members
and about 30,000 individual members and professionals. The agencies promote
the interests of patients who are suffering from diverse diseases and health
problems, including heart disease, visual impairment, handicap, diabetes,
Alzheimers disease, mental illness, asthma, epilepsy, Parkinsons disease,
pneumoconiosis, haemophilia, liver transplant, thalassaemia and cancer. The
Alliances concerns are discussed in regular meetings once every two months, and
the information about policy and resources is sent out to patients groups. Due
to limited resources, the Alliance works with other NGOs on various projects.
Jointly with the Hong Kong Council of Social Services, the Hong Kong Medical
Association, the Rehabilitation Alliance and the Hong Kong Society for
Rehabilitated Patients, it set up five Community Rehabilitation Network centres
that provide service and self-help for the chronically ill. It has also received
government funding to establish and run hospital-based Patient Resources Centres
since 1992.
Community Rehabilitation Network

The Community Rehabilitation Network was launched by the Hong Kong Society
for Rehabilitation in 1994. It provides community rehabilitation activities and
mutual aid groups. Its website provides comprehensive information on the support
services that are available to improve the quality of life of the chronically ill and
their families (www.rehabsociety.hk/crn/). Self-help courses and workshops, selfmanagement courses, counselling groups, seminars, sharing groups, recreational
and social activities, referral services, volunteer training and services for sufferers
of 20 chronic illnesses are offered.
89
Healthwise
A third, though minor, player is the charitable group Healthwise, which originally
catered to expatriates in Hong Kong. Originally known as the Community Medical
Library and Health Information Resource Centre, it was established as a charitable
trust in May 1996 and opened to the public in September 1997 at the Matilda
Hospital. It provides accessible, comprehensive, current, confidential and free
health care information to the local community in Hong Kong. Its role is to
provide resources that are not accessible through the government and other
health care providers. Set up initially to cater for the information needs of
expatriates, Healthwise recently began to reach out to the Chinese community.
Four support groups are using its facilities. They are COPING (Conception,
Pregnancy and Infertility) FOCUS (Focus on Childrens Understanding in
School), La Leche League and Adoptive Families of Hong Kong. The Healthwise
facilities include a bilingual library that contains books, journals, leaflets and other
publications on relevant health care issues. CD-ROMs allow individuals to
interactively explore their condition, and online access to the librarys database
and current health information on the Internet is provided, with the help of staff
and volunteers when necessary. A closed video viewing and reading room is also
available. Lecture facilities can be arranged for health-related events and support
groups at no cost. The major Healthwise project in 2003 was to prepare 200
information fact sheets on disease in conjunction with the insurer BUPA and the
University of Hong Kongs Department of Community Medicine. Disease
information is readily available on the AZ of Health section of the groups
website (www.healthwise.org.hk/english/az/). Due to limited funding, Healthwise
is not expected to expand rapidly in the future.
Patients as a Force for Change

The next decade will see many patients rights groups consolidating or emerging
as forces in their own right. Concern groups for the elderly and chronically ill
will comprise the majority of these groups. There are 12 visible groups, with the
Elderly Rights League and the Society for Community Organisation joining
together in their campaigns, and the Hong Kong Council of Social Services also
being a major supporter of and campaigner for the groups. Grey power was very
much in evidence during a special meeting of the Legislative Councils panel on
health services on 24 February 2003, which discussed the charges for public health
services and the fee waiver mechanism that was to be put into place on 1 April
that year.
The Patients Rights Association, however, retains its dominant advocacy role.
The Association is media savvy, which was reflected in the 176 stories that
mentioned it in the South China Morning Post from 1993 to January 2003, compared
90
with 22 stories that mentioned the Alliance for Patients Mutual Help
Organisations. The issues that it takes up are diverse, ranging from disaster plans,
drug labels, itemised charges and increasing hospital fees to the lack of long-term
medical policies and health insurance. The Association points to the reluctance
of doctors to criticise their colleagues as a major hurdle. A common observation
is that Hong Kong doctors protect themselves, and are biased against complaints.
The establishment of a new complaint office within the Medical Council could
address this situation, but a proposal for such an office that was endorsed by the
Medical Council in 2002 has yet to see the light of day. There is also a serious
lack of legal advice for patients to help them to formulate their complaints before
they seek legal aid. Patients groups rely on volunteer lawyers so much that patients
often have to wait months before they see any progress with their complaints.
Hong Kongs legal system itself also makes patients wary. Unlike in the United
States, where lawyers receive payment only when the case is won, patients bear
the double cost of their own litigation and the defendants legal costs if they lose
a case in Hong Kong.
At the moment, about 50 patients groups are concerned with particular
diseases, sharing experiences and helping each other. Although these groups will
continue to exist, their focus is limited to their particular concerns. The Alliance
for Patients Mutual Help Organisations is well placed to champion the concerns
of patients, but its membership on the board of the Hospital Authority has not
been as effective as many expected. The way in which it brings patients
perspectives to Authority decisions and takes the initiative as a patients advocate
more often will define its role in future. It is interesting to note that because of
the possibility of being shackled by membership on the Hospital Authority board,
the Society for Community Organisation turned down a request for its Patients
Rights Association to join the Hospital Authoritys Public Complaints Committee
in the first instance. With hindsight, its hesitation was not without merit.
The place of patients mutual-help groups in the health system is assured,
because they meet a need among patients when interaction and support are
crucial for their mental well-being. However, because they are usually small
support groups, the wider concern for patients rights has not been paramount that is until late 2002, when a pilot scheme by the New Territories East cluster of
hospitals to streamline the drug purchasing scheme provoked the ire of area
residents. Another major factor was a decision by the Hospital Authority to stop
the liver transplant programme at the Prince of Wales Hospital, which is the
teaching hospital of the medical school of the Chinese University. Liver patients
who were being treated at the Prince of Wales Hospital organised themselves into
a critical group that was backed by the Patients Rights Association. They submitted
petitions to Legislative Councillors and gained wide public sympathy for their
plight through extensive media coverage. The saga began in August 2002 when
a donor liver that could have saved a life was wasted by budget-conscious health
officials who said that another operation would have exceeded the monthly quota.
91
In a separate case, liver patient Leung Chi-mings transplant on 10 September

2002 was aborted because the doctor was tired, the necessary medical staff were
unavailable and the liver transplant surgery would have affected other operations
the following day. Mr Leung dropped from the top of the list at the Prince of
Wales Hospital to tenth. The Patients Rights Association is helping Mr Leung
seek legal aid for a civil claim or a judicial review of the sudden cancellation of
his planned transplant. Mr Leung won a partial victory when the Ombudsman,
after a year-long investigation, criticised the Hospital Authority and the Prince
of Wales Hospital for giving him false hope. However, the Ombudsman rejected
Mr Leungs complaint that maladministration denied him a new liver, and claimed
that the postponement of the transplant was a professional decision and outside
the jurisdiction of the Ombudsman. All liver transplants have since been
centralised at Queen Mary Hospital, which is the teaching hospital of the
University of Hong Kong. The liver transplant centre at the Prince of Wales
Hospital was officially closed on 5 July 2003, and about 20 patients on the waiting
list were transferred to the Queen Mary Hospital. The government insists that
the new central registry system is fair, because only one system assesses the
condition of patients.
Such public outbursts are rare, however, and are usually encouraged by
extensive media coverage. They sadly have not been successful in swaying a
Hospital Authority that is intent on carrying out policy changes. It is this lack of
coherence and unity, and the Hospital Authoritys seeming disregard for the
opinions of patients, that the Patients Rights Association has been hoping to
redress. The Associations new mission is to shift patients focus from their own
health to health policy. It has begun doing this by organising a core group of
patients and carers who are linked by their common experience of having
challenged the medical establishment. However, patients rarely maintain their
interest in the long term. Mutual help groups are also uninterested in advocacy,
and leave it up to the Patients Rights Association to be the sole advocate for
patients rights. The Hong Kong culture of being non-confrontational and
generally conformist is not likely to change any time soon, and the pace of
development of rights advocacy is unlikely to gain momentum. Despite the
opportunity that was presented by the SARS outbreak to put patients rights on
the government agenda, the momentum has been difficult to sustain. Many
patients suffer from the stigma of being sick and bringing misfortune, and hide
their illnesses. Among the 1,456 who survived SARS, few have come forward to
make their stories known.
A Critical Time
Over the next two decades, more patients will be aware and more knowledgeable
about health. By 1997, the cracks in the Hospital Authority were already showing.
92
Crises have occurred in the control of food hygiene, including the bird influenza
H5N1, and there have been many scandals in the hospitals. The government has
been repeatedly forced not to raise hospital fees and charges in the face of stiff
public and legislative opposition (Leung, 1998). Before the SARS outbreak, much
of the next decade had been set out in the governments health care reforms,
which were outlined in a Green Paper by the Secretary for Health, Welfare and
Food, Dr Yeoh Eng-Kiong, in 2001. Dr Yeoh had set the target for implementing
the health care financing model, known as the Health Protection Account, in
2005, and called for greater partnership between the public and private sectors
while sticking to the dogma that the provision of a strong publicly financed health
care system was an invaluable safety net for Hong Kong people, irrespective of
their financial position. The Department of Health would be repositioned as the
public health regulator, and would also assume the role of a health educator. It
was to become the governments expert adviser in disease prevention and control
(South China Morning Post, 9 April 2002).
The SARS outbreak in early 2003, during which Hong Kong was at the centre
of a widespread epidemic, spurred on the pace of reform. A total of 1,755 people
fell ill with SARS in Hong Kong, and 299 died. The disease showed that the 1990
management reform was inadequate, and that the issue of health financing should
have come hand in hand with management reform. SARS also lent credence to
the long-held criticism that the government had been putting too much emphasis
on the expansion of hospital services to the detriment of public health. Whether
the government will realise the imbalance and allocate more of its resources to
disease prevention, surveillance and controlling emergent infections remains to
be seen. At the same time it has to address the needs of an ageing population,
which SARS has placed on the public agenda more effectively than ever before.
It has put pressure on the government and the medical profession to be more
transparent and to transmit information to patients (interview with Richard
Cullen, City University Professor of Business Law, July 2003).
When Eng-Kiong Yeoh resigned following a critical report from the Legislative
Councils SARS select committee, his action was partly due to pressure from SARS
patients. On 6 July 2004, a group of victims, in an emotional press conference
that was organised by the Society for Community Organisation, said that it was
not enough for Yeoh to simply apologise. The following day, Yeoh resigned (South
China Morning Post, 7 July 2004). The Hospital Authority Chairman Leong CheHung also resigned, followed months later by Ko Wing-Man, one of the Authoritys
Directors who had acted as its Chief Executive during the outbreak. The future
now lies with the new Secretary, York Chow Yat-Ngok, who was appointed in
October 2004. However, with a term of just two years and nine months, it is
unlikely that Chow will introduce any major reforms, particularly in health
financing. Any drastic change in the system will be left to the next administration.
In non-financial terms, an independent medical ombudsman is definitely
needed as Hospital Authority committees are still handling complaints in closed-
93
door meetings. Indeed, the Hospital Authority would do well to give teeth to its
much-vaunted Patients Charter. A patients advocate in each public hospital may
be in order, as has been put in place in Britain. Even a developing country such
as the Philippines is considering a Magna Carta of Patients Rights to ensure,
provide and protect the rights of patients to decent, humane and quality health
care (Philippine House Bill No 666, 2002).
Private hospitals, which will see their market share further shrink, will also
have to drastically change their mind-sets and compete for customers who look
for quality as medical insurance or savings plans are set in motion. Doctors, both
public and private, will have to adjust to this new culture, in which patients will
ask questions and expect to be equal partners in the management of their health.
After all, patients are paying customers. The network of family medicine doctors
could be further strengthened to help with disease surveillance, and to act as
gatekeepers. To spread the message of health prevention and promotion, the
community health councils would be more efficient if the Department of Health
supervised them at the district level. Yet, patients groups see little hope for
improvement. Their concern is that the situation could deteriorate well before it
improves.
CHAPTER
6
1

Ruiping Fan and Ian Holliday
Ruiping Fan and Ian Holliday draw on their expertise in public

administration to analyse the health systems in Japan, South Korea,
Taiwan, Singapore and China and assess what lessons can be learned
for Hong Kong. They conclude that social insurance was attractive in
Japan, South Korea and Taiwan because it built on private sector
dominance and pre-existing social insurance schemes that covered
specific groups. However, ageing populations and moral hazard have
led to cost explosions that these governments are struggling to contain.
Singapore chose its own path of building on the pre-existing Central
Provident Fund, which seems to work well but requires both employees
and employers to accept high levels of contributions. China is trying
to learn from both approaches by having a combined social insurance
and provident fund, but it currently leaves much of the population
uncovered, including the rural population and even the dependents
of insured workers. They argue that Hong Kong can learn from
Singapores integration of primary, secondary and tertiary care. They
also draw some lessons in terms of integrating traditional Chinese
medicine into the health care system.
Introduction
Within their health care heartlands of modern scientific medicine, the developed
states of East Asia, with which Hong Kong is most frequently compared, offer two
distinct health system models. In Japan, South Korea and Taiwan, a social
insurance model dominates. In Singapore, a provident fund model can be found.
In China, with which Hong Kong is gradually reintegrating, a third model is being
developed that combines social insurance and provident fund elements. In this
chapter we analyse all three models. We also look at how each system relates to
the still vibrant forms of traditional medicine that characterise the region.We
96
conclude by considering the lessons that Hong Kong might draw from East Asian
health system models.
Social Insurance: Japan, South Korea and Taiwan

Gertler (1998) notes that in recent years many Asian countries have gone down
the road of social health insurance. He argues that this is because social insurance
is held by policy makers to offer a number of benefits, notably in shifting at least
part of the health care burden from the public sector to the private sector. In
Japan, South Korea and Taiwan, the creation of a social insurance regime was
especially attractive because it built on the pre-existing private sector dominance
of health care. All three countries continue to have market-focused systems that
are dominated by the private sector. In Japan and South Korea, hospitals and
clinics are overwhelmingly owned and operated by the private sector, and account
for some 80% to 90% of health care provision, as measured in terms of medical
facilities, hospital beds and physicians (Yang, 1997). In Taiwan, about 65% of all
hospital beds are in the private sector. However, Gertlers analysis, like many
others, also identifies a series of problems that are generated by social insurance
in the region: rapid cost inflation and systemic design faults that have undermined
performance. It is therefore necessary to look critically at social insurance in the
three most developed East Asian territories that have implemented it.
Until the mid-1980s, Japan had only very limited government regulation of
medical supply, which led to a serious over-provision of hospital and clinical
facilities, and medical personnel. There were also major regional imbalances, with
a clear focus on metropolitan areas, to the detriment of more rural parts of the
country. Although the Medical Service Act 1985 required prefectural governments
to undertake health planning on a regional basis, the Japanese system is still
characterised by over-supply and territorial imbalance. Global medical
expenditure, though historically extremely low, is now starting to spiral upwards
under pressure from an ageing population (Kawabuchi, 1998). In South Korea,
clinics and hospitals are commonly owned by doctors and operate according to
market principles. As in Japan, they are mainly found in urban centres where high
population density generates the likelihood of good returns. Taiwan has a similar
focus of private-sector activity in urban areas. Hence, measures have been taken
in the past 20 years to lure providers to rural areas or, if necessary, to provide
health care directly through the public sector. In all three countries, professional
power is often extensive and helps to explain some of the inefficiencies on the
supply side. In Japan, for instance, the Japan Medical Association has long
exercised considerable influence over key Liberal Democratic Party factions, and
has thereby generated a substantial degree of professional control. Only now is
that control being challenged.
97
In these private sector dominated systems, universal health insurance was

introduced in Japan in 1961, in South Korea in 1989 and in Taiwan in 1995. In
each case, universal provision was built on a series of social insurance schemes
that were created by mutual aid societies or introduced by the government to
cover specific population groups. In Japan, there are currently two main categories
of health insurance, organised through the workplace for those in work and
provided through a regionally based National Health Insurance scheme for selfemployed people and those not in formal employment. The number of people
covered ranges from a few hundred in small village schemes to more than 100,000
in the Osaka metropolitan area. In South Korea, a series of non-profit health
insurance societies established in workplaces and residential areas attained
universal population coverage in 1989. In the late 1990s, a single national health
insurance programme was implemented, and 350 societies were merged into the
National Health Insurance Corporation (Kwon, 2003). In Taiwan, the first social
insurance scheme introduced was Labour Insurance in 1950 which covered the
labour workers, followed by the Government Employees Insurance in 1958
covering initially government employees and gradually extending the coverage
to their spouses and teachers at private schools and civil service pensioners (Lu
and Hsiao, 2003). Once universal coverage was attained in 1995, there was also
some consolidation among providers (Hwang and Hill, 1997; Liu, 1998).
In all three societies, universal health insurance requires individuals to pay
insurance premiums, in return for which they gain access to all health care
institutions, from primary to tertiary care, with which the insurer has contracted.
They are characterised by ease of access and freedom of choice. Health care
benefits may also be paid as cash, to cover sickness and injury, maternity, child
care, funeral expenses, transportation costs and so on. Co-payments can be
substantial, and mean that patients sometimes bear a large proportion of health
care costs through direct payments. In Japan, out of pocket expenses as a
percentage of total health care expenditures ranged from 15.3% in 1995 to 17.3%
in 2002; in South Korea, it is around 50% (Kwon, 2003). In both societies, special
provision is made for the elderly through government subsidies. Pay-as-you-go
policies mean that insurance premiums are collected and medical costs are paid
at practically the same time, in an attempt to make health financing stable by
balancing income and expenditure. Reimbursement to providers takes place on
a fee-for-service basis, with fee schedules set by the government in consultation
with powerful provider associations and consumer groups.
Social insurance has many advantages (Campbell and Ikegami, 1998). It is a
relatively easy way to mobilise resources for health care and to raise taxes. It is
administratively efficient, at least for the majority of the population, because
contributions can be withheld from wages or salaries. It enables private sector
provision within a national system that is directed towards social ends. It protects
individuals from the financial risk that is associated with catastrophic health
episodes. In systems with large or even national insurance societies, it spreads risk
98
across large segments of the population (Gertler, 1998: 7246). Many of these
advantages have been secured in Japan, South Korea and Taiwan. However, there
are also considerable problems associated with social insurance regimes, and these
too are evident in the three systems analysed here.
One systemic weakness makes social insurance systems financially unstable
in ageing populations. Because premiums tend to be collected from workers, an
ageing population generates a decline in the number of contributors at the very
time when pressure on health care resources is increasing. As funds come under
financial pressure, it is necessary to either raise premiums or bolster insurance
funds through public subsidies, both of which are politically difficult. Alternatively,
co-payments can be increased, as is happening in Japan at present. A second
problem is moral hazard. Health insurance effectively reduces the price of health
care at the point of consumption, thereby prompting an increase in demand.
This extra consumption is inefficient, since individuals are purchasing health
care beyond the point where the marginal benefit equals the marginal cost
(Gertler, 1998: 728). A third problem, linked to the second, is that market
pressures can become very strong in social insurance systems, as demand is
artificially stimulated by price cuts at the point of use and supply is difficult to
control. Indeed, on both sides of the health care market there are incentives to
over-consumption, and government is often left in a rather weak regulatory
position, seeking to dampen demand through education and exhortation and to
control supply through competition and fee schedules. The result is usually a cost
explosion. Precisely these sorts of pressures are now being felt in Japan, South
Korea and Taiwan, prompting attempts to tighten up the social insurance regime
through increased premium collection rates, higher co-payment rates, reduction
of the misuse of medical resources and tougher fee schedules for providers.
Social insurance is widely used to finance health care, not only in East Asia
but also in many other parts of the world. It has many advantages when
populations are young and working, and economies are dynamic and growing.
However, as populations age in the early decades of the twenty-first century, and
regional economies appear to have lost some of their dynamism, social insurance
may not be a good choice for health policy makers. Its central problem is actually
not that it places an undue burden on the working population, because that is a
common problem across many types of health systems. Rather, social insurance
generates too many incentives for cost explosions and too few mechanisms for
cost containment.
Provident Fund: Singapore

In the post-war period, provident fund models were created in many British
colonial regimes. Nowhere were they developed as extensively as in Singapore. A
99
system that was introduced by the British in the 1950s was used by Singaporeans
after independence to underpin housing policy in the 1960s, and then expanded
into additional social sectors in the 1980s. The Central Provident Fund now
operates as an all-purpose compulsory savings system to which employers and
employees each contribute. A dedicated health care component was first created
in 1984 with the unveiling of Medisave. In 1990, MediShield was established to
help individuals meet medical expenses that are generated by major or prolonged
illness. An upgraded variant, MediShield Plus, was unveiled in 1994. In 1993,
Medifund was formed to provide a very basic social safety net (Aw and Low, 1997;
Holliday, 2003b).
On the funding side, employers and employees both pay a fixed percentage
of the monthly wage or salary into the Central Provident Fund, up to a ceiling of
around US$2,750 per month. In 2005, the percentages for most workers aged 50
and below were 20% for employees and 13% for employers, making a total of
33% of annual income. In an effort to boost their competitiveness in the job
market, lower percentages are paid by older workers. For instance, in 2005 the
percentages for most workers aged over 65 were 5% for employees and 3.5% for
employers, for a combined total of only 8.5%. Parts of these contributions are
then designated for Medisave: 6% for those aged up to 35, 7% for those aged
between 36 and 45, 8% for those aged 46 to 60, and 8.5% for those aged above
60. This means that for workers who are aged above 65, the entire Central
Provident Fund contribution is allocated to Medisave. A fixed ceiling of around
US$18,500 applies to the amount that can be accumulated in an individuals
account. In both cases, the ceilings were put in place because the accounts are
tax free, and the Singaporean government does not want them to become tax
havens. Accumulated Medisave balances can be used to cover major health care
expenses of a Central Provident Fund account holder or their immediate family
members. Primary care is not covered, but secondary and tertiary care can be
paid for in this way. Once an account is exhausted, payments must be made out
of pocket, or by drawing from the account of a close family member. At death,
all accounts, including the Medisave element, are bequeathed as cash to
nominated beneficiaries.
Linked to this individual savings scheme is a system of government subsidies
based on a graduated list of prices for public sector hospitals. In total, there are
six classes of ward, each with a different daily room rate. 2005 rates are cited here.
In Class A1+ wards, for a non-subsidised daily fee of US$170, patients have their
own ward and full service. In the other five ward classes, government subsidies
operate on a sliding scale to give rates of US$150 for Class A1, US$90 for Class
B1, US$60 for Class B2+, US$30 for Class B2 and US$15 for Class C. At each point
on the scale, the level of service is reduced as the level of subsidy rises. Patients
have a free choice of ward, but if they elect to enter a ward in Classes B2+, B2 or
C they must have a referral letter from a government polyclinic and are not able
100 Hong Kongs Health System: Reflections, Perspectives and Visions
to select the physician who will treat them. The government regulates the balance
of beds in each ward class, the treatment charges that public hospitals can levy,
and the maximum amount that any one patient can be charged per episode of
treatment. In total, government subsidies amount to roughly one quarter of health
care spending in Singapore.
As a direct health care provider, the Singaporean state is most active in the
secondary sector. In the primary sector, it runs 16 polyclinics that have a market
share of about 20%. Some 1,900 private medical clinics hold an 80% market share.
A Primary Care Partnership Scheme co-opts some private sector GPs into state
provision to extend subsidised services to elderly people who do not live close to
a polyclinic. To receive treatment at polyclinic rates, patients must pass a means
test. In the secondary sector, the positions are reversed, with 14 public hospitals
and specialty centres accounting for some 80% of hospital beds, and 13 private
hospitals accounting for the remaining 20%. Two territorial clusters, Singapore
Health Services and National Healthcare Group, bring together polyclinics,
hospitals and national clinics in an attempt to generate integrated public sector
delivery agencies.
The Singaporean system is unique. The nominally very small percentage of
GDP allocated to health care around 3% to 4% combined with good
outcome statistics have drawn considerable international attention (Ham, 1996;
Tan and Chew, 1997). In 2000, the World Health Organisation ranked Singapore
as the sixth best health care performer in the world (WHO, 2000). Its strength is
that it overcomes the moral hazard of social insurance systems. Through close
government overseeing of the secondary sector, it also eliminates many of the
cost-push dynamics that emerge on the supply side of social insurance systems. It
does have weaknesses, notably in the almost total absence of risk-sharing,
redistributive mechanisms in the core Medisave programme, which means that
the health burden is spread very unevenly across individuals. This problem is
somewhat mitigated by parallel insurance systems in MediShield, MediShield Plus
and the private sector, but as those systems are voluntary the problem is not
entirely eliminated.
However, perhaps the major difficulty in looking to Singapore for a model
is that an all-purpose provident fund would be very difficult to create anywhere
else in the world. Contributions are effectively taxes, though they are held in
individual accounts. To impose the current level of contribution in Singapore
20% for employees and 13% for employers would be politically impossible in
most societies. Even if it could be done, it would take many years for the fund to
reach the level of maturity required for individuals to draw from their accounts,
rather than simply contribute to them. Attractive as it may be in many ways, the
Singaporean system is likely to remain unique for the foreseeable future.
Comparative Health System Models in East Asia 101
Combined Social Insurance and Provident Fund: China

In 2000, China started to implement a new health protection mechanism for
urban employees. Proposed in State Council decree 44/1998, in conformity with
the Resolution on Social Security Reform that was approved by the Fifteenth
National Congress on 14 December 1998, the new mechanism was piloted in two
cities in 1999 before being introduced nationwide the following year. The new
model combined social insurance and provident fund arrangements for urban
employees, and created in China a distinctive third model, drawing on elements
of the two models already surveyed in this chapter.
The new model replaced an urban health care system put in place soon after
the establishment of the Peoples Republic of China in 1949. It was designed to
address several difficult problems inherent in that system, which was characterised
by two core elements. One was a free medical service programme set up in 1952
for government employees, scientists and health care providers at national
institutions, and also for university teachers and students. The programme was
directly financed by state revenues, and offered 100% reimbursement of the
health expenses of beneficiaries. The other was a labour protection medical care
programme that was set up in the mid-1950s for industrial, mineral and
commercial enterprise workers. The fund for this programme was drawn from
each enterprises profits, with the approval and under the general regulation of
the government. The three major problems with this system, which became
increasingly apparent from the mid-1980s, were an enormous increase in health
expenditure (notably in the free medical service programme) in the absence of
individual financial responsibility for health care, a frequent failure of beneficiaries
of the labour protection medical care programme to secure payments due to
financial difficulties suffered by enterprises, and the exclusion from the system
of non-public-sector workers and the self-employed, who now constitute about
50% of the urban labour force and continue to grow in numbers while the public
sector is shrinking.
The new health model aims to cover all of the employees and retirees of
urban-based establishments public and private, national and international,
employed and self-employed. It comprises two components: an individual medical
account and a collective health insurance fund. The health spending of an insured
person is first charged against their individual medical account. If the expenditure
exceeds the balance in the account, the surplus amount can be reimbursed out
of the health insurance fund. The proportions and ceilings of reimbursement
vary from city to city, and are determined by local authorities. Both employers
and employees are required to contribute to the health fund: 6% of monthly salary
from employers and 2% from employees. The balance of an individual medical
account derives from the 2% contributions paid by the insured, plus some credit
derived from employers contributions (in many cases about 1% of monthly salary,
though again the exact amount varies from city to city). The rest of the employers
contributions (in many cases approximately 5% of the payroll) are channelled

into the health insurance fund. Unspent allocations in an individual medical
account can be carried over from year to year, and the balance of a deceased
members account can be inherited by the designated heir or heirs. The
government also contributes to the system in the form of tax exemptions, subsidies
for the running costs of the system and by financing complementary and special
health insurance schemes for civil servants, retired senior government officers,
ex-revolutionaries, war veterans and injured soldiers (Hu, 2001).
Clearly, the most interesting feature of this new health care system lies in its
integration of the social insurance and provident fund models. It has successfully
reformed Chinas old system, in which individuals bore no financial obligation
for their health care and were not seriously concerned with rising health care
costs. It also draws on the values that underpin the Chinese culture of family
savings, and in this respect suggests that the establishment of individual medical
accounts is both feasible and desirable. Resources allocated to the accounts can
be economically used. As a result, health care costs can be self-contained, and
the moral hazard that is involved in a single social insurance system can be
overcome. At the same time, because a health insurance pooling fund is also
required, it carries the merit of risk sharing under social insurance principles that
are absent from a single provident fund model. Finally, within the health insurance
fund element of the new system, a co-payment requirement, an insurable benefit
ceiling, lists of insurable medicines, technical diagnostic texts and medical services,
a limited number of contracted providers and so on can effectively curb the costpush dynamics that emerge on the supply side of social insurance systems.
However, although it is still too early to engage in a full evaluation of the precise
advantages and disadvantages of this new model, some concerns do arise in
analysing its financial elements and the circumstances in which it is being
implemented.
First, is the benefit package adequate? It is said that the 8% of payroll rate
(6% plus 2%) that must be paid into the scheme was determined on the basis of
actual average health spending per worker per annum in urban areas in recent
years (Hu, 2001). If this is the case, then the financial success of the model in
each city will depend on a sufficient participation rate from its citizens to share
the risk and ensure the benefit package for everyone when needed. Although
no information is available about the numbers of participants in the new system,
we know that they are low in many cities due to unprofitable enterprises being
unable to afford health care payments for their employees. This must be one of
the major reasons why some local authorities set an extremely low proportion
and ceiling for reimbursement from health insurance funds. In some towns and
cities the reimbursing proportion is only 50% of the actual spending on insurable
items, and the annual ceiling is RMB20,000 (US$2,500). This generates real
difficulties for certain serious treatments, such as cancer therapies. The situation
is especially hard for those living in less developed urban areas, who need to travel
to developed cities to secure more reliable treatment of their critical diseases.
Second, is the coverage adequate? The new model is designed to cover
employees only, leaving their dependent family members uncovered. Health care
costs for any unemployed family dependent must be met out of pocket (Young,
2002). This is highly ironic in the context of the Confucian family-oriented
cultural values that are still dominant in China (Fan, 2002). Furthermore,
although the new system is designed to cover all enterprises and companies in
urban areas, such coverage is only recommended, and not required at present.
There are big differences from city to city; in some places, few private companies
and self-employed workers have joined the new system. Even many state-owned
enterprises fail to allow their employees to join the system because of poor
business conditions. Finally, more than 100 million peasants regularly work in
marginal sectors within urban areas, but they are entirely outside the new system.
Third, how can non-urban health care needs be met? A tremendous challenge
to any Chinese health system comes from the countryside, which is home to more
than two thirds of the population. The problem is not that the government has
never seriously tried to set up a health care safety net in rural areas. In 1955,
cooperative medical care systems began development in Chinese villages. Peasant
families paid a premium (usually 1% to 2% of family income), and on this basis
obtained reimbursement of their medical costs. A village system was mainly
financed by the collective fund of the village. The government provided subsidies
for establishing village clinics and commune hospitals. In particular, it attempted
through a short period of training to produce a great number of barefoot
doctors (who engaged in agricultural labour and only practised medicine parttime) to meet the needs of village clinics. In the late 1970s, cooperative medical
care systems operated in about 90% of Chinese villages, whether effectively or
poorly. However, when a new economic system was created in rural areas in the
early 1980s, villages no longer had collective funds to support such systems. This,
together with peasants dissatisfaction with the low quality of care, poor
organisation and corruption in the cooperative medical care systems, ensured that
most village systems and barefoot doctor clinics collapsed in the mid-1980s
(Zhou et al., 1991). Since then, approximately 800 million Chinese peasants have
once again had to purchase medical services and medical care out of pocket. In
many cases, a serious accident or disease can consume all of the family savings
accumulated over many years, and reduce the whole family to poverty. It would
be a substantial achievement if something like the new urban health care model
could be established in Chinas rural areas. In 2003, the government devised a
preliminary plan for this major reform, focused on impoverished mid-western
areas (Pu, 2002).
There are, then, many problems in implementing a combined social
insurance and provident model in China. However, many of those problems are
specific to the Chinese context, which is in many respects very different from the
Hong Kong context (Holliday and Wong, 2003). The Chinese model thus remains
one from which Hong Kong policy makers might learn.
Traditional Medical Sectors

Looking beyond modern scientific medicine, East Asia possesses a series of
marginal but still significant traditional medicine sectors that relate in various ways
to the dominant health care system (WHO, 2001). The two main dimensions of
that relationship are the nature of the links between modern scientific medicine
and traditional medicine, which can range from total fusion to complete
separation, and the nature of state practice towards the two sectors, which can
range from discriminatory to non-discriminatory. Building a matrix from these
cross-cutting dimensions generates four policy options for mixed health care
systems. Fusion and non-discrimination produce unification. Separation and nondiscrimination generate equalisation. Fusion and discrimination create
subjugation. Separation and discrimination result in marginalisation (Holliday,
2003a). The health systems that are analysed in this chapter fall into all four
quadrants. China is in the unification quadrant. South Korea and Taiwan are in
the equalisation quadrant. Japan is in the subjugation quadrant. Hong Kong and
Singapore are in the marginalisation quadrant. Since 1997, when the Chief
Executive announced that Hong Kong should aspire to become a leading centre
for traditional Chinese medicine, policy makers have sought to reconfigure the
relationship between modern scientific medicine and traditional medicine in the
territory. In doing so, they can learn from practice elsewhere in the region.
The marginalisation of traditional medicine that characterises the
Singaporean health system also constitutes the current state of play in Hong Kong.
In Singapore, separation and discrimination are quite extensive. Formal
government recognition of traditional medicine dates only from the late 1990s,
and is limited mainly to regulation. Policy continues to focus almost exclusively
on modern scientific medicine. Some acupuncture clinics have been created in
public hospitals, but they operate separately from the wider health care system.
There are no cross-referrals, and few links between modern scientific medicine
and traditional medicine. Until very recently, a similar situation characterised
Hong Kong. However, in 2003 the government embarked on a phased opening
of 18 traditional medicine clinics in public hospitals, and sought to raise the
traditional medicine knowledge of modern scientific medicine physicians.
Gradually, traditional medicine is being brought within the planning frame.
As Hong Kong policy makers look to other parts of East Asia for lessons, they
are unlikely to be drawn to the Japanese system of subjugation of traditional
medicine to modern scientific medicine. In Japan, the law recognises only one
form of medical practitioner, trained in modern scientific medicine, and allows
all such practitioners to legally practice the local form of traditional medicine. A
traditional medicine association operates a registration system, but has no official
status. There is some separate government monitoring of traditional medicine
products, but most regulation relates to a 1976 government drugs standard that
applies to all forms of medicine.
Equally, it seems unlikely that policy makers will opt for the Chinese system
of full unification. This system has some merits, notably in the lack of state
discrimination against traditional Chinese medicine. Indeed, the importance of
traditional Chinese medicine to health care has always been upheld in government
policy with, for instance, both the old and new urban health care models covering
traditional Chinese medicine and modern scientific medicine. However, there are
also some defects in the Chinese system generated by the over-fusion of modern
scientific medicine and traditional Chinese medicine. From the 1950s to the 1970s,
the government pushed medical scientists and physicians to create a new, unified
medicine. The ideal turned out to be a pernicious illusion. Having retreated from
it, policy makers now simply uphold equal treatment of modern scientific
medicine and traditional Chinese medicine. However, pressure is now placed on
traditional Chinese medicine to make itself more scientific in terms of modern
professional standards. One result is that modern scientific medicine clinics and
hospitals equip themselves with increasingly advanced facilities and offer
increasingly more modern scientific medicine, rather than traditional Chinese
medicine, treatments. Traditional Chinese medicine is therefore in danger of
losing its own features and usefulness. In short, the Chinese experience indicates
that although certain minimal scientific requirements may be necessary for the
secure practice of traditional medicine, some distance between modern scientific
medicine and traditional medicine is essential for each to exert its characteristic
health care function (Fan, 2003).
Hong Kong policy makers may learn more from the South Korean and
Taiwanese systems of equalisation. In both cases, modern scientific medicine and
traditional medicine operate separately, though with a small number of crosssectoral links, and are treated on a reasonably equal basis by the state. In South
Korea, traditional medicine has been formally acknowledged by the state for more
than half a century. The Medical Service Act 1951 formally recognised traditional
medicine doctors as medical persons, and official government sanction followed
in 1952. Today there is separate regulation of traditional medicine practitioners,
but not of traditional medicine products. Instead, a single Pharmaceutical Act
covers both modern scientific medicine and traditional medicine. In Taiwan, there
is separate regulation of both traditional medicine practitioners and traditional
medicine products. In both cases, there is some cross-referral, though overall
interaction between the two medical systems remains limited. South Korea and
Taiwan have strongly developed traditional medicine sectors, though neither
comes close to challenging the overall dominance of modern scientific medicine
in the health system. The key element of equalisation is that in both systems the
social insurance regime covers not only modern scientific medicine but also
traditional medicine.
Conclusion
No single East Asian model can provide an off the shelf pattern for Hong Kong
to adopt as it attempts to improve its health system. If this were the case, then
the model may well have been adopted some time ago. Instead, East Asian health
systems offer insights for Hong Kong policy makers to pick up and learn from.
Looking first at modern scientific medicine, perhaps the most important
lesson to be taken from the models surveyed here is that they offer very few clear
solutions on the funding side. The incentive structures embodied in the social
insurance model frequently generate suboptimal outcomes through excess
consumption. This model is also poorly equipped to deal with the pressures of
an ageing population, though it is by no means unique in that regard. The
provident fund model creates far fewer adverse incentives, and appears to be an
attractive model if underpinned by an adequate social safety net to cover those
who simply cannot meet their own health expenditure through an individual
account topped up by out of pocket payments. However, it would be very difficult
in the low growth, increasingly pluralistic political environment of contemporary
Hong Kong to build the Mandatory Provident Fund, introduced in 2000, into
the kind of all-purpose scheme that exists in Singapore. If there are any lessons
to be gained about funding, then they may come from the mixed mode approach
that has been adopted by China, which seeks to combine social insurance with a
provident fund.
More lessons might be found on the provision side (Ramesh and Holliday,
2001), where the more extensive state presence witnessed in Singapore than in
the market-focused health care systems of Japan, South Korea and Taiwan appears
to have the edge. Through government ownership of some polyclinics and most
hospitals, Singapore has been able to move towards an integrated health care
approach that seeks to tie together provision at the primary, secondary and tertiary
levels. Patient pathways then become more predictable and manageable, and the
system as a whole operates more smoothly. Hong Kong policy makers could
perhaps draw some lessons here. Patient pathways in the Hong Kong health care
system are not wholly unpredictable, and the system is not entirely fragmented
(Holliday and Tam, 2000). Nevertheless, there are clear barriers within the system
between primary care, which is dominated by the private sector, and secondary
care, which is dominated by the public sector. The recent implementation of
moving government-owned clinics from the Department of Health to the Hospital
Authority could form the basis of a more integrated approach on the provision
side.
Finally, there are similar divisions between modern scientific medicine and
traditional medicine, with very few contact points. The phased creation of 18
traditional medicine clinics in public sector facilities from 2003 creates the
possibility of some collaboration and cross-referral. Learning from the practice
of South Korea and Taiwan, Hong Kong could in the longer term seek to move
towards an equalised system of medical care, in which modern scientific medicine
and traditional medicine are treated as separate but reasonably equal sectors.
CHAPTER
The Role of Public Health in Social Justice:

The Next Steps in Hong Kong
Anthony Hedley
Anthony Hedley is a chief proponent of and role model for the

evidence-based public health movement in which research and practice
are inextricably linked, and has been Chair of Community Medicine
at the University of Hong Kong since 1988. In this chapter, he makes
an impassioned plea for a renewed, independent public health
discipline. He traces the major achievements and failures of public
health from a historical perspective, and draws parallels with
contemporary examples. He challenges all public health practitioners
to return to their true revolutionary calling of improving the health of
societies by translating research directly into socially advancing advocacy
and action.
Introduction
Public health as an activity of the medical professional in Hong Kong has recently
passed a very testing time. In the eyes of some civic bodies and the lay public, it
has been found wanting in the most pejorative terms (SARS Expert Committee,
2003), while in other fora it has received unbridled accolades (Stockholm
Challenge Award, 2004). My aim is to externalise and highlight a range of issues
that I believe illustrate the challenges to public health, define the tasks and role
of this professional specialty in Hong Kong and ultimately determine, from a
humanistic point of view, whether or not public health delivers solutions and
ensures social justice for the whole population.
Public health failure, or events that are perceived to represent failure, are
inevitably very high profile. This is in marked contrast to clinical practice, in which
the number of patients that need to be treated to benefit one patient clearly
indicates that for most therapies only a minority ever benefit, and the rest are
failures to varying degrees. However, it is important to assess how an evidence-
based approach to the public health function can achieve a stronger identity and
a more clearly defined role in the protection of the environment and population
health in the governance of Hong Kong. Such an assessment could usefully
include a review of some of the historical milestones in the history of public health
in Hong Kong and other places.
Definitions of Public Health Practice

The vade mecum for trainees and practitioners in public health is the Oxford
Handbook of Public Health Practice (Pencheon et al., 2001). Its introduction states
that
the last two decades of the twentieth century saw a renewal in the
external verities of public health, in disease prevention, communicable
disease control, health protection, and health promotion This [is]
partly due to the realization that continued investment in clinical care
brings diminishing returns and partly because of the recognition that
the problems tackled so successfully by public health actions in the last
half of the nineteenth century and the first half of the twentieth century
have not disappeared.
One of the conclusions of the authors from this spirited opener, surely overly
optimistic in both retrospect and prospect, is that public health practice therefore
(my emphasis) continues to be a major force in the twenty-first century. In some
senses that appears to be undeniable, but there are often contrary views that are
expressed across many sectors in Hong Kong, and public health advocates are
often accused on a daily basis of being self-serving, especially in newspaper
correspondence columns and by some legislators. Alternatively, these advocates
are simply ignored. One aim of this chapter is to attempt to relate the confidence
that is expressed in this statement from the Oxford Handbook to the status and
projected development of the public health function in Hong Kong.
One immediate challenge is to define what constitutes public health as a
discipline and its area of responsibility in what is loosely called the health system.
For this I turn to Lasts Dictionary of Epidemiology (Last et al., 2001), an excellent
source, albeit misnomer. Public health is defined therein as:
one of the efforts organised by society to protect, promote and
restore peoples health a combination of sciences, skills and beliefs
that is directed to the maintenance and improvement of the health of
all the people through collective and social actions.
Thus, public health is portrayed as a universally shared responsibility that is

clearly not dependent on a medical subspecialty, let alone being its exclusive
intellectual property. This wide ranging and somewhat difficult to define domain
The Role of Public Health in Social Justice: The Next Steps in Hong Kong 111
may be contrasted with conventional views of neurology, cardiology, or

nephrology, in which the organ-specific nature of the work almost amounts to a
statement of the obvious. All clinical specialties are now dependent on an almost
wholly reductionist approach to understanding the mechanisms of disease and
their treatment, but even here public health must intrude with goals to reduce
the amount of disease, premature death, and disease produced discomfort in the
population. Unless clinical interventions are delivered to achieve the coverage
of all those at risk, then regardless of the efficacy of the treatments the activity is
unlikely to be cost-effective in reducing the population-wide burden of disease.
The public health function in Hong Kong needs to do much more by way of
analysing and emphasising health needs and outcomes, in our mixed medical
economy, in terms of coverage of the population at risk. The long delays in
designing and promoting an organised population-based cervical screening
programme is just one example (Adab et al., 2004). Last states that public health
is thus a social institution, a discipline, and a practice but Acheson (1988) in his
report on the future of the public health function in the United Kingdom gives
this greater focus by stating it to be the science and art of preventing disease,
prolonging life and promoting health through organised efforts of society. As
an art it would include persuasive, if not compelling, advocacy, but with what
authority? What are the structure and boundaries of the public health function
in Hong Kong? There is no unified agreed statutory representation of the public
health function in Hong Kong as a network, group, or discipline with
acknowledged sapiential authority. In a simple but inadequate mapping of the
key agencies in public health function (Figure 1), we would include at its core
the two public sector providers of health care, the Department of Health and
the Hospital Authority, and hopefully the two academic departments. The solid
lines indicate that these four have strong and necessary professional links to the
College of Community Medicine, and the Department of Health to the Health,
Welfare and Food Bureau. However the broken lines indicate largely informal,
often fragmented and fragile links between these bodies, to the policy bureau,
to other government departments and to a wide spectrum of non-governmental
organisations. The lack of formalism in the relationship between the statutory
and other bodies, which should be integrated agencies in the public health
function, is a legacy of both the colonial government and the new post-handover
SAR government. This situation should now be rectified through a comprehensive
review of public health.
A Review of the Public Health Function

There has been virtually no discussion about the concept of the public health
function in Hong Kong. Previous directors of health have maintained a stout wall
of independence around their bailiwick, and because of faults on both sides there
Other
Govt
depts
HWFB
NGOs
Note: HWFB = Health, Welfare and Food Bureau

NGO = Non-governmental organisation
Figure 1 What is the structure of the public health function in Hong Kong?
has been mutual mistrust between the service and academic units. This has had
a major inhibitory effect on the development of the specialty in Hong Kong, and
it will take a new and visionary approach to break the old mould.
A review of the public health function would be, conservatively, a years work
for an energetic multidisciplinary task force under skilled chairmanship. The first
step would be to choose a model that can represent simply but logically the
relationships between the many different domains that together make up the
concerns (need and demand), resources, personnel, skills and activities
(interventions and coverage) of public health. An objective and impartial review
of public health, without preconception or prejudice, would define its interfaces
and boundaries and identify who should be doing what and why. In this process
roles and responsibilities, whether independent or shared, should be linked to
manpower, training and other resources. There are many non-medical experts,
such as health care researchers, statisticians and health economists, who are used
and relied upon by the government and many other agencies, and who should
be given much greater formal recognition. One of the most difficult tasks of such
a review would be the examination of the independence of the different agencies
that contribute to the public health function, and to ascertain the extent to which
the specialty of public health as practised by the governments Department of
Health is compromised by its civil service role, which not only prevents it from
acting effectively on problems that originate from government action, but also
precludes open action against external agents, such as tobacco companies.
The representation of such a system might be ultimately based on the
symbolic logic of a Venn diagram (Edwards, 2004), the properties of which are
ideally suited to the description of a complex and changing collective of
interactions in a single formulation. How a Venn diagram would represent a Hong

Kong model of public health would eventually be for the task force to decide,
but even the basic model that comprises three interlocking curves would allow
the identification of eight distinct regions and 28 (256) Boolean combinations
(Figure 2). The whole domain of public health in Hong Kong could, if necessary,
be represented by additional second sets, each with the potential to maintain a
symmetrical relationship with the other sets. As a dynamic model on the
workstation of every trainee, public health physician, health scientist and
administrator, it would develop a more coherent understanding of the public
health function and its responsibilities, goals, achievements and failures. In the
classical Donabedian concept of structure, process and outcome, such a model
would provide an operational measure for setting objectives, an audit and an
evaluation framework for practitioners, an aid to policy making for ministers and
bureaucrats and most of all a learning tool for trainees.
Unless all sectors of the public health function are embraced soon in a new
operational manifesto, at least some of them may die.
S
T
Figure 2 The symbolic logic of John Venn as a framework for public health
Missing Interfaces in Public Health

In devising a comprehensive map of the public health function, there should be
special emphasis on the identification of the many missing interfaces in
contemporary public health. An annually recurring one appears in the March
budget of the Hong Kong government (Hong Kong Special Administrative Region
Government, 2005). Exploitation of the relatively small, but critically important,

price elasticity in tobacco consumption is considered to be an essential element
of tobacco control by the World Bank and the World Health Organisation under
the Framework Convention on Tobacco Control (WHO, 2003). Both agencies
refute the argument about the relationship between duty levels and large-scale
smuggling as a reason for the maintenance of lower duty levels. Most smuggling
involves the movement across borders of billions of cigarettes on which no duty
is ever paid in any jurisdiction. Unfortunately a succession of Hong Kong financial
secretaries and their Treasury have not accepted this, and tobacco duty as a
proportion of retail price remains well below the level of most economically
developed countries. The continuing dialogue with the tobacco industry, but the
absence of such dialogue with the public health sector, is an important underlying
factor.
There has been no effective communication between the Health Bureau and
the Treasury on the issue of tobacco duty for many years. The Treasury continues
to pretend that its sector of government has nothing to do with public health,
and the Finance Minister is briefed to make statements that are incorrect. The
price that is paid by the whole community for this failure of the public health
function is otherwise avoidable nicotine addiction in the young, higher costs of
illness and premature deaths. The effects of the March 2005 budget will be
measurable in precisely those terms. However, we rarely externalise these facts
and their implications for the cost for the whole community, and until we do so
in a formal manner, it is unlikely that there will be any change in the lack of
insight on the part of many government officials and some legislators.
There are many similar incongruities in the interaction between party politics
and public health issues. The Op-Ed headline in the South China Morning Post of
24 December 2004 shouted clearly we must all work together (Tien, 2004). The
topic was cross-border air pollution, but the piece had the hallmarks of political
opportunism, rather than a genuine concern for public health. It called for
incentives to improve air quality, rather than urgent, mandatory and closely
monitored interventions on pollutant emissions. Apart from the fact that the
author, the leader of the Liberal party, does not appear to understand the issues,
he leads a party that has consistently opposed many different health protection
interventions that have been proposed by the Departments of Health, Food and
Environmental Hygiene and Environmental Protection to protect population
health. Other members of the Liberal party wield enormous influence in the
privileged positions of legislators, Executive Council members, or both. This raises
important questions about the viability of rational evidence-based approaches to
public health advocacy. Apart from the very constrained opportunities to argue
for public health in Legislative Council panels and motion debates, there is no
independent system of professional public health advocacy that is necessary to
effectively address the politics and polemics that threaten the passage of public
health legislation in an unrepresentative legislative council. It could and should
come from a truly independent specialty of public health.
The roots of modern public health can be found in the recognition of

inequalities by governments. Amartya Sen, the Nobel laureate welfare economist
said it is not a question of more or less government, but what kind of
government. He has proselytised in his book Development as Freedom a new
understanding of the catastrophes that plague societys poorest people (Sen,
1999).
In our quest for social justice, we need to re-examine the determinants of
health and the question of the role and responsibility of the state. What
responsibility does the Hong Kong government accept for public health? In 1854,
in the time of the fourth governor of Hong Kong, Sir George Bowring, the
government did not apparently even accept responsibility for provision of the
water supply (Cameron, 1986). In the time of the first chief executive of the Hong
Kong Special Administrative Region, despite the available public health
intelligence, the government did not accept responsibility for the daily deaths
that were caused by air pollution in the same way that it did for the water supply
or infectious disease control. A better understanding of and solution to such flaws
in governance would lead to a more comprehensive and effective system of public
health.
Historical Perspectives
Social medicine is a concept that was attributed to Johann Peter Frank in the
eighteenth century territory of modern Germany (Garrison, 1921). A
comprehensive system of public hygiene from womb to tomb has long since
been recognised as a medical discipline that is concerned with the health of
groups. Franks view of an all-embracing system of complete medical police takes
us well beyond advocacy towards monitoring and control, mainly through
legislation. Hong Kong needs the resources and internal political freedom to
develop an independent public health police. The College of Community
Medicine could take on this role if the issue of the independence of the specialty
could be resolved. However, its membership is only a fraction of all those who
should be players in public health, and furthermore its possible role in objective,
focused political advocacy is seriously compromised because of the lack of
independence of the majority of its members on account of their duty to their
employers, which includes the government. There is a stringent requirement for
the members of the college to be seen as rigorously impartial in their dealings
with external agencies, even those that are working to undermine public health
legislation. Whereas that is in no sense a criticism of individuals, it is a fundamental
flaw of our health system in terms of the public health function.
A clearer perspective of the current state of public health regulations and
controls in any jurisdiction can arguably be obtained through a study of history
(Berridge, 2000). Long-term historical analyses are important for the appraisal
of societal decisions and changing attitudes and for the assessment of the factors
that have had the biggest influence on policy. An analysis of recent decisions is
important for strategic planning, including public health advocacy, but Berg
(Berg, 2005) states that one of the perennial discouragements of public health
workers is the predictability of responses to health threats. We might forgive some
of the inept reactions and decisions early in the last century when knowledge of
causal agents, modes of transmission and effective controls were at best poorly
understood, but judging by our responses to more recent threats, we appear not
to have learned much. Fear, irrational policy and misdirected blame are still
common. Although this is hardly a revelation, it is a formal recognition of how
public health has often taken a wrong turn. In Hong Kong that would apply at
various times to sewage disposal, sanitation, tobacco control, air pollution, aspects
of communicable disease control and the balance between primary and secondary
care and inequity in health care delivery. However, as is pointed out by Berridge
(2000) the notion of historians as health policy analysts has little currency.
Historical analysis can support contemporary analysis and policy formulation
for the priority areas of avoidable morbidity and mortality. For example, for
tobacco control, an independent consultancy report to the government in 2001
on the resource implications of smoke-free policies began with a twenty-year
chronology of tobacco control legislation (Environmental Resources Management,
2001). That in itself provides a measure of where and how tobacco deaths might
have been avoided through political will and timely action. The political
manoeuvring and other tensions behind the chronology would be even more
instructive, and they are not unique to the case of tobacco. Berridge argues that
history opens up issues and asks broader questions that no-one else does. However,
for this to contribute to the development of the role of public health in Hong
Kong, more open government and an intellectually honest debate that is
unencumbered by secret lobbying and the protection of vested business interests
would be required. Effective debating positions need to be informed by past events
and the alternative sociology of political processes. One problem here may be
the diminishment of archives of communications in hardcopy form that permit
the review and interpretation of the process of government. As an example, I
would point to the discovery as a result of the Minnesota Master Tobacco
Settlement (Centres for Disease Control and Prevention , 2005) of letters from a
former chief secretary of the pre-handover Hong Kong government to a transnational tobacco company that negotiated the payment of US$40,000 to a ChineseAmerican tennis player (Ford, 1992). The athlete in question was a hero among
young people in Hong Kong, especially adolescent girls. He appeared in the media
as a tournament winner in later years clutching the rosette of yet another tobacco
brand. The covert action of the chief secretary was a powerful vector for tobaccorelated disease, and anything more antithetical to public health would be difficult
to imagine, but the historical sequence and the lessons that can be drawn from
it are generic, and must not be forgotten.
The identification of the determinants of health is of no value if effective

action cannot be implemented. The greatest impediments to progress on
contemporary public health threats include a lack of acceptance of the evidence
for causality, the treatment of preventive health imperatives as nothing more than
optional choices in a wider context, the acceptance of the primacy of commercial
vested interests and the idea that a minimalist approach (the so-called step-bystep approach) will allow time to be used as a tool to resolve major
confrontational issues. The net result of this irrational process is a trade-off
between the health and lives of the population at risk and various brands of
political expediency. Public health in Hong Kong is ill equipped at present to
confront and challenge the process of social policy-making that is based on this
political process. The special problems here that are faced by professional public
health personnel are deficiencies in training, a lack of priority for the generation
and use of appropriate public health intelligence and a lack of experience and
skills in risk communication. Added to this is a failure to achieve truly effective
cohesion between different groups with public health responsibility or interests
(for example governmental, academic and subvented NGOs, including the
Hospital Authority), and the aforementioned civil service status of public health
practitioners, who form the largest cadre of potential advocates. Of course, many
possible examples of cohesion can be pointed to, but there is no systematic
approach and a huge mal-distribution of resources. It must be said that the present
leadership has now adopted a radically different approach, with new targets for
performance and outcomes, but they are coming from a long way behind.
Those who are employed in public health roles deserve a better working
environment, more adequate resources and a new model for continuing
professional development. It was not very long ago that the civil service
administrations view was that because medical and health officers held medical
degrees they were already trained. The longstanding denial of the principle of
specialist training in public health still pervades today. In 2006, we have long
queues of both basic and specialist medical trainees in public health trying to
pass the College examinations. In the United Kingdom they would be
supernumerary, with strict limits on their working hours and a clearly defined
professional time for study. In Hong Kong, many are exhausted, demoralised and
underperforming, and their progress to Fellowship of the Academy is seriously
delayed.
The Toxicity of Poverty

In Britain in 1840, physicians and social welfare advocates in different towns and
districts documented the huge gradients in mortality as indicated by age at death
between the professional classes and labourers (Lewis, 1952) (Table 1). This kind
of information was recognised 165 years ago as public health intelligence, and

Table 1
UK: Average age at death 1840
Town/District
Derby
Bolton
Leeds
Truro
Bethnal Green
Whitechapel
Strand Union
Kensington
Professional Classes
Labourers
49
34
44
40
45
45
43
44
21
18
19
28
16
22
24
16
led to the origins of the worlds first public health legislation, the 1848 Public
Health Act (Hamlin and Sheard, 1998), which was based on the legendary 1842
Report on the Sanitary Conditions of the Working Classes by Edwin Chadwick
(Chadwick, 1842). Chadwick provided a clear recognition that unsanitary
conditions caused both social and biological disease.
Chadwicks acumen in identifying the relationships between poverty, filth,
high risk behaviour and disease, and his prescription of infrastructural and
engineering remedies was developed long before germ theory was conceived, but
is still needed long after the discovery of specific causative organisms, such as
cholera, HIV and the SARS coronavirus. However, the political reaction in Britain
to Chadwick was complex and antagonistic, and was characterised by the question
Who will pay for all this sewering and watering? (Hamlin and Sheard, 1998)
Then as now, in addition to a rejection of any obligation to accept a duty of care,
there was a failure to recognise a net loss to the community that is incurred from
the breakdown of public health. This remains an understated issue in modern
public health controversies. The English parliamentary debates for and against
Chadwicks new public health raged on and there was to be no clear answer to
the problem of what legislative means would best achieve sanitary ends (Hamlin
and Sheard, 1998). The arguments for included the optimistic view that if the
opposers had opportunities of seeing for themselves the sufferings from the want
of sanitary regulations they would not object and the ethical philosophical
viewpoint that this was not just a matter of compassion but one of justice
(Hamlin and Sheard, 1998). The proponents of the bill were clearly frustrated
by the difficulty of directly quantifying health outcomes in terms of observable
events.
Although the relationship between deprivation health risks and mortality was
clear enough, the demonstration of a causal relationship that was based on a
clinical syndrome, such as bubonic plague or SARS, was lacking. In any event,
the opposition had no difficulty in obfuscating the issues and challenging even
the most transparent statements of the obvious. The contrary libertarian view
against Chadwick was characterised by slogans such as the people were clever
enough to manage their own affairs (Hamlin and Sheard, 1998), or, in modern
parlance, that we do not need a nanny state, and the dismissive pun that there
was a mania now for sanitary measures. In fact there was insanity in sanity
(Hamlin and Sheard, 1998). The fact is that, as with the present-day public health
advocates in Hong Kongs Legislative Council, Chadwick made little progress in
advancing his cause in the English parliament, and the final bill was a shadow of
his original proposals. Nevertheless, it still stands as a great leap forward.
The public health achievements that were made possible by sewer
developments, domestic sanitation, clean water and food had an apparently
seamless relationship. The General Board of Health in England was created as a
strong central authority. In what was effectively a new medical arm of the state,
Medical Officers of Health oversaw sanitary conditions in each district, and
housing reforms and environmental controls dealt with the linked problems of
disease and poverty simultaneously.
This environmentalist strategy contrasts with the quarantinist approach that
is only concerned with interrupting the vectors for the spread of disease, rather
than dealing with the root causes (Baldwin, 1999). The quarantine or crisis
management approach ignores the direct relationship between general
socioeconomic and environmental improvements and the prevention of disease,
and reflects a systemic problem in modern health systems worldwide. In Hong
Kong, this approach accounts in large measure for disparities in funding for
prevention versus care, for example the $32 billion Hospital Authority budget,
the $2.8 billion for the Department of Health and the paltry $1.5 billion that is
allocated for environmental protection in the budget of the Environment,
Transport and Works Bureau.
Edwin Chadwick was a barrister, rather than a health professional. He could
stand aloof from the purely medical and physiological views of health, such as
those that were expressed by William Pulteney Alison, the Edinburgh physician
and reformer (Milne, 2004). Alison attributed ill health to poverty, and argued
for relief from the government, not charities, that would be funded out of general
taxation. Chadwick was able to steer his environmental reforms by navigating
around the issue of the direct alleviation of poverty. He targeted sanitation as
the remedy for the physical causes of acute illness, because it sidestepped the
criticism that the hardships that were imposed by the Poor Law and life in the
workhouse were the causes of illness in an already disadvantaged group. In any
case, arguments for increased financial support for the poor would have
foundered, just as they would today in Hong Kong if they went beyond the
provisions of the Comprehensive Social Security Assistance.
We can summarise Chadwicks legacy for public health and social justice as
a system of sanitation; the beginnings of a legislative tradition in environmental
health; and an evolving process of involvement of governments, communities and
individuals in public health. Chadwicks legacy also included a son called Osbert,
who laid the foundations of environmental and urban health in Hong Kong.
Politics Versus the Precautionary Principle

The evolution of public health advocacy in Hong Kong was as painful in the
nineteenth century as it is in the twenty-first. The colonists built a prison and a
cathedral, but no sewage system or water supply. In 1843, the first Governor, Sir
Henry Pottinger, admitted there was a great deal of most severe and fatal illness,
but his administration did nothing about it. In 1853, the Colonial Surgeon
reported on so much filth and so many nuisances, and recommended sewage,
drains and scavenging, but was ignored. In 1860, the surgeons report was
suppressed, and in 1861 was returned for revision (Cameron, 1986). The process
of reinterpretation is not a new phenomenon in Hong Kong. Finally, new hope
came in 1864 with the formation of the Sanitary Committee, but actually it made
little difference, and slum areas like Tai Ping Shan continued to grow to become
the epicentres of transmissible diseases.
On his arrival in Hong Kong in 1873, the dedicated Colonial Surgeon Dr
Phineas Ayres (Thame Local History, 2005) immediately called for serious
reform. He was a shoe leather epidemiologist, but remarked that house-to-house
visits with the surveyor general nearly killed them. In fact, three colonial surgeons
had died in the previous 10 years from infectious diseases. He found that every
condition existed for the development of cholera or fevers (Cameron, 1986).
Eventually, of course, it was bubonic plague that erupted in 1894.
In 1881, the Colonial Office dispatched Osbert Chadwick, Edwins son, to
Hong Kong to carry out a comprehensive investigation of Hong Kongs sanitary
problems, because, according to Governor John Pope Hennessy, Hong Kongs
sanitary state was threatening the health of the British military (Jarman, 1996).
Osbert Chadwick made comprehensive proposals for fundamental changes
in the environmental controls in Hong Kong (Chadwick, 1882). He provided
an analysis and commentary on the general situation, including housing and
drainage, streets, sewers and water supply and scavenging, and made
observations on the death rate of 26 to 30 per thousand. The mean age at death
was only 18.3 years (Chadwick, 1882). He said, my report shows the necessity
for strong and complete measures of sanitation and I trust they will be
undertaken without waiting for the necessity to be demonstrated by the
irresistible logic of a severe epidemic. Chadwicks recommendations were
immediately opposed, not only by the European and Chinese landlords in the
rental property business, but by the business-orientated distinguished medical
legislator Kai Ho Kai (Choa, 2000), whose views echoed those espoused in the
English parliamentary debates forty years earlier.
Ho Kais protest was delivered to the Governor in a Memorandum of
Objection. He argued from an economic, rather than a public health, standpoint
(as if the two were different) and stated that by this Ordinance millions of
dollars will be sacrificed, vested interests interfered with and public confidence
shaken to its foundation (Choa, 2000). It would be difficult to imagine a more
calculated attempt to sabotage an essential public health measure, but it is one

that could have been initiated in the Legislative Council only last week on a range
of contemporary public health problems. When the epidemic came in 1894,
followed by a period of crisis management, Dr Ayres expressed the view that what
all my reports could not do, the epidemic has done. The plea for action was not
heeded until the emergence of the irresistible logic of the outbreak, and today
in public health the fact that we are still forced to sit around waiting for many
predictable epidemics to either begin or mature before effective action is taken
is a largely unmet challenge.
In contemporary opposition to solutions to manifest public health risks, a
prime example is the denial by vested interests of the urgent measures that are
needed to prevent the genetic reassortment of avian and human influenza viruses
(Ferguson et al., 2004). In the Legislative Council Food and Environmental
Hygiene panel, the presentation of the conservatively estimated odds of the
development of a highly pathogenic influenza virus from the genetic reassortment
of human and avian viruses compared with the odds of dying from other lifestyle
and environmental hazards, such as tobacco, air pollution, or frequent flying
(Hedley et al., 2004), made little or no difference to political acceptance of the
necessity of intervention in the form of the closure of live chicken markets (Hong
Kong Legislative Council, 2004). Other similar examples include the opposition
to general tobacco control, indoor smoke-free policies (Hong Kong Legislative
Council, 2003), nutrition labelling (Hong Kong Legislative Council, 2003), the
reduction of road traffic, the cutback on industrial and power generation
emissions and many others. These public health interventions are firmly underpinned by epidemiological (Lam et al., 2001; McGhee et al., 2005; Wong et al.,
2001; Hedley et al., 2002) and economic (Environmental Resources Management,
2001; McGhee et al., 2005; Environmental Protection Department, 2005),
evidence for the benefits of prevention. However, 125 years after Osbert Chadwick,
progress in public health is still frequently delayed or derailed by the obtuse, nave,
or just plain cynical arguments of vested interest.
These experiences indicate that we need better knowledge and expertise in
the assessment of the perceptions of risk in a local and cultural context. In the
epidemic of the nineteenth century in Europe and Hong Kong, the military
searched houses for dead bodies and sprayed or fumigated the contents. The
administrative urgency and thoroughness with which these measures were taken
to contain epidemic outbreaks and the public fear and concern about the
economic impact contrast sharply with reactions to so-called normal disease.
For example, in England normal disease included an infant mortality rate in
inner city wards of 50% and an annual mortality of 30 per 1000 (Lewis, 1952).
Arguably, there is no better litmus test of public health and social justice in any
community than the trend in the infant mortality rate, as can be seen by the
declining rate in Hong Kong in successive decades since 1960 (Figure 3). This is
a measure that is critically dependent on both social and economic development
and medical and health care. Public health in Hong Kong should focus now on
the variations in avoidable mortality and their causes across the whole population.
For example, Hong Kong has enjoyed a major economic and epidemiological
transition, but even in successful economies there is nothing so toxic as poverty,
and although the standardised curve of declining death rates from 1970 onwards
looks very satisfactory (Figure 4a), an alternative version shows the excess risk of
deaths between the upper and lower tertiles of income groups at all ages and 0
4 years (Figure 4b)(Hedley and Thach, 2005). The inequity clearly remains, albeit
reduced in the good times, but in the recent economic downturn the differential
appears to have immediately increased, especially in those aged 04. This needs
confirmation and explanation, but probably shows that the Inverse Care Law,
which was first propounded by Julian Tudor Hart 35 years ago (Hart, 1971), is
unfortunately alive and well, even in Hong Kong. It must be in the forefront of
our public health thinking, and the elimination of inequality and inequity in
health and health care must be more strongly emphasised.
45
Mortality rate (per 1,000 live births)
40
35
30
25
20
15
10
5
0
0
19601969
19701979
4
Year in decade
19801989
19901999
20002004
Figure 3 Hong Kong infant mortality rate 19602004
Risk Communication
It may be argued that our difficulty in promoting the precautionary principle
(Wikipedia, 2005) reflects our deficiencies in risk communication, which
determines the eventual effectiveness of our public health intelligence. We have
11
Standardised death rate

(per 1,000 population)
10
9
8
7
6
5
4
1971
1976
1981
1986
1991
1996
2001
2006
Figure 4a Hong Kong standardised death rate, 19712004
1.8
1.6
Standardised death rate

(per 1,000 population)
1.4
1.2
1.0
0.8
0.6
0.4
0.2
0
19801982
19851987
19901992
19951997
20002002
Figure 4b Triennial excess deaths in the lowest tertile of income compared to the highest tertile
seen that there are problems with the way in which we construct, disseminate and
evaluate our health promotion messages. I would be reluctant to criticise other
peoples efforts in this difficult area, but many health promotion materials are
boring stereotypes compared with the lively images in the media such as a recent
cover of Time magazine (Figure 5). We need the resources to match Time on every
occasion, because the opposition often does. Brand images from cola drinks
stimulate MRI detectable neural responses in the ventromedial prefrontal cortex,
which correlates with the preferences of the subjects for these drinks (McClure
et al., 2004). This has enormous public health implications, especially for brand
diversification into non-tobacco products by tobacco companies. The eye-catching
and vulgar sentiments of a libertarian poster against tobacco control (Figure 6)
(Campus Libertarians, 2005) have successfully blocked many health interventions
Figure 5
around the world in the name of human rights. The caption reads when fascism
comes to America it will arrive in a white coat with a stethoscope. Public health
professionals are often accused of being health fascists, and it is quite clear that
we need to be better prepared in terms of our risk communication skills and
strategies to deal with charges of paternalism, for example, as set out in Jacob
Sullums book For Your Own Good, which characterises the public health that we
try to practise as a tyranny (Sullum, 1998). Many obstacles that are faced by the
public health issues that I have referred to, including tobacco, indoor air quality
and nutrition labelling, can be characterised as civil libertarianism versus public
health science. Libertarianism is defined as the extension of freedoms and rights
beyond necessity. In Hong Kongs public health we need to voice much more
forcibly and effectively John Stuart Mills maxim (Mill, 1859) that no one has the
right to harm others. At the same time, we should not be seen as an enemy of
the people. Although this is hardly a new phenomenon, the portrayal of public
health advocates as Ibsen-like enemies of the people(Ibsen, 1977), resonates with
many laissez-faire business interests in Hong Kong, and has done so for over 150
years in the face of compelling evidence on current or evolving public health
disasters. Henrik Ibsens characterisation of the local medical officer of health in
a Norwegian town who closed the swimming pool to prevent the spread of disease
was of a dedicated professional, but one who did not care about the other social
consequences of his actions. A contemporary example of this portrayal would be
the mistaken arguments about the loss of income in the Hong Kong hospitality
industry that would result from smoke-free policies.
The quantification of risk communication remains an unresolved challenge
both within the specialty of public health and in its relations with different lay
Figure 6 Libertarian prescription for health
sectors of the public. For example, we might ask which of the eight epidemics,
represented by different measures of risk and outcome, would be selected as the
priority for the next intervention by legislators (Table 2). They are, of course,
one and the same epidemic, in this case the annual deaths in Hong Kong that
are caused by passive smoking, but the perceptions of risk vary markedly
depending on how they are represented. Someone recently described public
health risk communication as epidemiological mumbo-jumbo. In terms of
perceptions of risk, we need to better understand what matters most, especially
to the government, legislators and the public. We need different approaches, and
in that area dollar signs as risks to the individual pocket or economy speak louder
than relative risk ratios as representations of harm or benefit.
We should undoubtedly be able to monetise all of the harm and benefit in
our risk communication, but high-level health economics skills in Hong Kong
are very scarce, and efforts to establish new service-related academic developments
in this area have failed, mainly due to a lack of resources.
Sometimes we are forced to stand by and watch the risks change without ever
having demonstrated a causal association. For example, the forty year declining

Table 2
Risk communication and translation of risks and changes:
Which epidemic is priority?
Increase in incidence
No. needed to harm
Relative risk
Excess risk
Attributable fraction in those exposed
Population attributable risk
Annualized no. of deaths
Annual avoidable costs
100/100,000
1009
1.34
34%
25%
14.5%
1324
HK$1.2 billion
mortality rates that reflect trends in the incidence of stomach cancer in Scotland,
Hong Kong and Singapore represent the tail of a largely unexplained global
epidemic (Figure 7) (WHO, 2005). However, when we do demonstrate causality,
should the government accept responsibility for health protection and guarantee
relative risk reduction? Hong Kong streets are studded with anti-oxidant stations
that combat cancer and heart disease the fruit and vegetable hawker stalls.
We have demonstrated in local studies the massive protection that is afforded
against oesophageal cancer by the daily consumption of citrus fruit and leafy
green vegetables (Cheng et al., 1992). However, virtually all of this produce is
imported. Should the protection of availability and affordability be a government
responsibility, or should avoidable mortality from any cause be determined by
market forces? In a truly effective public health approach, we should at least be
discussing this issue.
Rate (per 100,1000)
100
10
1
1950
1955
1960
1965
1970
1975
1980
1985
1990
1995
2000
Year
Figure 7 Age standardised mortality rate (world) of stomach cancer in men aged 085+
Commercial opportunism has a habit of misappropriating public health

science and risk communication and wrong-footing the public health approach.
The anti-oxidant story is a case in point. Within 25 m of each other on Lyndhurst
Terrace in the Central District of Hong Kong is a fruit and vegetable stall and an
emporium selling mega-doses of fat- and water-soluble vitamins and other
supplements and treatments as part of the emergent fashion of vitamania. It is
unusual for the value of over-the-counter preparations such as vitamin
supplements to be questioned in the lay media, although a Malaysian broadsheet
did cast doubt on their cost and effectiveness (Konsumer, 1999). However, papers
in peer-reviewed international medical journals do so frequently, such as the
Journal of the American Medical Association in March 2005 (Lonn et al., 2005), and
add to the growing evidence base of both the ineffectiveness and the possible
harm of vitamin supplements. This raises the question as to where the political
boundaries of public health are. Are we forced, through lack of a mandate, to sit
and watch an emergent cancer epidemic from P53 gene induction due to the
widespread consumption of large doses of vitamin supplements? Do we have
adequate mechanisms for stopping the entrepreneurial activities of retailers that
may pose serious health risks, including, perhaps, members of professional bodies
such as the Hong Kong Pharmaceutical Association? Such actions would be
extremely sensitive and fiercely opposed. Even with a solid body of evidence that
included randomised controlled trials and meta-analyses, I question whether the
government would have the confidence to intervene.
Instead of Should I take vitamin supplements, doctor? the question might
be Should I be tested for cancer, doctor? Commendably, the government
recently acted to examine a similar issue that of the suitability of breast
screening in the healthy population and the answer is clearly spelled out in
an excellent definitive report (Department of Health, 2004). The evidence-based
answer for Hong Kong Chinese is no. Hippocrates, who argued first do no
harm in 450 BC, would have approved, and the reason is found in the partitions
of the five boxes which are described by Leung et al (2002) that demonstrate
that any possible benefit would be vastly outweighed by the possible harm (Figure
8). Even more recent evidence points to the importance of investing in and
maintaining state of the art treatment services that are available to all without
any delay. In 2005 this has not stopped a new independent NGO from launching
a major campaign that advocates the screening of even young women (Hong Kong
Breast Cancer Foundation,, 2005). It is an important example of illusory messages
that ignore the Bayesian equations for the outcomes of screening. The
government has the authority to prevent the marketing of unauthorised
medicines, but not the marketing of incorrect prescriptions for invasive tests to
people who are not even patients. This is a commercial activity that amounts to a
public health scandal and social injustice in the making. If our discipline has any
relevance, it cannot allow it to pass unchallenged.
Lives saved = 77
Complications = 134
Figure 8 First do no harm: the predicted negative effects of

mammography screening on the health of Hong Kong Chinese
However, we are not good at stopping trends for which we have prima facie
evidence of causality. The great London smog of 1952 demonstrated how air
pollution causes fatal cardiopulmonary damage: it killed 4000 people in five days
(Lancet, 1954). However, despite this evidence Hong Kong has allowed its air
quality to deteriorate over the last 15 years (Figure 9). Our loss of horizon due
to pollutant aerosols contributes to at least 2000 to 3000 excess deaths a year,
and is pushing people into clinics, hospital beds and coffins. This is a massive
social injustice. Extrapolated curves from roadside and general air monitoring
stations indicate that it would take until about 2030 to bring our air quality in
line with new European guidelines, assuming that recent apparent modest
reductions in particulates and NO2 are real and sustainable, which unfortunately
they are probably not (Figure 10). The all-pervading and deteriorating air quality
of the Pearl River Delta is characterised by commercial activities that predictably
damage the health of children and kill adults, such as the use of Bunker C fuel.
Bunker C (Edwards, 1967) is a dense, viscous oil that is rich in sulphur and toxic
metals, such as nickel and vanadium. It is the fuel that is most commonly used
for power north of the Hong Kong boundary by Hong Kong and mainland
businesses in the more than 70,000 factories in the Pearl River Delta. Its use is
illegal in Hong Kong. The effects of Bunker C and the lack of controls on
imported road vehicle diesel from the mainland have now virtually negated the
unique public health triumph of 1 July 1990, in which the restriction of sulphur
in fuel led to improved respiratory health in children and the avoidance of 600
A reduction each 1km visibility below 20km

increases daily mortality by about 0.55
Figure 9 Visibility report (19772004)
120
100
days
80
60
40
20
0
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030
Year
Figure 10 Exprapolated curves from roadside and general air monitoring stations to 2030
deaths annually, mainly from cardiopulmonary disease (Hedley et al., 2002). The
question is, where is the official, independent and recognised expertise and
responsibility in public health for analysis, assessment, advocacy and action on
air pollution? Currently, there is no such post, person or priority, although it is
the biggest and most pervasive health hazard. Is there an active formal programme
of collaboration between the Health and Environment Bureaus on urgent
measures to reduce the avoidable deaths and morbidity from air pollution? The
answer is no. This is another example of a major missing interface in public
health.
If counts of illness episodes, hospital admissions and deaths fail to prompt
definitive action, then would the representation of risks through a reductionist
approach support advocacy in public health better than our conventional
epidemiological expressions? For example, perhaps the idea of acute daily
prostaglandin-mediated inflammatory responses of epithelial cells to air pollutants
in our lungs (Quay et al., 1998), which affects everybody, would drive political
will better than boring risk ratios and body counts. A reductionist perspective
would highlight the massive daily damage to cells in the arterial system, the
alteration of thromboxane chemistry that leads to platelet adhesiveness (Nemmar
et al., 2003) and the dumping of endothelial cell carcasses that initiates
atherosclerotic plaque formation (van Eeden et al., 2005). Might this lead to
indoor smoke-free policies faster than the present unproductive debate? As a
means of tobacco control, several countries have resorted to the use of graphic
images of tumours, ruptured blood vessels and impotence on cigarette packs to
paint compelling messages of the harm of tobacco smoking. Tobacco analysts in
the finance sector recognise that such health messages are effective and devalue
the brand. We need similar forms of public health intelligence in environmental
health to penetrate political obtuseness, bureaucratic inertia and complacency,
and to better inform public opinion.
Appreciation of the reductionist approach should not stop with the heart
and lungs. The epidemiological transition from leanness to being overweight is
an acute epidemic, with a recent onset over just 15 years or so (Trolano and Flegal,
1998). This is an extraordinary phenomenon, and its probable multifactoral cause
is still poorly understood. However, physical inactivity is certainly one component,
and although it took millions of years for us to evolve as lean, fit hunter-gatherers,
we have created a lifestyle and environment that has reduced us to couch potatoes
in the space of just a few decades. Physical inactivity causes injury to finely tuned
skeletal muscle and to the metabolism of the whole body. Physical activity controls
gene expression with the secretion of an array of short- and long-acting proteins,
which after even a single bout of exercise reduces the glycaemic response to our
next meal (Booth et al., 2002).
Department of Health posters that urge us to exercise more carry the right
message, but how many people can operationalise that, even if they want to? Will
the government invest in urban health, for example to make Hong Kong a
walkable city, to help reverse this next epidemiological transition? If we can build
Chek Lap Kok and Disneyland, we could do this, but unless the planning and
transport departments and many other sectors, together with public health bodies,
address the problem of the protection of gene expression, then the health benefits
of economic development will be seriously compromised. We are a very long way
from such cohesion and coordinated action to protect public health.
I have tried to reflect the need for a different approach to the pump handles
of Hong Kongs health problems. John Snows analytical and intuitive approach
led him, against considerable scepticism, to remove the handle from the pump
in Londons Broad Street to terminate the cholera epidemic in 1854 (Snow, 1855).
Today, public health needs better resources and a more integrated approach to
the removal of pump handles. I am sure that we all recognise the priorities of
the principal causes of avoidable morbidity and mortality, but it is a discouraging
fact that unless the priority is made manifest by a rapidly explosive and fatal series
of observable events, such as SARS, our approach is often forced to be slow and
measured almost to the point of being negligent. I would emphasise this issue by
pointing to the 1832 cholera epidemic in Sheffield, Yorkshire, which killed 402
people (http://public-art.shu.ac.uk/sheffield/unk126im.html site accessed May
2005). In shock, the city erected a large civic memorial as a reminder of that
preventable public health disaster. It has recently been restored. As we debate
what should be included in the plan for the West Kowloon Development, I
propose there should be a large obelisk to commemorate all of the avoidable
hospital admissions and deaths that have been caused by the non-removal of pump
handles. This is not a joke; public health needs to be able to point to metaphorical
monuments to unresolved issues, and perhaps one built in black marble in
Kowloon would provide an even better focus.
I have referred to the need for quality public health intelligence, and that,
in turn, needs a rational approach to public health and health care research, but
ten years after the initiation of the Health Services Research Committee (Health,
Welfare and Food Bureau, 2005) we still do not have it. In Scotland, which is
another semi-autonomous region with a population of 5.2 million, the annual
budget for health research (not including biomedical research), is HK$60 million
(Watt, 2005). In Hong Kong, it has scarcely averaged HK$ 7.2 million over 12
years. Even the availability of the public health information that is available, such
as Hospital Authority data on discharge from its clinical medical system, is subject
to a substantial tariff. There can be no justification for obliging not-for-profit
public health analysts to find funds for data that is needed to determine why
people are dying.
Hong Kong is a rich community. In New York in 1915, the City Board of
Health stated the City can have as much reduction of preventable disease as it
wishes to pay for; health is purchasable A city can determine its own death
rate. (BMJ Editorial, 1998) How are we going to ensure that the prescriptions
for social justice in Hong Kong that is, lower death rates beginning in 2005
are always issued without delay and without the arbitrary and cynical trade-off of
illness and premature death against vested interests? Who can deliver this health?
Does it take public health physicians or lawyers? The American Journal of Public
Health (Editors Choice, 2005) points to the public health achievements of Eliot
Spitzer, the charismatic New York Attorney General. Spitzers website (May 2005)
gives an impressive list of public health actions. For example, he brought a law
suit against British American Tobacco for promoting cigarettes to black youths,
reined in the power industry with a fine of US$1.1 billion and achieved an annual
reduction in emissions of 212,000 tons each of SO2 and NO2, and focuses on
strategies to overcome obesity. If only we had an Attorney General and
Department of Justice that were as informed and as active in playing a major role
in support of public health arguments in Hong Kong. Instead, our system is
trapped by bureaucracy and an unrepresentative legislature. As a professional
discipline we must externalise the political issues in public health in an objective
and effective way. I suggest that it will take a concerted politically incorrect
approach to extricate us from our present impasse.
As a symbolic gesture I propose a monthly political briefing paper: The Hong
Kong Pump Handle () that would regularly place on the desks of
bureaucrats, legislators, editors and public health physicians uncompromising
questions about sensitive and important public health issues. In the first issue we
might ask the following.
Is the HKSAR policy on air quality management consistent with the
elimination of avoidable-mortality? (No)
Is recruitment to nicotine addiction among 15 year olds in Kowloon East now
a major health crisis? (Yes)
Why is the standardised mortality rate in Lau Fau Shan 50% higher than the
rest of the SAR? (We do not know)
One problem I foresee is that, through no fault of their own, it might be
more than their job is worth for many people who work in public health to
be contributing authors to such a document.
Public health is at a crossroads in Hong Kong, both as a concept and as a
professional discipline. I believe that we ignore that at our peril. As some positive
steps forward, I propose the following three goals.
First, we should implement a review of the whole domain of public health
and map its structure, interfaces and roles. That map will look very different from
the crude diagram that I presented at the beginning of this chapter, but the
experience would be exciting, rewarding and rejuvenating.
Second, I would call for much greater independence of the core discipline.
The public health approach and public health intelligence should be synonymous
with independence. We need an Independent Commission for Public Health.
Third, there should be a much higher level of priority for the investment of
funds and skills to capture high quality information and generate intelligence
that is available free of charge to all bone fide users. In parallel, we need better
resources in both academia and the service sector for the capacity building of
the skills that are needed to carry out this work. Hong Kong must fund public
health intelligence or it will pay an even higher cost.
If we could achieve these three goals, then we might arrive at a new approach
to the acquisition of training, qualifications and skills and the experience to ensure
the future of the public health function in Hong Kong.
PART
II
The Organisation and

Management of Health Care
Parts II & III

Commentary
Organisational, Management and Quality of Care Issues

Introduction
We begin the middle sections (Parts II and III) of the book by considering whether
and why a public health system approach is important to achieving the best health
outcomes for whole populations, echoing many of the arguments advanced in
Chapter 7 by Anthony Hedley. Next, we introduce the macro-organisation of
Hong Kongs health system, and end by focusing on several key management and
organisational issues at the meso- and micro-levels.
Why do health systems matter? Since the late 1970s and early 1980s there
has been accumulating evidence that the financing, organisation and delivery of
care and services have a substantial impact on health outcomes (Morris, 1980).
World Health Report 2000 notes that even without progress in fundamental science,
changes in the way currently available interventions are organised and delivered
can reverse the spread of an epidemic and dramatically reduce the cost of saving
a life (WHO, 2000). The Evidence and Information in Policy team at the WHO
calculated that between 1960 and 1990, almost 50% of the reduction in mortality
in 115 low- to middle-income countries could be attributed to the generation and
utilisation of knowledge as developed and applied by the health system (WHO,
2000). Nevertheless, health systems worldwide can and should accomplish much
more with the available scientific understanding of how to improve and promote
health. The failings that limit greater health improvements stem from the
misapplication of best current clinical evidence rather than a lack of
understanding about appropriate interventions: that is, from systemic rather than
technical or scientific failures.
However, there are still major barriers to effectively using system levers to
achieve positive health improvements. Many health problems can and should be
approached from a system level but are not due to a lack of good evidence
demonstrating effectiveness. Part of the problem lies in the lack of scientific

expertise in health system research. This is a field frequently seen as fluffy,
pedestrian, and applied as opposed to the perceived rigour that is often
associated with basic or clinical science enquiries (Travis et al., 2004). In addition,
methodological difficulties such as the definition of relevant and measurable
outcomes, the myriad interactive issues that can and do influence system
performance, are common barriers. The WHO has convened an international
task force to identify health system research priorities (Taskforce on Health System
Research Priorities, 2004), propose strategies to raise financial support to address
these priorities and generate consensus about how to move forward.
From a quality of care perspective, James Reason (2000) advocated the system
approach to averting medical errors. He pointed out that the person or ad hominem
approach focuses on the errors of individuals, blaming them for forgetfulness,
inattention or moral weakness, whereas the system approach concentrates on the
conditions under which individuals work, and tries to build defences to avoid
errors or mitigate their effects. Highly reliable and successful organisations, such
as the military, airlines and nuclear power plants, which have less than their fair
share of accidents, recognise that human variability is a root cause of errors and
work hard to reduce that variability (Kohn et al., 1999). Shewhart (1931) and
Deming (1990), the fathers of quality control, devised early methods to quantify
variability in manufacturing processes, which directly led to unprecedented postwar productivity gains in Japan, then in North America and Europe. More
recently, Mohammed and colleagues (2001) demonstrated, using six case studies
including the Bristol paediatric cardiac surgery debacle and the Harold Shipman
murders, a central role for Shewharts control charts in operationalising clinical
governance using a system approach to protecting and improving health.
As Derek Gould notes in Chapter 1, Hong Kong is a relative latecomer (if it
has arrived yet!) in the deliberate formulation, development, implementation and
evaluation of health care interventions and programmes from a system
perspective. Such an approach would require policymakers to take into account
the potential impact of a policy on different components of the system and aim
at maximising health gain while minimising adverse consequences and costs to
the system overall. Indeed the health portfolio was only elevated to the level of a
fully fledged policy bureau in the government secretariat as late as 1983, although
it is arguable whether this really accomplished much in coordinating the different
aspects of health and health care policy across all relevant sectors in Hong Kong
until very recently. For the next 15 years or so up to the commissioning of the
Harvard Report in 1997, the system suffered from benign neglect, and mostly
operated in a reactive mode (Hsiao and Yip, 1999 and see Chapter 20 by the same
authors). In other words, not much had been done in terms of long-term,
sustainable strategic thinking using a system approach.
Commentary: Organisational, Management and Quality of Care Issues 139
Overview of Hong Kongs Health System

Figure 1 gives an overview of Hong Kongs health system. Hong Kong has a
mixed medical economy. Its annual total expenditure on health and health care
was 5.5% of gross domestic product in 2001/02 based on the latest set of
Domestic Health Accounts available, where public sources of funding accounted
for about 56% of total spending, and private sources accounted for about 44%.
The majority (about 95%) of public sector funding is derived from government
general tax revenue, with the rest recovered from fees and charges at the point
of care. Currently (after the upward revision of fees in 2003 following a
consultancy by Hu Teh-Wei of the University of California at Berkeley), the
public fee structure remains heavily subsidised, whereby the all-inclusive per diem
charge at a public hospital is HK$100 and out-patient consultation fees are
HK$60 for specialist appointments and $45 for generalist appointments, with a
$10 per item drug charge (US$1 = HK$7.8 pegged exchange rate). Hong Kong
has a very narrow tax base in which only 37% of the population pay any income
tax, and 7% contribute at the top marginal rate of 16%. The expenditure of
the Department of Health for 2003/04 was HK$3,038 million (9.3%), while the
remaining HK$29,539 million (90.7%) from the public purse was allocated to
the Hospital Authority. The major source of private health financing is through
out-of-pocket household expenditure, with private insurance schemes and
employer-provided medical benefits accounting for the remainder. The
predominant form of private insurance is indemnity policies (mostly as riders
on life insurance policies), which pay providers on a fee-for-service basis with
caps on the maximum reimbursement amount. Managed care, in the various
forms of contract medicine, prepaid plans and preferred provider networks, has
grown considerably in the last decade, although its penetration is still limited
in scope (mostly in the out-patient sector) and size (see Chapter 10 by Nelson
Wong). About 30% of the population have private insurance or benefit scheme
coverage, mostly through employment-based programmes. The majority of such
coverage comes in the form of riders to other types of insurance schemes, most
commonly life policies.
In terms of the macro-organisation of care, the Health, Welfare and Food
Bureau of the Government Secretariat oversees the entire health system. The
Bureau is headed by a political appointee, one of 11 ministers selected by the
governments Chief Executive. Public health and health protection functions, and
some limited forms of direct service delivery (mostly preventive in nature), fall
under the purview of the Department of Health, which reports directly to the
Bureau. The Department has recently been reorganised so that all of the disease
surveillance and prevention functions, along with nosocomial infection control
components of the Hospital Authority, are now under the newly established
Centre for Health Protection. The Centre was inaugurated in 2004 as a direct
result of the governments SARS Expert Committee Report (2003), which
Figure 1 An overview of the Hong Kong health system
recommended the consolidation and centralisation of such activities. The Centre

has five operational branches: surveillance and epidemiology (communicable and
non-communicable diseases); programme management and professional
development; public health (clinical) services (consisting of HIV/AIDS,
tuberculosis, and venereal disease services); public health laboratory services; and
emergency response and information. The remaining functional units of the
Department of Health include port health, radiation health, regulatory functions
for pharmaceuticals, all health professionals and private (i.e. non-Hospital
Authority) facilities and institutions, special public health areas of local
importance including the development of Chinese medicine and tobacco control,
and direct service provision in the form of 47 maternal and child health centres,
three womens health centres, 18 elderly health centres, 12 student health centres
in addition to the child assessment service and genetic counselling clinics. These
service clinics have also been increasingly used for the dual purpose of forming
a population-based sentinel disease (mostly non-communicable) and risk factor
surveillance network to monitor and evaluate public health programme
effectiveness. Other public health functions such as food safety and inspection
as well as environmental hygiene have been under the purview of the Food and
Environmental Hygiene Department, which took over many of the environmental
hygiene functions of the now defunct Urban and Regional Councils and where
some of its food-related functions have most recently been transferred to the newly
established Centre for Food Safety in 2006, all of which are also under the Health
Welfare and Food Bureau. Public health professional civil servants are shared and
regularly transferred between all these organisations.
To further enhance the effectiveness and efficiency of carrying out public
health functions in the immediate future, and to streamline the operation of the
Health, Welfare and Food Bureau and its constituent executive departments in
the longer term, concrete proposals in the advanced stages of planning were being
finalised to merge the Department of Health into the Bureau at the end of the
Yeoh Eng-Kiong administration. If implemented, a new Chief Medical Officer post
reporting directly to the Bureau Secretary will be created to advise on public
health policy formulation and oversee the relevant regulatory functions that are
currently carried out by the Department of Health. Further options such as
merging the food regulatory and safety standard functions of the Food and
Environmental Hygiene Department and the Agriculture, Fisheries and
Conservation Department to form a seamless farm to fork regulatory and control
system were also being actively considered at the time, which on account of
numerous food scares such as malachite green in fish and Streptococcus suis in pork
in 2005 led Chief Executive Donald Tsang to finally announce the formation of
the new Centre for Food Safety to consolidate such functions in his maiden Policy
Address in the same year. However, it appears that the first set of plans regarding
Department-Bureau merger has now been shelved under York Chow, who took
over from Yeoh in 2004 after he finally resigned over the fallout from SARS. This
is regretable because vested interest, in terms of control and dominance by the

elite administrative service, seems to have over-ridden professional and public
health imperatives. It remains to be seen whether other sensible organisational
re-engineering such as setting up a dedicated drug, pharmaceutical and medical
interventions oversight agency (to replace its current rather ineffective
counterpart in the Department of Health) to regulate western allopathic and
traditional Chinese therapies as well as the ever growing list of over-the-counter
nutri-ceuticals and new medical devices will be implemented. In recent years,
drug supplements have been regularly tested and faulted by the Consumer
Council as being overly toxic or potentially hazardous to health, followed by
reactive withdrawal of the product by the government. Another area of concern
is the aggressive, unqualified promotion of medical devices and technologies to
the population, especially those segments which are less questioning such as the
elderly, with a vacuous implied promise of benefit but are likely accompanied by
substantial iatrogenic harm. It is unacceptable to relegate such an important
public health function to a general consumer protection concern.
All 44 publicly funded hospitals are managed by the Hospital Authority via
seven geographic clusters. The Hospital Authority is a public statutory body
established outside of the civil service but directly accountable to the government
through the Health, Welfare and Food Bureau. The provision of out-patient
services is shared by the private and public sectors in a ratio of 80 to 20. On
average, each Hong Kong resident consumes about 8 to 12 ambulatory visits every
year. The Hospital Authority is responsible for all public specialist out-patient
clinics at its 44 hospitals and 64 general out-patient clinics, with an annual
throughput of about 11 million (8,461,500 out-patient clinic and 2,594,700
accident and emergency) attendances.
Hong Kong has no primary care network to speak of (and hence the lack of
gatekeeping and proliferation of doctor-shopping behaviour see Chapter 8 by
Janice Johnston), and the specialty of family medicine or general practice is
underdeveloped and chronically under valued and funded. About half of all
specialists work in the private setting, and most combine specialty care with
general practice services. Private doctors can and do dispense drugs and a single
fee is charged for both consultation and medication, with the latter category
accounting for a significant portion of the income.
The Hospital Authority provides 95% of total bed-days in 29,022 beds (or
4.2 beds per 1,000 population). The 12 private hospitals account for the
remaining market share. Private hospital occupancy rates have shrunk
substantially in recent years with improved service quality at the Hospital
Authority through most of the 1990s and the economic downturn since 1997.
However, since the 2003 SARS epidemic, probably as a result of the subsequent
economic recovery and perhaps coupled with the general publics wariness of
using public hospitals (given the large superspreading event at the Prince of Wales
Hospital and the overwhelmed surge capacity of the Princess Margaret, Alice Ho
Miu Ling Nethersole and Tai Po Hospitals during the outbreak), anecdotal reports
since 2004 indicated a strong rebound in private hospital attendance figures.
Chinese medicine and other complementary care, although popular with the
local community, occupy a relatively minor niche role in the system. Figure 2
shows that only 54 per 1,000 Hong Kong residents visited a Chinese medicine
practitioner over a one-month period in 2002, compared with 440 per 1,000 who
sought Western allopathic care as out-patients (Leung et al., 2005). This
proportion is even slightly less than the 65 per 1,000 Americans who typically seek
alternative or complementary therapy in a one-month period (Green et al., 2001).
Although the majority of ethnic Hong Kong Chinese still explain and understand
their illness by way of their ethno-specific traditional medical concepts rather than
Western medical principles (Lam, 2001), these findings indicate that the local
communitys care-seeking orientation, at least for acute conditions, still very much
favours Western allopathic medicine. This also holds true for self-management,
in which 54 of the 567 individuals with symptoms recalled using over the counter
Western medications, in contrast to 14 individuals who reported taking over the
counter traditional Chinese remedies (Figure 3; Leung et al., 2005).
1000 people
567 reported symptoms

512 considered seeking
medical care
372 sought primary care

(Western allopathic medicine)
68 sought speciality care

(Western allopathic medicine)
54 visited a Chinese medical
practitioner
16 visited an emergency room
7 were hospitalised in a
community hospital
1 was hospitalised in a
tertiary medical centre
Source: Thematic Household Survey, 2002 (Leung et al., 2005)
Note:
Data are for the Hong Kong general population in 2002. Each box represents a subgroup of the two largest boxes,
which comprise 1000 people from the general population and 567 who reported symptoms, respectively. The final
estimate is the number of people per 1000 in the Hong Kong population who experience each type of event.
Figure 2 Monthly prevalence estimates of illness in the community

and the roles of various sources of health care

Self management*
OTC Western medicine only
OTC Chinese medicine only
Both OTC Chinese and
Western medicine
Diet modification
Expectant with rest
Expectant with usual routine
0
10
20
30
40
50
60
70
80
Number of people per 1000 in the Hong Kong population
90
100
Source: Thematic Household Survey, 2002 (Leung et al., 2005)

Note: OTC = over the counter
* Includes all categories: (1) OTC Western medicine, (2) OTC Chinese medicine, (3) diet modification,
(4) expectant with rest, and (5) expectant with usual routine
Figure 3 Monthly prevalence estimates of different self-management modalities for those

who report symptoms (567 per 1000 population)
Towards a Primary Care-led Health System

There has been an accelerating epidemiologic shift away from acute diseases to
more chronic health problems in the last few decades in the developed world
including Hong Kong, and this trend is expected to continue at an even more
rapid pace over the next 20 years. By 2020, the rank order of major disease
burdens is projected to be dominated by ischaemic heart disease, unipolar major
depression, cerebrovascular disease and chronic obstructive pulmonary disease
(Murray and Lopez, 1996). Table 1 compares the top five leading causes of death
in Hong Kong between 1947 and 2004, and lists the same for the world between
1990 and projections for 2020. Locally, four out of the top five killers were
infectious in origin at the end of the Second World War as opposed to 80% noninfectious, chronic conditions in 2004 (Leung, 2002). Acute diseases that mainly
affect children in developing countries lower respiratory tract infections,
diarrhoeal diseases, conditions arising during the perinatal period and childhood
vaccine-preventable diseases are expected to decline significantly as global
immunisation reaches all countries in the next two decades (Murray and Lopez,
1996). Therefore, chronic conditions have and are expected to become the main
cause of morbidity and mortality locally now and globally by 2020, contributing
two-thirds of the burden of illness, which will have enormous implications for
health care resource allocation (Michaud et al., 2001). The demographic

Table 1
Epidemiologic transition
Five leading causes of death in Hong Kong
1947
1. Pneumonia
2. Tuberculosis
3. Perinatal/neonatal
conditions
4. Enteritis and
diarrhoea
5. Violence
2004
Five leading causes of disability

adjusted life-years (mortality) in the world
1990
Malignant
neoplasms
Heart diseases
Lower respiratory
tract infections
Diarrhoeal diseases
Cerebrovascular
disease
Pneumonia
Perinatal condition
Chronic lower
respiratory diseases
Unipolar major
depression
Ischaemic heart
disease
2020
Ischaemic heart
disease
Unipolar major
depression
Road traffic
collisions
Cerebrovascular
disease
Chronic obstructive
pulmonary disease
Sources: Department of Health, Hong Kong; Murray and Lopez. The global burden of disease,
1996.
transition to an ageing society (see Chapter 4 by Paul Yip and colleagues), the
rapid implementation of advanced technologies and the ever upward cost spiral
of financing a comprehensive health system (see Part IV) will no doubt compound
the already heavy economic toll of meeting the needs of the chronically ill.
It is precisely because of the epidemiologic, sociodemographic, technological
and economic transitions that an urgent rethink is needed in how Hong Kong
organises its health system. In particular, the concept of a primary care-led system
deserves much closer scrutiny and quick implementation. As Gould points out
in Chapter 1, this idea of a comprehensive primary care service delivery framework
was considered at length and painstakingly during the latter part of the 1980s,
culminating in the 1989 Primary Health Care Working Party Report (by a panel
chaired by Rosie Young, former Dean of the University of Hong Kong medical
school). Indeed the Report concurred with the Alma Ata declaration of the WHO,
which was promulgated in 1978 and recognised the central importance of an
intact and functional primary care network of general practitioners in any health
system. However, the disappointing, empty-handed and totally inconsequential
outcomes of that exercise were not lost on keen local students of health policy.
This lack of progress was further accentuated a year later by the failure of the
hospital-focused Scott Report that laid the groundwork for the establishment of
the Hospital Authority. Perhaps the narrow focus, almost to the point of tunnel
vision, of W.D. Scott and Company was understandable given its primary remit
of revamping the fragmented in-patient care non-system composed of 38 disparate
government and subvented hospitals with little direction, management or
oversight. Nevertheless, it was surprising that neither the consultants nor those
in the government who commissioned the work realised that any macroorganisational change, let alone a complete overhaul of in-patient and specialty
services as this turned out to be, cannot be divorced from a thorough
consideration of the basic layer of first-contact care whence the patients originate.
This Achilles heel of the otherwise appropriate recommendations from the Scott
consultancy, having been buffered by a buoyant economy and seemingly endless
expansion of the Hospital Authority budget until 1997 (total public expenditure
on health tripled, in constant dollar terms, between 1989/90 and 2001/02), finally
caught up with a system that is bursting at the seams with a close to half-billion
dollar budget deficit in the 2004/05 fiscal year.
The same blinkered perspective, however, cannot be said of the Harvard
Report led by William Hsiao and Winnie Yip (see Chapter 20 by the same authors).
They were initially asked to look into the financial sustainability of the public
system but eventually delivered a system-wide diagnosis and recommended as
many organisational changes as financing reform proposals. They criticised Hong
Kongs health care system as being highly fragmented, whereby little
communication exists between the different levels of care, public versus private
sectors, and types of services (e.g. Western allopathic and Chinese medicine). In
response, the government issued a consultation document in 2001 (Health and
Welfare Bureau, 2001) that promised to break down the walls between different
components of the system. For instance, it mapped out the merger of the
Department of Healths general out-patient clinics with the Hospital Authoritys
integrated clinics. While this makes good clinical and management sense, it has
contributed little to redressing the fragmented and variable quality of primary
care in the private system that has at least an 80% market share of all ambulatory
services. The Integrated Clinics of the Hospital Authority were originally set up
in response to the increasing pressures of the other specialist out-patient clinics.
Their function has been to deliver stepped-down care for patients with the
eventual objective of transferring them back to the general out-patient clinics or
private practitioners. This, however, conflicts with their new dual role as a training
ground for family medicine specialists, and the Hospital Authority annually takes
in more than 100 such trainees. The most basic tenet of family medicine dictates
the longitudinal follow-up of a defined patient population and their families. The
Hospital Authority, with the Health, Welfare and Food Bureau, will need to decide
whether these clinics are to continue as temporary stepped-down facilities with
high patient turnover or whether they should function as bona fide family
medicine-led primary care clinics and act as the centre of development for the
specialty.
Due to the Hospital Authoritys recent budget deficits, many family medicine
trainees have not had their contracts renewed at the end of their basic traineeship
(i.e. three years post-registration), thereby making it difficult, if not impossible,
for them to complete the minimum six-year supervised training necessary to
become an accredited specialist in family medicine. This is not only a waste of
resources but also an abdication of responsibility in the development of the

specialty. Compare this to the situations in the UK, Canada and most Scandinavian
countries with well-functioning primary care systems in which close to half of all
postgraduate medical training posts are reserved for family medicine, and general
practitioners are pillars of the entire health care system (e.g. primary care trusts
in the UKs National Health Service). A large part of the Hospital Authoritys
difficulties in this regard stems from the financial constraints under which it
operates. Without planning or forethought, it has largely inherited this extra
burden of providing postgraduate medical training by default because it is the
largest and predominant provider of specialty and in-patient care. Hence, a
potential solution may be to separate its service role from postgraduate training
activities. There should be explicit recognition of and accounting for the resources
that are required to fulfil training objectives, and these should be borne by both
the health and education (via the University Grants Committee) portfolios, instead
of relying solely on money allocated for the delivery of direct clinical service. This
extra money should follow the trainee and accredited training units, whether in
the public or private sectors, and opened for bidding by the Hong Kong Academy
of Medicine and its constituent colleges, which can act as the coordinator for all
training programmes. While the establishment of the Academy has pushed the
local system of specialist training into line with the norms of comparable health
systems of developed economies in Europe and America, the reform exercise since
the early 1990s has not been completely satisfactory due to the lack of
accompanying resources to effect much needed changes. For instance, the new
arrangements have placed more emphasis on structured teaching and supervised
learning and less on experiential apprenticeship, but the reality on the frontline
makes this ideal difficult to realise. Restrictions on the working hours of trainees,
protected time off for academic work, educational objective setting, training
agreements, induction at the start of each placement, rotational placements
designed to offer specified experience, and regular feedback on progress from
the supervising consultant are rarely all or even mostly fulfilled (Calman, 1993).
It is high time that Hong Kong rethinks the way that it delivers postgraduate
medical training and devotes new resources to ensure its success. In particular,
we should take an evidence-based approach to manpower planning in terms of
the relative proportion of training posts in different specialties according to
changing population needs, with a heavy emphasis on family medicine and
general practice, cost-effective cross-substitution between specialists, generalists
and non-medical health care professionals, and ultimately move towards better
quality training for learners and care for patients (see the following section on
quality of care).
For all the rhetoric and advocacy in support of a primary care-led system,
where is the evidence to show that primary care is an important, if not the most
important, component in a health system? First and foremost, primary care
matters because it has been consistently shown to be positively and strongly related
to the health of populations, although definitive causal inference cannot be

claimed, as is almost always the case in health policy research unlike hypotheses
in laboratory or clinical science, which can be tested under much more controlled
conditions. Barbara Starfields landmark ecological study, in which she found that
those OECD countries with weak primary care infrastructures (as measured by a
composite score based on five health system characteristics and six characteristics
of practice that reflect strong primary care) had higher costs and poorer health
outcomes, provided the first evidence that an intact primary care network should
underpin all health systems (Starfield, 1994). Within-country studies
demonstrating an inverse gradient between primary care physicians to population
ratios and mortality (Farmer et al., 1991) and a similar relationship between
primary versus specialty care providers per population and life chances (a
composite indicator representing total and cause-specific mortality, life expectancy
and low birth weight) (Shi, 1992 and 1994) in addition to numerous other
individual-level research reports (Starfield, 1985; Shea et al., 1992; Franks and
Fiscella, 1998) have confirmed these correlational findings. The World Health Report
2003 reaffirms that real progress in health depends vitally on stronger health
systems based on primary health care (WHO, 2003). There is no comparable
evidence outside of Western Europe and North America, in part because the
concept of primary care is still immature in other regions of the world. In Hong
Kong, we do not yet have a functional primary care network, and most of
ambulatory practice is still based on the solo practitioner model. The first cohort
of trained family physicians is only beginning to graduate from residency
programmes, let alone realising a multidisciplinary primary care team of nurse
practitioners, physician assistants and social workers. The lack of such a core
infrastructure hampers the delivery of health education, counselling and primary
and secondary screening interventions, and perhaps accounts for part of why
Hong Kong does not participate in the full range of health promotional activities,
especially outside of the government sector (Figure 1).
What exactly is primary care? It was defined and adopted by the World Health
Assembly in 1979, following the Alma Ata consensus meeting the previous year,
as:
Essential health care based on practical, scientifically sound, and socially
acceptable methods and technology made universally accessible to
individuals and families in the community by means acceptable to them
and at a cost that the community and the country can afford to maintain
at every stage of their development in a spirit of self-reliance and selfdetermination. It forms an integral part of both the countrys health
system of which it is the central function and the main focus of the
overall social and economic development of the community. It is the
first level of contact of individuals, the family and the community with
the national health system, bringing health care as close as possible to
where people live and work and constitutes the first element of a
continuing health care process.
WHO (1978)
Since this declaration, primary care has been universally recognised, although
not always implemented, as an integral part of any health system and not as an
add-on (Basch, 1990). Nonetheless, this conceptualisation of primary care
appears to be at odds with health systems based on the indiscriminate adoption
of new technology, specialisation and subspecialisation, the primacy of hospitals
in service delivery, medical and nursing education, and public health policy
formulation features that are characteristic of Hong Kongs macro-organisation.
For instance, the Hospital Authority consumes 90% of total public health
expenditure, but up to 2004 had only two consultant posts in family medicine
among a total consultant headcount of over 500 distributed over the medical and
surgical specialties and subspecialties. There is only one other family medicine
consultant in the Department of Health, bringing the total to three. Academic
family medicine units at the two medical schools are each staffed by only three
faculty members (out of a total of about 200 in each medical school), and are
subsumed within the specialty departments of internal medicine and community
medicine (public health medicine) respectively. In addition, both schools have
recently lost chair professors in family medicine. In contrast, half of all active
practising doctors carry out primary care functions in one way or another in the
private sector, without the necessary infrastructure that should accompany the
practice of first-contact medicine. The Hong Kong College of Family Physicians
should shoulder some responsibility for the current circumstances of its discipline.
As of 2004, the College had certified only 149 fellows (qualified specialists), slightly
more than only three other specialties of the constituent colleges of the Hong
Kong Academy of Medicine (refer to Table 2). The inflexible and often exclusive
attitude held by many senior practitioners in the profession pervades College
policy, resulting in a lack of opportunity for those who wish to become fully
recognised members of the discipline. Over time it has become clear to practising
general practitioners (non-specialist family doctors) that recognition as a fellow
does not necessarily bring extra incentives in terms of patient volume and
preference. Moreover, the training period of six years for family doctors as
prescribed by the College and required by Hong Kong Academy of Medicine is
probably one of the longest in the world. In Canada, the UK and US, the duration
ranges from two to four years, with optional special interest post-certification
fellowship opportunities in related areas such as low-risk obstetrics, elderly care
and family therapy thereafter. Instead of front-loading all training requirements
during residency, these countries recognise that the practice of family medicine
is inherently longitudinal, and its unique skill set cannot be acquired within a
few short years (as opposed to the much more procedure-based technical
disciplines such as surgery, and increasingly the medical subspecialities that
perform a lot more interventional procedures), but should be accumulated over
the span of ones career through active participation in continuous professional
development. The idea that all clinical specialties should require the same length
of residency training, while politically convenient, borders on the absurd. Instead,

Table 2
Health manpower statistics
Professional group/Specialty
No.
No. per 100,000 population
Anaesthesiology
Community medicine
Emergency medicine
Family medicine
Internal medicine
Obstetrics and gynaecology
Ophthalmology
Orthopaedics
Otorhinolaryngology
Paediatrics
Pathology
Psychiatry
Radiology
Surgery
Total number of specialists
260
71
124
149
944
357
161
256
107
452
188
158
308
565
4,100
3.8
1.0
1.8
2.2
13.9
5.3
2.4
3.8
1.6
6.6
2.8
2.3
4.5
8.3
60.3
Total number of doctors*
9,842
144.7
Total number of dentists**
1,719
25.3
Registered nurses (general)

Registered nurses (psychiatric)
Registered nurses (mental subnormal)
Registered nurses (sick children)
Enrolled nurses (general)
Enrolled nurses (psychiatric)
23,068
1,707
11
5
8,229
894
339.2
25.1
0.2
0.1
121.0
13.1
Total number of nurses***
33,914
498.7
Registered Chinese medicine practitioners

Listed Chinese medicine practitioners
4,875
3,131
71.7
46.0
Total number of Chinese medicine practitioners****
8,016
117.9
Includes those on the local full registration and limited registration lists as at 31
December 2002
** Includes all registered local dentists as at 31 December 2002
*** Includes those with practising certificates (i.e. in active practice) as at 3 May 2004
**** Includes both full and limited registration lists as at 31 July 2004
Sources: Hong Kong Academy of Medicine (www.hkam.org.hk/academy_colleges_fs.html
site accessed on 31 July 2004); Hong Kong Medical Council 2002 Annual Report;
Hong Kong Dental Council 2002 Annual Report; Hong Kong Nursing Council
(www.nchk.org.hk/ site accessed on 31 July 2004); Chinese Medical Council of
Hong Kong (www.cmchk.org.hk/ site accessed on 31 July 2004).
careful assessment should be made of the specific needs and competencies that
are required of a practitioner for each discipline, and a tailored training schedule
designed accordingly. This should be dealt with as a matter of urgency by both
the College and ultimately the Hong Kong Academy of Medicine and the relevant
legislative bodies. Coupled with the haphazard policy of the Hospital Authority
family medicine recruitment and retention programme, the ideal of moving ahead
in putting primary care, led by family doctors, at the centre of Hong Kongs health
system does not appear ready for quick progress.
In contrast, countries with a strong tradition in primary care like Canada have
witnessed family doctors taking up three of the latest deanship appointments at
the 13 medical schools in the country, thus being in a direct position to influence
medical curricula that are often under the control of hospital-based specialists.
On the other side of the Atlantic, since the general practitioner fund holding
experiments of the early 1990s that were introduced by the Conservative
government in the UK and later replaced with primary care groups and
subsequently trusts by New Labour, the basic tenet that money should follow the
patient (i.e. population-based financing) and that family doctors are best placed
to buy care for their patients from competing specialists and hospitals (i.e. the
National Health Service internal market) has been firmly established. From the
limited evaluations to date, the advantages of this new system appear to outweigh
its risks (Wilkin et al., 2001; Gillam et al., 2001; Watt, 2001).
We have been using the terms primary care and family medicine almost
interchangeably thus far. Our vision is that family medicine serves as the core of
the new primary care-led health system infrastructure, recognising the
predominantly physician-driven system in Hong Kong where literally all current
leaders in the health system are medics (except for the recent appointment of
an Australian expatriate who is not medically trained to head the Hospital
Authority in 2006). In fact, three out of the eleven policy secretaries (or ministers)
in government are also doctors! Pragmatism aside, it is common practice
elsewhere for physicians to coordinate the multidisciplinary primary care team,
consisting of nurse practitioners, social workers, psychologists, pharmacists and
other allied health professionals. The new family doctor, however, must be
different from the old general practitioner. Instead of the undifferentiated role
occupied by non-specialist medical practitioners (popularly known as general
practitioners), defined chiefly by a lack of special training and qualifications, there
now is a clearly specified role and a defined set of skills for family physicians
(McWhinney, 1989; Olesen et al., 2000). On a broader level, primary care should
become the approach that forms the basis for and determines the work of the
other components in the system (Figure 4). It integrates care when there is more
than one health problem and deals with the context in which illness exists and
influences the responses of people to their health problems it is care that
organises and rationalises the deployment of all resources, basic as well as
specialised, directed at promoting, maintaining, and improving health (Starfield,
1998). Lastly, whether family medicine is really different from primary care
internal medicine or paediatrics, as some have asked, is likely to be resolved on
epistemological grounds alone. If an internist or paediatrician provides
longitudinal, comprehensive, primary care to families, with the same philosophical
and scientific bases as a family doctor (McWhinney, 1989), then they are, for all
intents and purposes, practising family medicine or primary care. As the
philosopher of science and medicine Karl Popper (1972) observed:
Disciplines are distinguished partly for historical reasons and reasons
of administrative convenienceand partly because the theories we
construct to solve our problems have a tendency to grow into unified
systems. But all this classification and distinction is a comparatively
superficial affair. We are not students of some subject matter but
students of problems. And problems may cut right across the borders
of any subject matter or discipline.
From a system perspective, what are the pertinent functions of a primary care
infrastructure, and how might they improve Hong Kongs system? Gatekeeping
that prevents the unnecessary escalation of care, which leads to a mismatch
between real need and use of scarce resources, can be accomplished via one of
two mechanisms: a strong network of primary care providers or administrative
arrangements such as those associated with American-style managed care. The
government failed to unequivocally specify which system Hong Kong would adopt
Figure 4 A primary care-led health system with family medicine at the core
in its consultation document issued in 2001 in response to the Harvard Report.

As previously illustrated, international experience shows us that a solid primary
care network is both more clinically efficacious and cost effective than managed
care. Hong Kongs median number of out-patient visits average eight per person
each year (Tsui et al., 2005), which is almost twice that of comparable statistics
of Western countries, and 440 out of 1,000 seek Western allopathic out-patient
care within a one-month period versus only 238 in the US (Leung et al., 2005).
A high-income, mixed medical economy such as Hong Kongs, where the private
sector consists almost exclusively of solo practitioners, provides 80% of all outpatient services and has a predominantly fee-for-service remuneration pattern,
has the potential to encourage substantial supplier-induced demand. This is
accentuated by a high target income for physicians in Hong Kong, who are among
the best paid in the world. In addition, the widespread belief that there is a cure
(to be prescribed by the doctor) for every ill characterises Hong Kong residents
attitudes towards health and health care (Lam, 2003). The paternalistic view that
doctors know best is still pervasive in Hong Kong. Our previous findings show
that very few people who experience symptoms opt for self-management (90/567
= 15.9% in Figure 3), and even fewer avoid over the counter medications,
preferring to rely on lifestyle changes only. Doctor shopping, or the changing of
doctors without professional referral in a single illness episode, is very common
with an estimated prevalence of nearly 40% (Leung et al., 2003a; Lo et al., 1994).
This could again lead to the over-consumption of health care. Over time, the
whole society has been conditioned by such practices that encourage care-seeking
from multiple providers for even the slightest of physical complaints. While it is
difficult to distinguish between whether health care providers or individuals are
more responsible for the excessively high use of ambulatory care, we propose that
these observations are a manifestation of this complex phenomenon. Given the
large chasm between inappropriately excessive demand and objective medical
need, the potential impact of gatekeeping through primary care-led reform is
enormous. Not only would it bring costs under better control, it would also reduce
unnecessary iatrogenic (i.e. resulting from clinical activity) disbenefits and even
harm.
In addition, primary care can deliver continuity or longitudinality (Alpert
and Charney, 1974; Starfield, 1998). This means that family doctors deal with the
growth and change of individuals and their families over time. The US Institute
of Medicine recognises the value of this sustained partnership between patient
and doctor in its 1997 report on primary care in America. The patient is treated
as a whole person whose values and preferences are taken into account (Institute
of Medicine, 1997) by the doctor in a personal continuous relationship, regardless
of the type of health problems or even the presence of a health problem. Lambrew
and colleagues (1996) found that having a regular source of care reduced
unnecessary hospital admissions and improved preventive service coverage.
Furthermore, longitudinality can increase patient satisfaction (Wasson et al.,
1984), reduce inappropriate prescribing by physicians (Hjortdahl and

Borchgrevink, 1991) and lead to better diagnostic accuracy and recognition of
psychosocial problems (Kelleher et al., 1997; Gulbrandsen, 1997). On the
management level, this translates into defined patient lists, most commonly via
capitation, which is a form of pre-payment financing that remunerates providers
based on the number of enrolees in their practice regardless of actual utilisation.
In Ontario, Canada, experiments with such lists are ongoing and penalise
providers every time a patient on their list seeks care outside of the practice with
which they have registered by deducting a fixed amount from the providers
capitated payment. It is important to clarify that having a regular source of primary
care is not inherently in conflict with free choice, an attribute that many in Hong
Kongs capitalistic, laissez-faire economy hold dear. Places that have implemented
similar capitated systems usually allow for annual or even six-monthly transfers
between primary care practices, and the common concern of a lack of choice
due to geographic distance is not an issue in our densely populated city with an
excellent transport network. Compared to a managed care setup in which
preferred provider panels often restrict the choice of specialty referrals (see
Chapter 10 by Nelson Wong), a shared care arrangement between primary and
secondary care can maximise the choice of secondary and tertiary care providers
(McGhee et al., 2001), given the right accompanying financial incentives (see Part
IV for a full discussion of the potential impact of different financing strategies).
The comprehensiveness and coordination of care are two other distinctive
contributions of a primary care approach to health system planning. The
combined benefits of comprehensiveness and one-stop care management could
be particularly therapeutic for Hong Kongs highly compartmentalised and nonsustainable system (Hsiao and Yip, 1999). Patients find it difficult to navigate
through different types of care and move easily between the public and private
sectors to access the care that best serves their needs. The role of primary care is
to directly provide all services for common needs and act as an agent for
coordinating the provision of services for other more specialised needs. This can
address the agency problem due to the information differential between patient
and doctor and the attendant potential for supplier-induced demand. In the UK,
general practitioners form primary care trusts that commission secondary and
tertiary care services from competing providers in the National Health Service
internal market, as first envisioned and recommended in the early 1990s by Alain
Enthoven (Enthoven, 2000), the progenitor of managed competition (i.e. the
theoretical basis of managed care) in the US (Enthoven, 1993). Primary care
providers are best placed to act as agents for individuals on their lists, thus
overcoming the abnormal economics posed by the asymmetry of information and
medical uncertainty. Of course, such an organisational change must be
accompanied by concomitant financial and other incentives to primary care
doctors, such as basing a flexible portion of remuneration on their care
populations utilisation indices (e.g. readmission rate, referral rate), uptake of
preventive services (e.g. pap smear screening, immunisation), and health status
statistics (e.g. proportion of hypertensives and diabetics on treatment). Patient
satisfaction can be indirectly gauged from the number of enrolees and patterns
of change between years, especially as there is little geographical impediment in
Hong Kong to switching between different providers. An added benefit of this
arrangement is that doctor shopping, which has been a substantial but largely
unrecognised or at least acknowledged problem in Hong Kong (Leung et al.,
2003a; see Chapter 8 by Janice Johnston), can be virtually eliminated by the singlepoint of entry into the health care system. Indeed, this is similar to option E
proposed by the Harvard consultants, which recommended decentralising
vertically integrated care to district or regional level health integrated systems,
in the same manner as primary care trusts in the UK or a brick-and-mortar type
health maintenance organisation like Kaiser Permanante in California (Feachem
et al., 2004). The 2005 Building a healthy tomorrow consultation document by the
revamped Health and Medical Development Advisory Committee (HMDAC)
unfortunately appeared to have lost sight of the importance of vertical integration
by discussing each level of service delivery almost in isolation without regard for
the continuum of care. In fact, each level of care was discussed in a separate
subcommittee with few overlapping members between them. This infrastructure
almost guarantees a disconnection between primary, secondary and tertiary
services and the phenomenon of pigeon-holing health care conditions which
are actually continuous. Most importantly, the government seems to have preassigned primary care to the private sector while promising to maintain a
substantial public sector input for secondary and tertiary services. This is almost
a back-to-the-future scenario where the overriding objective appeared to have been
shifting the market share to the pre-HA era, thereby serving the dual purposes
of public budget containment and political gains with private provider vested
interests, but little else in terms of macro-organisation efficiency and clinical
optimality. The latter objective was patently clear where the report proclaimed
that the private sector should be one that attracts young members of the health
care professions (HMDAC, 2005). It is difficult to think of another more powerful
form of attraction for homo economicus in the job market, whether in the health
care industry or otherwise. In sum, the new proposals seem to be directly at odds
with the seamless continuum of care model as championed by officialdom
during the Yeoh era. Where Yeoh et al faltered was the single-minded focus on
public sector integration, leading to (perhaps unfair) charges of empire-building
which was in fact necessary to achieve seamless care as far as the public sector
per se is concerned, but a complete neglect of the private sector which after all
provides 80% of all ambulatory episodes. In contrast, the repositioning of public
versus private delivery stratified by service level espoused in the 2005 consultation
paper may be politically or even popularly expedient but falls short of the ultimate
goal of an integrated patient experience and may risk regressing to a more
compartmentalised system as previously.
The fallout from the medication error incident in 2005 involving a mistake
by a solo general practitioner in which a diabetes drug (diamicron) was wrongly
dispensed to 152 patients (four of whom died as a result) instead of an antacid
(simethicone) has resonated through the highest corridors of medical and
political power as well as the rest of the community. Of course, such an event
rarely occurs in isolation but most probably represents the tip of an iceberg of
iatrogenic harm resulting from medication errors that happen even in the best
facilities with a full team of professional pharmacists on an infrequent but regular
basis, let alone in the local setting where unqualified nurses (i.e. mostly high
school graduates with little advanced training in the health care sciences) or
assistants tend to be the ones filling prescriptions in private doctors offices. This
sentinel event prompted many in the community to call for the separation of the
anachronistic dual roles of prescribing and dispensing although leaders of private
doctor groups have largely resisted the pressure to change in an effort to preserve
the financial advantages of dispensing drugs under the guise of professional
autonomy. Over prescription in the form of the total number of medications a
patient receives is a well recognised feature of the local health care delivery system.
This incident is a typical and expected consequence of excessive power of a vested
interest, reminiscent of the pervasive influence the Japanese Medical Association
had wielded until very recently (Ikegami and Campbell, 2004). It is also the direct
result of years of benign neglect with respect to maintaining a contemporary
health care macro-organisation that is fit for its purpose. So long as ambulatory
care remains largely an entrepreneurial activity of solo individual doctors, the
limited scale and scope of such practice, combined with the inherent perverse
financial incentives, will preclude the adoption of current world standards
regarding dispensing through professional pharmacists or, by extension,
comprehensive primary care delivered by a multidisciplinary team of registered
nurses and social workers. It is true, as opponents of this inevitable evolution claim,
that these reforms will lead to higher costs of care. However, one must not allow
self-serving biases to obfuscate quality care through error minimisation with
disingenuous cost arguments. Society must be given the opportunity to be fully
informed and to debate quality and cost trade-offs. We believe our proposal for
a team approach to restructuring private out-patient care (Figure 4) is a feasible,
ethical and ultimately the most cost-effective direction for reform. From a
historical perspective, modern day Hong Kong is remarkably similar to nineteenthcentury England or rural India in the 1980s in terms of doctors dispensing
medications (Kapil, 1988). This vestige of our colonial legacy remains 50 years
after the pharmaceutical therapeutics revolution has taken place. In the present
era of multidisciplinary care, especially coupled with heavy doctor-shopping
behaviour in Hong Kong (Lo et al, 1994; Leung et al, 2003a), a pharmacist can
facilitate the coordination of care and look for possible drug overlap or adverse
interactions. There is necessary support infrastructure that must be put in place
to enable the new system however. First, community pharmacies must be better
regulated and achieve adequate capacity to cope with the potential volume of
throughput. Currently, it is not uncommon to observe informal self-prescribing
by patients through pharmacies leading to inappropriate and excessive use of
medications, especially antibiotics. Thus Hong Kong currently remains at the same
stage of pharmacy development as Bangladesh, Sri Lanka and Yemen in the 1980s
(Tomson and Sterky, 1986). Second, we should design strategies to guard against
patients not filling prescriptions due to financial or other reasons, as has been
observed in health systems which have adopted the proposed changes (Dixon et
al, 1994). Third, the system should ideally be underpinned by a Hong Kong-wide
informatics network that can link both public and private providers for individual
patients so that a current record can be easily accessed by the pharmacist for drug
alerts and to detect duplicate prescriptions or dispensing (in the case of abuse).
Lastly, while we encourage the professional separation of roles between doctors
and pharmacists, patients should be afforded a seamless continuum of service
and Hong Kong must avoid the pitfall of offering medical care independently
from pharmacies, especially in relation to financing. The separation of prescribing
from dispensing is clearly achievable and has recently been accomplished in South
Korea as of 1 July 2000, albeit sweetened eventually by increasing reimbursement
rates through the social insurance fee schedule, but despite several paralysing
strikes by doctors and ultimately higher costs due to unintended consequences
as a result of the ensuing political process that spun out of control (Kim et al,
2004). Hong Kong should learn from this experience where we should anticipate
a certain degree of popular resistance initially due to perceived inconvenience
of having to fill prescriptions outside of the consultation episode, and perhaps
increased out-of-pocket costs as a result of pharmacists fees although it remains
unclear whether this would be higher or lower than the doctors mark-up
currently (Kang et al, 2002). Finally, we must avoid the South Korean trap of
eluding cost containment, in fact effecting higher overall spending, as a direct
result of this policy change (Jeong, 2005).
Indeed, the HMDAC (2005) proposed adopting the family medicine concept
as the unifying platform on which to build a reformed health system. Of course
we endorse this in principle although it is difficult to fathom how the
recommendation could be implemented in the private sector, which provides the
majority of these services at the moment, with little more than rhetorical
government encouragement for solo practitioners to form group practices. There
has been some tangential mention of the Hospital Authority commissioning
primary care services from private providers, which would naturally favour larger
groups, in fact corporate health maintenance organisations in bidding for such
contracts. A potential pitfall concerns the current lack of a robust, transparent
and fair regulatory framework to govern the clinical and economic environment
under which this outsourcing process would function. This can be overcome, but
not without very careful forethought, pilot testing and post hoc evaluation by
independent teams of experts. Singapore and Switzerland have successfully
brought about similar changes to the private delivery market but a commonality
they share is a series of government rules and guidelines balancing the incentive
of private profits with the public good of patient interests and population health.
On the other hand, past experience shows us that an overly centralised
approach is unlikely to succeed in optimising health care and outcomes
(Enthoven, 2000). Such an approach implicitly assumes that the centre (i.e. the
government) knows best. Some have cited the many abnormal economic features
of health care, such as moral hazard, adverse selection, supplier-induced demand,
asymmetry of information and professional oligopoly (Hsiao, 1995), that inhibit
Adam Smiths invisible hand as argument in support of a command health care
economy. This school of thought claims that health care is too important to be
left to market forces. We believe that health care is indeed too important not to
harness the market to draw on innovation and creativity throughout the system
and empower frontline professionals. From political empires (e.g. the former
Soviet bloc) to listed corporations on Wall Street, the benefits of decentralising
to smaller operational units have been shown in many different geo-politicoeconomic settings. We further offer a note of caution in organising and regulating
the market. While it is intuitively sensible and politically correct to install a whole
series of fail-safe monitoring mechanisms to guide, assess and evaluate clinical
practice and standards, one must be very careful not to put in place so many
hurdles that they may stifle the very innovation that decentralisation is supposed
to create. Policymakers who need convincing only need to look at the chaos and
contradictions that the new oversight agencies (of which there are five) created
by the Labour government in the UK have wreaked upon primary care and
hospital trusts (Horton, 2004; Dewar and Finlayson, 2002; Walshe, 2003). Excessive
and unnecessary regulatory powers can and will negate the potential advantages
of decentralisation. The task, of course, is to determine the optimal balance
between allowing market forces to work or a laissez-faire approach (which Hong
Kongs system has experienced in the form of benign neglect for decades) and
appropriate governance and oversight to mitigate against the unique set of
abnormal economics distorting the market.
In sum, we propose that a primary care-led system consisting of
multidisciplinary, group practices of family doctors, advanced practice nurses,
clinical psychologists, physiotherapists and medical social workers should serve
as the hub of the new health system (Figure 4). These group practices would
undertake total, whole-person, first-contact care (including being on call 24 hours
for triage and management to reduce inappropriate accident and emergency
attendances (Leung et al., 2001a)) for all enrolees on their patient roster. The
roster should be renewed annually during a one-month period of completely open
registration to all comers across Hong Kong, thus minimising adverse and risk
selection by patients and providers respectively. Secondary and tertiary care will
be commissioned by larger purchasing blocs, composed of different group
practices on a regional basis, that assess and buy such services from vertically
integrated specialty and in-patient care organisations. To promote both demandside and supply-side management to contain health care costs (McGhee et al.,
2001), funding for these family practices can be based on two main components
in a hybrid funding formula, i.e. for the direct remuneration of the family
practices and the commissioning of specialty, in-patient and rehabilitation care
(Figure 5). The former category would include a base rate (taking into account
the case-mix adjusted capitated patient list and including payment for holidays,
continuous medical education/professional development, pension contributions
and mandatory provident fund contributions, and life, disability and medical/
dental insurance); rent, equipment, legal, auditing and staffing overhead costs;
volume modifiers that place a numerical value on individual work units, which
could be equivalent to resource-based relative value system (RBRVS) fee units
(Hsiao et al., 1992a and 1992b); and quality modifiers which reward practices that
achieve certain predefined health care process and outcome thresholds. The
amount allocated for the commissioning of non-primary care services could be
modelled on the current population-based funding formula adopted by the
Hospital Authority and further disaggregated down to the district level allowing
for more refined case-mix adjustment, based on data from the Department of
Pre-payment funding mechanism
Quality modifiers
based on care
processes, health
outcomes and
patient satisfaction
Volume modifiers
based on RBRVS*
Case-mix adjusted
capitated base rate
Overheads
Total practice remuneration
Population-based, case-mix
adjusted funding according to
patient roster, revised annually
with up to date health status data
Commissioning of non-primary
care services
Disbursement to integrated
secondary and tertiary care providers
*RBRVS = resource-based relative value system
Figure 5 Hybrid funding formula for primary care practices
Healths Population Health Information System. In theory at least, the plan is a

comprehensive proposal that allows for flexibility and pluralism, harnessing Hong
Kongs past success with a relatively laissez-faire medical care market, while moving
away from a fee for service point of care payment system to a pre-payment system
that enhances both equity and efficiency (see section IV for more details),
although its effectiveness in actual practice is still to be evaluated.
Redressing the Public-Private Sector Imbalance

While our vision for a new primary care-led system would essentially level the
competitive field between public and private providers in the secondary and
tertiary care markets, it is probably a long way off given the pace of past progress
in health reform (see Chapter 1 by Derek Gould). Therefore, short- and
intermediate-term measures are equally important to redress the public-private
sector imbalance that has seen the private in-patient market share reduced by
one-half to two-thirds from the late 1980s to the present, and the out-patient
market shrink from 85% in 1997 (Hsiao and Yip, 1999) to 71% (Wong et al., 2005)
by 2002 (although it has regained volume since the economic recovery from 2003
onwards).
Since the hard-hitting criticisms of the Harvard consultancy, another example
of change by the government is the much-touted public-private interface initiative
(see Chapter 9 by David Fang) that aims to accomplish mostly a political goal of
placating private providers who have publicly called for a return to the 15% inpatient and specialty care market share (as opposed to the 5% since the late 1990s)
by whatever means, as most recently echoed by leaders of the Hong Kong Medical
Association. Little real progress has been achieved mostly due to inertia on the
part of the Hospital Authority, whereby the sharing of guidelines, publications
and related materials (e.g. discharge summaries) and referral for highly incomeelastic radiological (e.g. CT, MRI or PET scans) or obstetric services have been
the most notable forms of exchange. We will, however, likely see more rapid
progress from 2006 onwards due to the ballooning deficit of the Hospital
Authority and the stepping down of Yeoh Eng-Kiong as the minister responsible
for the health portfolio. Yeoh was previously founding Chief Executive of the
Hospital Authority and widely known to distrust the private sector generally, and
resisted any move that might undermine the interests of the Authority, in
particular a diminution of its service delivery role. We hasten to add that Yeohs
belief that the public sector is best placed to provide most of the care in the
community has generally been considered as sincere and honest, however
unidimensional and suboptimal its ramifications. Of course, any reorganisation
of service delivery without financing reforms in tandem is doomed to abject
failure. In Hong Kong, the negligible fees and charges at the point of care, as
illustrated in Table 3, have been ineffective in controlling excessive demand due
to moral hazard let alone encourage patients to seek care in the private sector,
the fees of which are orders of magnitude higher than those charged by the public
sector and mirror those for non-eligible persons (Table 3). Adam Smiths invisible
hand is heavily tilted towards the public sector in this unequal market of health
care services. However, trying to persuade the tax-paying middle class that
government subsidies should be targeted at the medically and socially indigent
and gradually withdrawn from the better off as the governments budget deficit
turns into a structural problem is a challenge that a non-democratically elected
government is unlikely to be able to address in the foreseeable future.
In a recent study, Yeung and colleagues (2006) demonstrated the substantial
patient disutility or time costs associated with waiting for a specialist consultation
in the public sector (i.e. Hospital Authority clinics) as revealed through contingent
valuation using willingness to pay methodologies. The majority of respondents
were willing to pay to reduce their time in the queue; in fact, their hypothetical
willingness to pay finds real-life expression as doctor shopping, i.e. mostly seeking
care in the private sector, in effect, to reduce waiting time to see a specialist. In
turn, we know that doctor shopping is the single most important reason for patient
default in Hong Kongs public health care system (Leung et al., 2003a). Patient
non-attendance for scheduled appointments creates operational inefficiencies and
is a major management issue that carries with it enormous economic costs. Data
from the UK indicate that the cost per lost appointment was 65 (US$103) in
1997 and the National Health Service bears an estimated 300 million (US$477
million) cost annually as a result of this problem (Hamilton et al., 1999). However,
many private clinics are idle due to the large price differential (and the lack of a
quality of care gradient between the private and public sectors) and a depressed
economy since the 1997 financial crisis. Many private physicians are calling for
an urgent redress of this unsustainable situation, claiming that they are being
starved of their bread and butter (Hong Kong Medical Association, 2002).
Based on these observations, we (Leung et al., 2006) proposed the
examination of a new policy whereby patients and the private and public care
delivery sectors can all benefit. Private practitioners with excess capacity could
be contracted by their public counterparts to provide specialist consultation
services. This outsourcing policy would have the potential to shorten waiting time
and reduce disutility for patients in the public sector queues, minimise patient
default and associated inefficiencies due to excessive waiting and doctor-shopping
for public care providers, and increase private sector utilisation. There are two
corollary benefits to this scheme if the findings translate well in practice. First,
there is probably the usual efficiency gain from shifting to the private sector, where
the operational cost is lower (an average public sector gazetted charge (at the
cost of production) of HK$661 per visit versus a $500 median private fee). Second,
it is possible to ask patients initially on public waiting lists for a co-payment equal
to the median willingness to pay value of HK$100 (in addition to the usual public
sector fee of HK$60), thereby further reducing the per episode contract amount
Ambulatory care (medical)

Accident and emergency (HA)
Out-patient consultation
(all HA clinics)
In-patient (convalescent,
rehabilitation, infirmary and
psychiatric beds)
In-patient consultation
Special intensive care ward/unit
Intensive care ward/unit
High dependency ward/unit
Nursery
In-patient care (HA)

In-patient (general acute beds)
Service
$100 per attendance

n/a
n/a
n/a
$570 per attendance

n/a
$18,100 per day
$13,900 per day
$9,800 per day
$640 per day
$1,200 per day
$3,300 per day
Non-eligible persons
$50 admission fee for the 1st day,

$100 per day
$100 per day
$100 per day
$100 per day
$100 per day
$68 per day
Eligible persons
Fees
Table 3
Public sector fees and charges (in Hong Kong dollars*)
(Table 3 to be continued)
n/a
$1,500 (single specialty initial
consultation); $2,500 (multispecialty initial consultation);
$1,000 (subsequent follow-up
$1,500 per day
$3,300 (first class),

$2,200 (second class) per day
$12,700 per day
$9,900 per day
$7,000 per day
$3,900 (first class), $2,600

(second class) per day
$640 per day
Private care
Maternal and child health

centre (DH)
Womens health centre (DH)
General out-patient (HA)

Elderly health centre (DH)
Free
Free
Social hygiene or special skin clinic

(DH)
Tuberculosis and chest clinic (DH)
$700 per attendance

plus actual cost of special
investigations
$3,460 per attendance
$100 for the 1st attendance,

$60 per attendance $10 per drug item,
Free

plus actual drug and pathology cost
$215 per attendance (inclusive of drugs)
$770 (annual subscription fee);
$510 per mammographic examination
$365 (child health), $235
(family planning), $700
(maternal health) per attendance
$700 per attendance
$700 per attendance

$60 per attendance, $10 per drug item
$225 per mammographic examination
Free
HIV clinic (DH)
Fees

Eligible persons
Child assessment centre (DH)
Specialist out-patient (including

allied health services)
(DH and HA)
Genetic counselling clinic (DH)
Service
(Table 3 continued)
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
per specialty)
n/a
Private care
$70 per attendance

$880 per attendance
$340 per visit
$1,050 per visit
$1,050 per treatment
$1,050 per treatment
$55 per attendance

$80 per visit
Free
$64 per treatment
Free
$17 per attendance

$55 per attendance
Eligible persons
Fees
n/a
n/a
n/a
n/a
n/a
n/a
n/a
Private care
A nominal fee of $10 is levied on each out-patient drug item per prescription period up to a maximum of 16 weeks. If the prescription duration
exceeds 16 weeks, then the fee is $20.
Sources: Government Gazette, Department of Health and Hospital Authority.

DH = Department of Health; HA = Hospital Authority
*US$1 = HK$7.8
Note:
Those who are eligible to use public health services are holders of a Hong Kong Identity Card issued under the Registration of Persons Ordinance or
children under 11 years of age with Hong Kong resident status. All other individuals are deemed to be non-eligible for the purposes of public sector
fees and charges. Those who have financial difficulties (e.g. low income groups, chronically ill patients and elderly patients who have little income or
few assets) can apply for a waiver of fees, whereas those on Comprehensive Social Security Assistance are automatically exempt.
For non-private care, in-patient fees cover doctor consultations, most diagnostic and therapeutic (surgical or otherwise) procedures, general nursing,
core pathology investigation, catering and domestic services. For private care patients, in-patient fees cover general nursing, core pathology investigation,
catering and domestic services only.
Ambulatory care (non-medical)

Dressing and injection (DH and HA)
Geriatric and rehabilitation
day hospital (HA)
Psychiatric day hospital (HA)
Community nursing (general)
(HA)
Community nursing (psychiatric)
(HA)
Community allied health services
(general) (HA)
Community allied health services
(psychiatric) (HA)
Service
(Table 3 continued)
by some 20%. We caution that these recommendations are preliminary and should
be considered in the light of how patients react to them and make choices. For
instance, a potential crowd-out effect may result if a substantial number of
patients who currently choose the private sector switch to public clinics knowing
that they would be likely to be offered a private appointment, albeit with a copayment. Potential counterstrategies to prevent this abuse of the system could
include a minimum waiting time on the public sector list before offering transfers
to private facilities, discouraging patients who have previously opted for transfers
to the private system from returning to the public sector through incentives or
regulations, giving preference to patients who have not requested transfer before,
and so on. Ideally, all potential strategies should be pilot tested for feasibility,
acceptability and effectiveness at selected sites using a randomised-controlled
design before full implementation.
Hong Kong needs more of these evidence-based, out of the box ideas to
redress the imbalance between public and private provider markets. In addition,
we should extend our vision beyond a zero-sum tug of war between the two sectors.
For example, Hong Kongs private health providers must overcome their present
marketing myopia of concentrating on a shrinking local market and set their sights
on the burgeoning middle-class niche market of mainland China. Geo-ethnic
affinity, the Closer Economic Partnership Agreement (CEPA), sheer market size,
the availability of two-week individual visitor visas to Hong Kong for most midsized and large mainland cities and impending loosening of restrictive conditions
governing joint ventures by the Ministry of Health make exporting medical and
health care services an increasingly attractive and realistic option for the private
sector. There are two potential strategies in exporting Hong Kongs health care
services. The first is to import patients from the mainland (facilitated by the
central governments relaxation of individual visit permits) and the second is that
Hong Kong practitioners deliver services on location north of the border. To date,
with few exceptions, there has been little export activity either way.
Yeung and Leung (2002) did a study for the Hong Kong Trade Development
Council (TDC) in which they argued that the setting up of joint venture health
care facilities in China is a distinct business opportunity. Since 2000, the Chinese
Ministry of Health and the Ministry of Foreign Trade and Economic Cooperation
have implemented detailed guidelines for the establishment of joint venture
medical institutions. Foreign parties can hold equity stakes of up to 70%. Over
200 such facilities in Beijing, Shanghai, Fujian and Guangdong provide Westernstyle medical services. Many of them were set up during the past decade by foreign
investors from the US, Japan and Canada. Apart from the traditional expatriate
market, the growing segment of high-income earners in Chinas coastal cities has
created a whole new niche market for high-quality Western allopathic services.
However, the key to success in this market is through the aggressive differentiation
of services, not commoditisation in the form of general or multipurpose hospitals.
Entrepreneurial clinicians can consider setting up focused factories of
specialised, dedicated services (Herzlinger, 1997) either in Hong Kong or major

cities in the mainland to capture a significant share of this niche, bourgeoisie
market.
The term focused factory was coined by Wickham Skinner, a Harvard
Business School professor, when he argued that complex and overly ambitious
industrial factories were at the heart of the American productivity crisis in the
late 1960s and early 1970s. He concluded that simplicity and repetition breed
competence (Skinner, 1974). The parallel with the production of health care is
striking. There is a steep learning curve for most medical interventions. Centres
that have a higher volume of cases generally report better clinical outcomes at a
lower cost than do centres with a lower volume of cases. This phenomenon seems
to hold true for most interventions, irrespective of the technological sophistication
involved (Bennett et al., 1995; Grumbach, 1995; Tu et al., 2001). The experience
of Shouldice Hospital in Ontario, Canada, is typical. The hospital performs only
abdominal hernia repair, a relatively low-tech procedure. Yet its excellent
outcomes, low relapse rates and relatively low costs have prompted former patients
to celebrate anniversaries of their operations with a gala banquet every year. What
is so special about the hospital? It is a focused factory. Such a streamlined focus
and dedicated infrastructure can realise enormous clinical and financial
economies of scale (Leung, 2000). In the US, there are many examples of such
organisations including the Johns Hopkins Breast Center for breast disease, the
Dartmouth-Hitchcock Medical Center for heart surgery, and the Pediatrix Medical
Group, which manages neonatal and paediatric units in 21 states. Procedure (or
organ system) based focused factories are already proliferating in the form of
centres of excellence in some parts of East Asia (mostly catering to medical
tourists by offering highly income-elastic services such as cosmetic and
orthopaedic surgery), and Hong Kong is beginning to see similar setups by the
larger private hospitals. However, some appear to be little more than repackaged
marketing deals rather than bona fide units with full-time teams and the attendant
infrastructure that must be in place to support these focused operations. If these
initiatives are to succeed in Hong Kong, then more flexible visa requirements
must be negotiated with the Chinese government to allow patients to stay longer
than the current maximum of two weeks and to be granted multiple entries for
follow-up and adjuvant treatment sessions. The alternative is to locate the facilities
in hub mainland cities such as Guangdong, Shanghai and Beijing, but the main
concern will then be the recruitment and training of qualified health care
professionals.
CEPA now provides Hong Kong medical graduates with three-year temporary
or transitional licences to practise in the mainland, after which they must sit
Chinese qualification examinations. This is an improvement from the previously
haphazard application procedures, but so far it has attracted few takers mostly
because remuneration and working condition differentials between Hong Kong
and the mainland remain large and there is little incentive (positive or negative)
for local doctors to emigrate. A related issue is the lack of market awareness among
local professionals because most clinicians do not have sufficient time, skills or
resources to develop and cultivate a new client base. While present conditions
may not favour relocating immediately, we caution that the profession as a whole
should take a longer-term perspective lest it lose the first-mover advantage for
market entry and penetration. The profession needs to rethink how it can
overcome Hong Kongs huge disadvantage of a high cost base, in order to
compete effectively with Thailand and Indonesia (and Singapore) to attract the
same pool of mobile high-income patients. We must compete on quality with the
US and Europe, while leveraging our geographic and cultural proximity, rather
than pursue the dead end of commoditification of low-risk medical business.
Next, education and training services seem to be ripe for export almost as
soon as the bureaucratic hurdles are cleared. For instance, undergraduate medical
places have been cut by as much as one-third at both local medical schools since
2002. This is largely in response to the budget deficit incurred by the Hospital
Authority and its default postgraduate training, and thus employer of last resort,
role. This very short-sighted, reactive response by the University Grants Committee
(which funds all tertiary institutions in Hong Kong), largely supported by the
profession (with a potential pecuniary interest in keeping the supply of doctors
limited), has not taken into full account Hong Kongs current and future medical
manpower needs. Even allowing for the geospatial concentration of our
population, with only 1.4 doctors per 1,000 population (Table 2), Hong Kong
already lags behind most OECD doctor to population ratios, which range from
2.5 to 3.5 per 1,000. Nevertheless, faculty numbers at the medical schools have
not decreased and such fixed costs remain high. The University of Hong Kong
and the Chinese University of Hong Kong medical schools should fill the currently
underused capacity of their education function by recruiting high-quality students
from mainland China and elsewhere (especially places with medical licensing
boards that recognise Hong Kong medical qualifications such as most
Commonwealth countries). At least one medical school has proceeded in this
direction, although concrete steps have yet to be implemented beyond the
experimental stage.
Lastly, with ongoing and impending deregulation of the health care market
(including many previous state owned and operated facilities), China needs backoffice, logistics and operational management skills, at which Hong Kong excels.
However, much of the health care-specific expertise resides in the Hospital
Authority, which has undergone many similar changes since being founded in
the early 1990s. More general purveyors of such services include management
consulting firms and accounting or even law outfits. Therefore, neither categories
of potential service providers impact on the private health sector in Hong Kong.
It may be high time for administratively minded health care professionals to
consider a parallel career using their clinical experience.
Bacon-Shone et al. (2005) recently completed a follow-up study for the TDC
which undertook patient and employee surveys in four mainland cities covering
the Yangtze and Pearl River Deltas (Shanghai, Hangzhou, Guangzhou and
Shenzhen) to better understand the potential inbound market for mainland
patients. They also surveyed private doctors and hospitals in Hong Kong to better
understand the supply side and interviewed key stakeholders.
The key message from the mainland patients was that they know very little
about the Hong Kong medical system, but are willing to learn. Not surprisingly,
they are unaware of the high quality health care options which the private doctors
in Hong Kong believe that they provide. One concern is that they seem more
interested in visiting the already under pressure public hospitals, rather than the
private hospitals. The patients in these four cities are well aware of the individual
traveller option for visiting Hong Kong. While the willingness to learn about Hong
Kong is reassuring to marketers, the question remains as to how best to get the
message across. The current strict limitations on medical advertising mean that
private doctors are not able to inform either Hong Kong or mainland patients
about their expertise and experience. This suggests a key role for the TDC in
helping market Hong Kong services, at least until the advertising rules are
changed, pending further deliberations by the Medical Council of Hong Kong.
This picture is consistent with the private doctor survey, which shows that
many doctors have a small, but growing, clientele of walk-in mainland patients
(84% had mainland patients in the last 3 months, with a median proportion of
total business volume of 5%), who seem to come almost entirely through informal
referrals via friends and relatives, in the absence of any formal referral networks.
Doctors identify follow-up, fee levels, advertising restraints and immigration as
the major constraints. Few of the doctors are interested in expanding their services
into the mainland, primarily because of the capital requirements and low patient
fees.
Most private hospitals are non-profits, so it is not too surprising that, although
a substantial number are expanding in the expectation of more patients crossing
over from the public sector, only two show real interest in the mainland market,
one in the mass market in Guangdong, the other in the expatriate market. They
are explicit about their concern that it will not be possible to decant catastrophic
cases onto the Hospital Authority, unlike local patients! A key niche may be in
providing second opinion and diagnostic services. For those who question the
quality or impartiality of the diagnosis they receive on the mainland, they can
come to get a second opinion or better diagnosis using Hong Kongs higher
technology equipment and doctors who do not have an ulterior motive of selling
expensive drug treatment. Follow-up treatment could be prescribed in Hong Kong
and completed on subsequent visits or even completed in the patients place of
domicile, to minimize cost and travel inconvenience.
Private hospitals could focus on low-risk, pre-paid services, especially those
that require the latest equipment or techniques. Hong Kong doctors good
English language, training and equipment give them an advantage in this area.
The need to focus on low-risk procedures is to avoid the payment risks that
concern hospitals.
This all suggests an important, but limited, role for Hong Kong in supplying
medical services to mainland patients, particularly in the Pearl River Delta (PRD),
which is geographically and linguistically convenient, as well as containing a
significant number of households with income levels that would enable them to
purchase some health care in Hong Kong. Crude analysis suggests that the
inbound mainland market may already be worth HK$300 million, with a potential
pan-PRD market of HK$1.5 billion.
From Quality Improvement to Value Creation

Hong Kong has certainly come a long way since the first Secretary for Health
and Welfare, Henry Ching, signalled concern and called for a large-scale review
of services in hospitals in a 1985 Executive Council briefing paper, which
subsequently led to the commissioning of the Scott Report. The reasons for this
review were demographic expansion (especially Vietnamese and mainland legal
and illegal immigrants), deteriorating and overcrowded conditions at the 38
publicly funded (i.e. either government or subvented) hospitals, longstanding
management inaction or failure in terms of cost control and staff productivity
(via the Director of Medical and Health Services) and pressure from the
legislature and the public (Hutcheon, 1999). The efforts of the Hospital Authority
and its predecessor the Provisional Hospital Authority led by Chung Sze Yuen
(the senior unofficial member of the Executive Council at the time the idea of a
Hospital Authority was first mooted), paid off quickly soon after establishment.
Camp beds that once lined the corridors of even the most prestigious public
hospitals disappeared, a coherent management ethos pervaded the entire
organisation, local professional clinician-managers were recruited and trained,
care processes and guidelines were developed and promulgated, logistics and
operation management was upgraded and professionalised, and community
relations were improved, to name but a few improvements. At the risk of sounding
negative despite the long list of impressive achievements and belittling the
immense progress made, the Hospital Authority was flush with new capital and
recurrent money until the 1997 financial crisis, mostly thanks to the hard lobbying
initially by Chung and his colleagues within and without the Executive Council,
and supported by David Wilson, the then Governor. This history of strong
financial backing made reform a much easier task than it otherwise would have
been. (Section IV provides more detailed accounting and secular trend analysis
of total public expenditure on health and health care (about 90% is consistently
consumed by the Hospital Authority).) In addition, the disparate and often poor
quality of care in all respects throughout the publicly funded hospitals at the time
of the reform made raising this low baseline to an acceptable threshold a less
than insurmountable task to accomplish.
However, the leaders in the present health system are presented with a much
more difficult challenge. They are essentially victims of their own success in so
effectively and rapidly upgrading all quality dimensions (i.e. clinical care,
amenities and management processes) over the last decade and a half. Public
expectation has been elevated in parallel, further fuelled by a recent communitywide call for accountability of all public services. For the next generation of
managers, the task is to improve on a high-quality status quo at the margin that
is commensurate with Hong Kongs socioeconomic development and world-class
image. Any incremental change will be subjected to the economic law of
diminishing returns, where the same amount of effort will yield increasingly less
improvement and results. Several areas that we highlight below should attract
special attention from policymakers and managers in the next decade of
continuous quality improvement.
Medical error tops the list partly because it is a relatively new area in health
services research, championed by Don Berwick, David Blumenthal and Lucian
Leape at the Harvard School of Public Health for a dozen years or so. Hong Kong
has yet to face the reality of its commonplace existence. The Institute of Medicine
of the US National Academy of Sciences issued landmark reports in 1999 (To err
is human) and 2001 (Crossing the quality chasm) to bring this important issue to
the forefront on the national and international health care agenda. The Harvard
Medical Practice Study, the most extensive research on adverse events (defined
as an injury caused by medical management rather than by the underlying disease
or condition of the patient), found that such events occurred in 3.7% of the over
30,000 hospital episodes they studied (Brennan et al., 1991) in 51 randomly
selected institutions in New York State in 1984. The proportion of adverse events
attributable to medical error (i.e. events that were preventable) was 58%, and
28% were due to negligence. While most of these adverse events led to disability
lasting fewer than six months, 14% resulted in death and 3% caused permanent
injuries. Complications related to medication error were the most common type
of adverse event, followed by wound infection and technical complications after
procedures. These findings have since been confirmed in other settings (Institute
of Medicine, 1999). For instance, Dr Foster (an independent research
organisation) based in Imperial College, London, reported that about 850,000
(2.2% of all in-patient episodes) medical errors occur in National Health Service
hospitals every year, resulting in 40,000 deaths, excluding ambulatory episodes,
obstetric complications and hospital-acquired infections (Aylin et al., 2004). Based
on extrapolation of the Harvard Medical Practice Study (1991) to all 1,098,006
hospital admissions in Hong Kong during 2001/2, and allowing for temporal
improvement in error reduction and geographic differences between the US and
Hong Kong, we estimate that the annual number of local deaths due to
preventable medical errors falls between 239 and 3,817 (Table 4). The mortality
burden of the 2003 SARS epidemic, in which 302 died, pales in comparison to
this largely invisible toll that is sustained from year to year in the production of
in-patient health care. In response, the WHO recently launched a World Alliance
for Patient Safety to promote the cause (WHO, 2004). Specific action areas
include a biennial global patients safety challenge, patient empowerment, the
development of standards and dissemination of best practice, all underpinned
by research, reporting and learning (Donaldson, 2004).
All of this is, of course, closely related to patient complaint and redress (see
Chapter 12 by Felice Lieh-Mak, Chairwoman of the Hong Kong Medical Council,
which regulates the medical profession). Medical errors take place in the very
hospitals that the public perceives to be safe, where patients are supposed to be
cured rather than exposed to potential harm. There is an implied social contract
of benefit when a patient is admitted for care. However, there appears to be a
disconnection between public perceptions and actual health care error rates,
especially outside the western hemisphere. The lack of media attention or indeed
recognition of an error may play a large part in explaining this misperception.
Table 4
Potential annual burden of adverse events and related outcomes in Hong Kong
Annual Adverse events
hospital
(ADE)
admissions
No.
1,098,006
% of
admissions
3.70%
1.85%
0.925%
Attributable to medical error

(preventable ADE)
No.
40,626
20,313
10,157
Resulting in death
or permanent injuries
% of
ADE
No.
%
preventable
ADE
58.0%
23,563
29.0%
11,782
58.0%
11,782
29.0%
5,891
58.0%
5,891
29.0%
2,945
16.2%
8.1%
16.2%
8.1%
16.2%
8.1%
16.2%
8.1%
16.2%
8.1%
16.2%
8.1%
No.
3,817
1,909
1,909
954
1,909
954
954
477
954
477
477
239
Sources: Estimates adapted from Brennan et al. (1991) and applied to local hospitalisation
statistics in 2001/02 compiled by the Hospital Authority and the Department of
Health. Proportions in bold type are derived from the original estimates, and the
remaining are projections allowing for temporal improvements and geo-ethnic
differences.
An individual health care adverse event does not have the collective impact of a
nuclear waste disaster or an aviation accident, although the probability of death
due to medical error from being admitted to hospital for treatment is several
orders of magnitude higher than that of dying from a commercial plane crash.
Patient safety is also hindered by the liability system and the threat of malpractice,
termed the prosecutory or disciplinary model by Lieh-Mak in Chapter 12. This
bad apple approach encourages tacit behaviour about medical errors
throughout the system due to the discoverability of evidence under legal
proceedings, with the result that most adverse events go undetected and
unreported, both internally within health care organisations and externally
(Institute of Medicine, 1999). This important shortcoming of a solely punitive
redress system is in urgent need of reform. Instead, a learning model should
be adopted. Health systems should become learning organisations that continually
seek to reinvent outmoded work systems with poor designs to enhance safety and
the quality of care. It is gratifying to note that the Hospital Authority recently
carried out a system-wide audit of its public complaints committee cases from 2000
to 2002. The findings revealed useful patient demographic data, as well as
important insights into the reasons for complaint. Associations were found
between selected populations of patients and the outcomes of complaints,
suggesting that evidence-based targeting of particular risk factors may lead to
better management (Choy et al., 2004a). However, this has barely scratched the
surface of the much more important underlying problem of medical errors, as
previously explained. As the second article in the two-part audit report
acknowledged, what we can see from the complaints received is only the tip of
the complaints iceberg (Choy et al., 2004b).
This issue of medical error and quality improvement is closely linked to the
maintenance of practice standards by health care professionals, especially medical
practitioners. Over ten countries and 37 American states have already moved to
implement revalidation and re-certification, whereby lifelong medical licences are
a thing of the past. The UK and Canada are closely following suit. It is clear that
there is increasing societal expectation that doctors regularly demonstrate fitness
to practise, much like what is expected of airline pilots, members of the military
and even truck drivers and other transport workers given the high risk
environment in these occupations. Yet many medical leaders, especially those with
vested interests in protecting the status quo, have repeatedly withheld support
for linking continuous medical education credits to the renewal of the annual
practising certificate and in fact have campaigned on this issue during elections.
This attitude does not bode well for a well-respected, self-regulating profession
with an unequivocal mandate to demonstrate continuing competence. Viewed
from the global perspective, Hong Kong is more than several steps behind where
the profession is heading globally. The link between continuous medical
education and actual clinical performance is tenuous at best. The Hong Kong
Academy of Medicine has been actively pursuing the idea of adopting continuous
professional development since it was first introduced during the presidency of

David Fang. Continuous professional development is the purposeful, systematic
activity of individuals and their organisations to maintain and develop the
knowledge, skills and attributes that are needed for effective professional practice.
In contrast, continuous medical education is often rather more passive and does
not necessarily require the same degree of purposeful planning and reflection
that are distinguishing attributes of effective andragogy. It is apparent that if the
profession fails in rising to the challenge of reorienting to a continuous validation
and evaluation paradigm, the public, through government regulation, will fill the
void. The only question is how and when, not whether this will proceed in tandem
with world trends. Nevertheless, authorities need to think carefully about the way
forward as revalidation and recertification would require a tremendous amount
of resources, both in cash from the government and in kind from the professional
colleges and universities. It could potentially compound the problems of an
overstretched health system and affect service delivery. Lastly, the different
purposes of revalidation require more detailed thinking as they apply to the local
situation. One is to identify seriously under-performing doctors, while another
concerns supporting all doctors in striving constantly to improve their
performance. The mode of learning and appraisal will differ depending on the
outcomes of interest and acceptability by doctors (Bruce et al., 2004).
From the provider management perspective, the concept of clinical
governance has been embraced in recent years as a tool to improve quality. On
the theoretical level, it requires structures and processes that integrate financial
control, service performance and clinical quality in ways that engage clinicians
and generate service improvements (Scally and Donaldson, 1998). Many previous
efforts, notably in the UK National Health Service, have failed because
programmes that were originally designed to improve quality were often perceived
as unhelpful top-down, managerial impositions. Critical to the success of any
effort, clinicians and other frontline staff who are at the core of delivering care
must be at the heart of clinical governance a bottom-up approach. Failure to
take account of the detailed composition of clinicians work results in their
disengagement from management and thus the failure of quality improvement
activities (Degeling et al., 2004). In Chapter 16, the Hospital Authoritys Vivian
Wong and her colleagues review the past efforts of Hong Kongs public hospitals
in approaching clinical governance and how it has helped in improving the quality
of care at the patient-provider interface.
From the patients or consumers perspective, Chu Yiu-Ming, having served
on the Hospital Authoritys Public Complaints Committee, argues strongly and
passionately in Chapter 13 for a thorough review and overhaul of that system in
the interest of quality of care and patient rights. System redesign must be a priority
item on the annual plan of every health care organisation. A major strategic focus
in any redesign effort should be an integrated information technology platform
that can support and enhance care delivery by bringing together clinical,
laboratory and administrative data across care providers and payers longitudinally
using a single interface at the point of care. This sort of computer architecture
in the clinical setting has already demonstrated its usefulness in reducing
prescribing errors and improving drug compliance, minimising anaesthesiarelated mortality with the implementation of new computer monitoring
techniques, and improving the coordination of complex care in chronic diseases
such as diabetes. Further refinement of these functions such as the incorporation
of artificial intelligence and their pervasive integration with most clinical processes
are trends for the future. (Leung, 2003b)
Currently in Hong Kong, however, health informatics penetration is woefully
low, with the notable exception of the Hospital Authority. According to a
population-based physician survey in 2001. We (Leung et al., 2001b) reported
that at best, about only half of all doctors in Hong Kong have computerised any
clinical function. Similar results were obtained for administrative tasks involved
with daily practice management. We found large variations in the extent of
computerisation between physicians practising in large corporate organisations
such as the Hospital Authority or private HMOs (health maintenance
organisations) and those in solo or small-group clinics that provide at least 60%
of ambulatory care in Hong Kong (Figure 6). Time costs, lack of technical support
and large capital investments were cited as the biggest barriers to computerisation,
whereas improved office efficiency and better quality care were ranked highest
as potential incentives to computerise, according to another recent survey (Leung
et al., 2003c). Our task ahead is to focus on building implementation plans by
overcoming the identified barriers and designing tailored incentive schemes for
care providers with different characteristics and needs to encourage
computerisation, especially in the ambulatory solo and small group practice
settings.
More importantly, once there is good informatics penetration throughout
most care settings in Hong Kong, we must ensure that data are regularly
downloaded into a central repository for cleaning, checking, formatting and finally
detailed analysis to inform research, policy development and evaluation. The lack
of routinely available morbidity data from ambulatory care visits, which is mostly
provided for in the private sector, amounts to a medical emergency on the
community level. Without access to good quality records and information systems,
many of the problems that are associated with chronic disease management (a
major driver for use of public sector health services) and quality assurance in
general will remain unidentified, unrecognised or otherwise insoluble. An
excellent example of the utility of such a resource is the UK General Practice
Research Database (GPRD www.gprd.com), which is the worlds largest
computerised database of anonymised longitudinal patient records from general
practice, containing more than 35 million patient-years of data. It allows the
prosecution of hypotheses in different areas of medical science, including clinical
epidemiology, drug safety, pharmaceutical utilisation, health outcomes, health

80
Overall
Corporate Practice
Individual Practice
70
Proportion (%)
60
50
40
30
20
10
0
Receiving or storing
information
electronically such as
laboratory results or
specialist reports
Writing prescriptions
Recording
consultation
notes
70
Running a recall
system to remind
patients to return for
routine tests
Using decision
support functions to
solve diagnostic
problems or make
decisions about
dispensing or
treatment
Overall
Corporate Practice
Individual Practice
60
Proportion (%)
50
40
30
20
10
0
Registration of
patient details
Billing and payment

system
Scheduling
appointment
Managing practice Making insurance

claims electronically
finance
Source: Leung et al. (2001b)
Figure 6 Extent of computerisation of (a) clinical and

(b) administrative functions by type of practice
service planning and pharmacoeconomics, among others. The GPRD is used

regularly by academics, public health agencies and private industry to generate
new intelligence and evaluate health care interventions.
There is also a large volume of routinely collected data in our public health
and health care agencies that can be much better harnessed. The current system
of access to such useful information remains haphazard, non-systematic and
subject to rules that are not entirely transparent to external partners. The
principle that the Hospital Authority and indeed all public agencies are trustees
of the publicly-owned data on behalf of the wider community should be inculcated
among the guardians of such data, health professionals and scientists in academia
and industry. Subject to the usual rules of privacy, confidentiality and a legitimate
use of the data requested, the data should be promptly and unconditionally
released. Indeed, most quality periodicals in the medical and scientific literature
now require that sponsors (financial or otherwise) and data suppliers have
absolutely no role in or influence over the design, conduct, and reporting of the
study or in the decision to submit the manuscript for publication. It is neither
the job nor in the remit of such guardians of public data to question or secondguess the value or potential outcomes of the proposed projects. Otherwise, we
run a very real risk of losing the already thin layer of autonomous health service
researchers in Hong Kong. Set on its present course, the findings and
recommendations based on the released data and officially sanctioned projects
cannot be received as entirely objective and credible, warranting the full
confidence of the various stakeholders and the lay public. As a more general
principle, the sequestration of data within the bureaucratic confines of a restricted
sector is not conducive to medical progress. Unfortunately, this restrictive
behaviour is endemic in the Hong Kong Government, from the Census and
Statistics Department (C&SD) outwards, which continues to place unrealistic
contractual demands on any researcher wishing to make good use of data already
paid for from the public purse. Researchers are forbidden from publishing any
research based on samples and are required to pay C&SD to repeat their analysis
on the complete dataset and accept recoding of the dataset, even where no tables
are to be published, only model parameter estimates. Until the Harvard
consultancy, C&SD had never allowed access to record level data from the General
Household Survey (GHS) and this restriction was only removed when it was
pointed out that proper analysis of the health care expenditure of households
requires access to household level data. An ironic example of the damage done
by this attitude is that one round of the GHS collected both smoking behaviour
and hospital utilisation data simultaneously, which went unanalysed for ten years!
There are many other good examples of policy research undone in demography
because of this short-sightedness. A close parallel can be drawn to the open access
policy of the Human Genome Project. John Quackenbush (2001) summarised
this position succinctly.
The paradigm under which we operate as scientists is that even
published, peer-reviewed findings represent hypotheses that must be
tested and validated, and that the primary data supporting those
hypotheses should be freely available to facilitate this process. As
published data and findings are reviewed and analysed by others, this
allows the conclusions to be confirmed. This also opens the work to
the identification of errors, misinterpretations, and even flaws in the
underlying assumptions or the logic used to deduce the final results.
A proper data archiving policy for Hong Kong with all government funded
data being deposited is long overdue.
The business administration parallel to patient-centred care in the clinical
realm is the consumer-driven health care movement. Regina Herzlinger (2004)
has been a long-time advocate calling on health care insurers, providers and
policymakers to embrace and adjust to this movement, and she predicts that
consumerism will ultimately improve quality, citing past examples in the
education, financial and business sectors. The essence of her argument, when
applied to Hong Kong, is that most of health care is presently controlled by thirdparty technocrats rather than innovative providers who are intent on delivering
health care in a way that is responsive to consumers needs for efficient and
personalised services. She claims that a technocrats notion of managing care is
to wean consumers away from wasteful, expensive specialists and policy elites
do not seek to recreate the way health care is delivered through competition
among different services for the consumers custom (Herzlinger, 2004). Her
criticism of the US health system finds echoes in Hong Kongs gargantuan public
sector that is for all intents and purposes centrally planned and controlled by
the Hospital Authority head office via the different hospital clusters. Like many
other policy analysts (Robinson, 1997), while we do not subscribe to many (even
most) of Herzlingers arguments in a wholesale fashion, a large consumerism tide
is quickly approaching and health care managers should be prepared to respond.
Our proposal for a primary care-led health system that commissions integrated
secondary and tertiary care from public or private providers on an equal
competitive platform is compatible with Herzlinger and her colleagues (2004)
vision of a consumer-driven culture (albeit filtered through the professional
judgement of primary care purchasing cooperatives, but ultimately accountable
through the annual renewal of patient rosters) as well as Enthovens plea (2000)
for a decentralised approach to health care production and delivery. We caution
that a decentralised, market-driven approach to health care should not translate
into loosely fragmented service provision with no continuity through the system.
Two prerequisites must be in place for this to function properly: a seamless,
confidential information technology platform that holds a person-based electronic
health record that can be accessed by patients and all authorised providers for
clinical purposes and by third-party payers for billing administration; a strong
public health agency that protects, promotes and improves health and health care,
and provides oversight of the entire system.
To push this idea of competition in health care further, we turn to some
recent work by Michael Porter, arguably the best known and most respected
strategist in the world. Porter and Teisberg (2004) argued that competition
currently takes place at the wrong level where providers, payers and financial
intermediaries (e.g. insurers) are simply shifting costs from one sector to another
in a zero-sum exercise. Instead, the different players must focus on competing at
the level of preventing, diagnosing and treating health conditions through
innovation in hubs of excellence like Herzlingers focused factories. Competition

should be centred on creating value (e.g. cost per quality-adjusted life-year) and
not just reducing costs. Better care need not mean higher costs. In fact, better
quality can often be less expensive because it involves eliminating unnecessary
effort, redeploying resources efficiently and improving clinical decision making
based on scientific evidence.
***
Many of the lessons in the preceding paragraphs, concerning an integrated acute
care infrastructure (both in terms of levels of care and ownership) putting
preventive and primary care first and continuous quality improvements, can and
should be translated to the areas of elderly and long-term care, as Chu LeungWing and Iris Chi point out in Chapter 11. However, care of the elderly, who are
ever increasing in numbers and relative proportion (see Chapter 4 by Paul Yip
and his colleagues), in sickness and in health brings its own unique set of issues
that are not always paralleled in acute adult and paediatric care. Reform strategies
must therefore be thoughtfully adapted to these special circumstances. Health
care and social services are inextricably linked in the elderly unlike in other age
groups. The line that separates health care services from non-health care services
is increasingly blurred because the social determinants of health are particularly
important in old age as deinstitutionalisation and the dissolution of live-in
arrangements of extended families (i.e. with parents and grandparents) become
the norm in most of the developed world including Hong Kong, even with our
strong Confucian tradition of looking after family elders. For instance, poor living
conditions, the unavailability of caregivers and the lack of social support are
commonly associated with frequent admissions and readmissions (or the
revolving door phenomenon) to hospitals. Chu and Chi emphasise a
multidisciplinary, multisectoral approach to managing such frail elders. Another
case in point is dementia, which represents the category of disorders that afflict
the elderly almost exclusively (another example is Parkinsons disease) but do
not fit neatly into an acute or even conventional definition of chronic disease
such as diabetes or hypertension given the myriad clinical and social
manifestations and attendant care needs outside of the strictly medical realm. The
costs of informal, unpaid caregiver time make up an unusually large share of the
direct personal and indirect costs that are associated with Alzheimers disease (the
most common version of dementia) compared to other conditions. This reflects
the hands-on, intensive nature of care by chiefly family caregivers, which accounts
for 40% to 70% of total costs (Leung et al., 2003d). The responses that these
examples call for are in concert with our previous argument for a seamless,
integrated, primary care-led system, where a focus factory-like approach (e.g. acute
geriatric units as opposed to general medical beds) dedicated to elder care that
bridges the home and the hospital is required. On the macro-level, the present
grouping of health with the welfare and elderly portfolios in the Health, Welfare
and Food Bureau should be retained to optimise policy coordination and
coherence.
Additionally, long-term residential services and/or care are another focus of
priority. There is currently a serious mismatch between need, which mirrors
demand closely (unlike many other areas in health care), and supply. From an
organisational point of view, because of the invalid and unreliable division of care
homes into residential and nursing, care and attention homes, homes for the
aged, hostels and infirmaries, there are perverse incentives that confuse rather
than differentiate between health and social care. Trying to separate care into
these two labels is an unproductive exercise, consuming thousands of hours of
scarce resources. Instead, full recognition of long-term care as an integral part
of a comprehensive health service is long overdue. The crux of the problem lies
in the financing of quality elderly welfare and long-term care. Whereas this can
be prohibitively expensive for the public purse, which is already saddled with a
structural budget deficit, let alone for an individual or a family, a possible solution
likely lies in a compulsory, pre-funded savings model that smoothes anticipated
expenditures over the working life. Ultimately, a mixture of public and private
finances will be involved. A major pitfall to avoid is what the UKs National Health
Service has recently committed, i.e. trading greater equity of finance for equity
of access (Deeming and Keen, 2004). Asking people to pay for elements of their
care assumes that they will exercise choices in ways that maximise their own wellbeing, largely uninfluenced by social and other considerations, but this is often
not the case. We previously emphasised the imperfect economics of health care,
which is again pertinent here, where seniors often do not have the presence of
mind or symmetry of information to optimally assess the pros and cons of different
service offerings at the time of need. We provide a fuller treatment of long-term
care financing in Part IV. While we continue to debate about an optimal system
for the future (which can take many years, even decades, if past experience in
local health system reform is anything to go by), the present difficulty is to
organise a transitional arrangement whereby the intervening sandwich
generations can be taken care of appropriately in the meantime.
Reinventing the Public Health Function

We end this section by revisiting the starting premise of our commentary, i.e. a
public health and system approach to health reform.
Hong Kong appears to have done well, at least until the 2003 SARS outbreak,
at the more traditional public health functions of communicable disease control
and disease prevention. Indeed, Hong Kong boasts vital statistics and health
indicators that are among the most favourable in the world. Today, however, the
government is receiving broadsides from all sectors on its handling of the SARS
epidemic and communicable diseases generally. Most of this is gratuitous criticism

based on 20/20 hindsight (Hedley and Leung, 2003). Overall, as reports
commissioned by the government and the Hospital Authority have concluded,
the health system responded as well as could have been expected under the
circumstances of a novel agent causing a large community epidemic. This view
was not shared by most in the community and the media. The Asian Wall Street
Journal editorialised its opposition by headlining the government-commissioned
report Hong Kongs SARS whitewash (Editorial, 2003) the day after its release.
A third report by the Legislative Council, reflecting the prevailing public opinion
and acutely aware of impending elections later in 2004, named specific individuals
and assigned blame in the spirit of political accountability that ultimately brought
down the health minister and the chairman of the Hospital Authority. There had
even been talk of a fourth review of professional standards by the Medical Council,
although this did not materialise.
From the public health perspective, there is a proper role for retrospective
reflection from which lessons should be drawn and learnt. First, there is no doubt
that the global medical myopia that developed in the 1960s and 1970s in relation
to communicable disease has led to under-investment in the public health
function as it applies to surveillance, research and control of communicable
disease. SARS demonstrated just how urgently the whole of southern China needs
integrated information systems and laboratories to monitor the possible
emergence of new microbial species. A substantial part of the debriefing process
should now focus on developing a new in-depth understanding of Hong Kongs
public health needs and recognition of the resources that are required to protect
community health rather than simply treat illness. Second, there are
inconsistencies in the public health regulatory powers delegated to the
Department of Health. For instance, the 44 Hospital Authority hospitals fall
outside the Department of Healths purview by legislative ordinance. In essence,
this creates a triple role for the Hospital Authority: that of purchaser, provider
and regulator. This is an untenable situation. The US has the Joint Commission
on Accreditation of Healthcare Organizations, which is independent of any
hospital board, and the UK has the Commission for Healthcare Audit and
Inspection separate from the National Health Service. Hong Kong deserves the
same organisational independence and structural integrity. Third, to be truly
effective at detecting and controlling the next infectious disease outbreak, whether
it be SARS, dengue fever or bird influenza (H5N1), cross-border collaboration is
essential. The Pearl River Delta is a mixing vessel for new viruses, as the preceding
sections show. Hong Kong should push for structural integration with the relevant
public health and disease control and prevention agencies in Guangdong at both
the municipal and provincial levels. More important, however, is genuine
operational collaboration, including the unconditional and routine sharing of
micro-level surveillance datasets and information (not just aggregate numbers),
the harmonisation of data standards and the collaborative training and posting
of personnel. All of these can only be made possible through regular dialogue,
mutual understanding and trust, and greater political openness. On a different
level, the same willingness to cooperate and to work together is demanded from
within each jurisdiction. At least one major international newspaper has attributed
research and outbreak control failings in how China handled the SARS epidemic
to entrenched bureaucratic inflexibility, intramural bickering and governmentdirected agendas in Beijing (Hutzler, 2003). Similar anecdotes abound in other
quarters locally. The tasks and approach that are needed to avoid this are now
clearly set out for politicians and public servants. (Leung et al., 2004)
In response, the government has established a new Centre for Health
Protection, the mission of which is to achieve effective prevention and control
of diseases in Hong Kong in collaboration with major local and international
stakeholders (Centre for Health Protection, 2004). It pledges to adhere to the
seven common principles as laid down by the government-appointed SARS Expert
Committee in its report (2003), namely strengthening epidemiologic capacity,
installing systems for early detection and reporting, planning for contingencies,
delineating clear command and control structures, integrating a unified response
to outbreaks, planning for and managing surge capacity of health care facilities,
and promoting transparency and effective communication (SARS Expert
Committee, 2003). If the new agency can maintain its initial momentum in
persisting along these lines, then the public health function in Hong Kong will
have made a great leap forward in the area of infectious disease control,
recovering much ground that was lost in the previous two decades.
However, with the demographic transition to an ageing population, the
epidemiologic transition to chronic, non-communicable diseases, the technologic
transition to ever more sophisticated equipment and scientific techniques, and
the economic transition to a post-industrialised knowledge-based society, the
portfolio of modern public health responsibilities has expanded considerably. It
includes health technology assessment, the development of clinical practice of
proven impact, the evaluation of preventive interventions, sound health economic
and policy analyses, health target setting and benchmarking (see Chapter 15 by
Geoffrey Lieu), regulatory oversight of health care and related organisations, and
the creation and maintenance of a comprehensive health information system that
includes both the public and private sectors, to name but a few core competencies
of a comprehensive public health function. Hong Kong as a whole urgently
requires the necessary resources to build this infrastructure to maintain an intact
public health function. These resources should be directed at training public
health professionals, funding additional posts, strengthening existing
organisations and establishing new ones, and facilitating the further integration
of public health with clinical medicine on the one hand and society at large on
the other (Horton, 1998a and 1998b).
On technology assessment, Hong Kong needs to quickly get up to speed in
managing technological innovations in health care, a key cost driver of the upward
expenditure spiral. A prototypical case in point concerns the UK National Institute

for Health and Clinical Excellence (NICE), which gives guidance on individual
health technologies, the management of specific conditions and the safety and
efficacy of interventional diagnostic and therapeutic procedures, grounded in the
best available evidence. Currently, the introduction and adoption of new drugs
and technologies in the Hospital Authority is a non-transparent process and does
not meet many of the criteria laid down by the British Medical Journal during the
first phase of implementing NICE (Smith, 2000). These criteria called for an
agency that admits openly that it is about rationing, works transparently, uses
evidence, looks right across health care, incorporates ethical thinking
systematically into its judgements, is more distant from politicians and the
pharmaceutical industry and is directly accountable to the public. While taking
lessons from overseas organisations such as NICE, Hong Kong must avoid
committing the mistakes that those organisations have made. For instance, a
favourable appraisal from NICE essentially amounts to a compulsory purchase
order from health care providers, irrespective of budgetary constraints. This
blatantly disregards the rationing role of NICE and leaves the dirty work of saying
no to the health service, and also goes against the spirit of decentralisation of
decision-making to primary care trusts at the local level. A related issue concerns
the fact that NICE has focused on evaluating new rather than existing
technologies, thus creating inflationary cost pressures that the National Health
Service cannot afford. What is needed is an ordinal ranking of all technologies,
old and new, by incremental cost-effectiveness ratios in ascending order and a
systematic shopping spree approach to adopt as many as possible down the list
of interventions under a realistic budget cap. The current NICE appraisal system
also fails to leave an option of safe understudy treatments in case the mainstay
becomes unavailable for whatever reason. The recent examples of Vioxx and
Baycol highlight the importance of appropriate redundancy in the system. In
addition, some critics of cost-effectiveness evaluations have argued that utilitarian
values are inadequate and consideration of other perspectives such as the fair
innings approach should be explicitly included in the appraisal process.
(Maynard, 2004) Lastly, if Hong Kong plans to go along this route of an explicit,
evidence-based technology appraisal process, and it should because of the
predominant role of the public sector in the health care market, it needs to
adequately resource the initiative, unlike what its public agencies have always done
in the past: i.e. expend minimally and expect everything. As a rough guide, each
technical appraisal alone, discounting the administrative, bureaucratic and fixed
expenses, currently costs 80,000 or about HK$1.2 million. Six universities in the
UK are commissioned to carry out six such reviews annually on five-year contracts
to establish and maintain institutional expertise and memory. This represents nontrivial effort by the technical experts to collect, collate, analyse and synthesise the
best current evidence, and cannot be sustained on a shoestring as many other
similar public health activities have been.
Concerning research and development in public or population health, there

is a woeful lack of dedicated resources locally. This has been largely driven by
the implicit (and perhaps insincere) belief that a solution to a biological or
clinical problem found at, say, the molecular level can be equated to the solution
of the problem for a population. Ignoring population oriented research is not
only naive but delays effective actions to improve health or to avert harm to health
(Saracci et al, 2005). The main funding body, the Research Grants Council (RGC),
has a pitiful record of funding non-bench research projects through its Biology
and Medicine Panel, let alone epidemiologic investigations. The Social Science
and Humanities Panel, on the other hand, has a narrow remit on health-related
research. As a result, public health research falls into no-mans land which is
profoundly discouraging and anti-educational for younger researchers in the field
as it penalises the ability to compete on scientific grounds through rigorous
professional peer review. The only other source of relevant funding is the Health
and Health Services Research Fund administered by the government health
ministry. However, there is a funding cap of HK$800,000 and such sponsorship
does not carry the prestige of RGC money. Whereas there is a large pot of funds
in the most recently established Research Fund for the Control of Infectious
Diseases (in response to the 2003 SARS experience), many public health
researchers have had to change their expertise and interest areas to match the
availability of resources which in the long term may not be good for Hong Kong
where chronic diseases still claim the most lives every year.
There has been some discussion recently about the duplicative organisational
structure of the Health, Welfare and Food Bureau and the Department of Health,
and whether the two should be merged into a larger secretariat, similar to the
education and manpower portfolio. The Bureau is mostly staffed by administrative
and executive staff, whereas the Department of Health is a professional public
health agency. Combining the two will give much needed critical mass and bring
together complementary staff mixes under one roof, thus eliminating redundant
management personnel, although the main benefit for such an exercise lies not
in budgetary savings but in the operational efficiency and effectiveness of having
a single policy formulation, development, implementation and evaluation agency
responsible for public health and welfare. During 2004, there were preliminary
proposals circulating in government concerning the reorganisation of the Health,
Welfare and Food Bureau portfolio, including the merger of the Department of
Health with the policy branch and other structural and reporting changes
although its priority appears to have been reassigned downwards in the present
administration. Such a reorganisation effort is to be welcomed, although the new
arrangements must retain and indeed strengthen its public health focus. Perhaps
Anthony Hedleys proposal for a truly and effectively public health agency, or the
ICAC of public health, merits further consideration.
One important point bears particular mention. Public health is a distinct
professional discipline with its own body of knowledge and skills. According to
the UK Faculty of Public Health (2004), it is
the science and art of preventing disease, prolonging life and

promoting health through organised efforts of society. Public health
is concerned with improving the health of the population, rather than
treating the diseases of individual patients. Public health professionals
work with other groups to: monitor the health status of the community;
identify health needs; develop programmes to reduce risk and screen
for early disease; control communicable disease; foster policies which
promote health; plan and evaluate the provision of health care; and
manage and implement change.
Therefore, all public health providers should be properly trained, certified

through professional examinations, and recognised as such in the health system.
Accordingly, this training and certification mechanism should be expanded to
include non-medically qualified candidates who wish to become specialists in the
discipline. The Hong Kong College of Community Medicine and its parent, the
Hong Kong Academy of Medicine, should take the lead in actively pursuing this
goal despite the necessary political and legislative challenges it will entail. The
age of Brownian motion in terms of the recruitment and deployment of public
health personnel is over. Moreover, while senior clinicians (and indeed nonmedics) will continue to occupy important positions in Hong Kongs health
system, they must be fully supported by a team of public health specialists.
Otherwise, they risk falling into the trap many public, well-respected figures have
stepped into, i.e. managing or making policy on topics outside their ken by
overstepping the usual compartmentalisation of competence for which they
became noted (Posner, 2001). On a related and deeper level, intellectuals and
experts who have achieved public recognition for their specialised area of work
have been known to find themselves driven into a political sphere they hardly
understood and consequently fell blind to its many pitfalls with disastrous
consequences for the population for whom they were supposed to have served.
Lilla (2001) outlined the momentous events involving intellectual giants such as
Heidegger, Schmit, Foucault and Derrida and their political insouciance during
the time of the insurgence of fascist ideology in Europe. A recent and perhaps
more relevant example could be the role of Lee Yuan-Tseh, Taiwans first Nobel
Prize winner and President of Academia Sinica since 1994, in his unwavering and
unquestioning support for Chen Shui-Bians educational reforms which failed on
a massive scale and has left a crippling system that is increasingly strained under
regional and international competitive pressures.
Lastly, the university schools of public health can play an important role in
training, service and research if they are allowed to, but they are particularly
vulnerable to the current higher education cuts and territorial wars for intellectual
space from some quarters within and without the walls of the academe. Both units
are small and ageing, despite recent infusion of small new sums of seeding money
as a result of fundraising efforts galvanised by the governments matching schemes
although neither faculty of medicine appears to be truly committed to the

discipline beyond such and other lip-service appearances in strategic planning
documents. Unless better opportunities and incentives are made available to
attract young specialists to public health on a sustainable basis, this academic
specialty will be dead within about ten years. This would be disastrous, especially
as the service sector needs more and not fewer teachers and trainers in the
discipline to boost its own capacity. New thinking is needed to overcome
institutional inertia. At present, there is a complete mismatch of need and
demand/accountability. The discipline suffers from years of benign (or some may
say deliberate) neglect thus there is an urgent need to build basic necessary
infrastructure, such as an adequately funded (in terms of recurrent budgets as
opposed to soft money) academic base that includes all cognate disciplines of
the public health sciences as well as research and teaching programmes that are
fit for purpose in contemporary Hong Kong and Asia, for the next generation of
public health professionals. However, public health academics spend a substantial
amount of time teaching medical undergraduates because they are (90%) funded
through the general first-year-first-degree formula of the University Grants
Council. This detracts from developing their own separate, albeit related,
postgraduate discipline of public health sciences. Unlike other clinical specialties
which can rely on leveraging HA resources in the hospitals for the recruitment
of new trainees annually, there is no parallel mechanism for public health
medicine. In order to make up for the constant financial shortfall due to a cut
in medical student numbers (from 180 to 125 per year at the University of Hong
Kong in the last four years), both departments have had to subsidise their income
through offering a large number of self-financing postgraduate courses, thereby
further restricting time resources and productivity. Lastly, all academics in Hong
Kong are evaluated by original research output, almost to the exclusion of all other
scholarly activities, in the form of a UK-style research assessment exercise. In
conclusion, public health departments are funded to carry out undergraduate
teaching (not in their primary focus area), expected to produce research output
that is competitive in the international scientific literature (with a Research Grants
Council funding bias against population health research on the Biology and
Medicine assessment panel) but the discipline actually needs to expend the most
resources in building basic infrastructure. There is not enough critical mass at
either medical school in the public health sciences, which presents two options.
First, the two departments could merge and form a Hong Kong-wide school or
institute of public health that would be better able to attract new resources,
especially in the present climate of deep collaboration encouraged by the
University Grants Council among the eight universities. Second, whereas many
related activities that are not branded as public health research and training are
actually taking place across the rest of the campus communities, university-wide
reorganisation and consolidation should take place to bring together like-minded
people under the umbrella of a school of public health with core funding. In
the past, virtual centres proliferated but yielded little in terms of real output and
impact. These two approaches are not mutually exclusive, in fact they must be
vigorously followed up in parallel if this discipline is to have a fighting chance at
survival, let alone responding to urgent calls from society to become a thriving
community of public health scholars. The time is now ripe to bring forward
substantive proposals, with the necessary resources, to be implemented in the
coming decade.
CHAPTER
Operations Management in the Public Sector

Janice Johnston
Janice Johnston, a health services researcher and management specialist

at the University of Hong Kong who has studied the ambulatory care
market since the early 1990s, begins the chapter with some theoretical
considerations of operations management and just-in-time supply chains
in health care and then focuses on a full account of three fixture
issues in the public ambulatory care system of Hong Kong long
queues, doctor shopping and clinic default. These concerns have
plagued local public service providers for decades, and remain largely
unresolved. A large part of the explanation for this situation is related
to the non-recognition of the underlying system structure and the
incentives that lead to such phenomena, which Johnston carefully
dissects in this chapter. She calls on public sector providers to reorient
key control policies to facilitate the optimal utilisation of out-patient
services based on a thorough understanding of operations management
theory and its application in practice. She also illustrates how the
solutions to these three management issues are often intertwined with
broader health reform questions that are discussed elsewhere in the
book.
Introduction
The escalating complexity of health care organisations compels a change in the
way we view problems. The resolution or amelioration of health care management
challenges necessitates the coordination of many inter-related activities (Plesk,
2001). More specifically, a thorough evidence-based understanding of the
fundamentals of systems operations and management decision-making is an
essential aspect of managing problems associated with the efficient delivery of
frontline clinical care activities. In a public health care system, many of these
decisions are tactical in nature, i.e. they focus on structural, routine, repetitive
decisions that are fixed within a bureaucratic framework (Krajewski, 1999).

Evaluating the performance of a public health care system can be difficult,
particularly in the absence of a focus on profitability. Assessment from an
operations management perspective should draw from compliance with
organisational goals, societal functions, procedures and structures, as well as
indicator-based criteria (Lemieux-Charles, 2002). Although performance
measurement is an elusive concept, management activity is central to the
assessment of organisation performance, innovation and capability. The
underlying premise is that benchmarked knowledge or organisational
performance will provide managers with the information necessary to guide
behaviour change and bring about improved performance. Within the public
ambulatory care sector, a complex interplay of organisational characteristics of
clinics such as booking policy and procedures, waiting time for an appointment,
patients self-perceived severity of illness and willingness to acquiesce or otherwise
contribute to the overall assessment of the performance of the clinic. When
considered within a strategic supply chain management system framework, such
analyses can provide informative insights into system performance.
Supply chain management strategies, traditionally applied in the materials
management sector of health care operations, are equally relevant to the
integration and coordination of ambulatory care referral systems. Managing the
flow of information and patients from the referral to providers of care is especially
difficult in clinical supply chains. Referral coordination and just-in-time out-patient
appointment scheduling with the goal of doing todays work today, not next
month are integral to managing the supply of and demand for ambulatory care
service (Gray, 2001). While achieving a competitive advantage may not be a
common goal of publicly funded ambulatory care systems, appropriate supply
chain strategies have the potential to get patients to the right place at the right
time while managing to keep waiting times short (Slone, 2004). However, the
complexity of ambulatory care supply chains substantiates the need to clearly
understand these mechanisms and how they add to improved quality of care.
For most patients, access to the health system is through ambulatory care,
and for many this point of care accounts for the largest share of their contact
with physicians and other health care providers within the health care system.
Assessing the quality of ambulatory care is an important component of the
evaluation of health care systems. From an operations management perspective,
such evaluations often focus on process and outcome measures such as prescribing
and referral rates, preventive care targets, measures of administrative or
organisational efficiency such as waiting time, patient satisfaction (including
seeking care elsewhere or doctor shopping), and non-attendance behaviour.
However imperfect or blunt an instrument, non-attendance as a gauge of the
patients health care system and the delivery of care remains a key measure of
ambulatory care quality. Non-attendance reflects the potential barriers of access,
is associated with increased patient morbidity (Turner, 1991), has been attributed
Operations Management in the Public Sector 189
to long waiting times for consultations (Edwards, 1997; Hamilton, 2002) and
doctor shopping, and is a major issue in ambulatory care supply chain
management (Sharp, 2001). Operations management and operations research
strategies such as queue modelling, process and workflow analysis are useful tools
for identifying these inefficient non-patient centred activities contributing to such
patient behaviour.
In health systems with universal coverage, it is widely assumed that access to
care for patients is independent of socio-economic status (Leon, 2001). In fact
horizontal equity, sometimes termed equal access (or treatment) for equal need,
is the chief justification for designing such a system in the first place (Oliver, 2004).
Whether this is true in practice is unknown although several large-scale studies
have questioned the realisation of this goal as socio-economic disparities in
effective access to care persist to varying degrees in countries with universal health
care coverage (Cooper, 1998; Andrulis, 1998; Sin, 2003). On the other hand, in
the absence of universal access, variation in the availability of health care is
inevitably and strongly related to socio-economic status (Andrulis, 1998;
Halldorsson, 2002; Roos, 1997; McIssac, 1997; Dunlop, 2000). Patients from higher
socio-economic status groups are often able to negotiate or expedite access to
care, receive earlier referral (or preferential access) to specialist care, have shorter
waiting times and doctor-shop when dissatisfied with long queues (Roos, 1997;
McIssac, 1997). The distribution of income within a society is an important
predictor of health (Wilkinson, 1992). Understanding societal barriers within the
ambulatory supply chain framework is pivotal to the design of a referral system
that is fair and equitable for all.
In Hong Kongs mixed medical economy, which includes both private and
public service providers, the public sector is responsible for 2030% of all
ambulatory care visits (The Harvard Team, 1999). This is a sharp increase in
service utilisation compared with the figure of 17% for the sector in the early
1990s (Hedley, 1993) and is largely due to vastly improved service quality (in terms
of both quality of care and amenities) coupled with very low charges. This high
level of utilisation has resulted in long waiting lists for public specialist
appointments, while the waiting rooms of private practitioners remain mostly
empty. The public sector specialist out-patient departments (SOPD) operate under
the Hospital Authority, and are funded by government general revenue, like the
National Health Service system in the UK, whereas private operators (which are
mostly single providers or small group practices) charge fees for services on an
episodic basis (The Harvard Team, 1999; McGhee, 2001). The ambulatory care
sector has been criticised as being fragmented, and there is no organised primary
care network or referral system (The Harvard Team, 1999), unlike the
organisational structure of other mature medical care systems.
The unpublished results of pilot studies indicate that about 25% of all new
appointments at public specialist clinics result in default, largely because of doctor
shopping behaviour. When benchmarked against the National Health Services
non-attendance rate of 12% and cost per lost appointment of 65 (Turner, 1991;
Sharp, 2001; Hamilton, 1990; Stone, 1999), the higher non-attendance rate for
scheduled appointments in Hong Kong contributes to even greater operational
inefficiencies than are seen elsewhere, including increased economic costs and
longer queues for those who require the service.
Reasons for Non-Attendance

The decision to attend for care is complex and multidimensional (Campbell,
2000). It is important from a clinical, management and health services research
perspective to distinguish the potential reasons why patients fail to attend. The
application of health care management modelling, simulation and queuing theory
have the potential to make important contributions to the analysis and
understanding of multifaceted patient behaviour at the system interface.
Specifically, is non-attendance a voluntary patient decision or behaviour (i.e. they
do not attend by choice), or are there underlying structural barriers to attendance
(viz health system characteristics especially with respect to socio-economic factors)
that are outside the patients control (i.e. they cannot attend) (Campbell, 2000)?
Non-attendance arising from a lack of effective access (George, 2003) is a major
barrier to receiving needed health care services and may be seen as a form of
structural inequity (Farmer, 1999). Non-attendance can be viewed as a failure of
the system to comply with acceptable access conditions, in part a supply chain
management problem (Campbell, 2000) or the failure of the patient to meet the
terms of the implied contract the appointment booking. The locus of control
resulting in non-attendance is an important distinction as interventions to remedy
the problem will differ widely depending on the causal pathway.
Patients who do not attend have treatable morbidity, and in contrast to other
evidence (Campbell, 2000), non-attendance in Hong Kong is highly associated
with the self-perceived severity of illness (Hedley 1993, Lo 1994, Leung 2003).
The inappropriate matching of severity of illness and appointment time reflect
problems in the process of and access to care and often result in less than timely
interventions. Such problems are amenable to operations management strategies
such as those related to just-in-time appointment scheduling and other leanproduction approaches. Patient beliefs, conflicting personal and work obligations
including the lack of available child care and concern about taking time off work
(Morton, 1995), the financial cost of attendance, a change in health status and
the degree of patient participation within the consultations are key patient
characteristics of non-attendance (Griffin, 1998). As is the case elsewhere, nonattendance is also associated with system-related ineptitude or lack of patient focus
(resulting in lost appointment information and forgetfulness), inefficient clinic
organisation, poor communication between clinic staff and patients, and poor
attitudes of health professionals. All these lead to doctor shopping behaviour and
excessive waiting time (Lo, 1994; Leung, 2003; Goddard, 1998). In Hong Kong,
unpublished data indicate that system-related problems are the most frequent
reasons (35%) for non-attendance. Using the relevant operations management
sciences, substantial reductions can be achieved in reducing non-attendance
(Berwick, 1998). In addition, a substantial proportion of the patients who were
surveyed felt that the visit was no longer necessary.
Elsewhere, age, gender, socio-economic status, source of referral and doctor
shopping are associated with non-attendance (Hamilton, 1990). In contrast, the
socio-demographic characteristics and the socio-economic status of patients in
Hong Kong show little direct association with non-attendance (Lo, 1994). Rather,
they are associated with non-attendance through waiting time and doctor
shopping. Understanding these external loci of control issues are important in
order to assess whether there is effective (as opposed to nominal) access to care
and what extent structural societal characteristics contribute to non-attendance,
waiting time and doctor shopping. Are those less well off more likely to default
the clinic appointment? Are those from lower socio-economic classes and living
in poorer neighbourhoods systematically given longer waiting times? Are the poor
more likely to doctor shop or seek multiple sources of care and therefore less
likely to keep their appointment? Or do system rather than patient characteristics
contribute more to non-attendance?
Non-attendance is highly associated with both the source of referral and the
source of care. Non-attenders are twice as likely to be referred from a public sector
accident and emergency department, to have defaulted on previous out-patient
clinic appointments, and to perceive their problem to be non-urgent. Demand
management initiatives to address referral-related non-attendance should address
demand-smoothing and capacity management strategies (Reid, 1989).
Inexperience with the out-patient clinic environment is also associated with a small
increased risk of non-attendance. In contrast to the UK (Getrad, 1997), patients
who are referred for follow-up appointments from hospitalisation do not have a
high default rate. Patients who are referred from accident and emergency
departments in Hong Kong, as elsewhere (Mason, 1992), have the lowest selfperceived illness severity.
Waiting Time and Health Care Service Quality

Long waiting times and doctor shopping are important proxy measures of access
to care (Shortt, 2001; George, 2003), equity and how well a system responds to
patient needs (Hamilton, 2002). They have also been shown to contribute directly
to non-attendance behaviour among patients in Hong Kong (Leung, 2003).
Growing waiting lists and increased waiting time have a negative impact on quality
of life and levels of stress among patients, adversely influence public opinion,
contribute to inefficient clinic utilisation and management (Killapsy, 2000) and
may increase the economic cost of illness. Long waiting times are perceived by
patients to be important barriers to care. However, within the public sector there
are few incentives to improve clinic efficiency and address those aspects of the
referral system that are barriers to effective access. As has been repeatedly
demonstrated in evaluations of the public sector ambulatory care services in Hong
Kong, long waiting time is a reason behind patients deciding not to attend and
to seek alternative care in the private sector (Hedley, 1993; Lo, 1994; Leung, 2003).
For such patients, non-attendance may lead to delayed and sub-optimal care either
for themselves or for others who are in the queue, especially in a public service
setting (Lo, 1994; Frankel, 1989). In the absence of an effective supply chain
management strategy and to protect patients from the financial risk of illness,
public sector services are dependent on efficient and effective triage systems to
minimise the potentially negative impact of waiting time on patient morbidity.
However, the quality of referral letters greatly deters effective triage decisions. For
providers, particularly those who reimburse physicians on a non-fee-for-service
basis, long waiting times represent an inefficient use of resources that is manifested
in higher costs and lower productivity (Turner, 1991; Stone, 1999), and often
result in patient non-attendance. As it is difficult to replace or fill unused
appointments at short notice, public and private sector practitioners have adopted
strategies to decrease the appointment wastage that is caused by non-attendance.
In the public sector, most of these measures focus on aspects of clinic efficiency,
such as waiting time targets, or the implementation of booking systems that
increase appointment management flexibility, such as block booking and
overbooking. These last two measures are inherently non-customer focused, and
place the burden of non-attendance on other patients who are waiting in the
queue. However, computer simulations based on clinic activity facilitate the
analysis of patient and work flow, enabling the identification of bottlenecks
contributing to extended waiting time. Health care managers in Hong Kong as
elsewhere have been slow to implement quality of care management strategies
that benchmark or target clinic performance in such a way as to facilitate timely
responses to changes in important patient-centred clinical and satisfaction
outcomes. Most of what is understood about non-attendance, waiting time and
doctor shopping comes from stand-alone research. These strategies, while effective
in addressing in clinic inefficiency, do not address route cause problems
downstream of the clinic.
Long waiting times, in Hong Kong as elsewhere (Lo, 1994), are largely related
to factors in the referral-discharge system, and to the implicit rationing that is
common in publicly funded health systems. Due to the absence of resources
needed to shorten appointment queues and the unwillingness of public sector
providers to discharge patients back to the private sector or down the referral
chain to the general out-patient clinics, longer waiting times are imposed on
patients who seek specialist out-patient care. Although rationing through waiting
lists may be the preferred strategy to manage patient demand, the true health
care costs of long waiting times may be distorted, as the opportunity costs of
waiting (from the perspective of the patient) and the inefficiencies in the system
(from the perspective of the provider) are not counted (Danzon, 1992). In
addition, the longer the waiting list, the more inaccurate it is, and the greater
the contribution to system inefficiencies (Partridge, 1992). In Hong Kong,
specialist clinic out-patient non-attenders report a significantly longer median
waiting time (70 days) than attenders (62 days), this waiting time compares
favourably with that which is reported for the UK (median 70 days) (Hamilton,
2002). Non-attenders are more likely to be younger, divorced, separated or
widowed, be current smokers, have a higher self-perceived illness severity and have
private medical benefits or health insurance coverage. Those who are left to bear
the burden of excessive system-related waiting times are the elderly, the less
educated and disadvantaged members of society. Such system inequity is
inappropriate in a modern publicly funded health care system. Although part of
the causal network, waiting time contributes less to non-attendance than doctor
shopping and the non-attendance that is attributable to waiting time is not
mediated by individual level socio-economic status but rather by tertiary planning
unit socio-economic status. That is those in higher income neighbourhoods (and
those with less income inequality) have a longer waiting time, consistent with a
health care system built on the principle of horizontal equity (Johnston, 2006).
Doctor Shopping and Health Care Service Quality

Doctor shopping is an important public health issue. Many patients who are
initially attracted by the high service quality and low fees of the public sector but
cannot afford the time costs of waiting, seek care elsewhere (mostly in the private
sector, in which the waiting time is minimal) a process that we term doctorshopping. Doctor shopping has been defined as the changing of doctors without
professional referral in a single illness episode (Lo, 1994) and is a practice that
has substantially contributed to the high levels of ambulatory care utilisation in
Hong Kong. Although the problem of doctor shopping was already well known,
the 1989 and 1990 general and specialist out-patient clinic studies (Department
of Community Medicine 1991; Johnston, 1993) clarified the scale and impact of
such behaviour (40% of general and 21% of specialist out-patient clinic attenders
reported visiting one or more physicians mostly private practitioners for
their present problem) within the local health care system (Shortt, 2001). Thirtyone per cent of general out-patient clinic attenders reported having a regular
private practitioner. In addition, general and specialist out-patient clinic attenders
reported frequent and multiple contacts with other health care providers in the
six months before their clinic appointments. These attendance patterns have not
changed substantially, and the 2001 specialist out-patient clinic study reports a
corresponding figure for doctor shopping of 26.4%, which signals only marginal
improvement in the past dozen years (Leung, 2003). Doctor shopping occurs both
within and between the private and public sectors, poses an enormous challenge
to the continuity of care between patients and caregivers and reflects patientrelated behaviour, system inequity and access to care barriers where those who
have the capacity to pay are able to acquire private sector care while contributing
to higher public health care costs.
Patients who doctor shop have a higher socio-economic status and thus a
greater ability to pay for care elsewhere (Lo, 1994) and are twice as likely to
default on their clinic appointments (Leung, 2003). In a mixed medical economy
such as that of Hong Kong, where patients have the latitude and apparently the
persistent habitual tendency to doctor shop for medical attention, it is essential
for care providers to have a heightened sense of awareness of this common
practice, to find out patients understanding of their health problems and their
expectations of treatment, and, most importantly, to find out which other
providers they have visited, or indeed may plan to consult, for the same illness
episode.
Although some have argued that doctor shopping is part of the fundamental
patient right to choose the best care that is available, this behaviour often leads
to the wasteful deployment of resources and the duplication of clinical and
laboratory work at the health care services level, and exposes patients to the
potential hazards of polypharmacy, iatrogenic disease, such as from drug
interactions, and the discontinuity of care from an individual perspective (Lo,
1994). Doctor shopping in Hong Kong is a well established type of patient
behaviour, and has been implicated in serious negative health outcomes. This is
a significant public health problem that remains unresolved for individual
providers and health care organisations alike.
Doctor shopping is the single most important factor that is responsible for
patient non-attendance in the public health care system in Hong Kong (Leung,
2003). Caution is needed, however, in delineating waiting time as being exclusively
responsible for doctor shopping as doctor shopping mediated by individual-level
socio-economic status appears to have a much stronger effect on non-attendance.
Other factors such as self-perceived severity of illness also mediate doctor
shopping-related non-attendance but with less effect. Seeking second opinions
and further medical consultation, may be additional explanatory factors. Those
who are willing and able to pay more are also more likely to doctor shop (Lo,
1994). Patients in Hong Kong act on their stated willingness to pay to reduce
their waiting time on a public sector waiting list by seeking and paying for an
alternative source of care, mostly in the private sector, which thereby effectively
shortens their waiting time to consult a specialist doctor (Hedley, 1993; Lo, 1994).
In Hong Kong, both waiting time and doctor shopping are independent
predictors for non-attendance, which is a relationship that persists after
multivariate adjustment and testing for effect modifiers (Leung, 2003). However,
waiting time and doctor shopping are associated with each other. The factors that
are associated with the motivation to attend, the treatment or outcome

expectations and dissatisfaction with the service quality are important triggers of
doctor shopping, but these and other potential predictors are not clearly
understood and deserve greater study. The apparent perceptions of patients that
more care is better and that care from different sources provides additional value
to their health status are also thought to be important components of doctor
shopping, and should also be the subject of further study (Hedley, 1993).
Strategies to Decrease Waiting Time and Doctor Shopping and to

Improve Quality of Care
The reasons for non-attendance are highly complex and not resolvable by simple
solutions (Lloyd, 1993). Numerous strategies that target the factors associated with
non-attendance have been attempted with varying degrees of success (Hamilton,
2002). Mason found that short waiting time intervals and postal and telephone
reminders enhanced attendance (Mason, 1992). Although non-attenders in Hong
Kong often do not take action to cancel appointments, habitual non-attendance
has not been identified, and although non-attendance is clearly associated with
waiting time, there is a limited correlation between the need for care and nonattendance. Growing waiting lists, and hence waiting time, may reflect
inappropriate referral or provider-induced rationing. Such supplier-induced
demand is a hidden cost of waiting list management that is borne by patients.
However, doctor shopping either directly or mediated by individual-level socioeconomic status has a greater effect on non-attendance. Doctor shopping
behaviour reflects the multifaceted patient response to out-patient attendance
barriers and incentives within the health care system. Further research should
be undertaken to identify the mutable patient, physician and system-related factors
that are associated with long waiting times, doctor shopping and patient nonattendance.
Most health systems today feature a mixed medical economy in which private
and public service providers co-exist. Even under the highly socialised National
Health Service in the UK there is a sizable and growing private sector, and an
expanded private financing initiative is being hotly debated (Pollock, 2002).
Canada provides another example where an almost exclusively national social
insurance system also has burgeoning pockets of private service delivery, most
notably in the province of Alberta (Shortt, 2001). Public sector physicians in Hong
Kong are salaried, whereas their private counterparts, mostly working solo or in
very small group practices with one or two partners, are largely paid through fees
for service, which is directly financed by patients. Private insurance coverage is
low, at around 30%, and the majority is funded by large corporate employers.
Drawing together the two sectors of the medical economy and utilising the
excess capacity of the private sector through an outsourcing policy has the
potential to shorten waiting time and reduce the disutility that is associated with
public sector queues, to minimise patient default and the associated inefficiencies
that are due to excessive waiting and doctor shopping for public care providers,
and to increase private sector utilisation. To achieve such an objective, the public
sector should explore ways to improve the referral system through public-private
partnerships. Such intersectoral collaboration is a key response of the Health,
Welfare and Food Bureau (Health Welfare and Food Bureau, 2001) of the Hong
Kong government to the Harvard Report (The Harvard Report, 1999) and is
fundamental to the provision of accessible, equitable and high quality services to
members of the community on the basis of health needs. The transfer of general
out-patient clinic services from the Department of Health to the Hospital
Authority, and the development of the family medicine speciality should further
facilitate the referral process (both admission and discharge), and should become
instrumental in freeing specialist out-patient clinic appointment space, decreasing
waiting time and clinic congestion, enhancing patient satisfaction and decreasing
the dissatisfaction and other factors that induce doctor shopping behaviour.
Such aspirations to improve access to care in Hong Kong are similar to those
in the European Union, where quality of care guarantees have been introduced,
such as the commitment to reducing waiting times, but which have also
undermined equitable access by introducing user charges (Oliver, 2004). In its
response to the Harvard Report, the Health, Welfare and Food Bureau renewed
its pledge to maintain equitable access to care for comparable needs, and
confirmed the Hong Kong governments commitment that any reform should
maintain the existing system strengths of accessibility, equity and affordability, but
should also enhance quality.
Counterstrategies to prevent the abuse of the system could include a
minimum waiting time on the public sector waiting list before the transfer to
private facilities is offered, the discouragement through incentives or regulations
of a return to the public sector by patients who have previously opted for transfer
to the private system, giving preference to public to private transfers for patients
who have not requested transfers before, and so on. Supplementing publicly
funded care with a private payment system will not necessarily reduce waiting time.
However, strategies to improve ambulatory care, reduce waiting time and address
inadequacies in the referral chain and operations management of publicly funded
clinics in the NHS have not met with unreserved applause or success (Meadows,
2001; Cave, 2001; Craighead, 2001). Ideally, all potential strategies should be pilot
tested for feasibility, acceptability and effectiveness at selected sites using a
randomised controlled design before full implementation.
In Hong Kong, as elsewhere, there is an urgent need to improve
communication between care providers between specialties, across the publicprivate sector divide, and among both Western and complementary practitioners
to minimise the potential harm of doctor shopping and to discourage such
practice (McGlade, 1988). The freedom of patients to move through the health
care system without the transfer of, or easy access to, patient records is a hazard
to patients and providers alike (Hedley, 1993). One strategy to improve medical
communication would be through clinical computerisation and the use of
electronic medical records (Leung, 2001) although regulatory measures, such as
the US Health Insurance Portability and Accountability Act of 1996, may make
this difficult to achieve in some countries. Specifically, for the local public hospital
sector, we suggest that patients should not be given the referral letter to book
their own appointments because they can, and have, used the same letter to
schedule several specialist appointments simultaneously, which thereby leads to
increased defaults. In the UK, Hamilton and colleagues (1990) demonstrated in
a randomised controlled trial that giving patients a copy of their referral letter
did not improve attendance. Although such gamesmanship by patients is difficult
to manage, recent improvements to the Hospital Authoritys out-patient
appointment booking system in Hong Kong have now largely prevented the
multiple booking of specialist out-patient clinic appointments.
Understanding the interplay between the need, demand and provision of
services within the overall policy framework that governs the health care system
is the key to resolving these quality of care issues (Hedley, 1993) Patterns of care
and the assessment services for patients who attend ambulatory care services are
difficult to interpret, because they are a function of referral and discharge rates
and the retention of patients within the same clinic over many years. Although
the retention of patients may be related to the nature and severity of a patients
problems, it is also related to the actions of both patient and doctor and their
preferences for future care, which increases clinic congestion and waiting time.
Referral rates into the system are very low, and do not account for the lack of
available appointment times for new cases. The majority of the general and
specialist out-patient clinic workload derives from the follow up of current cases
and the apparent unwillingness of physicians to discharge patients down the
referral chain. Access to specialist care can only be improved if appointment space
is made available, waiting time decreased and doctor shopping among clinic
attenders resolved. Adopting the quality and productivity (six sigma) tools used
by industries may be key to the successful implementation of changes necessary
to improve the quality of out-patient care. Technology that supports advanced
planning, synchronisation, and collaboration between agencies is essential to the
successful integration of complex health service supply chains and the
management of referral systems.
The organisation and provision of health care has become increasingly
complex, as is reflected by the common problems of non-attendance, excessive
waiting time and doctor shopping. Future studies should continue to examine
the extent of non-attendance in settings outside the major industrialised nations,
and should study the unique characteristics that are associated with each local
care delivery system. As Sharp and Hamilton (2001) have stressed, local solutions
are needed to address local problems, which require the development of

managerial and organisational skills to ensure more effective care and service
provision. Researchers and managers should take heed and redouble their efforts
to evaluate the effectiveness of current system reforms on the reduction of waiting
time, doctor shopping and, ultimately, non-attendance.
CHAPTER
The Private-Public Interface

David Fang
David Fang, who is a former president of the Hong Kong Medical

Association and the Hong Kong Academy of Medicine, current medical
superintendent of the privately operated St Pauls Hospital and ex-chair
of the government Health and Medical Development Advisory
Committee, and whose career has straddled both the public and private
sectors, discusses cross-sectoral partnerships. The impetus for such
partnerships stems from the wide acknowledgement from all quarters
of the need to redress the progressively more serious market
imbalance that has occurred since the Hospital Authority was
established in 1993, which was exacerbated by a prolonged economic
crisis after 1997. He picks up the key issues that Janice Johnston puts
forward to resolve the perennial management conundrums of the
public out-patient system in the previous chapter, and goes on to discuss
how shared care across the two sectors can be realised, such as by the
redeployment through joint appointments of specialists who are welltrained but under-utilised due to budgetary limitations. This, Fang
argues, would have a positive outcome for both public and private
hospitals, as the former would be relieved of the shortage of posts and
the latter would be able to evolve more quickly towards a full-service,
team-based staff model rather than the current situation in which
private hospitals function mostly as facility providers for part-time solo
practitioners. However, whether proper regulatory oversight can be
effectively implemented to guard against perverse incentives and
protect the system from abuse remains to be evaluated.
Introduction
In Hong Kong there is a saying that public health service provision is separated
from the private sector by an impenetrable wall and never the twain shall meet.
We could be witnessing the historic dissolution of that Berlin Wall, which is
happening partly by design but mostly out of sheer necessity.
The historical background dates back to pre-Hospital Authority days (before

1990). Public hospitals were under-funded, severely overcrowded and mired in
bureaucratic civil service regulations. The WD Scott Report of 1986 proposed an
independent Hospital Authority that could flexibly utilise and generate resources
with all government and subvented hospitals under its overarching management
umbrella. From fiscal years 1991/92 to 2002/03, the recurrent subvention alone
of the Hospital Authority grew more than 7 times in nominal terms (from $4
billion to $29 billion) or about six times in real terms, factoring out the effect of
inflation. Income from all sources other than recurrent and capital government
subvention has remained at roughly 7% of total revenue (Figure 1). This was
hardly the model proposed where the consultants recommended a relatively
higher proportion of cost recovery for services including emergency room care,
initial admission workup surcharge, high-tech radiological investigations and
higher per diem hospitalisation charges, but certainly the most politically
expedient because in the final colonial years, government coffers were so swelled
with the receipts of sky-high land auction premiums. Ironically, many of these
fee increases are now only beginning to be implemented by the Hospital Authority
in an effort to salvage its own financial implosion.
It did not require a health accountant or economist to predict that the
formula would fail. Tragically, when the SAR awoke from the binge, both the
government and the legislature opted for procrastination, which best suited their
political agenda. By 1998, the Hospital Authority had gone from exceptionally
100%
As a share of total revenue
80%
60%
405
20%
0%
1991/92 1992/93 1993/94 1994/95 1995/96 1996/97 1997/98 1998/99 1999/00 2000/01 2001/02 2002/03 2003/04
Fiscal year
Government subvention
All other sources
Figure 1 Hospital Authority annual revenue stream stratified by

government subvention vs other sources
The Private-Public Interface 201
well-endowed to a first taste of belt tightening by so-called productivity

enhancement. Over-reliance on an exceptionally well-indulged, but financially
unsustainable Hospital Authority directly led to the severe attrition of private
medical services, particularly private hospitals, some of which were on the brink
of bankruptcy.
While praising Hong Kong for having achieved relatively equitable and costeffective health care and for improvements in quality and efficiency that had been
made under the auspices of the Hospital Authority, the 1999 Harvard Report
exposed, in a very public way, the Achilles heel of our health system, namely its
highly questionable financial sustainability, the segregation of services (both within
and between the private and public sectors) and the neglect of primary care and
community-based medicine generally. None of these were newly discovered
problems, and they had all been addressed by one committee or another,
including the Health and Medical Development Advisory Committee (HMDAC),
at least three years before. However, the government and the legislature had been
preoccupied, and procrastination had best suited their political agenda. The
Harvard consultancy was appointed to look closely at these known deficiencies,
but their main proposal involved the dissolution of Hospital Authority, which, after
all, had been so painstakingly nurtured by the still powerful and influential
personalities of high government at the time. Although the Harvard Report had
its own inherent weaknesses, it was accurate in pointing out that Hong Kongs
health care system is highly compartmentalised, threatening the organisational
sustainability, quality and efficiency of the system. This, like so many other reports
before and after it, died a painful death.
In late 2001, at the behest of the then Chief Executive Tung Chee-hwa, two
working groups were set up under the Secretary for Health and Welfare (and
now also Food) to propose and promote a private-public health care interface
strategy, with one group focusing on hospital services and the other on out-patient
ambulatory services. The terms of reference included identifying areas of
collaboration, facilitating the transfer of patients and medical records between
sectors and devising viable plans of implementation. After several meetings and
some consensus, a plan indeed emerged. Both working groups stressed the
importance of maintaining a robust private sector to ensure viable alternate
funding and freedom of choice. They decided that public funding should be
targeted at high financial risk (catastrophic illness), the financially needy,
preventive health, education and research. Primary medical care should be given
high priority, but should remain predominantly private, and options for elective
care in private hospitals should be enhanced. The Hospital Authority would play
a major role in shifting the equilibrium, and would set in motion a number of
initiatives.
The newly appointed Secretary for Health, Welfare and Food, York Chow,
believes that the Hospital Authority should have its role clearly and realistically
defined. He has time and again reiterated that it should target its resources at
four priority areas: accident and emergency care, low-income groups, treatment
involving high financial risk, and training. The Department of Healths focus will
of course continue to be on preventive health and health protection from both
communicable and chronic complex diseases.
These new role delineations and redefinitions, with the upswing of the
economic cycle, have seen the private sector grow back from severe attrition to a
state of temporary engorgement since 2003. Never before was it necessary to wait
for a bed in a private hospital, but that happened in 2005, although the wait was
very short. A parallel development on the human capital front concerns
manpower attrition in the public sector. For about ten years, the turnover of
Hospital Authority medical staff had been under 2.5%, but there is currently an
unprecedented exodus of highly trained and experienced personnel, particularly
specialist doctors, from the public to the private sector.
Such a reversal of fortunes occurred for a number of reasons, the most
important of which was a drastic curtailment of public health care spending on
the heels of the steep economic downturn from 1997 to 2003. The SAR woke up
from its self-perpetuated imaginary trance of overflowing coffers to the harsh
reality of unsustainable structural deficits. Without radical expansion in the tax
base either through marginal rate increases, broadening the tax net or new types
of taxation (e.g. a goods and services tax), the Financial Secretary had no
alternative but to slash public spending, including the Hospital Authority budget.
This reduction was implemented over and above a designated 5% productivity
enhancement from 1998 to 2002 (Figure 2).
25
Nominal annual growth (%)
20
15
10
5
0
5
10
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
Year
- - - - - - GDP
Govt subvention to HA
Figure 2 Nominal annual growth rates of Hong Kongs GDP and

government subvention to the Hospital Authority (HA)
2003
2004
Although the Hospital Authority is presently still able to employ all of the
new medical graduates of the two universities, their terms of service are a far cry
from the halcyon days of their predecessors. They must accept no salary increment
for two consecutive three-year contracts, but if they do not pass their basic
specialist training then they will lose their second contract. Even if they successfully
complete their full six-year training they could no longer expect a reasonable
chance of continued employment as a matter of course. Although consultant
doctors have left in droves, their posts have been largely reabsorbed in the general
budget pool for redeployment, leaving little incentive to stay for those who are
waiting in line for a promotion. As a result, staff morale in Hospital Authority
hospitals is at an all-time low. What we all dreaded in the past is actually
happening: we are witnessing the impending collapse of, at least the human
capital part of, the Hospital Authority.
The private-public interface has in fact been transformed from an organised
effort to revive the ailing private sector to a life-saving parachute for a grossly
under-funded public sector. The parallel with the National Health Service in the
UK, from which Hong Kongs system is derived and drew inspiration under the
colonial administration, rings loud and clear. In the UK, private sector
participation has turned from being a pariah or nemesis to a saviour for the
National Health Service in the last decade. More specifically, since the early 1990s,
a new private finance initiative has become the main way of building much needed
new hospitals, whereby private capital finances construction in exchange for a
30-year government contract to operate the facility. Also around the same time,
the British government realised that it needed capacity and incentives to shorten
waiting lists and the private sector could offer both, and thus the internal market
was born following Alain Enthovens theory of managed competition. In practice,
this manifested as a purchaser-provider split in terms of general practitioner fund
holding and later primary care trusts that commission services on behalf of their
patient roster. It is interesting to note that it has been mostly under Gordon Brown
and Tony Blair of the Labour Party, not the Tory queen of privitisation Margaret
Thatcher, that all of this has happened. Richard Smith, long-time editor of the
British Medical Journal and latterly the Chief Executive of UnitedHealthCare
Europe, declared that Britain deserves an NHS of values not institutions. He
argues that what needs to survive is not necessarily the NHS itself but, rather,
the values it embodies of universal coverage, being free at the point of access,
and providing care of equal quality to all.
These are the very values that are espoused by the Hong Kong government.
I hazard to predict that without the new private-public interface initiatives in place,
the Hospital Authority would very quickly either have to turn away patients (which
would mean rationing, although without any explicit consideration or guidance)
or revert back to the days of the old Medical and Health Department, when public
wards were so loaded with camp beds that essential care was severely
compromised.
There are many ways to look at and conceptualise a public-private interface.

From an economic perspective, the first consideration would be that it is an effort
to rebalance the supply-side equation by shifting the equilibrium point towards
the private sector. Second, proper and effective interfacing seeks to maximise the
health dollar by breaking down barriers that would otherwise hinder technical
efficiency on the societal level. A third point concerns service delivery, where a
seamless interface is necessary to ensure appropriate and responsive organisation
and continuity of care. Most recently, after the latest HMDAC consultation
document entitled Building a Healthy Tomorrow, public-private interface should be
seen as an integral part of a holistic comprehensive service delivery model that
may become the backbone of our future health care system.
The more important recent developments in the notion of a public-private
interface are discussed in the following paragraphs.
Enhancing Private Service Channels in Public Hospitals and Clinics

The current target waiting times for Hospital Authority specialist out-patient
appointments are 2 weeks for urgent cases, 8 weeks for semi-urgent cases and
beyond 8 weeks for non-urgent cases. Patients triaged as non-urgent cases are
encouraged to seek alternative private specialist care through a number of
channels. These include the proactive provision of private provider information
through a Health Care Logistics Support System in New Territories East cluster
hospitals (including the Prince of Wales, North District and Alice Ho Miu Ling
Nethersole Hospitals), and the Private Health Care Infodesk of the New Territories
West Cluster (represented by the large acute care Tuen Mun Hospital).
Fostering Better Affordability

Cost has always been a major concern for patients seeking private care. Since even
before the establishment of the Hospital Authority, public sector patients have
enjoyed a hefty discount on a variety of expensive diagnostic investigations or
procedures such as magnetic resonance imaging, radioisotopic scans and gamma
knife surgery when referred to private facilities. These discounts, however, have
barely touched the surface of a much larger, longstanding concern the lack of
transparency of private professional and hospital charges in Hong Kong, which
has traditionally attracted an enormous amount of rightful public criticism.
Over the last decade, attempts at salvaging the situation have come from
several quarters. In the latest edition of the Hong Kong Medical Councils
professional code and conduct in 2000, doctors who refuse to disclose their
professional fees before service, or who charge unreasonably high fees, are liable
to disciplinary action. The discrepancy in charges between general ward, semi-
private and private in-patients remains contentious. Although doctors can explain
the differential levels of personal attention required, hospitals still fail to account
for the surcharge in consumables in many cases.
To encourage alternative care seeking from the private sector, the Hospital
Authority has had to provide reliable information on the likely total cost of services
to patients before they have been willing to make the decision to switch from
the public system. Although few private hospitals have the cost accounting system
capacity to accurately and reliably quote all-inclusive prices for procedures and
services, all 12 private hospitals now offer standard surgical packages. Further price
lowering has also been achieved for more urgent interventions such as cystoscopic
surgery for patients with urinary retention.
Notwithstanding such progress, the volume of public to private hospital
referrals remains a trickle. Outward referrals from public hospitals to private
specialists for ambulatory consultations, however, have been more successful. In
June to August 2004, 217 patients at Hospital Authority eye clinics were offered
a choice of private ophthalmologists, and 84 of them sought private out-patient
care. During 2003 and 2004, over 20% of specialist out-patients who were offered
alternative private care at the New Territories East and West clusters accepted the
private option. Yet these well-intentioned efforts can only provide temporary
symptomatic relief for the Hospital Authoritys rapidly deteriorating budget deficit.
As long as the hospital subsidy continues at 97% of actual costs, these initiatives
can do little to restore the equilibrium.
Improving Quality Assurance

Quality has been another vexed issue in the public-private disequilibrium. The
Hospital Authoritys introduction of modern hospital management techniques in
the early 1990s rendered most private hospitals obsolescent in their own
management structure. Few had anything to compare with the Hospital
Authoritys vast administrative resources and openly accountable clinical
governance.
In 2000, the Private Hospitals Association engaged the UK Trent Hospital
Accreditation Board to conduct biennial surveys of its 12 member hospitals. The
first survey appeared lenient, with allowances made for local conditions.
However, several areas of deficiency were cited, such as a lack of coordinated
clinical audits, and inadequate documentation by visiting doctors who form the
majority of clinicians at these private facilities. Conditions for future accreditation
were laid down with strict time limits for improved results. Subsequent inspections
became much more rigorous, without any special allowances, and hospitals had
to struggle to achieve full accreditation.
One of the most difficult problems, private hospitals faced was poor
documentation and record keeping by visiting doctors. Efforts at improving their
clinical notes were initially futile, because they could easily switch their patients
to another hospital. Finally, all 12 private hospitals jointly issued a letter warning
that punitive action would be taken against repeat offenders for non-compliance
with standard hospital practice in charting. More recently, the Private Hospitals
Association has been working on a common code of practice to encompass a
whole range of quality assurance measures as a prerequisite for all doctors who
are applying for or renewing their admission privileges. In addition, Department
of Health officials have stepped up their annual inspection of private hospitals
and tightened up the licensing procedure. In 2003 they introduced a Code of
Practice for Private Hospitals, which has a comprehensive range of standards
including proper clinical governance, comparable to the requirements of Trent.
Interflow of Professionals
There are a number of obvious advantages in allowing the part-time employment
of private clinicians to provide public medical services. Seen another way, this
involves having public sector consultants look after private patients for part of
their time, which would then not have to be paid for out of the public purse.
Resources can be more efficiently deployed, and a broader spectrum of expertise
can be retained. Patients can more easily accept financial responsibility.
Professionals can remain with training institutions or academic health centres
where they both contribute to and receive continuous development. However,
the potential for abuse is considerable, which has led to stiff opposition from
conservatives within the medical establishment and beyond.
The UK has experimented with this type of initiative on a small scale in the
past and the new National Health Service consultant contract has again reignited
the controversy, with considerable noise on both sides of the debate. Some suggest
that consultants purposefully control the waiting lists to increase private practice,
while others retort that waiting lists are mainly a resource problem in a statefunded system. Still others question why it is a problem for doctors to operate
with a personal profit motive when other professionals, notably those from the
law and accounting sectors, are generally much more generously remunerated
than physicians. The fundamental question of whether consultants are
undervalued by the National Health Service monopoly or profiteering in private
practice remains to be resolved, but Hong Kong should carefully examine some
of the lessons learned lest the same mistakes are repeated as in the UK in this
otherwise worthwhile exercise.
With careful supervision, a structured but flexible scheme ranging from
minimal to maximal part-time employment of professionals should be able to
substantially ease present vacuums in manpower deployment. Pilot and some
established schemes are already in place. Private anaesthetists and other specialists
now provide public sessions in Our Lady of Maryknoll Hospital. Private general
practitioners are employed as visiting medical officers in residential care homes

for the elderly. Private pharmacists provide medication management to public
patients, enhancing the quality of medication advice. Private family physicians act
as trainers in Hospital Authority general out-patient and family medicine specialist
departments as well as their own clinics. Furthermore, public consultants,
supplementary medical professionals and hospital administrators are seconded
to private hospitals, on a sessional or contract basis, acting as trainers. These
initiatives have tremendous potential but need to be formalised and governed
with strict discipline to ensure quality of care and to prevent abuse.
Although in the last 15 years we have witnessed impressive milestones in the
development of hospital services in both the private and public sectors, tandem
progress in primary care has remained a laggard and proceeded at a pitifully slow
pace. Interfacing has become rather meaningless, or at least ineffective, when
discontinuity of care is so pervasive as a result. There has been consensus all along
that primary care should remain approximately 85% private and 15% public. In
the latest HMDAC consultation document the essential role of primary care is
fully acknowledged. Proper interfacing of primary, secondary and tertiary care
spanning all sectors will be the vital linchpin in the proposed reoriented health
care system. The family doctor will function as a gatekeeper and interact closely
with specialists in clinics and hospitals. As in the case of hospital services, similar
improvements in the quality and credentialing of primary care will no doubt have
to apply if the entire system is to achieve positive results and thrive.
Sharing of Patient Information

Proper health information sharing is vital not only to patient service, but as the
SARS pandemic clearly showed, can determine the ultimate survival of whole
populations. Although there were widely divergent opinions on interfacing the
apparently incompatible public and private sectors, all saw the controlled sharing
of information as an effective and practical solution.
Many web-based communication networks have been established in the past
decade linking private and public health care institutions. As a key interfacing
initiative, private doctors can, with their patients consent, request summary
clinical information from any HA hospital. The sharing of a common information
technology platform has been a long-time goal of all health care providers across
the sectors. To this end, the Hospital Authority recently offered to share part of
its advanced clinical information management system (CMS) with private
hospitals. Four pilot private hospitals have recently been selected to participate
in a trial usage of relevant CMS applications. If the pilot scheme succeeds, further
development of the CMS is assured with resource contributions from private
hospitals and practitioners. Whereas private hospitals are poised to invest heavily
in clinical information management, and the Hospital Authority lacks the
necessary resources to revitalise its now ageing CMS, this should prove a win-win
situation for all parties.
Finally, a Hong Kong-wide health care information infrastructure was
proposed in 2000. As directed by the then Secretary of Health, Welfare and Food,
EK Yeoh, a series of meetings involving all major stakeholders were convened.
No one doubted the importance of the proposed project for effective
communication and continuity of care across sectors and service levels. The social,
moral, legal, technical and financial implications were thoroughly discussed by
three separate committees. A budget of roughly $2 billion, spread over several
years, was worked out. Recurrent expenditure would be borne by the users. Every
citizen would hold a lifelong electronic health record, which could be accessed
and updated across all sectors with his or her permission, and due protection of
privacy. Such a health information infrastructure promises to unlock the
compartments described in the Harvard Report.
Although the project was shelved due to a lack of resources, the government
should now revive it as a top priority. Because of our intelligent universal identity
card, no city or country in the world is better placed for equipping its citizens
with this innovative health information system. Richard Granger, architect of the
similarly ambitious UK National Programme for Information Technology
Initiative, was recently quoted as likening information technology in 2005 to the
state of civil engineering in the mid-nineteenth century, where a common digital
platform in health care is comparable to the construction of sewers in Victorian
England. We would be wise to heed this compelling analogy because the
alternative of a non-existent or dysfunctional health informatics system will indeed
prove to be as dire as when sewers were clogged.
All of these initiatives will be futile if the public does not acquire the means
to look after its own health. A long-term solution that addresses the overall
financing of public and private health care must still be found to prevent the
wholesale deterioration of existing public services. Unfortunately, we are leaving
such vital policies in the hands of politicians and legislators who either do not
comprehend the health care crisis that Hong Kong is now facing, or who lack
the will to take concrete steps towards effective and sustainable solutions. For the
sake of patients and the public, we hope that the legacy of the current HMDAC
two-part consultation exercise will not meet the same ignominious fate as the
volumes of previous reports that preceded it.
CHAPTER
10
The Emergence of Managed Care

Nelson Wong
Nelson Wong, medical director of numerous successful corporate

group practices and contract medicine providers, shares his
extensive experience in managing private health care. The chapter
opens with a detailed description of the development of managed
care at the international and local levels, which complements Derek
Goulds historical account of the public policy perspective. Wong
proceeds to outline how and why managed care works, albeit with
the implicit assumption of optimised managed competition as
conceived by the father of the concept, Stanford health economist
Alain Enthoven. He is also quick to draw a line between managed
care proper and health maintenance organisations, which earned a
bad reputation in the United States in the 1990s for restricting
choice and compromising on care quality. He concludes by laying
out a set of recommendations, echoed in many of the other chapters,
for harnessing the power of competition in the private and public
sectors, directing value creation at the level of preventing,
diagnosing and treating diseases, and underpinning reform with a
pervasive informatics network.
What Is Managed Care?

Managed care is a complex and evolving system of financing health care that
originated in the United States. Managed care plans are prospectively priced on
headcount, and are delivered across different organisational settings and effected
through the modification of clinical practice using financial incentives, clinical
guidelines and systems management with the aim of achieving cost-effective and
consistent quality care. From the need to track, measure and promote quality was
born quality assurance for health care. Managed care can be a confusing and
difficult concept to grasp, and is often misunderstood even by health care workers
because of its ever changing nature, which is shaped by the health care industrys
historical responses to market forces. Managed care was the markets response
to uncoordinated, inconsistent and fragmented services that were offered in a
fee-for-service model, the cost of which was escalating out of control and which
consumed huge amounts of resources without necessarily delivering consistent
or favourable outcomes. The result of this response was prospectively priced health
plans based on the number of participants (capitation), with coordinated care
that emphasised primary care and preventive medicine within an efficient and
convenient integrated delivery system. The traditional fee-for-service model also
suffered from a lack of preventive services, the potential over-treatment of patients
and a lack of accountability in cost and service quality.
Historical Perspective
The origins of managed care can be traced to the United States in 1882, when
the North Pacific Railroad company contracted independent doctors and hospitals
to provide care for its staff. The second historical root was the emergence of the
group practice model in the 1950s. The pooling and sharing of resources and
the division of backroom administrative support from frontline clinical services
led to greater overall efficiency. The last element of modern managed care
crystallised in the 1940s, when group practices started to offer comprehensive
medical plans that were based on prospective pricing (prepayment) and fees that
were based on the number of enrolees (capitation). This model became
established in the United States and was cited in the Health Maintenance
Organization Act of 1973, which provided federal funding for the expansion of
health maintenance organisations.
The uncontrollable growth of medical care costs based on a fee-for-service
regime that was financed by traditional reimbursement insurance plans fuelled
the growth of prepaid capitated schemes, which could offer comparable care
prospectively for about a third less. It was not until the 1980s, however, that the
US Federal Government became committed to curbing rising health care costs
by encouraging the adoption of the prepaid capitated plans that were delivered
through the group practice model. From then on, modern managed care plans
began to take the format which is familiar today.
The medical establishment saw the emergence of managed care, with its
accompanying intermediaries between doctors and patients, as a threat to its
potential profits and professional autonomy. Prepaid group practice plans and
their related provisions were vigorously opposed by groups with vested interests.
At the same time, these plans were also resisted by many patients, who disliked
being confined to a fixed panel of doctors. The response to this customer
discontent was the development in the early 1990s of products that allowed some
out of panel flexibility, which were financed by higher premiums and co-payments.
The Emergence of Managed Care 211
Further enhancement in the form of preventive care to reduce future utilisation

led to the emergence of the health maintenance concept. The ability of the US
health care industry to adapt and innovate its products and services has ensured
its continued evolution, which has resulted in the wider general acceptance and
further growth of managed care.
This evolution in response to market forces, government regulation and the
rise of consumerism also meant that managed care was poorly understood by both
the public and many health care workers. Users of health care services have
changed from being patients to being consumers. In true US tradition, the
competition for consumers in an efficient market place, which empowers
consumers by giving them a freer flow of information about the quality of
providers and the flexibility to choose organisational setting and delivery
mechanism, has meant that innovative health care products and services have
further developed managed care into what it is today. Competition has also
introduced the market economy and business enterprise into what used to be
non-competitive services with asymmetrical flow of information between doctors
and patients.
How Does It Work?

Within the managed care framework, the purchaser exercises macro-level control
over cost by setting a global budget, which is followed by the purchase of a
managed care plan from a managed care organisation. This organisation then
executes the policy by an established management system to micromanage care
delivery right down to expenditure on certain expensive items to meet overriding
budgetary constraints.
Managed care works by influencing clinical practice through the modification
of the actions of health care professionals to reduce inappropriate treatment by
using a combination of processes to achieve cost-effective care. The practice of
clinicians can be modified in three ways: by developing a preferred providers
network with selection and de-selection processes, by offering financial incentives
to those who help to contain costs or avoid waste while maintaining quality and
by providing clinical guidelines.
Various other associated techniques are also deployed, such as reviewing and
assessing the profiling patterns of the services that are used by doctors through
the deployment of sophisticated management software. However, doctors are
extremely concerned about who conducts such reviews and who sets the criteria
for them, and about who is accountable should the guidelines later be proven
wrong.
Some remuneration may also be based on patient satisfaction, quality
measures, outcomes (such as complication rate and length of stay), total numbers
of patients enrolled, turnover of patients enrolled and productivity. Other
strategies to save costs include seeking a second opinion before surgery, the
requirement of prior authorisation for expensive items such as MRI scans and
the assignment of case coordinators or managers to monitor hospitalised patients.
Health care provision can become more consistent through the adoption of
standardised decision support guidelines. Clinical guidelines are often
administered by case coordinators or managers, who are often senior nurses with
experience in case management. The normal sequence of events requires preapproval with or without a second opinion for hospitalisation, expensive
investigations, or treatment above certain preset thresholds. The case manager
monitors all hospital stays with a view to reducing the length of stay to the
minimum. In a complex case, the case manager may even work together with the
doctor to devise a treatment plan that may involve the substitution of less
expensive alternative treatment.
Another important element of managed care is the use of primary care
doctors to manage demand or to act as gatekeepers to specialised services. In the
US and the UK, each patient usually registers with just one primary care doctor
or medical partnership, and more often than not the doctor is paid on a capitation
basis, which allows the managed care organisations to transfer the primary care
risk to the provider. In Hong Kong however, capitated schemes that are serviced
by individual doctors are paid on a fee-for-service basis by the managed care
organisation. This anomaly is historical, and has probably been caused by a lack
of confidence on the part of doctors in the similar, but now defunct, capitated
School Medical Service scheme and the habit of doctor shopping by Hong Kong
patients in general.
Why Does It Work?

It is not difficult to see why managed care processes work. The constant threat of
being removed from the network is sufficient incentive for doctors and other
providers not to waste resources by considering non-essential expensive
investigations or treatment when there are more cost-effective alternatives. A
centralised management is also unlikely to allow the duplication of a recently
preformed expensive investigation, which can often happen in an uncoordinated
fee-for-service setting. Incentives are offered to those who provide a quality service
without wasting resources. The potential for financial incentives to change clinical
practice is well documented. It is difficult to argue against the adoption of clinical
guidelines, which aim to deliver consistent care through the standardisation of
processes, and hopefully result in more predictable quality outcomes. These
guidelines should be evidence-based, and are usually written by in-house medical
directors or adopted from external medical consultants. These are all important
tools for the standardisation of care and the minimisation of waste.
Structures and Organisational Settings of Managed Care

Many different managed care structures have evolved over the years. Much of
managed care is conducted in two settings: either through health maintenance
organisations or preferred provider organisations. Health maintenance
organisations can be structured with all doctors as direct employees (staff model)
or with doctors who have organised themselves into a group that provides services
to the health maintenance organisation on an exclusive basis (group model). A
further evolution has seen the development of networks or independent physician
associations, which are popular in California. These associations often serve more
than one health maintenance organisation and are free to treat fee-for-service
patients. A variation on the health maintenance organisation plan is the addition
of a point of service option, which permits patients to use doctors and other
providers who are not part of the plan by paying a higher premium, co-payment,
or both.
Meanwhile, preferred provider organisations have sprung up to empanel
providers and to take over the administration and utilisation management for
health insurers, which in turn appoint preferred provider organisations as
intermediaries between the insurers and the networks of providers. The providers
within a preferred provider organisation agree to provide services to enrolees of
health plans for reduced fees in return for an implicit increase in patient load.
Whereas a health maintenance organisation assumes the financial risk of
providing care to enrolees based on prospectively priced prepayments, a preferred
provider organisation merely offers its services to insurers without assuming the
financial risk. Hence, it is logical that a further evolution has been the emergence
of provider sponsored organisations, which comprise doctors and other providers
who agree as a group to assume the financial risks and offer managed care plans
directly to purchasers of health care plans, such as employers.
It is relevant to note that the link between primary care and secondary care
can be achieved through vertical integration or virtual integration. With the
former, both primary care doctors and secondary care providers, such as specialists
and hospitals, belong to the same organisation. The organisation receives
capitated payment for patient care, bears all the financial risk and often provides
incentives for staff to reduce the use of resources (such as fewer admissions to
hospitals) by sharing profits with them, thus ensuring that their interests are
aligned with those of the organisation.
With virtual integration, a primary care organisation of physicians receives
capitated payment for patient care, and collectively bears the financial risk of that
care. It does not own secondary care facilities, but contracts with preferred
secondary care providers to provide integrated care, often through multi-year
contracts.
Effects and Implications of Managed Care

As with any fundamental system change, there will always be winners and losers.
Managed care sets out to cut costs while maintaining quality. Few expert observers
doubt that the first objective has been achieved. To this extent, funding agencies
or purchasers are the winners, together with the managed care organisations that
find a niche in the health care industry. Providers are the losers, because of the
implicit reduction of income per unit of work and the infringement of
professional freedom and dominance. For patients, the answer is less clear, but
it can only be a good thing if health gains and more consistent and accountable
care can be achieved at a lower overall cost, and if, in the process, patients are
liberated from the lack of accountability regarding cost and quality of the feefor-service system. At the same time, this shift empowers patients through the
associated rise of consumer power in a market that responds to competition.
Patients no longer have to accept that doctors know best when they are not always
in a position to judge, but can hear another viewpoint from the managed care
organisation which in effect acts as the patients advocate or can at least
rely on the clinical guidelines that are established by the managed care
organisation. Simply put, the major losers are the doctors and other health service
providers. Although some observers have until recently doubted the ability of
managed care to deliver quality care for less, an increasing number of research
papers are confirming that the quality of care under such a system is at least
maintained.
Some fundamentally important questions about managed care remain, such
as who should set the clinical guidelines and undertake the utilisation review of
doctors, who should assess the quality of the guidelines and who should be
accountable for bad outcomes that are caused by a doctor who strictly follows
the guidelines. What processes are in place to prevent the inappropriate
withholding of treatment just because it is expensive, and who will be accountable
when financial incentives to under-treat backfire? What is there to stop employers
purchasing managed care plans purely on the basis of price, as opposed to quality?
With rising consumerism in health care transactions, many doctors have also
lamented the erosion of the traditional doctor-patient relationship and the rise
of the scientific-bureaucratic practice model. If all of these issues can be
addressed satisfactorily, and disease management protocols lead to greater
consistency in care and, by extension, a healthier community, then that can only
be good for everyone, and the wider communitys need for affordable and quality
care will be one step closer to fulfilment.
Is Managed Care Transferable?

There is no doubt that some of the more durable features of managed care can
and will be adopted by different countries, because unmanaged health care is
inefficient and leads to the expensive waste of valuable community resources. For
example, Europeans have added a community dimension by emphasising
community health gain as the starting point for health care management, such
that managed care is seen as a process to maximise [the] health gain of a
community within limited resources by ensuring an appropriate range and level
of services are provided and by monitoring on a case by case basis to ensure
continuous improvement to meet national targets for health and individual health
needs (Fairfield et al., 1997). This viewpoint contrasts with the US model in that
it is inclusive and seeks to involve policy makers, funders, providers and patients
for the benefit of the whole community.
In the UK, the National Health Service is funded by prepayments that are
effected through National Insurance contributions. It has had a long tradition
of general practitioners (GPs) playing the role of gatekeepers to secondary care.
Secondary care is commonly provided by preferred providers, the selection of
which is traditionally based on a GPs professional affiliation or geographical
location, coupled with rationing based on the relative ability of patients to wait.
The medical professions general acceptance of evidence-based medicine and the
establishment of the National Institute for Health and Clinical Excellence (NICE)
in 1999, which is charged with the task of devising authoritative, robust and
reliable guidance on current best practice, form the foundation of managed care
with British characteristics.
In 2002, Feachem et al. published an influential article in the British Medical
Journal that drew comparisons between the National Health Service and Kaiser
Permanente of California, which is a typical US integrated managed care
organisation. Much controversy was generated in the ensuing debate, but expert
reviewers with a good working knowledge of both types of health delivery system
agreed with the articles basic conclusion that Kaiser offers superior performance
at about the same unit cost, after allowing for certain health coverage and
economic adjustments. The implication of this goes beyond any perceived chronic
underinvestment in the National Health Service to point to more fundamental
transatlantic differences in how care is organised. The authors cited four reasons
for Kaisers superior performance: integration throughout the delivery system, a
more efficient use of hospital beds, the benefit of a competitive market and a
better deployment of information technology. Other expert commentators have
attributed other possible factors as reasons, such as clinical governance, a topdown organisational structure, financial incentives, staff training, the way in which
staff are valued, type of leadership, quality of management, an emphasis on
preventive care and service culture. Another reviewer highlighted Kaisers
coordinated care, which is based on its enormous capacity to manage a
constructive patient journey from the out-patient arena to the hospital to specialty
services and back (Feachem et al., 2002).
Perhaps as a result of this and other articles that compared Kaiser Permanente
more favourably with the National Health Service, the UK government has openly
acknowledged that there are lessons to be learnt from Kaiser. Furthermore, a

number of recent initiatives, including cooperation with private health care
providers, the purchase of surgical procedures in continental Europe and the offer
of choice to patients, are the concrete results of this learning process.
The Hong Kong Perspective

With the rise of Hong Kong as an international centre of commerce and finance
in the second half of the twentieth century, there were periods of full employment
that led to a great deal of competition for quality employees. This competition
made the coverage of employer-sponsored medical schemes a factor that was
considered by jobseekers and job hoppers. The public primary care system of that
era, with its daily quota, poor record keeping and in-built time-wasting operational
characteristics, was an unsuitable substitute for private sector employees.
In the health care system as a whole, there was free movement of patients
both across the public and private divide, and often between the private primary
and public secondary sectors, which made continuity of care a challenge. From
that viewpoint, a more structured and integrated delivery mechanism with an
emphasis on prevention and an outcome-orientated system that is advocated by
managed care is just what the doctor ordered.
For much of the period in question, the public sector only catered for 15%
of primary care, and the private sector was generally fragmented and almost all
private doctors practised as solo practitioners. Two expatriate partnerships and a
sole proprietors practice have flourished during the last three decades. These
practices have set up multiple clinics to cater for the corporate contract medicine
market. In parallel with what happened in the United States, these practices, as
forerunners of managed care organisations, soon made attempts to offer
integrated services with some elements of secondary care, such as common
specialty consultations in internal medicine, paediatrics, obstetrics and
gynaecology. Nevertheless, it is important to note that the bulk of the schemes
offered by these Hong Kong groups even to this day remain the fee-for-service
type. Whereas the expatriate partnerships chose the staff model by employing their
own specialists, the entrepreneurial sole proprietors entered into contracts with
a variety of part-time specialists to provide the services across their network.
Unsurprisingly, the initial schemes were all the fee-for-service type, and some
of these contracts were signed on an exclusive basis. These two facts, coupled with
the advent of information technology and cheaper computers, meant that very
useful demographic and utilisation data could be collected within a few years. By
the 1970s, these forerunners were beginning to offer some prospectively priced
schemes that were based on capitation with varying degrees of coverage.
The most basic scheme covered GP consultation only, and was similar to that
which a traditional British GP offers and gets paid for by the National Health
Service, which is based on the number of patients that are registered with the
practice. As the number of additional billable items charged on a fee-for-service
basis continued to rise, more employers asked for an increasing range of items
to be covered by prepayment to get to a more comprehensive bottom-line figure
for budgetary purposes. In quick succession, group practices started to add shortterm medication, laboratory investigation, specialist consultation and finally longterm medication and specialised imaging to the overall coverage with the
corresponding increases in annual contract fees.
By the 1980s, more group practices had been set up in Hong Kong. The
impetus for this was a paradigm shift in how the contract medicine business was
structured, which meant that it was no longer necessary to have a lot of capital
to set up a multi-clinic network. This new concept was put into practice in 1982
with the formation of a medical cooperative. Initially, a management company
provided the administrative support, and 35 independent practices came under
the same banner to offer themselves as a group to serve eligible medical scheme
participants. Once the concept was proven, the group soon expanded to comprise
over 100 doctors through the further recruitment of both primary care doctors
and specialists. This pioneering group soon restructured into a large partnership
and ditched the management company in anticipation of adverse regulatory
changes that would target doctors who were working with management companies
that acted as intermediaries. As it turned out, the anticipated changes never came.
The lack of regulation also allowed some non-medical operators to enter the
market using the same formula to offer the same generic service and to compete
on price alone. It is worth noting that a fairly comprehensive Hong Kong-managed
care scheme sold at around 20% of the price of US schemes. No amount of
purchasing power parity or coverage adjustment could reduce this difference by
much. Hong Kong in the 1990s, with its buoyant economy, full employment and
high inflation, meant that an increasing number of employers were offering
medical schemes for their staff, and thus the contract medicine pie grew at a great
pace, which gave operators more room to manoeuvre.
During the 1980s, Hong Kong medical insurers were increasingly alarmed
by the encroachment on their business by group practices that offered prepaid
medical schemes, which were akin to insurers underwriting insurance policies in
return for premium payments. The insurers made an official complaint to the
authorities, accusing medical practices of transacting insurance business without
a medical insurance licence. However, it was to no avail, because the Attorney
General ruled that the doctors were merely providing a maintenance service, albeit
one that was priced prospectively, which was not dissimilar to the electrical
appliance maintenance services that were offered to consumers. The real grey
area was whether medical groups could offer integrated contracts that oblige the
provider to manage the hospitalisation portion. As far as is known, medical
practices generally avoided crossing that line and left the hospitalisation portion
to insurers, despite functioning as provider sponsored organisations.
This historic account of local private health care and its financing would be
incomplete without mentioning the role the local stock market has played in
providing capital and/or liquidity for local health care enterprises. This dimension
has also fascinated or perplexed many health care workers. In the late 1990s, a
number of health care providers were consolidated using a staff model, which in
turn evolved into a publicly listed corporate structure. The consolidation process
took it one step closer to offering almost totally integrated health care plans to
employers who require them. Shortly thereafter, another health care service
provider mainly based in residential housing estates but not directly selling many
employer sponsored health care schemes, was listed on Hong Kongs second
bourse. However, the difficulty facing those making the decision with respect to
accessing the capital markets as a source of financing is to balance the costs of
maintaining a listing, and the resulting regulatory burdens, against the benefits
of being a listed company. This is particularly true in Hong Kong where the
investing public is notoriously focused on the short-term results of a company as
opposed to long-term development, and the option of low-cost bank finance is
potentially a compelling alternative. For local health care investors, a persistent
problem remains the governments stubborn refusal to provide a clear coherent
plan with regard to the long-term role of private care in the Hong Kong health
care matrix such that would allow those who wish to risk capital in this sector to
make better medium-term judgments on capital allocation. This is regrettable
because a thriving private sector offers patients more choices and can also act as
an escape valve for the overstretched public sector. For listed companies, the
obligation to disclose regular financial statements gives too much advantage to
competitors. Furthermore, any declared large profit also potentially alienates
patients and corporate clients alike, thus inviting bargaining at contract renewals.
The full benefits of operating private health care enterprises both publicly listed
and privately funded ones in Hong Kong at true economy of scale have yet to
be realised.
Around the same time, overseas companies also established operations in
Hong Kong, either independently or as joint-venture partners of local companies
with varying degrees of success, which further underlines the competitive nature
of the environment.
Is the Hospital Authority or Any of the Private Group Practices a

Health Care Maintenance Organisation?
In many workshops and seminars, participants have called private group practices
health maintenance organisations, either deliberately or out of confusion about
the definition of the term, and others have asked whether the Hospital Authority
is a health maintenance organisation. The majority of medical schemes that are
provided by private groups are still of the fee-for-service type, and many groups
have little use for guidelines and lack any arrangement with secondary care
facilities. In short, there is no health maintenance organisation in the Hong Kong
private sector. By contrast, the Hospital Authority is a health maintenance
organisation insofar as it is financed out of a central budget for the whole
population that equates to a prospectively priced and capitated mode of funding,
and intensively deploys modern systems management and has a knowledge base
that is filled with treatment protocols and clinical guidelines with the stated
intention of providing quality care for all. The label has been even more apt since
the Hospital Authority took over the general out-patient clinics from the
Department of Health, thus offering more vertically integrated services.
The role of private medical groups in the future of Hong Kongs health care
system is uncertain due to the public-private imbalance that is caused by structural
inequities and the unfair competition of the public versus private sector. Public
hospitals, for example, only charge 2% of the costs of care, and it is unsurprising
that the Hospital Authority has 94% of the in-patient market. The citizens of Hong
Kong have no incentive to purchase proper hospitalisation insurance, although
many cash payment indemnities against hospitalisation are sold as riders to life
policies, which places a further unhealthy strain on the public system. The
Hospital Authority, with a workforce of 50,000, is relatively well funded from the
public purse to the tune of HK$30.6 billion, which comprises 20% of the total
projected government revenue of HK$150 billion for 20034, or about 2.5% of
Hong Kongs GDP. The principally tax-based mode of funding still means that
nobody is denied care due to a lack of means, compared with the US where 44
million people were uninsured in 2000.
Meanwhile, private medicine in Hong Kong continues to be very expensive
for consumers, and suffers from unpredictable charges, inconsistent quality and
relatively inadequate multidisciplinary team coverage (Hospital Authority
Convention 2002).
No responsible official in charge of a publicly funded health policy would
be in favour of health care that is unmanaged. A virtually free system that is not
rationed is unsustainable. Health policy experts are in favour of macro-level
budgetary caps to contain overall cost in a managed competition environment.
This is then combined with micro-level control of spending (while allowing some
degree of provider autonomy over care delivery founded on evidenced-based
clinical guidelines) and the promotion of individual responsibility for healthy
lifestyles with the ultimate goal of health gain for the whole community. Crucial
to all of this is the continuing existence of a viable private sector that is allowed
to thrive alongside the public system to provide choice and competition. The
current unfair competition and imbalance cannot continue for long without
risking the extinction of the private sector.
Conclusion
In 1998, when a managed care organisation entered the Hong Kong market it
drew fire from the local medical profession. This is understandable and fits with
the patterns of objection in other parts of the world where doctors are concerned
about reduced dominance, diminished income and the erosion of professional
autonomy that is brought about by managed care. At the same time, international
trends over the last three decades have seen the systematisation of medical
knowledge through methods that allow the standardised measurement of medical
work, such as related diagnosis groups and case-mix analyses. Such measurements
also allow for the payment of performance-related incentives, and inevitably lead
to management at the institutional level and state regulation, which culminates
in the substantial erosion of dominance and the diminished autonomy of doctors.
The mode of medical practice has also shifted from the traditional reflective
practice model, which is based on the doctors personal experience and is
implemented by individual motivation, to the scientific-bureaucratic model,
which is based on systematic study and is implemented by external or collective
processes (Harrison et al., 2002). However, if the positive aspects of managed care
can be adopted within a robust regulatory framework to achieve quality of care
in a cost-effective manner, then it can only be a good thing for the community
of Hong Kong, and cost-effective care means long-term financial sustainability.
Knowing what to do is one thing, but knowing how to implement all of the
necessary steps with the backing of the majority of the community is another
matter. It is all about execution, which will most probably happen through a
number of intermediate steps over a period that covers a full economic cycle.
Compared with the US, managed care is in its infancy in Hong Kong. However,
Hong Kong is an open and international city, and should never be too proud to
adopt the positive features of the systems or methodologies of other countries,
thereby shortening the time that is spent on the learning curve. Political inertia
is the greatest obstacle to the reform that is much needed to secure the longterm sustainability of the health system.
A discussion of managed care in isolation without due regard for the broader
framework of health system financing is futile. In this respect, Hong Kong has
much to learn from Singapore, where free market strategies are deployed that
allow private and subvented hospitals to flourish in parallel, and individual
responsibility is emphasised over the collective role of society to avoid the
promotion of a dependency culture or overuse. The overall financing of health
care in Singapore is based on compulsory tax-free savings to individual Medisave
accounts that are administered as an extension of the Central Provident Fund,
which thereby allows the programme to reduce administration costs (less than
2% compared with 5% for the UKs National Health Service). Taking into account
the predominant Confucian base of the two communities, the intra-family
transferability feature of the Medisave account is bound to find favour in Hong
Kong. Other elements of public health care finance in Singapore include copayments to encourage people to stay well, money that follows patients so that
they can opt for either public or private hospital care, optional Medishield plans
to cover chronic and catastrophic illnesses and a tax-based Medifund to cater for
those who fall through the cracks. Subsidisation is targeted such that non-essential
services, such as cosmetic surgery and fertility treatment, are covered. The
exhaustion of individual Medisave accounts is also taken care of subject to social
worker reports.
Hong Kong desperately needs to implement the following measures:
1. Integrate primary, secondary and tertiary care across both the private and
public sectors to deliver health care at the most cost-effective level for any
given disease condition.
2. Leverage resources in the private sector instead of ignoring them, with
market-enabling strategies to improve and consolidate private health care
providers to make it easier for the public sector to commission its services.
3. Introduce market competition, even within the public sector, such that
clusters compete among themselves at least for elective procedures within a
framework of targeted subsidies and money that follows patients.
4. Invite the respective Colleges of the Academy of Medicine to review clinical
guidelines from overseas institutions, such as the UKs NICE, with a view to
adopting or modifying them for Hong Kong (there is no need to reinvent
the wheel).
5. Reinvigorate public health and preventive medicine and redefine the
relationship between the Hospital Authority and the Department of Health.
6. Devise a sustainable strategy for elderly care and the management of chronic
diseases.
7. Implement a community-wide strategy for twenty-first century health
informatics that covers both the public and private sectors.
CHAPTER
11
Long-Term Care and Hospital Care for the Elderly

Chu Leung-Wing and Iris Chi
Chu Leung-Wing, Chief of Geriatric Medicine at Queen Mary Hospital,

and Iris Chi, a social work and gerontology professor at the University
of Hong Kong, and, most recently, at the University of Southern
California, give an insightful account of the long-term care needs and
directions for change that would be necessary to satisfy demand as a
result of the demographic transition that Paul Yip and colleagues
highlight in Chapter 4. Neither the Harvard Report nor the
governments 2001 consultation document examined the issues of longterm care closely. Chu and Chis chapter fills this gap. They identify
the root problem as being a fragmented care system which does not
take into account the patient-centred principle that is required by the
nature of long-term care. Drawing on a wide array of international
examples, they argue persuasively for an integrated long-term health
and social care policy that is coherent and engages with the acute care
sector, rather than considering each in isolation, as has been the case
previously. Ultimately, Chu and Chi come to the same conclusion as
other authors in this book that the financing of reform underpins the
success or failure of any long-term care strategy, and call on the
government to examine overseas experience such as Japans newly
consolidated long-term care insurance programme.
Introduction
The Elderly Population in Hong Kong
In 2004, 0.82 million people in Hong Kong were aged 65 years and over, which
represents 11.7% of the population. The proportion of elderly people in Hong
Kong is likely to increase to 24% in 2031, which will create enormous demand
for long-term care and health care services for the elderly. This demographic
change is related to a decrease in birth in Hong Kong (Census and Statistic

Department, 2002; Hospital Authority, 2003). The elderly dependency ratio will
increase from 382 in 2001 to 562 in 2031. The average life expectancy at birth in
Hong Kong in 2001 was 78.2 years for men and 84.1 years for women. Closely
related to the health care needs of the elderly is the life expectancy at and above
60 years old. In 2001, the average life expectancy at 60 was 21.4 years for men
and 26.0 years for women, and at 80 was 8.1 years for men and 10.6 years for
women (Census and Statistic Department, 2002). The increased life expectancy
results from an improvement in public health and nutrition, but is also related
to improved medical care for very elderly patients (Hospital Authority, 2003).
However, improved survival may not mean normal health without disability or
functional improvement. Elderly people have multiple chronic diseases, functional
impairments and need regular medical services (Chu et al., 1998; Woo et al.,
1997).
The Health and Long-Term Care System for the Elderly

All Hong Kong citizens are entitled to inexpensive health and social care services.
Moreover, for those who benefit from the Comprehensive Social Security
Allowance scheme, the service fees are waived a scenario that is very common
among frail elderly patients in hospitals. As a result of escalating health care costs
and an ageing population, the Hospital Authority now has an annual budget
deficit of $601 million per year (Hospital Authority, 2004).
The Social Welfare Department is responsible for the policy and funding of
social services. At present, social services for the elderly are categorised into
community support (non-residential) and residential care services (Hospital
Authority, 2004; www.info.gov.hk/swd/text_eng/ser_sec/ser_elder/index.html
accessed on 12 July 2004) (Table 1). In the past, long-term care services for the
elderly referred primarily to residential care services, which were largely provided
by non-government organisations. Over the past decade, the private old age home
industry has been developing rapidly, and private old age homes now form the
main service group for residential care homes for the elderly in Hong Kong. Meal
delivery and personal care services are the key non-residential homecare services
available to elderly people who live in their own homes. The great demand for
long-term residential care services has been a problem for many years, and the
problem is increasing. At present, institutional care is quite commonly utilised,
and approximately 8% of the Hong Kong elderly now reside in residential care
homes and hospital infirmaries (Hospital Authority, 2004; www.info.gov.hk/swd/
text_eng/ser_sec/ser_elder/index.html accessed on 12 July 2004.). The majority
of residential care homes in Hong Kong are low quality private old age homes,
and a minority are government subvented care and attention homes and selffinancing homes (Table 2).
Long-Term Care and Hospital Care for the Elderly 225

Table 1
Long-term Care for the Elderly in Hong Kong
Spectrum of Long-term Care Services for the Elderly
A. Community Support Services for the Elderly*
1. Family services**
2. Neighbourhood Elderly Centres
3. Social Centres for the Elderly
4. District Elderly Community Centres
5. Day Care Centres, which include general care for the demented elderly
6. Home Help Services
7. Enhanced Home Care Services
8. Support Team for the Elderly through a volunteer network
9. Carers Support Centre
B. Residential Care Services for the Elderly*
Residential Care Homes for the Elderly
1. Self-care Hostels for the Elderly
2. Homes for the Aged
3. Subvented Care and Attention Homes
4. Residential Care Homes for the Elderly Pilot Project on Continuum of Care
5. Private old age homes including Bought Place Scheme and Enhanced Bought Place
Scheme
6. Infirmary (under the Hospital Authority)
Notes: *Applicants are assessed by the MDS-HC (Standardised Care Assessment Mechanism
for Elderly Services); ** family services include Comprehensive Social Security Scheme,
Disability Allowance and Higher Disability Allowance.
Alternative health and long-term care service models for the elderly with
appropriate health financing policies are urgently needed. Effective solutions
should be explored and implemented in the near future to avoid catastrophic
incidents in both health and social care services for the elderly.
Hospital Care Services for the Elderly

Disease Burden of the Elderly in the Community
At present, the main killer diseases in the elderly population include cancer, heart
disease and pneumonia, and the main chronic diseases include arthritis,
hypertension and diabetes mellitus (Leung and Lo, 1997; Chu et al., 2004; Chiu
et al., 1998; Lau and Lok, 1997) (Table 3).

Table 2
Long-term Care for the Elderly: Institutional Care in Hong Kong
Residential Care Homes for the Elderly under the Social Welfare Department (1 to 5) and
the Hospital Authority (6)
Number of Elderly
1. Hostels for the Elderly
97
2. Homes for the Elderly (Homes for the Aged)
7,343
3. Subvented Care and Attention Homes
11,534
4. Self-financing homes
3,203
(16 in Hostels, 1,108 in Homes for the Elderly
and 1,945 in Care and Attention Homes)
5. Nursing Homes
1,884
6. Infirmary
2,100
7. Private old aged homes (approx.)
41,000
Total = 67,161(8.19% of the elderly population*)
* Note: 65+ elderly population = 0.82 million in 2004
Waiting time as at June 2004
1. Hostels for the elderly: 18 months. Total of 5 applicants waiting.
2. Homes for the aged: 23 months. Total of 1,671 applicants waiting
3. Subvented Care and Attention homes: 31 months. Total of 16,631 applicants waiting.
4. Enhanced Bought Place Scheme in private old age homes: 12 months. (Total number
of applicants waiting = same list as subvented care and attention homes)
5. Nursing Home: 40 months. Total of 5,265 applicants waiting.
6. Infirmary: 32 months. Total of 4,458 applicants waiting.
7. Private old aged homes. Total of 0 applicants waiting.
Grand total = 28,030 applicants waiting
Note: Numbers based on data from March to June 2004
Issues in Primary Health Care in the Elderly

Primary health care for the general population is largely provided by the private
sector, and the government is responsible for approximately 10% of this service
through general out-patient clinics. The proportion of private doctor consultation
for the elderly is less than that for the young, and approximately 70% of elderly
people consult general out-patient clinics for primary health care problems
(Census and Statistics Department, 2001). Most of the patients that attend these
clinics are either old or poor.
Primary care providers are mostly private doctors who manage episodic health
problems well, but are inexperienced in detecting and managing chronic geriatric
problems. For example, dementia is sometimes dismissed as normal ageing
phenomenon without appropriate investigation and treatment.

Table 3
Causes of Death and Common Chronic Diseases in the Elderly
Top killer diseases in the elderly in 2001 (Hospital Authority Statistical Report 20012002), (Hospital
Authority Statistical Report 20002001)
1. Cancer
2. Heart disease
3. Pneumonia
4. Cerebrovascular diseases (stroke)
5. Chronic lower respiratory disease
6. Kidney diseases (nephritis, nephrotic syndrome, etc.)
7. Diabetes mellitus
8. Injury and poisoning
Common chronic diseases (Leung and Lo, 1997), (Chu et al., 2004), (Chiu et al., 1998), (Lau
and Lok, 1997)
1. Arthritis (34.261.4%)
2. Hypertension (3233%)
3. Fracture (17.1%)
4. Peptic ulcers (13.515.4%)
5. Diabetes mellitus (10.712.4%)
6. Coronary heart disease (8.614.3%)
7. Hyperlipidaemia (7.4%)
8. Dementia (6.1%)
9. Hyperthyroidism (6.1%)
10. Chronic obstructive airway disease (6.08.2%)
11. Stroke (3.86.3%)
12. Asthma (3.0%)
Health promotion to improve lifestyle (e.g., stopping smoking, maintaining

a healthy diet and exercising), disease prevention (e.g., fall prevention and
influenza vaccination for the elderly) and the early identification and control of
chronic diseases are important. These measures would improve the health of the
whole population and decrease geriatric health and long-term care needs in the
years to come. The Elderly Health Service of the Department of Health provides
health promotion programmes for members of its Elderly Health centres.
However, no data regarding improvement in the health status of the elderly as a
result of these programmes have been reported. Moreover, elderly citizens who
are not members of these centres do not have access to the programmes.
Present Organisation of Hospital Care for the Elderly

Hospital care for the elderly is a continuum, with cyclic fluctuations from acute
to sub-acute conditions and rehabilitation, pre-discharge planning and post-
discharge care. The latter should bridge seamlessly with community health and
long-term care services.
The main objectives of hospital medical care for the elderly are diagnostic
assessment, the treatment of moderate or severe illness and the subsequent
rehabilitation to pre-morbid health and functional status. Independent or
supported quality living in the community after discharge is the goal.
Over 90% of the hospital care and specialist medical care for the elderly is
provided by the Hospital Authority (Chu et al., 1998). Nearly all frail elderly
people who live in old age homes go to Hospital Authority hospitals if they need
hospital care (Leung et al., 2000; Luk et al., 2002). It is important to realise that
elderly patients consume a large proportion of the Hospital Authoritys in-patient
services. Although elderly people aged 65 years and above only comprised 11.4%
of the Hong Kong population in 2002, they consumed 52.1% of the Hospital
Authoritys in-patient services (n = 11,021 on 31 March 2002). This proportion
has progressively increased, and is much higher than the corresponding figures
of 46.8% in September 2000 and 49.9% on 31 March 2001. This is a result of the
ageing population and the very low fees for public in-patient and specialist outpatient services compared to similar services in private hospitals. The majority of
residents in private old aged homes benefit from the Comprehensive Social
Security Allowance Scheme (Health and Welfare Bureau, 1997). In the past, there
was a tendency by residents of residential care homes to over-use in-patient
services, but this has improved since the provision of outreach geriatric services
through the Community Geriatrics Assessment Team service (Luk et al., 2002).
In Hong Kong, hospital care for the elderly is functionally divided into acute
hospital, sub-acute hospital (convalescent and rehabilitation) and long-stay
hospital (infirmary) care services (Figure 1). In 2004, there were seven hospital
clusters in Hong Kong. Every hospital cluster has one or more accident and
emergency department in the acute hospitals. Some hospitals have both acute
Levels of Hospital Care

Acute Hospital Care
Transitional care*
Subacute Hospital Care
(Extended Care or Intermediate Care)
Transitional care*
Long-stay Hospital Care
(Infirmary Care)
*Bridging community health and long-term care services
Figure 1 Hospital care for the elderly
care and convalescent and rehabilitation wards. However, in most acute hospitals,
the convalescent and rehabilitation wards for elderly patients are located in the
extended care hospitals in the same cluster. Elderly patients are often transferred
to these facilities for step-down convalescence, rehabilitation and discharge
planning (Table 4).
Table 4
Acute and Extended (Sub-acute/Rehabilitation) Care Hospitals in Hong Kong
Cluster
Acute care
Extended care
Long-stay infirmary
Hong Kong West Queen Mary Hospital Fung Yiu King Hospital Fung Yiu King Hospital
Tung Wah Hospital
Tung Wah Hospital
Grantham Hospital
(Respiratory infirmary)
Hong Kong East
Ruttonjee & Tang

Siu Kin Hospital
Pamela Youde
Nethersole Eastern
Hospital
Tung Wah East Hospital

Wong Chuk Hang
Hospital
St. John Hospital
Cheshire Home,
Chung Hom Kok
Ruttonjee & Tang Siu

Kin Hospital
Tung Wah East
Hospital
Wong Chuk Hang
Hospital
St. John Hospital
Cheshire Home,
Chung Hom Kok
Kowloon East
United Christian
Hospital
Tseung Kwan O
Hospital
Haven of Hope
Hospital
Haven of Hope
Hospital
Kowloon West
Princess Margaret
Our Lady of Maryknoll
Hospital
Hospital
Caritas Medical Centre Wong Tai Sin Hospital
Kwong Wah Hospital Yan Chai Hospital
Yan Chai Hospital
Kowloon Central Queen Elizabeth

Hospital
Kowloon Hospital
Hong Kong Buddhist
Hospital
Princess Margaret
Hospital
Caritas Medical Centre
Our Lady of Maryknoll
Hospital
Wong Tai Sin Hospital
Yan Chai Hospital
Kowloon Hospital
New Territories
East
Prince of Wales
Shatin Hospital
Hospital
Tai Po Hospital
Alice Ho Miu Ling
Nethersole Hospital
North District Hospital
Shatin Hospital
Tai Po Hospital
Cheshire Home, Shatin
New Territories
West
Tuen Mun Hospital
Pok Oi Hospital
Pok Oi Hospital
The majority of elderly patients with acute conditions are admitted after
consultations at accident and emergency departments. The diagnostic procedures
that are followed include history taking, physical examination, laboratory
investigations, radiological procedures, urgent treatment and acute and sub-acute
management. For subsequent rehabilitation, discharge problems and long-term
management, elderly patients are often transferred to sub-acute geriatric or
rehabilitation wards in the same hospital, or to extended care hospitals within
the same cluster (Table 4).
Drawbacks of the Present Organisation of Care for the Elderly

The current acute hospital care model is primarily organ and discipline-based.
The service model is principally organised by specialty and sub-specialty, and is
department-based. Cross-specialty and allied health services are provided on a
consultation or referral basis, and laboratory and radiology support services are
arranged according to the judgments of the primary clinical team. This type of
service model, which originated in the historical clinical service model for
handling acute infective outbreaks at the turn of the century, is appropriate for
acute infective illnesses or acute diseases without chronic disability. The hospital
ward environment (the hospital bed and the layout of the accessory facilities) is
also primarily designed for professional care purposes, and not from the
perspective of the frail elderly patient. For example, bedside rails are usually
pulled up to prevent falls, but unfortunately falling from the bed when climbing
over the bed rails actually increases the chance of serious injury.
The presence of multiple pathologies in elderly patients means that the
traditional approach to diagnosis and management, which aims to make a single
diagnosis in the young patient, is frequently inappropriate. Approximately 70%
to 80% of the elderly have more than one diagnosis (Chu et al., 1998; Woo et al.,
1997; Leung and Lo, 1997; Chu et al., 2004; Census and Statistics Department,
2002; Chu et al., 2003). Most patients have multiple diseases, which may or may
not have been diagnosed previously (Chu et al., 1998). In acute hospitals, the
early diagnosis of both acute conditions and pre-morbid multiple diseases would
pave the way for a holistic management plan. The prompt medical or surgical
management of the acute disease together with comprehensive geriatric
assessment and subsequent rehabilitation to independent living is the ultimate
measure of success in the hospital management of elderly patients. In most acute
hospitals, the primary emphasis is to treat the acute episode and achieve a quick
discharge to vacate beds on a daily basis for the next batch of acutely ill patients.
Avoidable disability may be overlooked and will not be managed appropriately
or promptly. Moreover, the patient unfriendly acute hospital environment has a
negative effect on functional ability outcomes in frail elderly patients after
hospitalisation. In addition, psycho-social issues, such as financial difficulty,
inadequate carers and elder abuse, are often overlooked.
Acute illnesses are commonly associated with de-conditioning during

hospitalisation. Rehabilitation is needed in at least 50% of elderly patients after
an acute illness, and this is often neglected by general physicians and surgical
colleagues, who usually do not have the appropriate training in geriatric medicine.
Chronic diseases, including stroke, Parkinsonism, chronic obstructive airway
diseases, hip fracture and osteoarthritis, may lead to chronic disability and the
need for long-term care support. The neglect of rehabilitation thus increases the
proportion and severity of disability after acute and chronic illnesses.
The characteristics of frail elderly patients include the presence of multiple
medical problems, multiple medications and acute and sub-acute medical
problems, on top of chronic medical diseases. They are prone to suffering from
adverse effects after drug treatment or surgical procedures and de-conditioning
after bed rest, and experience a significant decline in function. They commonly
have falls, fall-related injuries, hospitalisation-related complications, delirium,
dementia and depression. Overall, they have a higher mortality and morbidity
after hospitalisation than young patients. Social needs are prevalent in elderly
patients, and in caregivers. Long-term care needs in the form of home care or
institutional care are common.
In summary, elderly patients have multiple needs, which include aspects of
social, psychological, physical health and functional status. Dysfunctional
syndromes often occur after acute illness and hospitalisation in the frail elderly
(Figure 2). These needs are inter-related and often intertwined. Health and
Conceptual Model of Functional Decline
Functional Older Patient
Acute Illness,
Possible Impariment
Hospitalization
Depressed Mood
Negative Expectations
Hostile Environment Starvation

Depersonalization
Medicine
Bedrest
Procedures
Physical Impairment
Dysfunctional elderly patient
Figure 2 The dysfunctional syndromes of frail elderly patients in the general ward setting
functional, psychological and socio-economic status are important considerations

in the care of elderly people, and as geriatric patients are typically frail, a
multidimensional and multidisciplinary approach is the cornerstone of the success
of any geriatric service programme (Chu, 1998; Rubenstein and Rubenstein, 1992;
Chu and Lam, 1997; Chow and Chi, 1997; Fox and Puxty, 1993; Stuck et al., 1993).
Figure 3 summarises the key domains of the assessment and management of
elderly patients, and Figure 4 describes the core members and supporting
members of multi-disciplinary geriatric teams (Figures 3 and 4).
Physical health and diseases
The frail
geriatric patient
Functional status
Psychosocial health statue
Socioeconomic and
environmental status
Figure 3 Multidimensional geriatric assessment of the elderly patient
Core members
Supporting members
Geriatrician
Nurse
Social worker
Occupational therapist
Physiotherapist
Psychogeriatrician
Dietician
Podiatrist
Speech therapist
Prosthetic and orthotic specialist
Clinical psychologist
By consultation
Volunteer
Pastoral care
Other speciaties or subspecialties
Core members
Nurse
Geriatrician
Social workers
Elderly patient
Occupatinal therapist
Physiotheraphist
Figure 4 A multidisciplinary geriatric team
Role of Geriatric Medicine in Acute Hospital Care for the Elderly

Geriatric medicine can effectively handle the complex diagnostic, investigative
and management issues of frail elderly patients. An interdisciplinary approach
with a close-knit geriatric team is an approach that has been proven effective in
the management of frail geriatric patients, and leads to improved outcomes, such
as the ability to carry out the activities of daily living, and health care service
utilisation, such as decreased hospital readmission.
History of the Development of Geriatric Medicine in Hong Kong

Geriatric medicine has been defined as the branch of general medicine that deals
with the clinical, rehabilitative, psychosocial and preventive aspects of illness in
elderly people. The term geriatrics was coined by the US physician Dr Nascher
in 1907. However, the pioneer of geriatric medicine was Dr Marjory Warren of
the UK. Based on the British model, Hong Kong established its first geriatric unit
in 1975, but the development of geriatric medicine was slow in the first ten years.
However, in recent years, the importance of geriatric services for the elderly
community has been gradually recognised. At present, there is at least one
geriatric service per hospital cluster (Tables 5 and 6). In 2004, there were seven
hospital clusters (Table 4) and it had been proposed that five mega-clusters be
formed.
Inadequate Acute Geriatric Care in Acute Hospitals

Most elderly patients are admitted through accident and emergency departments
into the various adult departments (medicine and geriatrics, surgery, orthopaedics,
ophthalmology and neurosurgery). The in-patient statistical data from 2001 and
2002 shows that most elderly hospital admissions were related to medical
conditions. Elderly patients are either admitted into the general medical wards
or to geriatric wards. The latter have shrunk tremendously with the integration
of geriatric medicine and internal medicine in 199394 (Table 5). At present,
only three hospitals retain functional acute geriatric wards (Tuen Mun Hospital,
the United Christian Hospital and Ruttonjee Hospital).
Unfortunately, the present arrangement of admitting frail elderly patients into
the general ward setting is detrimental to the quality of care, the clinical outcome
and the health care cost.
Undoubtedly, elderly patients with acute medical problems that resolve
themselves completely without much physical, cognitive and functional
impairment can be treated and managed satisfactorily in the general medical ward
setting. However, less than 50% of elderly patients belong to this category. The

Table 5
Geriatric Service in the Hospital Authority by Hospital Cluster
Year
Cluster
Hospital
1994
Hong Kong West
1994
2002
2004
1990
Hong Kong East
1995
1996
1995
1995
1996
1974
Kowloon East
Unit/Ward/Team
Acute Geriatric
Ward in
Acute Hospital
Queen Mary Hospital
Geriatric Team
Nil after SARS

in 2003
Fung Yiu King

Hospital
Tung Wah Hospital
Grantham Hospital
(Integrated)
Ruttonjee & Tang

Siu Kin Hospital
Pamela Youde
Nethersole Eastern
Hospital
Tung Wah East
Hospital
Wong Chuk Hang
Hospital
St. John Hospital
Cheshire Home,
Chung Hom Kok
1978
United Christian
Hospital
Tseung Kwan O
Hospital
Haven of Hope
Hospital
Princess Margaret
Hospital
Caritas Medical Centre
1982
1994
Kwong Wah Hospital

Yan Chai Hospital
1995
Our Lady of
Maryknoll Hospital
Wong Tai Sin Hospital
2000
1991
1975
1995
Kowloon West
Geriatric Department
Geriatric Team
(Integrated)
Geriatric Team
(Integrated)
Geriatric Team
(Integrated)
Geriatric Team
(Integrated)
Geriatric Ward
Yes
Geriatric Team
(Integrated)
Geriatric and
Rehabilitation Unit
First formal Geriatric
Department
Nil
NA
Nil after
integration
Nil after
integration
Geriatric Unit
Geriatric Team
(Integrated)
Geriatric Team
(Integrated)
Geriatric Team
(Integrated)

(Table 5 continued)
Year
Cluster
1993
Kowloon Central
1995
2003
Hospital
Queen Elizabeth
Hospital
Kowloon Hospital
1998
Hong Kong Buddhist

Hospital
New Territories East Prince of Wales
Hospital
Shatin Hospital
Alice Ho Miu Ling
Nethersole Hospital
Tai Po Hospital
1990
New Territories West Tuen Mun Hospital
1985
2001
1997
Unit/Ward/Team
Acute Geriatric
Ward in
Acute Hospital
Geriatric Team
(Integrated)
Geriatric and
Rehabilitation Unit
Geriatric Team
(Integrated)
Geriatric Team
(Integrated)
Geriatric Unit
Geriatric Team
(Integrated)
Geriatric Department Yes
majority of elderly patients have acute medical illnesses on top of their existing
chronic medical diseases and physical and cognitive impairments. These frail
elderly patients have multiple diseases, physical and cognitive impairment in
addition to possible social problems. They need the expertise of a multidisciplinary
geriatric team to treat, rehabilitate and provide the necessary psycho-social
intervention. The general medical ward setting can only treat the acute episode
of illness, and does not have the system in place or the staff expertise to
simultaneously manage physical and cognitive impairment and social problems.
The problem of quick discharge and frequent unplanned readmission (Chu and
Pei, 1999; Chu and Pei, 1999; Kwok et al., 1999) has led to the well-known
revolving door phenomenon (Figure 5). The prevention of these unplanned
readmissions is possible in up to 50% of cases (Chu and Pei, 1999).
As the present computerised system in the Hospital Authority captures patient
activity (such as number of admissions, occupancy and length of stay per episode),
many frail elderly patients who have been going through a rapid turnover in acute
care wards will be shown on the system as having had multiple episodes with short
lengths of stay per admission. They are readmitted again because medical
problems that are unresolved because of the overemphasis on short hospital stays
and because of complications such as pressure sores that have been acquired
during previous admissions (Stuck et al., 1993; Chu and Pei, 1999; Chu and Pei,
1999). Eventually, both the frail elderly patients and the health care system suffer.

Table 6
Geriatric Services in the Hong Kong West Hospital Cluster
Acute hospital care
Convalescent care
Geriatric rehabilitation beds
Long-stay infirmary beds for

geriatric patients
Pre-discharge programme
and post-discharge support
Geriatric Day Hospital as day
rehabilitation centre
Geriatric Specialist Clinics
Hong Kong West

Community Geriatric
Assessment Team
Queen Mary Hospital (Integrated Model)

Grantham Hospital (Direct accident and emergency
transfer)
Fung Yiu King Hospital
Tung Wah Hospital
Grantham Hospital
Tung Wah Hospital
Grantham Hospital
Tung Wah Hospital
Queen Mary Hospital, Tung Wah Hospital, Fung Yiu
King Hospital, Grantham Hospital
Tung Wah Hospital
Queen Mary Hospital Geriatric Specialist Outpatient
Department
Queen Mary Hospital Memory Clinic
Queen Mary Hospital Falls Clinic
Queen Mary Hospital Nutrition Clinic
Fung Yiu King Hospital Continence Clinic
Outreach Geriatric Doctor Clinics in over 60 old age
homes (subvented care and attention homes, private
old age homes and day care centres)
Visiting Medical Officer under the Community Geriatric
Assessment Team Visiting Medical Officer programme
Central Infirmary Waiting List clients pre-admission
assessment
Domiciliary visits medical, nursing, physiotherapy and
occupational therapy
Educational and training programme for caregivers and
the elderly in the community
Health education programmes with community partners
It would be a better approach to admit and manage frail elderly patients (e.g.
elderly patients who are admitted from old age homes, elderly patients with
significant physical impairment or dementia and socially frail elderly) in specially
designed settings with multidisciplinary teams of health care professionals who
can provide the necessary care and prevent unwanted iatrogenic events (Palmer
et al., 1994). Pre-discharge planning, post-discharge support and community
health care should be developed to provide prompt and efficient bridging
support. In the present health care system, the initial few weeks after hospital
Journey of an Elderly Patient
Admission to an
acute hospital
Acute medical ward

Geriatric beds
Subacute Hospital
Rehabitation
Discharge
Home
Old age home
Private old age home

Revolving door
Subvented care and
attention home
Figure 5 An elderly patient in the Hong Kong hospital care system
discharge is a vulnerable period for the frail elderly, during which they are prone
to a decline in health and functional status, and are often readmitted to hospital
because of inadequate support after discharge.
Lack of a Systematic Approach to Acute Geriatric Care

The fundamental problem in the present organisation of hospital care for the
elderly is the lack of a systematic approach to acute care. Although
multidisciplinary and multidimensional geriatric assessment is frequently practiced
in extended care hospitals, there is a general lack of acute geriatric services in
most acute hospitals in Hong Kong. At present, only two out of the twelve acute
hospitals in Hong Kong have designated acute geriatric wards.
The number of elderly in acute hospitals is huge. To be cost-effective, acute
care for the elderly has to be focused, and to attain a cost-effective health care
model the targeting of frail elderly patients in acute geriatrics care programmes
is necessary. Geriatric patients are physically, cognitively and psycho-socially frail.
The settings for geriatric assessment should be located at sites where the frail
elderly are present such as medical, surgical, and orthopaedic and emergency
room settings. Geriatric assessment and intervention should start at the same time
as the treatment of medical diseases to prevent functional decline.
The core elements of acute care for the elderly programme can be
summarised as follows (Palmer et al., 1994). Target patients should be the frail
elderly at accident and emergency departments and medical, orthopaedic,
neurosurgical and surgical wards, with particular attention given to elderly people
who are residents of old age homes. Comprehensive geriatric assessment should
be undertaken, with a multidisciplinary team round or case conference.
Intervention in the form of a prehab programme should be used to prevent
functional decline in an appropriately designed ward environment. A rehab
programme should be used to reverse functional decline and improve the ability
to perform the activities of daily living. Finally, there should be comprehensive
discharge planning with early pre-discharge planning and post-discharge support
and appropriate placement. A case management approach is effective, and should
be employed. In this manner, clinical outcomes will be optimised and unnecessary
hospital admissions prevented.
Inadequate rehabilitation after acute illness in the frail elderly is also a
problem, and the waiting time for geriatric day hospital rehabilitation is long.
Inadequate transportation to geriatric day hospitals is another obstacle to the
provision of adequate day rehabilitation for the frail elderly, who because of
moderate disability usually require transportation support, such as non-emergency
ambulance transport, from home to the hospital.
Geriatric Health Care at Residential Care Homes for the Elderly

Elderly people who live at home or alone constitute 12.4% of the elderly
population aged 65 and above (11.2% of elderly men and 13.6% of elderly
women) (Luk et al., 2002). Although community and primary health care is largely
provided by private family doctors and general out-patient clinic doctors, specialist
geriatric services at old age homes are provided mainly by community geriatric
assessment teams and partly by community health nurses. A new programme of
visiting medical officers began in October 2003 to improve infection control and
provide ad hoc primary or geriatric medical care for frail elderly residents of old
age homes. Since that time, 78 visiting medical officers have been appointed as
part-time Hospital Authority staff to upgrade the previously inadequate primary
and geriatric care in 178 old age homes throughout Hong Kong.
Service Gaps and Duplication Issues in the Health Care and Long-Term Care of the
Elderly
Multiple and continuing gaps in traditional care models (Figure 6) may lead to
elderly patients falling through the cracks (Coleman, 2003). The fragmentation
of care leads to the frustration of elderly patients and caregivers, and causes
potential harm to patients. Examples of this fragmentation include the
prescription of multiple repeat or similar drugs by multiple doctors or of being
given no drugs at all while waiting for a new case appointment. The latter is a
common transitional care problem for the elderly in Hong Kong.
In the community, a single frail elderly person commonly receives multiple
health care services, such as those of a private family doctor, visiting medical
officer, orthopaedic doctor, ophthalmologist, cardiologist or endocrinologist, and
multiple social services, such as being a member of several multi-service or social
centres for the elderly and receiving home help services. Current problems
include the fragmentation of care, service gaps, the overlapping of services and
poor communication and coordination. An integrated geriatric health and longterm care team across both the health and social sectors would be able to
Social
Hospital Authority
Clinical Care
General
Outpatient
Clinic
Acute
Hospital
Residential Care Service

Hostel, Home, Care and
Attention Home,
Nursing Home
Day
Hospital
Subacute
Hospital
Infirmary
Hospital
*
Elderly Health
Centre,
Department of
Health
Private Doctor,
Visiting
Medical
Officer
Home Help Services,

Enhanced Home Care
Services, Integrated
Home Care Services
Community Support Services,

Neighbourhood Elderly Centres,
Social Centres (for the Elderly),
District Elderly Community Centres,
Multi-Service Centres for the elderly
Specialist
Outpatient
Clinic
Carers Social
Centres
Private Old Age

Homes
* Bought-place scheme
Figure 6 Present organization of health and long-term care for the elderly in Hong Kong
substantially overcome these undesirable issues. Unfortunately, however, the

current financing and public policies do not facilitate this development. Moreover,
public health and social policies still lead to unhealthy competition for clients
and create major gaps in services for the elderly. At present, separate service
providers come under different budgetary areas in the Department of Healths
Elderly Health Service, the Hospital Authority, the Social Welfare Department and
non-governmental organisations.
Most elderly people use public health and social long-term care services. Only
a small proportion of the elderly population seeks services from private hospitals,
clinics and social services. In general, the objectives and policies of the different
service organisations differ, and policies on service direction may also be different.
In terms of collaboration between different elderly service providers, a model of
service purchasing between organisations is in operation, but it is limited in its
ability to bridge gaps or eliminate overlaps. For example, frontline staff have
difficulty working together as integrated teams, despite the overlap of services.
Loose collaboration is the current practice, but this is far from ideal.
There has been slow development in the interface between the public and
private health sectors. Communications have been improved, and private doctors
can obtain a discharge summary of their own patients from Hospital Authority if
they have pre-registered. The recent public-private collaboration with visiting
medical officers in the Caritas Evergreen Home is one of the successful pilot
projects that have been implemented by one of the authors at the Hong Kong
West Hospital Cluster (Chu et al., 2004).
The present organisation of health care for the elderly indirectly gives rise
to the overuse of hospital care services over community care services. A cost
containment trend has shifted care away from acute to sub-acute care, which
shortens the length of hospital stay in acute hospitals per episode of admission.
However, this is a mere consequence of concentrating only on the activity figures,
and there is no cost incentive to decrease unnecessary hospital readmissions.
Moreover, there has been an overemphasis on specialty-led and organ-based
disciplines, which are all very costly.
The main financial issue in the health care system for the elderly is inadequate
financial resources for public health care. Most of the elderly are poor and would
obviously choose to use the public health care services rather than private sector
services. The financial condition of the current generation of the elderly and the
next generation is neither good nor optimistic.
Financial Disposition of the Current and Next Generation of Elderly People

In 2000, the Hong Kong government conducted a survey on the current
generation of elderly people (aged 60 and above) and the next generation (aged
45 to 59) to obtain a better understanding of their financial situations (Census
and Statistics Department, 2002). Altogether 2,180 respondents aged 60 or above

and 1,867 aged 45 to 59 were surveyed. The survey results showed that the income
of the current elderly generation is still mainly provided by the family, with 58%
of older people receiving a family contribution of an average amount of US$800
a month. However, the importance of the role of the family seems to have been
diminishing, as a survey that was conducted in 1996 showed that 71% of older
persons received financial support from family members. Only a small percentage
of elderly people had a formal source of income such as a salary (12%) or
retirement benefits (15%). Those who were still in employment earned a median
monthly income of US$750. Of those who enjoyed retirement benefits, most only
received lump sums on retirement, and very few received regular monthly
payments. The lump sums had a median value of US$8,125 and did not enable
the elderly to support themselves for long. Older people of this generation did
not generally own many assets. About 24% owned self-occupied properties, and
4% had investments such as stocks and bonds. Although the great majority had
Table 7
Major Sources of Income for the Current Elderly Population
(Retrieved from 2001 Census data)
Item
Salary
Retirement protection
Financial support from children and/or relatives
Comprehensive Social Security Allowance
Old Age Allowance
Others
Proportion
6.54%
3.27%
44.96%
17.06%
24.02%
4.04%
cash deposits, the values were not very high, as the amount of interest was small
(Table 7).
The survey showed that about 10% of elderly people relied on the Old Age
Allowance as their main source of income, despite its modest rate of payment,
and of this group about one third received financial contributions from their
families and had a total average monthly income of US$140. The remaining two
thirds did not receive any family contributions, and had to rely on an average
monthly income of US$95. Furthermore, according to the General Household
Survey in the second quarter of 2000, 74% of the households in the lowest income
bracket had elderly family members, and most of these households in fact
comprised single elderly people or elderly couples.
We do not know what the income of the next generation of elderly people
will be after retirement, but 30% are working or have worked with employers who
provide retirement benefits for their employees. With the introduction of the
Mandatory Provident Fund, most of them should enjoy retirement benefits in one
form or another. They are also richer in assets: 37% have self-occupied properties,
11% invest in shares, bonds or unit trusts, and 96% have bank deposits. Judging
from the reported dividends and income from investment, the average value of
their assets, not including property, should be in excess of US$12,960. In summary,
a proportion of the next generation of elderly people will have an improved
financial standing upon retirement compared with the current generation.
Nevertheless, the majority of these people may not be adequately protected.
Although the next generation of elderly people appears to be financially
better off at present, the majority of them (around 67%) have not made any
arrangement to meet their future financial needs. Although 58% of them
indicated that they would rely on the financial support of their children after
retirement, the actual family size of the next generation of elderly people is getting
smaller. Around 55% have only one or two children, and 12% have no children
at all. The reduction in family size is expected to affect how the soon to be old
will finance their post-retirement living. We are concerned that there may be a
group in the next generation of elderly people who are currently on low incomes
and have few or even no children to support them. After retirement, they could
quickly exhaust their savings or retirement benefits, and will subsequently fall into
the welfare safety net. The Mandatory Provident Fund will take some 30 to 40
years to mature and will have a limited effect in the interim, and the benefits for
people with low incomes are limited even in the longer term (Chi, 2004).
Problems with Long-Term Care for the Elderly

In 1993, the Social Welfare Department assessed 97% of private old age homes
in Hong Kong to be below standard (Cheng and Chan, 1993). In 1996, the
Residential Care Homes (Elderly Persons) Ordinance was implemented. All old
age homes have since been required to obtain licences, which specified statutory
requirements for environment and staff grade or strength. The health care services
in these facilities were judged to be inadequate, and many frail elderly people
resided in poor quality old age homes, while the health and functional status of
the residents who lived in subvented care and attention homes was much better.
This represents a mismatch of the public financial support and the needs of the
frail elderly. In 1997, the Deloitte report on the needs of elderly people for
residential care suggested a shift from subvention to purchasing a quality system
in the form of a contractual agreement (Health and Welfare Bureau, 1997). A
standardised care needs assessment using the minimum data set instrument was
implemented in November 2002 to assess the needs of elderly people who might
require a home or institutional care (Hospital Authority, 2004). The assessment
mechanism covers all applications for institutional and home long-term care
services, and the central philosophy is ageing in place.
The key issues within the Hong Kong long-term care system are a high
demand for institutional care and the poor quality of care in residential care
homes (old age homes). In general, the quality of care in private old age homes
is low, and the waiting times for subvented care and attention homes, nursing
homes and hospital infirmary beds are unacceptably long (Table 2). Alternatives
to institutional care were severely neglected in the past, and only in recent years
have community supportive services been upgraded. Nowadays, Home Help
Services, Enhanced Home Care Services and Integrated Home Care Services are
all available. General nursing care is provided at home by the Enhanced Home
Care Service and the Integrated Home Care Service, whereas primary medical
care is provided only by the Integrated Home Care Service. The waiting times
for day care services are long, and there are very few dementia day care places in
the day care centres. Service gaps and duplications are common problems. A case
management approach is needed to arrange the services in these programmes,
with a case manager who is a trained geriatric nurse or social worker.
Caregivers are very important in the care of the frail elderly. Several caregiver
support and training programmes, which aim to upgrade the knowledge and skills
of caregivers, are in operation (www.info.gov.hk/swd/text_eng/ser_sec/ser_elder/
index.html accessed on 12 July 2004). The practical difficulty is that most family
caregivers, such as frail elderly spouses, or busy children, may not have the health,
physical strength or time to provide adequate caregiving to frail geriatrics.
Collaboration between long-term care service providers (Enhanced Home
Care Services and Integrated Home Care Services) and geriatric medical services
on a cost-recovery basis for the Hospital Authority has recently been implemented.
This involves some cost sharing, but it must be understood that all of these service
providers receive funding from the government. Interestingly, there is also costshifting. Some self-financing residential homes and private old age homes utilise
loopholes in the present health care system and over-use the Hospital Authority
hospital services to save medical and nursing staff costs. Residents are commonly
sent to accident and emergency departments and stay in hospitals for mild
complaints that could have been managed in the old age home if the home had
been willing to provide geriatric medical and nursing care. This is related to the
lack of directives from the government to improve the level of on-site geriatric
health care for old age homes. A directive from the funding authority is needed
to upgrade the medical and nursing support in these residential homes to avoid
the unnecessary use of hospital services. Even the newly introduced accreditation
system is only a voluntary exercise, and is unlikely to improve the quality of the
residential care service.
Private health care loses competitiveness for the sick elderly. The charges for
hospitalisation per day or specialist out-patient department or general out-patient
clinic consultations are much cheaper than private doctor charges, and for elderly
people who receive a Comprehensive Social Security Allowance, there is no charge
at all. Thus, the majority of Hong Kongs elderly are dependent on government
subvention in both health and social care services. This is true for the care and
attention homes, which are subvented by the government, and for private old
age homes, where 80% of the residents are Comprehensive Social Security
Allowance recipients (Luk et al., 2002). Thus, the fee for living in old age homes
is also borne indirectly by the government. At present, only a small minority of
elderly people can afford private health and long-term care. Integration of the
organisation of geriatric health and long-term care is needed, and should be
accompanied by a corresponding public financing arrangement.
The way in which long-term care can be financed has become a major policy
issue in Hong Kong. The majority of frail elderly in need of long-term care are
still being cared for by family members. However, when elderly family members
are in need of long-term care, many families find it difficult to provide physical
care and financing. Families that cannot afford to pay for the private long-term
care services have to apply for public assistance. Due to the constraints of public
funding, the development of long-term care services is extremely slow, and the
quality of care is poor. Over 8% of the elderly population live in residential care
homes, which is an alarming figure, and is higher than most of the developed
countries in the world. All of the local studies on the preference of living
arrangements for frail older people indicate that residential care homes are not
preferable. We should question the appropriateness of the current long-term care
policy, programmes and practices. Furthermore, one wonders what the quality
of life is like for elderly people who do not choose residential care.
In recent years, the Hong Kong government has introduced several initiatives
to reform long-term care services. For example, it has adopted a gate-keeping
mechanism to control the eligibility for long-term care services. Instead of building
nursing homes, the government has focused on developing district-level enhanced
home care and community support services for vulnerable elderly people. Another
initiative is the contracting out of all long-term care services using competitive
bidding, an exercise that has saved the government money in long-term care
expenditure, as it previously subsidised these services. For instance, the unit cost
of the recent bidding on residential care facilities was half that of the subsidised
unit cost before 2000, and these new facilities are taking in even more frail elderly
residents than before. Although there is merit in cost-efficiency, many queries have
been raised about the quality of care and the effectiveness of these services. These
initiatives have served to quickly release part of the pressure on the public funding
of long-term care, but without a comprehensive policy and new sources of funding
to support long-term care services, the new measures may not be able to meet
the challenges that Hong Kong will face in coming years.
Future Model of the Organisation of Hospital and Long-Term Care for the Elderly
in Hong Kong
The challenge for Hong Kongs ageing society is to achieve a reduction in
morbidity for the elderly population. To shift the whole population towards
healthy ageing, a decreased prevalence of chronic diseases and minimal disability
with chronic disease, we must decrease the need for hospital and institutional
care, and may need to increase community long-term care for the frail or sick
elderly. Health promotion and preventive medicine for geriatrics should be
practised to achieve healthy ageing. A cost-effective long-term and geriatric health
care model could be developed by shifting away from hospital-based and
institutional care to community and home-based care. The integration of social
long-term care and geriatric health care would reduce fragmentation more
effectively than the present system of collaboration. The present system is
frequently blocked by financial considerations. Integrated organisational and
financing health and social care would be a sustainable model to cater to the poor,
sick and frail elderly, whose health and social care are mostly subsidised by the
government.
It may be possible to adapt successful overseas experiments in geriatric health
and long-term care to Hong Kong. A successful example of an integrated health
and long-term care model under a single care delivery organisation and financing
funding is the Program of All-Inclusive Care for the Elderly (PACE) that covers
the poor and elderly in the United States (Figure 7). This care delivery model
integrates geriatric health and social care services for the elderly. The health and
social services that are provided include acute hospital, sub-acute hospital, day
centre and long-term care services. The funding comes from the US government,
and an integrated policy and clinical/social management is practised. The
government funding is attained by pooling existing resources for elderly people
who are on Medicare or Medicaid. Thus, instead of isolated components, a single
assessment entry for a comprehensive range of geriatric health and social care
services using a case management approach is practised. The PACE model
includes day health services, social services, medical supervision, nursing, personal
care, therapy, socialisation, nutrition, transportation, education, group exercise
and recreation. The remarkable strength of PACE is that it is an integrated and
coordinated programme with one record (information system) for each elderly
patient. The target clients are very frail, elderly people with multiple medical
problems (i.e. a mean age of 80 with 7.8 disease diagnoses and dependent in 2.7
ADL). The success is exhibited by the cost that is saved compared with the feefor-service model (12% cheaper). Compared with the fee-for-service clients, the
PACE clients are frailer, but have fewer hospital bed days, fewer nursing home
admissions and better consumer satisfaction. Over the past few years, the US
government has approved the deployment of PACE in many states (Lee et al.,
1998).
PACE Model of Geriatric Care On-Lok (San Francisco)
Prescription Drugs
Day centre
health & social services
In-home services
Home health, chore
services, portable meals
Acute hospital care
Medical specialty
services & clinics
PACE TEAM
Hospice care
Multi-disciplinary intake &

assessment
Skilled nursing
facility care
Housing
Laboratory, X-ray,
ambulance services
Primary care
Volunteer
Rehabilitative &
supportive care
Figure 7 Regional elderly health and long-term care programme

(Adapted from PACE)
Collaboration between Geriatric Health and Long-Term Care Services

The Community Geriatrics Assessment Team service has been welcomed by most
residential care homes for the elderly. On-site geriatric medical and nursing
services are provided, and the quality of clinical care and outcome has been
improved, and unnecessary hospital admissions have been reduced. However,
inadequate funding has limited the scope of the service, despite the increase in
the number of elderly residential care home residents and old age homes.
A new collaboration model is currently being tested in residential care homes.
The Caritas Evergreen Home is the first contract home under this principle,
under which geriatric health services are provided in collaboration with a
designated family doctor (i.e. the visiting medical officer) in the home (Hospital
Authority, 2004; Chu et al., 2004). Cost recovery for the geriatrician input is agreed
by the Hospital Authority. Integrated Home Services is a community-based home
care approach with strong social and weak geriatric health care input. These
represent initial efforts to remove the gaps and the fragmentation of geriatric
health and long-term care for the frail elderly. The present problem is that the
financial incentives and budget constraints of the separate service providers often
lead to the phenomenon of cost shifting. The best model for the future would
be to organise long-term and geriatric health care under one roof, with a single
public policy and set of service parameters and an integrated care management
team. The previous funding for different providers would then be pooled into a
single source of funding for this integrated team.
The key to good quality long-term care in an ageing society includes both
adequate funding and integrated health and social care systems. It goes beyond
the hospital and residential care arena funding should be enough to cover a
whole spectrum of health and social care services that range from health
promotion and primary health to palliative care, and the integration of the two
major health and social care systems should cover this wide spectrum. The
following sections will address the issue of the financing of long-term care and
will provide a brief description of the Japanese long-term care insurance scheme.
Some strategies to integrate health and social care systems will also be discussed.
Long-Term Care Financing

Most countries with ageing populations are facing the financial pressures of
providing long-term care services to their disabled senior citizens. Different
countries may choose different approaches to meet this challenge. The variation
in long-term care financing is related to the history and philosophy of the health
and social care of the country (or culture). For instance, many Commonwealth
countries have chosen to reform their health care system to meet long-term care
needs, the United States has chosen private insurance, and countries like
Germany, Israel and Japan have chosen social insurance. Two main funding
schemes have emerged: tax-based and social insurance schemes. It has become
more apparent that social insurance is a better solution for long-term care in
developed countries if it is well planned and carefully implemented.
Japans mandatory long-term care insurance system was established in 2000,
and represents a reversal from earlier steps towards a tax-based direct service
system. It is based on consumer choice of services and providers. Although
municipalities continue to have responsibilities as insurers, they must provide
mandated services to all those who are certified as eligible. The benefits come in
the form of institutional or community-based services, rather than cash, with a
10% co-payment. In institutional care, the full costs of care except food are
covered, and in community care, the amount that patients are entitled to ranges
from US$500 to US$3,600 per month, based on six levels of need as measured
by an objective assessment of physical and mental function. Recipients can
purchase more services if they wish by paying out of their own pocket. The fees
for long-term care insurance services are set by the government, and are applied
to all providers.
The total expenditure for the initial year was budgeted at 4.3 trillion Yen or
0.8% of GDP. Actual spending has been 3.6 trillion, because less than the expected
number of hospital beds were transferred to the scheme. However, the

governments estimates for the initial demand for community-based care were
nearly on target: 2.7 million (12% of the population over 65) applied to be
certified, and those who chose community care used on average about one third
of their entitled amount. Of the 2.7 million who were certified, 2.2 million actually
applied for services, of which 0.6 million applied for services in institutions and
1.6 million for services in the community. Thus, if those who were already in
institutions are excluded, only two-thirds of those certified actually received any
service, and those who did used on average only 45% of their entitled amount.
This usage rate was initially projected to be low, because it was expected to take
time for people to realise that they now had an entitlement, and to become
accustomed to relying on formal services.
Although expenditure has since steadily increased, this increase has been
within the projected figure of 8 trillion Yen in ten years. However, with the
dampened economy in Japan, efforts are being made to constrain all public
expenditure. One step taken was to decrease the long-term care insurance
reimbursement for services, and prices were reduced by an average of 2.3% from
1 April 2003. However, this was not sufficient to cover the increase in expenditure,
and thus the premium levels are now scheduled to be increased in most
municipalities, and mayors must make a political decision about whether to
continue to expand long-term care insurance services or to contain premium
increases. Another major policy decision that has to be made is whether to further
transfer institutional care from health insurance to long-term care insurance. The
appropriate demarcation and coordination of long-term care and medical care
are issues that will always have to be addressed. However, the Japanese experience
appears to show that establishing an independent, comprehensive system for longterm care is preferable to leaving it in an ambiguous state within the medical and
social service systems. If policies have clear objectives, defined targets, logical
criteria and well thought out mechanisms, then public expenditures is easier to
control. With increasing pressure to contain public sector expenditure and
improve efficiency, the focus of care will gradually shift from hospital care to longterm care, and within long-term care itself from institutions to housing, with a
commensurate increase in the share of private financing. The determination of
how this process can be made proactive and planned, instead of ad hoc and
reactive, is the challenge for public policy makers (Ikegami, 2003).
In addition to funding and resources, the key to a successful long-term care
programme is to effectively integrate health and social care services in such a way
that the scope of integration goes beyond just hospital care and the long-term
care boundaries. The government must make a political commitment to
integrated health and social care systems to meet the diverse needs of the elderly
and to ensure continued social and economic development. This, of course,
requires not only government commitment, but also active support from the
integrated health and social care policies and programmes of the community and
civil society. To achieve this societal goal new thinking should be adopted, and
the following strategies are suggested (Lubben, 2002):
1. Updating the Primary Health Care Approach
New thinking on the development of health and social care systems is needed.
The 1978 Alma-Ata Declaration inspired the primary health care approach, which
has been credited with advancing health care around the world. However, the
needs of ageing societies were not fully appreciated, and many of the shortcomings
of the primary health care approach are becoming increasingly apparent. For
example, the prominent acute care models in primary health care are often
inappropriate for chronic health problems in ageing populations. The primary
health care approach does not give adequate attention to the promotion of health
and the prevention of disability, and the highly specialised categorical
programming characteristic is particularly unsuited to achieving the highest
quality of life among the elderly. Furthermore, the primary health care approach
does not adequately cover the full continuum of care services that are needed in
ageing societies. A new approach should encourage the active involvement of the
community and be client driven, rather than provider driven. Systems that
integrate and coordinate health and social care programmes will be both more
effective and efficient in addressing the type of care needs that many elderly
people are likely to have. Integration is a basic requirement both within and
among the health and social service sectors. The community health care
framework has been proposed as a means to update the primary health care
approach to better address the needs of the elderly and the future elderly. The
proposed approach provides a framework for the integration of the health and
social service systems and strengthens the connection between the elderly and
their families and communities, regardless of ability or disability.
2. Develop Programmes That Delay the Onset of Disability, Ameliorate Its Trajectory and
Enhance the Capacity of the Elderly to Take Better Care of Themselves
Disability is not inevitable in old age, and its onset can often be delayed or totally
prevented. Furthermore, disability is not only defined by the characteristics of
an elderly person with functional limitations, but also by the characteristics of
the home and community environment in which that persons lives. For example,
properly modified housing and ageing-friendly communities could greatly
facilitate an elderly persons ability to care for themselves, despite significant
physical limitations. Integrated health and welfare service approaches are required
to identify the malleable aspects of the physical and social environment that would
optimise the functional capacity of the elderly within the community.
3. Support, Encourage and Accommodate the Family and Other Forms of Social Network Care
A central component of an integrated approach to health and social care for the
elderly should involve programmes and policies that support, encourage and
accommodate the family and other forms of social network care. Research shows
that family members are often the backbone of care for elderly people with
disabilities. However, there is also considerable evidence that family members are
ill informed about how to best handle and cope with the many demands that are
placed upon them. Furthermore, family members and other caregivers are often
confused by the complexity of community health and social care services for
elderly people with disabilities. Accordingly, health and social care programmes
that inform family or other caregivers about proper techniques and options could
lower caregiver stress and prolong their ability to provide care. Respite
programmes for caregivers and the flexible work schedules that are offered by
some employers are additional examples of caregiver support programmes that
have been reported to be highly successful in helping informal caregivers do a
better job of caring for their loved ones with disabilities.
4. Develop Adequate Funding Schemes for Integrated Health and Social Care Systems and
Examine Public and Private Sector Roles and Responsibilities for Innovations, Resource
Mobilisation and the Development of Health and Social Care Systems
Models for the development of adequate funding schemes must be tailored to

local circumstances. Varying economic and social conditions make it highly
unlikely that a singular approach can ever meet the needs of all of the countries
around the world. A cross-national comparison and review could clarify the merits
of each approach, and suggest hybrid models that may be more advantageous in
particular circumstances. Differences will probably be especially observed when
comparing and contrasting developing and developed countries. Regardless of
the method or methods used, it will be necessary to find the political will to
adequately fund these systems in ageing societies. This will be different because
public and private partnerships are essential for the successful development of
health and social care systems for ageing populations. The private sector is an
essential provider of cost-effective community health and social care for the elderly
to maximise their functioning, health and quality of life. Furthermore, the private
sector can often more readily experiment with new practice models than can
larger publicly supported programmes. The various roles and responsibilities of
the public and private sectors in the development of integrated health and social
care systems in ageing societies need further examination and clarification.
5. Establish a Mechanism to Monitor and Maintain Quality Assurance in Health and Social
Care Service Systems for Ageing Societies
Quality assurance is essential in maintaining the appropriate quality of care and

the protection of care recipients. More applied research is required to refine the
definitions of the measurable outcomes of community health care policy and
programme endeavours in different settings and nations. Although health and
social care systems often present challenges to the maintenance of quality control
across complex organisational structures, experiences in other countries
demonstrate ways in which this challenge can be successfully addressed. More
work will be necessary to tailor these examples of successful quality control to
other settings and countries.
6. Facilitate the Recruitment and Training of the Workforce that is needed for Health and
Social Care Systems in Ageing Societies
Educational opportunities in the field of geriatrics and gerontology must be

expanded around the world to address the needs of ageing societies. Furthermore,
new practice models must be created to better function within an integrated
health and social system of care. There is a need to enhance programmes that
help the elderly to better take care of themselves as well as to train family
caregivers. Thus, the training of geriatric specialists in all fields of practice (e.g.
medicine, nursing and social work) must include curricula that help to accomplish
these important functions. Besides the need for qualified geriatric specialists, all
health and human service professionals need to have some basic knowledge of
ageing.
7. Support Research That Will Inform the Development of Integrated Health and Social Care
Systems
Research provides essential evidence for the efficacy of policies and programmes.
There is a need to know more about the health status and needs of the elderly
as the ultimate outcome of an effective health care policy, and the system and
services that are applied to the elderly in their communities. Furthermore, there
is a lack of systematically organised collective information and reports on
community health care policies and programmes for older populations. There is
a special need for evaluative research that will test and refine various adaptations
of proposed community health care approaches to clarify the relative merits of
various iterations. Applied research can inform preferred approaches to
implementing integrated health and social care systems. The scope for
international experience sharing and comparison are substantial, and must be
encouraged at every level.
Conclusion
In conclusion, a comprehensive long-term care and geriatric health care
programme is needed in Hong Kong. This programme can be sub-divided into
regional teams. The geriatric health care and social long-term services are fully
integrated, but we need to further develop the present interface and collaboration
models. Financial incentives are crucial to the success of this model. Merging the
various organisational structures to form an integrated long-term and geriatric
care team (Figure 8) would be a cost-effective and sustainable way of providing
targeted care to the frail elderly in the Hong Kong population. Alternative sources
of health care financing for the elderly are limited at present. Primary health care
should remain largely private, and the general out-patient clinic system should
remain primarily for the poor and sick elderly patients. For the financially secure
middle and upper class elderly, options for care and payment contributions
towards health and social care services could be explored. The long-term care
financing model in Japan and the integrated PACE in the US can serve as good
references for Hong Kong in designing an integrated health and long-term care
model for the elderly.
A single
health & social care department
Common financial policy and source
Common policy on objectives

and operation
Integrated
health and social care operation units
Private
health and social care operation units
Figure 8 Proposal for the future organisation of health and long-term care
for the elderly in Hong Kong
PART
III
Quality of Care
CHAPTER
12
Quality of Care and Patient Redress:

A Professional Perspective
Felice Lieh-Mak
Felice Lieh-Mak, a local pioneer in psychiatric care, former Dean of

Medicine at the University of Hong Kong and an Executive Council
member during the Patten administration, focuses her attention on the
role that the Medical Council of Hong Kong plays in regulating the
profession and protecting the publics health. She describes new efforts
that are being made by the body to evolve in line with societal demands
for a more responsive profession. This transformation requires a
reorientation towards a new consumer-driven learning model and away
from the bad apple, punitive, behind closed doors approach of the
past. She calls on all doctors to accept the complaints system as an
opportunity for systemic improvement, and to embrace the new culture
of openness. Dispensing with the aloof, hierarchical and paternalistic
attitudes of yesteryear may well prove to be the only way for the
profession to survive and thrive in the long term. Together with the
contribution of Chan and Benitez, this chapter argues convincingly for
an urgent re-examination of patient rights, professional autonomy and
the privilege of self-regulation as they are currently understood.
Introduction
Strictly speaking, systems of patient redress address two issues: the putting right
of a wrong and compensation for the suffering that results from wrongdoing. Such
systems are private and decentralised in the sense that it is left to the individual
to enforce their rights. Hence, the effect of such a system on the quality of care
is dependant on organisational or individual responses.
Most systems of redress follow one of two models. The persecutory/
disciplinary model is mainly intended to establish individual responsibility, fault
and culpability. The finding of fault carries with it the possibility of sanctions,
which can range from imprisonment to a warning letter. This model assumes that
standards can be maintained by weeding out the bad apples, which will act as a
deterrent to others. In contrast, the consumer-orientated/learning model seeks
to satisfy the complainant and provide impetus for the organisation to learn or
take action as part of its concern for quality of service. It is less adversarial, because
resolution and redress are used as a means of maintaining the user relationship
and organisational loyalty. In this model, individual failure is not the issue. Rather,
it is the failure of the group, organisation or process that must be tackled.
The two models are illustrated in Figure 1.
Features
Persecutory/
disciplinary model
Consumer orientated/
learning model
Process
Formal
Informal
Purpose
Establishment of fault
Improve services
Nature of complaint
Strictly defined
Any dissatisfaction
Focus of the complaint
Individual
Organisation
Resolution of the
complaint
Judicial/semi-judicial
process
Any staff in
the organisation
Resultant action
Punishment/exoneration
Changes to prevent
recurrence
Figure 1 Models of complaints systems
In Hong Kong, patients can take a variety of pathways in their quest for
redress. The formal routes are the courts and quasi-judiciary bodies like the
Medical Council. The less formal channels are through organisations such as the
Hospital Authority or private hospitals, the Consumer Council and professional
bodies. The least formal courses are through the media and casual talk, rumour
and gossip. This chapter will discuss how each of these pathways affects the quality
of health care.
Legal System
There are three models for legal proceedings. Administrative law deals with
regulation by the state, some examples of which are the licensing of private
hospitals and clinics, fire and safety regulations and the disposal of medical waste.
The violation of administrative regulations can result in the closure of facilities,
fines or imprisonment.
Criminal law is used to protect individuals for their own good, and to protect
the social order that makes it possible for a government to function. Criminal
law is a part of police power, but it is the government that prosecutes. Violations
of criminal laws that apply to medical care are the issuing of false sick leave
Quality of Care and Patient Redress: A Professional Perspective 257
certificates, criminal sexual abuse of a patient by a physician under the guise of

an examination, criminal abortion and failure to keep proper records of
dangerous drugs. Although criminal defendants have substantial constitutional
protection, a conviction can result in imprisonment, hefty fines and expensive
defence costs, which are not paid for by medical malpractice insurance.
Civil law proceedings are used to enforce compliance with either public laws
or private contracts, and to determine the liability and the amount of monetary
compensation for injuries. Depending on the nature of the alleged injury or the
requested remedy, civil claims can be categorised into personal injury, contract
and property claims, and claims against incompetence.
Medical negligence is the classic civil lawsuit in the health care sector. Five
elements are required to establish a prima facie case of medical negligence: the
existence of a duty of reasonable care, that a breach of that duty has occurred
through substandard care, that this breach has resulted in the injury, that the
injury did not occur long before or after the events, and that the claimant has
suffered as a result of the injury.
In the context of quality care, the most salient feature is to establish a standard
of care. Standards of medical practice are drawn from the customs and behaviour
of members of the profession, and the courts have delegated the setting of
standards to the medical profession itself. In theory, this seems to be a logical
practice, but the reality is much more complex.
In most instances, an expert witness is called upon to establish a standard
for medical care and to give an opinion on whether this standard has been met.
Ideally, the standard should be supported by robust scientific literature, be general
to all practitioners, be specific to the special circumstances of the plaintiff and
either endorse or proscribe the defendants conduct.
The authoritative statement on the standard of care that is expected was given
in the case of Bolam v. the Friern Hospital Management Committee in 1957:
The test is the standard of the ordinary skilled man exercising and
professing to have that special skill. A man need not possess the highest
expert skill at the risk of being found negligent. It is a well-established
law that it is sufficient if he exercises the ordinary skill of an ordinary
man exercising that particular art.
This approach has been criticised for being paternalistic and a hang-over from
the Victorian age when nanny was supposed to know best (Kirby, 1995). In the
past decade, courts in the United States and Canada have placed more emphasis
on the standard of care that a patient would expect to receive.
In giving an opinion, the expert witness should refer to scientific evidence.
Before 1993, many courts relied on the Frye Rule, which admitted scientific
testimony that had achieved general acceptance in the relevant scientific
community. However, in the Daubert case the US Supreme Court rejected the
differential standard of the Frye Rule in favour of a more assertive standard that
required courts to determine that expert testimony was well grounded in the
methods and procedures of science (Henefin, Kippen, Poulter, 2000). In their
comments on the recent decisions that have been made by the US Supreme Court,
Kassirer and Cecil (2002) argued that a number of courts have required standards
for expert testimony that exceed what physicians use to make ordinary clinical
decisions. Regardless of the decisions that the courts arrive at in terms of expert
evidence, the situation is tautological insofar as health care quality is concerned.
The quality of health care is guided by scientific evidence, which the courts also
use. To expect patient redress through the courts to influence quality is therefore
both irrelevant and convoluted. In medical negligence cases, the focus is on the
individual, whereas the data that is available from evidence is based on medical
literature that concerns groups or cohorts. How this information can be applied
to an individual is often dependent on the subjective judgments of experts. In
addition, there are still unresolved issues, and the ongoing controversy about
mammography is a case in point. When evidence is sparse, evidence-based
medicine cannot address many issues that are related to court decisions.
The locality rule adds to the complexity of the proper qualification of the
expert witness. In its strictest form, the rule requires the expert to be from the
same or a similar community. In places where a gulf exists between specialists
and non-specialists, it is not unusual for such an argument to be raised. The setting
up of explicit practice standards can go a long way towards ensuring quality health
care and reducing ambiguities in the courts, but there are impediments to setting
standards for medical practice. Many clinicians find practice guidelines onerous,
and few assiduously adhere to them because they are seen as too mechanistic and
limiting of flexibility in the treatment of individual patients. In an increasingly
litigious society, physicians fear that practice guidelines will be used to cite error
and attach blame, and the need for consensus means that guidelines are
sometimes so diluted as to be useless. Standards are also believed to inhibit
innovation, although this objection is less significant in everyday medical care.
Nevertheless, judges are very deferential towards the explicit standards of practice
that are promulgated by credible professional organisations. Lawyers for the
plaintiffs find it difficult to prove a case against a doctor who has complied with
the approved standards. Thus, patient redress through the courts can serve to
motivate the medical profession towards standard setting.
When experts disagree, the jury or the judge has to decide whose opinion
to take, and sometimes accord less weight to reasoned opinion from acknowledged
experts than to the testimony of hired advocates. Given the inconsistencies in
evidentiary standards that are accepted by the courts, their decisions are not useful
as a basis for improving the quality of health care. The problem of variable
evidentiary standards is compounded by the reluctance of many reputable
physicians to act as experts for the plaintiff. In small communities where doctors
know each other socially, this problem is especially serious. Although it is always
possible to appoint an expert from overseas, the locality argument may lessen
the strength of the experts opinion.
Another notable problem in using litigation as an instrument to curb poor

performance and to improve standards is that claims are not necessarily
representative of the types of substandard practice that occur. Not all litigants
pursue claims that are necessarily related to poor standards, and conversely there
are many patients who have suffered poor care who do not take action. Vincent
et al. (1994) examined the reasons why patients and their relatives take legal
action and reported four main themes: concern about the standard of care when
both patients and relatives want to prevent similar incidents in the future, the
need for an explanation of how and why the injury happened, compensation for
actual losses, pain or suffering or to provide care in the future for an injured
person, and accountability, which comes from a belief that the staff or organisation
have to account for their actions.
Regardless of the primary reasons for initiating litigation, patients and
relatives often blame doctors for a lack of openness or willingness to explain. A
recent study by Hickson et al. (2002) reported results that were consistent with
many previous studies on the relationships between the dissatisfaction of patients
and malpractice claims. The patients of physicians that had been involved in the
highest number of lawsuits were more likely to complain that their physicians
would not listen or return their telephone calls, were rude and did not show
respect. Although it is evident that personal attention is a key driver of patient
satisfaction, it is not the only element in quality care. The likelihood that a good
bedside manner may serve as a camouflage for an appalling lack of professional
knowledge should not be ignored.
Despite the high profile that the media give to successful litigation and the
fear of a crisis, the number of patients who pursue claims is rather small. A study
that was initiated by the California Medical Association (1977) found that of 126
patients who were admitted to the hospital, 0.8% suffered negligent injuries, and
of these only 1 in 10 filed a claim. In a study that was commissioned by New York
State, the Harvard team (1991) reported that for every 7.5 negligent medical
actions, only one malpractice claim was filed. The reasons for this failure to
translate grievances into claims are multiple and complex. The starting point of
a pathway towards litigation is the recognition that something untoward has
occurred. At this crucial point, many patients are disadvantaged by lack of medical
knowledge and awareness of what standards to expect. For patients who are aware
that something has gone wrong, additional impediments exist. Many are reluctant
to be involved in a slow, painful and expensive adversarial system with an
unexpected outcome. Even when legal aid is available there are hidden costs,
which include having to take time off work and travelling expenses.
The escalating cost of settling clinical negligence is never far from the public
consciousness, and some have even called it a crisis. In England, negligence
settlements increased sevenfold between 1995 and 2000. The number of claims
that were opened in the Hong Kong SAR rose from 15 in 1990 to 45 in 2000.
This is coupled with an increase in the indemnity costs from HK$4.5 million to
$35 million over the same period. In the United States in 1999, the median
medical liability award was US$800,000, and the mean was $3.5 million. There
was a 39% increase in million-dollar awards compared with the previous year. Many
factors have contributed to the rise: an increase in the amount and complexity
of medical interventions and the amount of damage caused, rising patient
expectations, the increased cost of litigation, the increased skills that are required
of doctors and ineffective quality assurance systems. The sky rocketing costs of
medical litigation have resulted in high malpractice premiums, which translate
to higher health care costs. At least in the United States, this has led to a
breakdown in the health care delivery system, severe hardship for the poor and
uninsured, and a deteriorating quality of health care for a significant proportion
of the population. It is feared that this scenario may also be played out in other
countries.
The many limitations and difficulties that are associated with medical
malpractice prompted the president of the Risk Management Foundation of the
Harvard Medical Institution to pronounce:
It would be a tremendous abrogation of intellectual responsibility to
look at a system with this many problems that costs this much and serves
the public this poorly, and say that it is the best we can do.
Creasy (1991)
In civil cases when imprisonment is not an issue, the odds of winning should the
case go to trial are 60% to 80%, and even when the doctor loses an insurance
company nearly always pays the settlement. Despite this, most doctors do not face
trial with equanimity. The whole process is stressful for the defendant doctor, and
the source of this fear is the belief that the doctors reputation and personal worth,
rather than the quality of the medical care, is at stake. This is especially tragic in
situations in which perfectly good doctors make mistakes due to a heavy clinical
load, inexperience, a lack of team support or because they are unfortunate
enough to come across a litigious patient. The fear of a lawsuit hangs over the
heads of many doctors. To avoid being sued, doctors practise defensive medicine,
which Macquade (1991) defined as the ordering of treatment, tests and
procedures for the purpose of protecting the doctor from criticism. Marpro, Mills
and Van Bolschning (1995) added that, specific procedures, tests or treatments
are either employed or deliberately withheld for the purpose of avoiding a
lawsuit.
Summerton (1995) conducted a postal questionnaire survey of general
practitioners in the UK and came up with a list of positive and negative defensive
medical practices:
Negative Practices:
Increased referral rate.

Increased follow up.
Avoiding treatment of certain conditions in general practice.

Consideration of diagnostic testing when there is a known element of risk.
Prescription of unnecessary drugs.
Removal of patients from list.
Positive Practices:
Move towards detailed note taking.

Move towards a detailed explanation of procedures to patients.
Increased screening in practice.
Development of auditing within a practice.
Development of consumer satisfaction activities.
This division is, however, not entirely free of ambiguities. Doctors frequently ask
how much note taking or detailed explanation is considered to be good practice.
Furthermore, increased referral can lead to increased cost, and increased
diagnostic testing is open to interpretation. One doctors defensive medicine may
be another doctors good practice.
The Medical Council

The Medical Council is the main organisation that is charged with the
responsibility of regulating the practice of medicine. In the health care sector,
this is but one of the many self-regulating professional groups. The Council was
established under the Medical Registration Ordinance in 1957, which was
modelled on the United Kingdom Medical Act of 1858 and in turn served as a
model for other health care professional councils. The primary task of the Council
is to maintain professional standards. Pursuant to this task, it keeps a register of
qualified doctors and specialists to enable the public to know who is competent
to practice. Through the registry, the Council decides on the necessary
qualifications for admission and operates a disciplinary mechanism through which
a doctor can have his or her name removed. The Council has 18 members, of
which four are lay members who are appointed by the Chief Executive, and
fourteen are registered medical practitioners. To ensure as wide a representation
as possible, the Director of Health, the University of Hong Kong, the Chinese
University, the Hospital Authority and the Hong Kong Academy of Medicine each
nominate two members, who are then appointed by the Chief Executive. The
Hong Kong Medical Association elects seven members, and the remaining seven
members are elected by registered medical practitioners. The structure of the
Council is shown in Figure 2.
The Licentiate Committee sets and conducts the licensing examination for
all doctors who qualified outside Hong Kong.

Medical Council of Hong Kong
Preliminary
Investigation
Committee
Licentiate
Committee
Education and
Accreditation
Committee
Ethics
Committee
Health
Committee
Examination Subcommittee
Internship Subcommittee
Credentials Subcommittee
Exemptions Subcommittee
Reveiw Subcommittee
Figure 2 Organisational structure of the Hong Kong Medical Council
The Education and Accreditation Committee has the following functions.

Most significantly, it determines, upon the recommendations of the Academy of
Medicine, the various specialties. It also recommends to the Council, upon the
recommendations of the Academy of Medicine, the qualifications and experience
that qualify registered medical practitioners to be included in the Specialist
Register. Finally, it recommends and reviews the standard and structure of
undergraduate medical education and the medical training that is required to
become a registered medical practitioner.
The Ethics Committee advises and makes recommendations on matters about
medical ethics and general professional conduct.
The Health Committee conducts hearings into any case or matter concerning
the health or physical or mental fitness to practice of any registered medical
practitioner. After conducting such hearings it recommends to the Council
whether the name of a registered medical practitioner should be removed from
the General Registry permanently, or for any period that does not exceed 12
months. Such an order can be suspended subject to certain conditions.
The Preliminary Investigation Committee (PIC) makes preliminary
investigations into complaints or information that touches on any matter that may
be inquired into by the Council or heard by the Health Committee, and gives
advice on the matter to any registered doctor. After conducting preliminary

investigations, it can make recommendations to the Council to hold an inquiry
or to the Health Committee to conduct a hearing. The three stages of disciplinary
proceedings are shown in Figure 3.
The Secretary of the Medical Council receives

information or a complaint and informs the complainant
of procedures for handling that complaint
Stage 1
I. Initial screening by PIC
Chairman in consultation with
the PIC Deputy Chairman
and a lay member
Stage 2
II. PIC meeting
Stage 3
III. Disciplinary inquiry by Council
or Health Commitee
Case dismissed
Case dismissed with letter

of advice as appropriate
Figure 3 The stages of disciplinary proceedings
The complaints that were received by the Medical Council between 1998 and
2002 are listed in Table 1. One hundred and seventeen cases were dismissed after
Stage 1 screening. The reasons for dismissal are listed in Table 2. In 2002, ten
disciplinary inquiries were held. The nature of the cases and the decisions that
were handed out are listed in Table 3.
Over the past decade, the number of complaints that have been received by
the Council has not increased substantially, and has tended to fluctuate around
200 cases annually. There has also been no discernable trend for specific
complaints to increase. The Council adapts an inquisitorial/disciplinary approach
in its procedures. Like the courts, the bad apple theory of dealing with standards
of care affects only a deviant few, to the exclusion of many more who may not be
competent to provide quality care. However, the Councils inquiries are open to

Table 1
Complaints Received by the Medical Council
Nature
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
Conviction in court
(a) Failure to keep proper record of dangerous drugs
(b) Others
Disregard of professional responsibility to patients
Drug-related cases (excluding court convictions)
(a) Failure to properly label drugs dispensed
(b) Failure to keep proper record of dangerous drugs
(c) Prescription of drugs of dependence other than
bona-fide treatment
(d) Abuse of drugs
(e) Others
Termination of pregnancy
Abuse of professional position to further improper
association with patients
Improper, indecent behaviour towards patients
Abuse of professional confidence
Advertising/canvassing
Sharing fees and improper financial transactions
Deprecation of other medical practitioner(s)
Misleading, unapproved descriptions and
announcements
Issuing misleading, false medical certificates
Improper delegation of medical duties to
unregistered people
Fitness to practise
Miscellaneous
1998 1999 2000 2001 2002

2
7
133
1
6
120
5
114
3
1
7
11
121 160*
3
1
4
-
12
1
33
2
8
35
1
2
9
25
8
1
19
1
2
1
24
3
3
6
18
2
26
1
14
1
21
2
23
2
19
22
1
48
43
46
Total:
245 230 227 236 287
Remarks
(i) Of the 287 complaints received in 2002:
28 cases (9%) were inactionable because the complainants failed to provide further
information or statutory declarations, or they were anonymous, etc.;
117 cases (41%) were dismissed by the PIC Chairman, the PIC Deputy Chairman and
the Lay Member as being frivolous or groundless;
71 cases (25%) were referred to the PIC meeting; and
71 cases (25%) are pending further information or statutory declaration.
(ii)
Some of the cases were referred to the PIC meeting and carried forward to 2003.
(iii)
*The major categories of cases of disregard of professional responsibility to patients
in 2002 include:
(1) failure/unsatisfactory result of surgery (25%); and
(2) failure to properly/timely diagnose illness or to give proper advice (29%).
Source: Medical Council Annual Report 2002

Table 2
Breakdown of the Complaints Received in 2002 That Were Dismissed by
the PIC Chairman, the PIC Deputy Chairman and the Lay Member
Reasons for Dismissal
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
(i)
No. of Cases
Doctors attitude
Commercial dispute
Communication problem
Complications of treatment
Unsatisfactory results of treatment
Difference of medical opinion
Misdiagnosis
No evidence
Groundless
12
6
15
5
11
5
19
44
TOTAL
117
Table 3
Figures on Appeal Cases
1998
No. of appeals lodged

No. of appeal cases carried forward from previous years
Total No. of appeal cases in progress in the year
1999
2000
2001
2002
4(+1*)
2
7
2
2
2(+3*)
2
7
Result of appeal cases concluded in 2002:

(a) Dismissed by the Court of First Instance/Court of Appeal.
(b) Allowed
(c) Appeal withdrawn
1
4
5
2
1
1
4
* Judicial review case in the Court of First Instance/Court of Appeal.
the public and are often widely reported in the media, which works as a deterrent
to the medical profession. For many years, the Council has been criticised for
setting the threshold of professional misconduct too high, which thus meant that
disciplinary action was rare. Previously, misconduct was defined as something
that can be reasonably regarded as disgraceful, unethical or dishonourable. In
a judgment in 2003, this was changed to falling short of standards. However, it
is too early to gauge the impact of this change on the quality of care.
As a system of redress, finding a doctor guilty of misconduct does not result
in any financial gain for the patient or the patients family. Thus, the most frequent
reasons for patients or their families to lodge complaints to the Medical Council
are anger at the perceived wrong done to them or a desire to expose incompetent
doctors.
The Complaint System of the Hospital Authority

The Hospital Authority is an independent body that manages all the public
hospitals in Hong Kong. It has a complaint system both at the head office level
and at the hospital level. The head office complaints system is headed by the
Public Complaints Committee, and the Public Relations Office handles complaints
at the hospitals. The process for the handling of complaints at the hospitals is
described in Figure 4.
The total numbers of complaints against all Hospital Authority hospitals are
listed in Table 4.
Table 4 Complaint Statistics of All Hospital Authority Hospitals

From 1996/97 to 2001/02
1.4.96
31.9.97
1.4.97
31.3.98
1.4.98
31.3.99
Medical services
677
635
740
678
729
710
Staff attitude
538
600
682
526
513
505
Administrative
procedure
225
292
351
288
255
221
Others
295
188
175
203
182
160
Total no. of
complaint cases
1735
1715
1948
1695
1679
1596
Year
1.4.99
31.3.00
1.4.00
31-3-01
1.4.01
31.3.02
Nature
of Cases
The total number of complaints is very small compared with the million or
so patients that are discharged and the more than 7.5 million out-patient specialist
clinic attendances per year. This is certainly not an indication of the quality of
care that is delivered by the Hospital Authority. The reasons for the small numbers
are similar to those that were mentioned in the previous discussion relating to
the legal system and the Medical Council. However, because the Hospital Authority
uses a hybrid system of a persecutory/disciplinary model and a consumerorientated model, complaints are used for the early identification and
management of potential negligence claims, as a managerial tool in the assessment
of quality and as an opportunity to improve the image of the Hospital Authority.
Thus, the complaint system may be more effective than one that employs a single
model in improving the quality of health care.
1. Being informed of a complaint, potential incident or actual incident from various

sources, e.g. directly/indirectly from a complainant, a Hospital Problem Report,
through the media, the coroner or by death audit or the like.
2. The Public Relations Office acknowledges complainant/informant.
3. Cross check daily with the Public Relations Office, the Hospital Chief Executive office
and the medical record office to detect early signs of potential problems.
4. Tag potential incident cases when any two of the following conditions are found:
Patient/relatives have lodged a complaint.
The staff involved have submitted an incident notification form.
Patient/relatives have requested a medical record/report.
The media has shown interest in reporting the incident.
5. Invite comments from all parties involved while the preliminary investigation takes
place.
6. Enter all key events on a log sheet that is kept on the left side of the file cover for
easy reference and appraisal.
7. Subsequent contact with the complainant should be recorded and faxed as soon as
possible from the Public Relations Office to the Hospital Chief Executive and vice
versa for filing.
8. Hold an end of day meeting with the Senior Nursing Officer to discuss the complaints
that have been received by the Public Relations Office to:
identify the real concern of the complainant,
discuss immediate and definitive solutions for the complaint,
seek advice from senior management when in doubt.
9. Deliberate on the case weekly with the Complaint Management Group, which includes
senior management to review key events, problems and progress.
10. Categorise as simple complaints, cases requiring further investigation or medico-legal
cases.
Complaint Cases
11. Confirmation of facts
with supervisor
Cases that Require

Further Investigation
11. Invite involved parties
to attend meeting
Medico-legal Cases
11. Work closely with
Cluster Manager and
Legal Services
Section of Head Office
12. Keep in regular contact with the complainant to report on progress.

13. Bring up outstanding cases for discussion by the Complaint Management Group
weekly to review the progress and for the early identification of new problems.
14. Submit investigation findings, conclusions and recommendations on improvement
measures disciplinary action to the head of department and the Hospital Chief
Executive.
15. Answer the complainant directly and expediently.
16. Talk with the staff involved and relevant parties to finalise the recommendation on
improvement measures as appropriate.
17. Implement improvement measures and disciplinary action as appropriate.
18. Audit the outcome of the improvement measures.
19. Complete Part B of the Hospital Problem Report and forward the Report to the
Head Office as appropriate.
Figure 4 Handling of complaints and incidents
Informal Routes
One of the more dramatic routes that is used by patients is to write letters to the
media. These types of complaints are often given high profile by certain
newspapers, especially at times when there is not much news. Both the Medical
Council and the Hospital Authority take note of such complaints when the
complainants can be identified. In the case of the Medical Council, the
complainant will still need to come forward to give a statutory declaration when
the evidence is inadequate. The Hospital Authority carries out its own
investigations based on complaints to the media, and although such complaints
do get public attention, they are one- sided, and do not necessarily result in an
improvement in quality.
Complaints that are lodged with the Consumer Council often relate to
professional charges, health-related procedures and products. The public trust
that is placed in the Council and its widely publicised reports make it an effective
watchdog of quality.
Conclusion
Doctors frequently regard complaints as a challenge to their competence or an
annoying intrusion. Less often, they are considered in a positive light as an
opportunity to put things right. The reasons for doctors to view complaints
negatively are varied, but nevertheless deeply embedded in the socio-cultural value
system. Chinese society is hierarchical and paternalistic. People who assume
positions of authority do so either because of age or status or both. Authority
carries with it the responsibility of benevolence, and the combination of
authoritarianism and benevolence puts a person in authority on an unassailable
moral high ground where decisions cannot be questioned. This is reflected in
the way that Hong Kong society regards doctors as possessing the hearts of parents.
Working from such a vantage point, it is no wonder that doctors resent being
challenged.
In modern societies, domination is closely linked to the possession and use
of knowledge, and nowhere is this more evident than in the doctor-patient
relationship. The doctor is endowed with authority that arises from specialised
knowledge, and therefore the power to heal and to prevent death. In an unequal
relationship, the person in authority will not take kindly to being subjected to
complaints. The socialisation experiences of medical students reinforces the
special status that is accorded to the medical profession. The competition for entry
into medical school is intense, and only the very best are admitted. In Hong Kong,
as in many other places, medical students are conferred a special status that is
not enjoyed by other students, which creates a sense of superiority and provides
an aura of power.
The patient takes up a sick role that reflects a socially institutionalised set
of expectations for those who are ill. The patient is not expected to carry out a
normal social role or responsibilities, is obliged to seek competent medical care
and is expected to cooperate with medical advice and to comply with treatment.
What is not expected is that the patient may complain. Indeed, the increase in
medical litigation has engendered a defensive reflex in the medical profession.
Any hint of patient dissatisfaction is perceived to be the prelude to a demeaning
and painful process of litigation. Under such circumstances, it is difficult for a
doctor to accept complaints with grace and openness. Despite the many negative
effects on doctors individually, and the randomness of action that is taken by
patients, the value of complaints as a means to improve quality should not be
underestimated. Complainants may highlight a problem that is experienced by
many, such as the improper labelling of drugs or the lack of information from
doctors. In addition, patients and their relatives all have unique perspectives on
the health care service, and they alone experience the pains, discomforts and
dehumanising consequences of quality care. Doctors and health care organisations
thus have an obligation to address these complaints in a constructive manner.
CHAPTER
13
Quality of Care and Patient Redress:

A Patient Perspective
Chu Yiu-Ming
Chu Yiu-Ming, Baptist minister and outspoken democrat, is a former

member of the Public Complaints Committee of the Hospital Authority.
He gives a counterpoint to Lieh-Maks professional perspective on how
the patient redress system should be reformed. Chu re-emphasises the
uneven balance of power between patients and doctors, reviews the
current mechanisms of recourse to redress the balance, and articulates
the deficiencies in the status quo. He highlights overseas experiences,
such as the Bristol paediatric surgery debacle and the Shipman murders,
to forewarn a complacent public of the disastrous consequences that
are associated with benign neglect. Closer to home, he analyses several
high-profile medical mishaps, ranging from the mobile phone
colonoscopist to a neurosurgeons consistently inappropriate use of
steroids. Chu implores the medical profession to examine the ethical
dimensions of practice, and links this issue to the largely invisible
epidemic of medical errors. Like the authors of the Harvard Report,
Chu advocates a health ombudsman to provide a one-stop complaints
system with a fully independent mandate that is unfettered by existing
organisational and fiduciary relationships. He further suggests that an
ombudsman should, by statutory authority, have direct investigative
powers, the right to access the relevant information and the right to
represent complainants.
Outmoded Protection of Patients Rights

In the last 30 years, the Hong Kong government has published two reports on
hospital services. The Future Development of Medical and Health Services in
Hong Kong was a government-commissioned report authored by the Medical
Development Advisory Committee (MDAC) in 1974. The focus of the report was
the development of solutions to the serious problem of the shortage of hospital
beds at that time, and to explore ways in which new hospitals should be built in
relation to the population distribution in different districts. Improvement in the
quality of medical services was not an issue of concern for the committee (Medical
Development Advisory Committee, 1974).
Further study on the development of medical services in Hong Kong was
commissioned by the government in 1985. The final consultancy report, which
proved to have a profound influence on future policy, emphasised restructuring
of the medical services system, improving the work environment for health care
workers and recognising the overcrowded conditions in hospital wards. The report
eventually led to the formation of the Hospital Authority, a body that is
independent of the government. In these discussions, however, the most
important factor in health system reform was omitted the patients perspective
(Scott, 1985).
The government established the Hospital Authority in 1990. Freed from
bureaucratic shackles, the Authority was able to introduce modern management
principles and establish a new organisational structure. More importantly, it
included patients rights in its service pledge. The Hospital Authority Ordinance
(Cap. 113), Section 5(m), states that the Hospital Authority should establish and
maintain a system for providing a proper consideration of complaints from users
of hospital services, or of members of the public, in relation to hospital services.
In accordance with this pledge, the Hospital Authority established the Public
Complaints Committee in 1991, and appointed three of its own committee
members to take charge of it. The function of this committee is to handle
complaints about hospitals under the Authority, and is the final point of appeal
in the system.1
Reform Why and for Whom?

The closed-door and conservative culture of the medical system in Hong Kong
has long been recognised. The mechanism that oversees the conduct of
practitioners is under the complete control of doctors themselves, who have both
power and professional knowledge. People perceive the system to be unjust, and
feel that they are unable to change this situation. Despite the strength of the calls
for reform from society, patients remain at a disadvantage. Doctors are supported
and protected by the Hong Kong Public Doctors Association, which is an
organisation of doctors from the 40 hospitals under the Hospital Authority, and
other doctors associations, of which there is one in each major acute hospital.
These unions have extensive powers that are aimed at protecting the interests of
their members, which puts patients in an extremely unfair situation.
Although there are channels for complaint, the process is not transparent.
Patients or their families may lodge complaints with the Medical Council of Hong
Kong or the complaints departments of the Legislative Council, and a Public
Quality of Care and Patient Redress: A Patient Perspective 273
Complaints Committee which handles complaints about the hospitals under the
Hospital Authority. Theoretically, the interests of patients are duly protected, but
in reality this is not the case at all. Patients and their families have no confidence
in the existing mechanisms because there is no transparency in handling
complaints. Neither the complainants nor the respondents are informed about
the process of an investigation or the justifications for a ruling.
The Truth as Revealed by the Harvard Report

Functions and Role of the Medical Council
The Medical Councils professional code of conduct clearly states that the task
of the Council is not only to discipline its members, but also to protect the public
where necessary, and to seek to maintain public confidence in the profession (The
Medical Council of Hong Kong, 2000). Past incidents show that the Medical
Council has failed to maintain the professional standards of doctors, and, on the
contrary, has greatly undermined public trust in the profession.
Professional Aspirations
Cheung Sum-Yin suggested that among the various traditions and codes of
professional conduct, the most important one is to act in the interests of the
patients throughout your professional practice. The former Secretary for Health,
Welfare and Food, Yeoh Eng-Kiong, quoting Plato, stated that Greek doctors met
dead ends for many kinds of illnesses, because they lacked a holistic approach to
the human body, whereas recovery of a part of the body does not mean overall
well-being . . . It is a glaring error for the doctors of our time to treat patients
bodies and souls separately. Quoting from another scholar, he went on in our
mind, a doctor is a scientist, an educationalist and a social worker who readily
cooperates with others, cares for and serves the patients selflessly. He is a friend,
a mentor . . . a doctor of society who protects the public and enables them to
lead a healthy and happy life.
The Truth
The Harvard Report found that:
One explanation for the highly variable quality of medical services in
Hong Kong is the privilege enjoyed by the medical profession to selfregulate without interference and inadequate oversight from external
organizations. International experience shows that physicians possess
a natural dominance in medicine because of their superior medical
knowledge and professional authority. Physicians in Hong Kong are no

exception. Experience in other advanced nations also shows that the
self-regulation of a dominant profession does not protect the public
interests unless strong check and balance measures are put in place.
Hong Kong has few such measures. The leaders of organized medicine
in Hong Kong are largely graduates of one medical school and have
close professional ties to other commonwealth nations. As a result, their
professional education and beliefs tend to be similar, creating close
professional loyalties and collective defences against external criticism.
This situation has been further exacerbated by the fact that colonial
powers commonly rule through the local elite, who decide on policies
and programs; the general public, lacking influence and substantive
input, depend on the good intentions of the elite. This legacy continues
in Hong Kong, where there is little transparency or public input in
assuring quality of health care, and raises a fundamental question: are
the interests of patients and the public best served by the current
system?
(Hsiao and Yip, 1999)
The Harvard Report pointed out that the existing self-regulatory organisations
of doctors lack public participation and supervision. These organisations are
unable to ensure that complaints are properly handled, and the professional circle
is so small and the relationships among doctors so intricate that it is extremely
difficult for a doctor to testify against another doctor (Cheung, 1998).
The Three Existing Major Complaint Mechanisms

The Harvard Report asserted that the three existing channels for medical
complaints, which are detailed in the following, are far from perfect.
The Medical Council of Hong Kong

The Medical Council was established in accordance with the Medical Registration
Ordinance, and was given legal powers . . . [that] cover doctors in all branches
of medicine (Government of the Hong Kong Special Administrative Region,
2000). The Medical Council has the statutory power to govern the conduct of
doctors, but it has long been criticised by the public as a system of doctors covering
up for each other. Although doctors emphasise their professional autonomy,
there is little transparency or public input in assuring quality of health care, and
raises a fundamental question of whether the interests of patients and the public
are best served by the current system (Hsiao and Yip, 1999). As to the handling
of complaints, some legislative councillors have expressed that it is hard to believe
that the situation of doctors covering up for each other does not exist (Apple
Daily, 2001). One doctor even explicitly stated in the press that the Medical
Council should safeguard the reputation of doctors. (Ming Pao Daily News, 2001)
The Medical Council claims that it acts in compliance with the law, and believes
that it has demonstrated a great deal of courage in assuming responsibility for
the regulation of doctors (Ming Pao Daily News, 2001), but the severe criticism
that it received in the Harvard Report and the strong public impression that the
Council simply represents doctors covering up for each other belie these claims.
Professional Manipulation Is Inherent in the System
Justice requires a fair, impartial and open system. However, the Medical Council
has been accused of professional manipulation, as it is not monitored by the
public. At present, the Medical Council is a statutory professional body that acts
as an assessor of professional qualifications, a self-regulator, and in the eyes of
the public, more like a labour union. In handling complaints, it deals with the
entire process from investigation to hearing and judgement (Ming Pao Daily News,
2001). This makes the public suspicious of the Councils biased treatment in
favour of doctors.
As far as the composition is concerned, with only four appointed lay members
out of 28 in total (detailed in Chapter 12), the public has reason to be sceptical
that complaints will only be handled in a manner that safeguards the interests of
the profession, will overlook patients rights and will lead to doctors covering up
for each other (Apple Daily, 2001).
A professor at the Faculty of Medicine of the Chinese University of Hong
Kong criticised the system, saying that there are too many elected members in
the Medical Council now. As they are accountable to their voters, the fairness of
the hearing is affected. It is inevitable that the suspicion of prejudice arises (Ming
Pao Daily News, 2001). Some of the committee members from the Medical Council
admitted that as the committee is elected by doctors, committee members have
to rely on the number of votes and there is certainly some kind of burden. A
professor of a medical faculty also pointed out that the existing Medical Council
is totally behind the times. We should find ways towards radical reform (Ming
Pao Daily News, 2001).
Following the release of the Harvard Report, the public has become
increasingly dissatisfied with the way the Medical Council handles complaints.
Both the Hong Kong Medical Association and the Medical Council have claimed
that an additional two lay members will be added to the Council to soothe public
indignation at the lack of impartiality. However, the addition of two more lay
members is a political move that will not solve the inherent problems. Legislative
councillor Tsang Yok-Sing suggested that what should be reviewed is not only
who is in the Medical Council, but the entire system and all procedures as well
(Ming Pao Daily News, 2001).
Preliminary Investigation of the Medical Council
All complaints that are made to the Medical Council must go through two major
procedures. An initial decision on the complaint is made by the Chairman and
the Vice-Chairman of the Preliminary Investigation Committee. If prima facie
evidence exists to the satisfaction of both chairpersons, the case will be heard by
the Preliminary Investigation Committee. The statistics on these investigations for
the past five years are as follows (The Medical Council of Hong Kong, 1999).
Number of cases
Nature
1995 1996 1997
1998
1999 2000 2001 2002 2003 2004
Total number of cases

considered by Chairman
and Vice-Chairman of
the Preliminary
Investigation
Committee
177
168
190
245
230
227
236
287
350
311

heard by the Preliminary
Investigation Committee
78
42
44
56
39
58
80
76
108
112

14
referred by the Preliminary
Investigation Committee to
the Medical Council
for disciplinary inquiry
10
17
15
18
14
22
25
referred by the Preliminary

Investigation Committee
to the Health Committee
for inquiry
According to these figures, most complaints are dismissed by the Chairman and
the Vice-Chairman from the very beginning. The two chairmen have the right to
throw the case away without going through the Preliminary Investigation
Committee. In the end, the complainant will receive a reply letter that simply
affirms that:
After carefully reviewing and considering the relevant materials, the
Chairman and Vice-Chairman of the Committee unanimously decided
that there is no evidence to show that the doctor has committed any
misconduct in a professional respect. Therefore, in accordance with
the provisions of the above regulations, the Medical Council will not
proceed further with your complaint, and this disciplinary action will
be terminated automatically.
The unanimous termination comes without any explanation. Modern public

administration experts have long advocated a system of accountability and
increased transparency. If the Medical Council is unwilling to make changes in
this direction, then it will be abandoned by the public.
Vague Definitions and No Yardstick for Penalties
Misconduct in a professional respect is defined by the Medical Council as

follows:
If a medical practitioner in the pursuit of his profession has done
something which will be reasonably regarded as disgraceful, unethical
or dishonourable by his professional colleagues of good repute and
competency, then it is open to the Medical Council of Hong Kong, if
that be shown, to say that he has been guilty of professional misconduct.
(The Medical Council of Hong Kong, www.mchk.org.hk/complain/
index.htm accessed October 2005).
This definition is very abstract and ambiguous, and there seems to be no yardstick
against which the Councils rulings have been measured. Some examples of these
rulings are cited in the following.
Example 1
On 22 May 2000, a middle-aged woman was diagnosed as having fibroadenoma.

Within less than five hours, a doctor performed several surgical procedures on
her, including an artificial abortion, a hysterectomy, and the removal of her
ovaries and the right fallopian tube. The Medical Council ruled that this was
professional misconduct because no advice was given to the patient before the
surgery, and ruled that the surgery was inappropriate and unnecessary. The
case involved professional ethics and the patients rights. However, the Medical
Council merely issued a warning letter to the doctor in question, because it
considered the issue to be a minor problem of communication. The public was
enraged, but the Council members indignantly claimed that outsiders were not
qualified to pass comment (Hong Kong Economic Times, 2000). However,
understanding the controversy in this incident does not involve complicated
medical knowledge. Anyone who is literate would be able to understand the
meaning of inappropriate and unnecessary. The public questioned whether
appropriate disciplinary action was given to the doctor and why the Council
absolutely refused to give the public any explanation for its action. Medical services
have already entered an era of evidence, (Cheung, 1998) in which accountability
and transparency are indispensable in public administration to convince the

public.
Example 2
In 1998, a doctor used a letter from the government to promote his name, which
was ruled by the Medical Council to be professional misconduct. The doctor was
penalised with the suspension of his licence for three months. The doctor
disagreed with the ruling, and applied for a judicial review because no reason
was given by the Medical Council for the ruling. The case was heard by the Court
of Appeal in 1998, and the judge made it clear that the Medical Council should
be responsible for giving reason(s) for the ruling. The judge also stated that
the ruling of the Medical Council should never be a mere announcement of the
results, but should be furnished with facts and reasons for the ruling so that the
respondent may know why the case has been lost or won (Ming Pao Daily News,
2000). A professor at the Faculty of Law of the University of Hong Kong stated
that by giving no reason in the ruling, the Medical Council has already breached
the course of justice under common law, and the peril of this is that it could be
overruled by a superior court as being inappropriate (Ming Pao Daily News, 2000).
Example 3
In 1994, the Medical Council ruled that a private practitioner prescribed too high
a dosage of steroids for a three-year-old child for two months, which led to
suppressed adrenaline secretion and damage to the childs bodily functions. The
Medical Council considered that there had been negligence, but that it did not
amount to gross negligence. The doctor was not charged with professional
misconduct, and was simply reprimanded (Cheung, 1998).
In 2001, a private practitioner prescribed a female patient steroids at twice
the safe dosage. The steroids caused redness, swelling and hair growth on the
patients face, and thickening of the waist. Expert witnesses concluded that it was
Cushings syndrome, and the Medical Council ruled that the doctor was guilty of
professional misconduct and gave a penalty of licence suspension for one year
(Ming Pao Daily News, 2001). From the above-mentioned examples, it is obvious
that there is no yardstick for the rulings and penalties that are given by the Medical
Council, nor is any reasonable explanation provided to the relevant party or the
public.
Example 4
In April 2001, a doctor was found to have been talking on a mobile phone with
a hands-free device for 13 minutes while carrying out a colon examination and
endoscopic polyp removal in May 1999 on a taxi driver who suffered from blood
in the stools. The patient suspected that the doctor had been distracted by the
phone conversation, which led to the rupturing of his colon the chances of
which are 1 in 1,000 and resulted in the patient requiring further surgery. The
Medical Council ruled that the defendant did not commit any neglect of duty
nor professional misconduct, which caused much public discussion (The Medical
Council of Hong Kong, 2001). The reason for the controversy was simple. A
statutory professional body should make judgments based on high standards of
professional conduct, but in this case, it was not only apparent that the Medical
Council was acting contrary to common sense, but was biased in favour of the
doctor.2
The International Code of Medical Ethics (The Medical Council of Hong
Kong, www.mchk.org.hk/conduct/intrnl.htm accessed October 2005) states that
a doctor should act in the patients interest, and that treating a patient with
compassion and respect is a fundamental duty of every doctor. A professor at the
City University of Hong Kong wrote:
In this issue, what concerns us most might not be the problem of
doctors covering up for each other, but the problems of apathy towards
the rights and wrongs, the absence of a basic moral sense, and the
silence over apparently insulting behaviour. Rather than simply
prejudice, it would be more appropriate to say they suffer from the
Poverty of Moral Vocabulary. The symptom of this illness is that, in
making a judgement, what concerns them is whether it involves any
non-compliance, any act of tort and whether the procedures are fair.
Ethical considerations beyond legal aspects, such as sympathy for the
weak, respect for patients and shame of ones own mistakes, are totally
neglected.
(Mok, 2001)
Cheung Sum-Yin opined that the ethical conduct of a doctor is the lifeblood of
the study of medicine! What would be the difference between a doctor with no
ethics and a butcher or a swindler? A medically skilled doctor who is dishonest
and has no respect for life will only see his patients as prey. If he performs surgery
that should not be performed, no matter how skilfully it is done, he is merely a
cold-blooded butcher. He is nothing more than a doctor who gives out soft drugs,
a doctor who does tricks and makes up research data, or a doctor who simply
believes that other people are idiots. (The University of Hong Kong, 1996)
A professor at the Faculty of Medicine of the Chinese University of Hong
Kong asserted that:
The Medical Council is a statutory body whose job should be to
maintain medical standards and regulate doctors professional conduct.
It is not a doctors union to safeguard doctors interests. However, some
committee members are confused in their role and regard safeguarding
doctors interests as their priority.
(Ming Pao Daily News, 2001)
After the Medical Council made its ruling of no professional misconduct on the
case in the first example that was cited, a professor of urology at the Chinese
University of Hong Kong pointed out that the Medical Council should endeavour
to maintain high standards of professional conduct instead of covering up
individual doctors breaches of duty (South China Morning Post, 2000). These are
words of conscience and sincerity, and should serve as a timely warning for the
committees of the Medical Council.
Dr Yeoh Eng-Kiong, former Secretary for Health, Welfare and Food, pointed
out that no regulatory mechanism can work for decades without change. Peoples
concepts have changed. We have to keep reviewing the whole system . . . to see
whether it meets the expectations of society. (Hong Kong Economic Journal, 2001).
The president of the Hong Kong Medical Association urged fellow practitioners
to stop being defensive or yearning for the old days when they enjoyed a high
degree of freedom, but to be united and evolve with society, appropriately
responding to the requests of the public (Ming Pao Daily News, 2001).
Undoubtedly, a reform of the Medical Council is inevitable.
Public Complaints Committee of the Hospital Authority

The Public Complaints Committee holds an average of two meetings every month
to handle complaint cases, with each meeting lasting between five and six hours.
The committee members on duty meet the staff of the secretariat two or three
days a week to discuss and review documents, and meet complainants or
respondents. They also visit the relevant hospitals in person and exchange views
with the Chief Executive of the hospital or the attending doctor who is the subject
of the complaint. [According to my information, the meeting time has shortened
to about 2 hours since I left the Public Complaints Committee. Public Complaints
Committee members and staff of secretariat seldom meet during each week and
meetings with the complainants have become less often. On site visits have almost
become history.] The actual investigation of the complaint is carried out by the
hospital concerned and the Hospital Authority. However, this system has been
strongly criticised by the Hong Kong Public Doctors Association. Doctors are
dissatisfied, complainants are dissatisfied and the patients organisations and the
Public Complaints Committee are dissatisfied. What is the problem with this
system, which started out with such good intentions?
An Internal Body
The Public Complaints Committee is an internal body within the Hospital

Authority, and was established in accordance with the Hospital Authority
Ordinance (Cap 113), Section 5(m) with the aim of providing a proper
consideration of complaints from users of hospital services, or of members of the
public, in relation to hospital services. Unfortunately, as the committee has no

statutory status, it does not have direct investigative powers. In extreme cases,
doctors and nurses under the Hospital Authority can even refuse to attend
interviews (South China Morning Post, 2001).
Independence of the Public Complaints Committee
The ex-Assistant Secretary for the Treasury Carrie Lam Cheng Yuet-Ngor suggested
that the Secretariat of the Public Complaints Committee should become an
independent body to allow people to see its independent operation (Ming Pao
Daily News, 1999). The terms of reference for the Public Complains Committee
state that the Committee shall independently consider and decide upon
complaints from members of the public .... and complaints referred by the
Hospital Authority, Legislative Council Secretariat and other channels of
complaint (Hospital Authority, 1999). As the Public Complaints Committee
Secretariat falls under the Hospital Authority, its independence is in question.
With respect to the Hospital Authoritys handling of complaints, Dr Yeoh EngKiong explained that:
The Hospital Authority has designated staff who give assistance to the
Public Complaints Committee in handling complaints. This includes
one Assistant Chief Executive and five officials. They are responsible
for obtaining information from the relevant hospital for analysis and
assessment of the complaint, and should seek professional opinions
from medical experts where necessary. In addition, eight Hospital
Authority cluster managers who are doctors themselves will also provide
assistance and advice.
The investigation of complaints is conducted entirely by the hospital that is the

subject of the complaint, and mainly by the Chief Executive of the hospital, which
means that the hospital is essentially investigating itself. Everyone from the Chief
Executive, to consultant doctors to workmen can influence the investigation
report. That which is presented to the committee is the investigation results as
arrived at by the hospital, and the analytical assessment of the Hospital Authority.
Carrie Lam, an ex-board member of the Hospital Authority, had always hoped
that the Public Complaints Committee would set up an independent secretariat,
as she believed that this would help complainants in clinical incidents in a fairer
and more proactive way (Singtao Daily, 1999). The Chairman of the Alliance for
Patients Mutual Help Organisations, who is also a Board member of the Hospital
Authority and a member of the Public Complaints Committee, also admitted that
the committee members lacked independence. As she pointed out:
There is no independent secretariat for the Public Complaints
Committee, so all correspondence, collection of information, [and]
meeting arrangements are handled by the Hospital Authority
Secretariat. Serving both the Committee and the Authority and

handling complaints against their own buddies, the Secretariat has
little credibility under this conflict of interests. Even some of the
committee members are unable to shake off the burden of the
Authority, as they would sometimes consider the stance of the Authority
in handling complaints.
(Singtao Daily, 2000)
The Opinion of Independent Experts
The terms of reference of the Public Complaints Committee states that the
Committee shall independently cause complaints to be investigated and, if
considered appropriate, commission Expert Panel(s) from HA, or private practice,
or overseas to investigate and advise on complaints (Hospital Authority, 1999).
Legislative councillor Cheng Kar-Foo, who often assists the public in making
medical complaints, thinks that the Public Complaints Committee only relies on
the Hospital Authority experts opinions, and an appeal mechanism is absent. It
is not independent and comprehensive enough . . . In the doctors circle, there
are many teacher-student relationships and people know each other. There are
always issues like giving face and doctors covering up for each other is inevitable
(Singtao Daily, 1999). A large pool of resources is available to the Hospital
Authority, with 500 consultants alone, whereas a complainant, even if they are
willing to pay, is unlikely to be able to entice any expert to testify for them. A
complainant once asked anxiously, how can an individual fight for justice against
the enormous Hospital Authority? As to the suggestion of appointing overseas
experts, there has been no move towards this practice.
The Public Complaints Committee has to make its final decision on a case,
based on an expert report. Experts are appointed by the hospital or the Hospital
Authority, and provide a full report to Public Complaints Committee. However,
if independent experts opinion differs from those of the hospital complained
about, then the reports are usually given to the Hospital Chief Executive,
consultants and the attending doctors of the hospital concerned, who can respond
to or comment on it. The complainants are not allowed to obtain or inspect this
report. This unfair procedure leads many complainants to consider the Public
Complaints Committees handling of complaints to be greatly compromised.
The Public Complaints Committee A Virtual Entity?
Cheng Kar-Foo has claimed that the Public Complaints Committee lacks
transparency . . . and has no statutory powers, so it is incapable of fighting for
justice for the public. (Apple Daily, 2001) The Chairman of the Medical Council
said in a radio programme in 2001 that the Public Complaints Committee suffered
as much from a lack of credibility as the Medical Council.
Given that the Public Complaints Committee does not have statutory powers
to summon the relevant medical staff to give statements in a direct investigation,
that the Secretariat is run by staff of the Hospital Authority, and that the
committee meetings are held in private without any channel for public
participation, its transparency and accountability are highly doubtful. Regardless
of how hard the Committee and its Chairman try, they fail to win the trust of the
public.
The Public Complaints Committee Is Influenced by the Hospital Authoritys Legal
Advisers
There is a legal advisers office in the Hospital Authority that is responsible for
handling complaints. Reply letters from hospitals or complaint letters from the
public are first reviewed by the lawyers in the Authority to avoid potential liability3
or to maintain a more favourable position in the event of litigation. Consequently,
cases that are being heard by the Public Complaints Committee can be delayed
by months.
Dr Conrad Lam Kui-Shing, an ex-board member of the Hospital Authority
and a member of the Public Complaints Committee, raised a pertinent question
in one of the board meetings: how should the Public Complaints Committee
obtain appropriate legal support? The answer that was given by the Chairman
of the Board was that the Public Complaints Committee should consider having
its own legal advisers. However, this proposal has never been explored.
The Truth Unveiled?
The duty of the Public Complaints Committee is restricted to finding out the
truth. Therefore, although the defendants in some cases may be found culpable,
it is beyond the scope and authority of the Committees duties to decide whether
the complainant will receive redress, or how the staff concerned will be penalised.
Furthermore, any suggestion that is made about the improvement of the hospital
system must await follow up by the management of the Hospital Authority. In
most cases, the results are unknown.
The Hong Kong Public Doctors Association Refuses to Cooperate
As the labour union of doctors in the public medical system, the Hong Kong
Public Doctors Association has a huge influence. In a radio interview on 14
September 2000, its chairman asked doctors not to attend any Public Complaints
Committee hearings, or, if they had to attend, to remain silent.
In September 2000, the Chairman of the Hong Kong Public Doctors
Association sent a letter to all doctors in the public medical system asking them
not to attend hearings of the Public Complaints Committee and only to make
written reports (South China Morning Post, 2000).
On 11 March 2000, an article entitle (Diary of medical

practice by a little doctor) was published under the name . The articles
content, which was completely fabricated and very provocative, aimed at confusing
the public and defaming the Public Complaints Committee. The senior
management of the hospitals came under fire and the management of the
Hospital Authority were well aware of the truth, but they were unwilling to clarify
the situation lest they offend the doctors union (Hong Kong Economic Journal,
2001). The Committee still bears the weight of this unjust accusation.
The Department of Health

The Department of Health currently still provides out-patient services, and also
monitors the private hospitals. However, what the Department of Health has done
in the past in relation to the complaint channels, investigation procedure,
investigation results, etc, is grossly unknown to the public. Since the Department
of Health handles complaints directed against services provided by the
department, the fairness of decision will certainly be questioned by the public
(Ming Pao Daily News, 2001). After the Hospital Authority took over the General
Out-patient Department, data in June 2005 showed that the number of the GOPD
complaints was at the top of the complaints list.
The professional manipulation of the three complaint mechanisms as
criticised by the public and the Harvard Report has not changed. Each of the
mechanisms is only responsible for handling part of the complaints process. The
public has difficulty in identifying and finding the right channel for complaints,
and as a result, complaints are not handled in a reasonable and fair manner.4
Other Mechanisms
Office of the Ombudsman
The Office of the Ombudsman reportedly receives an average of 200 medically

related complaints a year, half of which relate to the Hospital Authority. However,
the Office of the Ombudsman is unable to look into these cases fully, because its
authority is restricted to cases that concern maladministration. As medical
malpractice is beyond its remit, it has to refer the cases to other organisations,
rather than handling them itself from beginning to end (Hong Kong Economic
Times, 2001).
Consumer Council
The Chief Executive of the Consumer Council considers the current mechanisms
are confusing for patients, and has suggested the formation of an independent
and transparent mechanism that is designated to handle the complaints of patients

(Ming Pao Daily News, 2001). The Chief Executive of the Council stated that:
To regain the credibility of the Medical Council and to allow doctors
to restore their professional image, the Medical Council must carry out
drastic reform. Doctors conduct should no longer be assessed solely
by fellow practitioners as to whether there has been professional
misconduct. This should be jointly determined by the public, judges,
patients interests groups and consumer rights groups.
(Singtao Daily, 2001).
Equal Opportunities Commission
Established in accordance with the law, the Equal Opportunities Commission can
only handle complaints that are related to disability and sexual discrimination.
By law it cannot handle cases that involve clinical incidents.5
Councillors
Legislative and district councillors can only help in the referral of cases. They do
not have the authority to handle complaints.
The Judicial System
Not everyone can afford the high costs of litigation (Eu, 2001).6 For those who
are qualified for Legal Aid, they have one more hurdle to get over. Since the
Legal Aid Department lacks the professional expertise to decide whether the case
has sufficient ground to proceed, the qualified applicants may be turned down
even though they have a favourable case clinically.
Moving into a New Era and Revitalising Medical Culture

In the UK, the tragedies involving the malpractice of paediatric cardiac surgeons7
and the case of Harold Shipman8 stimulated demand for a thorough reform of
the existing regulatory system. In just a few years, drastic reform had taken place
throughout the National Health Service and the British Medical Association. This
kind of change should also be pushed through in Hong Kong, with attention
being paid to the following areas.
Professional Autonomy
The fundamental missions of professional medical bodies are to protect patients
and safeguard public interests (General Medical Council, 1995). Although there
is a Medical Association, an Academy of Medicine and a Medical Council in Hong

Kong, they seldom talk about how to set standards for their services. A high
standard of service is the key to public confidence in the medical system. Every
clinical incident has a cause, and what is needed in the investigation of such
incidents is to find out the root of the problem so that it can be rectified and
prevented in the future. Many Hong Kong doctors believe that laymen are
ignorant, but as professional bodies undertake no self-evaluation or review, the
publics main perception of them is that they are reluctant to improve and are
irrational. Having learned this lesson, the UK revised the service standards and
indicators of the National Health Service and the General Medical Council
(General Medical Council, 1999). Is it not also time for professional medical
bodies in Hong Kong to emerge from their elitism?
Competence and Conduct Go Hand in Hand

In the phone surgeon incident, no matter how hard the Medical Council tried
to give an explanation, it was never accepted by the public. The reason behind
this was simple: the Medical Council thought that the doctor should not be held
responsible as long as there was no legal liability, but it overlooked the doctors
ethical responsibilities. As Audrey Eu commented, without any legal provisions,
we can only hope for health care professionals to establish a mindset of respecting
the patients (Eu, 2001). Lam Sam-Chi wrote that medical competence and
ethical conduct must be more unified in professional autonomy to allow dignity
for the profession. (Hong Kong Economic Journal, 1999).
Professionalism
It has been reported that 70% of health care providers believe that the patients
charter has caused a great deal of trouble and has led to unnecessary complaints
(South China Morning Post, 2001). The patients charter, once highly advocated
by the Hospital Authority and government is now seldom mentioned. If it is no
longer considered inportant, then medical culture is still rooted in the past and
has not evolved with time. Patients need to know about their medical condition
and the side effects of therapy and treatment methods. Is there a problem with
this? Is it not the responsibility of doctors to explain this to patients? The reaction
of the medical profession is puzzling.
After the phone surgeon incident, the Chairman of the Hong Kong Public
Doctors Association said that each patient should be regarded as a potential
complainant and we should keep a suitable distance from them. Do not establish
a doctor-patient relationship easily (Apple Daily, 2001). Such an attitude will surely
be a hindrance to any reform of the medical system. As Mok Ka-Tung wrote, the
challenge ahead is rather the mending of the relationship between doctors and
patients than restructuring the medical inquiry system. What we need to do is
not only add lay members, but also discuss the medical ethics which are beyond
legal procedures (Hong Kong Economic Journal, 2001).
Maintaining Strengths and Correcting Weaknesses in a Lifelong

Learning Process
Patient-Oriented
In the United States, there are 98,000 deaths due to clinical error every year. In
response to this figure, an ad-hoc committee was appointed during the Clinton
presidency to deal with matters that were related to patient safety. On the advice
of the committee, the National Centre for Patient Safety was established to deal
with the relevant issues with a view to arousing public attention to patient interests.
The conducting of research projects and long-term policy studies, such as
population forecasts, are some of the major tasks of the centre. A database of
clinical incidents has also been created as a means of preventing further incidents
in the future. The centre both provides technical assistance for complainants and
conducts research projects and policy research to improve or introduce new
elements into the medical system (Kohn et al., 1999).
The Independent Mechanism in the UK Has Achieved Remarkable Results

The UK government has long recognised the importance of independent
complaints mechanisms. In the UK, the General Medical Council is undergoing
substantial changes. The number of lay people in its 104-person membership will
be increased from 25% to 50%, and the position of chairman will be taken by a
lay member. Lay members will be appointed based on specific, open principles
to enhance accountability and credibility. In dealing with complaints, investigation
will be separate from judgment. Another council will be formed to handle
professional matters under the General Medical Councils supervision, in which
the ratio of professionals to lay people will be 6 to 4. In addition, there will be a
Commissioner of Health Care Complaints, who will be appointed by the
government pursuant to the Public Appointments Order 1993 (General Medical
Council, 2001).
At the community level, there is a charitable organisation called Action for
Victims of Medical Accidents that is devoted to providing free professional and
legal advice for complainants (www.avma.org.uk/index.asp site accessed October
2005). Through the trust and mutual help of the GMC and such nongovernmental organisations, the protection for complainants has been greatly
enhanced.
Australia
According to the medical protection provisions of the Australian federal
government, each state in Australia is obliged to set up an independent complaints
committee to handle medical complaints. For example, the Health Care
Complaints Commission in New South Wales is an independent statutory body
that directly reports to the Minister for Health. Its duties include handling medical
complaints and setting out the code of conduct for the profession; investigating
complaint cases and making prosecutions; following up investigation reports;
publishing and distributing materials about lodging complaints; providing
information for professional bodies and educational bodies about the handling
of complaints; providing forecasts of complaint patterns for the Minister to
improve the existing medical policy; and seeking advice and opinions from
professional bodies, public and private health care providers and the general
public on medical complaints procedures. Australias medical complaints system
is committed to the protection of the interests of complainants, but at the same
time, emphasis is placed on maintaining flexibility in the culture and policy of
medical complaints (Health Care Complaints Commission, 2001).
Meet the Challenge and Seize the Opportunity

Although the Medical Council is losing the trust of the public, and the Hong Kong
Public Doctors Association is reluctant to co-operate with the Public Complaints
Committee, some medical professionals (Research and Library Services Division,
2001) and the general public are urging the formation of an independent
complaints system. It is time that the government show its determination and
courage in taking up the new challenge. The new complaints mechanism should
meet the following criteria and principles.
An Independent Statutory Body

The complaints mechanisms in most developed countries are accountable to the
public, whether through parliament or the legislative body, and are independent
of the government structure (Kohn et al., 1999). Our future complaints
mechanism should also be independent of the Hospital Authority, the professional
medical bodies and the Department of Health or other government departments,
and should be of a similar nature to other statutory bodies, such as the Office of
the Ombudsman, the Consumer Council and the Equal Opportunities
Commission.
A One-Stop Complaints Mechanism

As its name suggests, with a one-stop complaints mechanism complainants do not
need to relive their sufferings in multiple complaints procedures. The pain that
is borne by complainants in making their complaints is beyond imagination. To
avoid unnecessary pressure on complainants, a one-stop complaints mechanism
is imperative.
Direct Investigative Power

The independent complaints mechanism should have direct investigative powers,
because the truthfulness, reliability and thoroughness of an investigation all have
profound effects on the judgment of a case. Without the power to directly conduct
investigations, it is difficult for the existing Public Complaints Committee to
monitor the truthfulness of a hospitals investigation. Dr Yeoh Eng-Kiong pointed
out that the Medical Council lacks the investigative powers to make the necessary
accusations (Ming Pao Daily, 2001). A new mechanism that has direct investigative
powers would avoid time wasting and possible deviations from the facts.
The Right to Access Information

Patients often encounter difficulties in producing evidence. Many may not even
know the kind of information that is available or that they are entitled to access
it. The failure to obtain crucial information, such as expert reports, is often the
reason why a complaint is improperly handled. The complainant is in an
extremely unfavourable position, and the complaint may simply be terminated
as a result. The new complaints mechanism should be empowered to obtain
information from the relevant hospitals or doctors on behalf of the complainant,
so that the complainant and respondent are on an equal footing.
Right of Representation
Complainants are totally helpless when making a complaint, and often face
technical difficulties, as they are obliged to state sufficient reasons and evidence
in support of their cases. However, this is extremely difficult for a complainant
with no medical knowledge, especially as most of the information is only available
to the doctors. Therefore, the new independent mechanism should be vested with
statutory powers to initiate litigation on behalf of patients, and to help
complainants to gather evidence. Furthermore, as complainants have to pay the
legal costs in civil actions and run the risk of an unfavourable award, such as
paying costs, they seldom institute such actions (Ming Pao Daily News, 2001).
Conclusion
Death happens in only a moment, but it represents eternal parting with loved
ones. Although birth, ageing, illnesses and death form the inevitable process of
life that no one can escape, and it is true that some illnesses are incurable, it is
nevertheless sad, stirring and grievous whenever there is any medical incident that
could lead to severe physical impairment, if not death. This kind of feeling is
shared by everyone who has mercy.
According to surveys conducted by foreign experts, 80% of medical incidents
are caused by problems with the system and 20% are caused by human mistakes
(Berwick et al., 2002). Resources in public hospitals are in constant shortage, and
health care workers face a huge workload. A paediatric ward of 50 patients, for
example, is allocated only one registered nurse, one enrolled nurse and one
student nurse for the night shift how are they supposed to take care of
everything (Apple Daily, 1999)?
Although the government is advocating value-added services, this represents
nothing more than a reduction of funding and manpower for hospitals. Highrisk hours arose because of doctors working prolonged hours and a lack of
manpower in general, as well as the lack of senior doctors during holidays and at
midnight to carry out ward visits and supervision.9 Neither doctors nor patients
are content with this situation, and there are new complaints every day. This is
the root of the problem that must be solved by the government.
In recent years, the cost of professional indemnity insurance for doctors has
soared. Presumably, this is due to the growing number of claims for medical
incidents. The number of complaints against the Hospital Authority is also on
the rise (Hospsital Authority, 2004). Both situations suggest that the quality of
services in the public health care system is declining. The relationship between
patients and doctors should be one of partnership; moreover, doctors are the
guardians of patients interests. Now that some doctors organisations, patients
interests groups and the public agree that there should be an independent
complaint mechanism, it is time that the government begin medical reform with
determination and courage (Research and Library Services Division, 2001).
Nurses as Agents of Quality Improvement 291
CHAPTER
14
Nurses as Agents of Quality Improvement

Sophia Chan, David R. Thompson and Thomas Wong
Sophia Chan, David Thompson and Thomas Wong, the three heads
or deans of nursing in Hong Kong, seek to redefine the role of the
largest health care profession. They argue persuasively that the
traditionally marginalised area of nursing must be incorporated into
the mainstream by policy and decision makers if the health system is
to achieve optimal outcomes for patients, and cite evidence from
overseas while challenging Hong Kong authorities and researchers to
undertake a detailed examination of the local impact of the staffing
levels and quality of nursing. If it took the Crimean War to revolutionise
the discipline in the West, then surely SARS was the defining moment
in Hong Kongs evolution towards a new model of nursing
practice. Many of the lessons that are highlighted in this chapter are
equally applicable to other allied health professions that lamentably lag
behind their counterparts in the rest of the developed world. The
system needs the collective wisdom of all of its constituent workers to
successfully manage the health care liability that is imposed by the
double disease burden of emerging infectious diseases and chronic
diseases that are brought on by demography and lifestyle.
Introduction
There has been an information explosion in science and technology, an ageing
of the population, changes in health financing, escalating public expectations of
the quality of the services and a growing recognition of the need to deliver high
quality, safe and effective health care to patients to attain better health outcomes.
The shift to a growing population that is mobile, ageing and has (often multiple)
chronic diseases, along with the menace of emerging and re-emerging infections
are likely to be the major threats to the health of the global community. Nurses,
like other health professionals, are rapidly rising to meet these complex challenges
to thrive in the ever-changing health care environment.
Over the years, Hong Kongs health system has experienced many changes,
particularly in the areas of health and medical leadership, service landmarks and
the political environment (Leong, 2002). Since the establishment of the Hospital
Authority, changes have occurred in service organisation and provision, such as
an improvement in clinical efficiency, the re-engineering and rationing of services,
more visible accountability, and better teamwork (Leung, 2002). These changes
have in turn influenced the restructuring of the nature and processes of nursing
work, and have led to the development of new roles for nurses (Wong, 1998) and
recognition of the need for a nursing workforce that has the competence to
improve the health outcomes of patients. Leung (2002) suggested a paradigm
shift in disease management strategies that involves the more integrated approach
of including family education, the promotion of self-management, care process
re-engineering, the adoption of evidence-based protocols and an infrastructure
of information technology to support implementation and evaluation. The success
of this framework requires the creation of an appropriate health care
environment, but, more importantly, the collaborative efforts of a multidisciplinary
team of health care professionals and a highly educated nursing workforce. This
chapter highlights recent developments in the role of nursing in Hong Kong,
the shortage of nurses and its implications, the need to invest in quality nursing
education to achieve better health outcomes and the importance of a
multidisciplinary effort to influence policy development.
Role Development in Nursing

The health service in Hong Kong has undergone significant changes since the
Hospital Authority was established 15 years ago. Continuous efforts to improve
quality have led the Hospital Authority to gradually develop a culture of change.
Staff now recognise that they have an obligation to change for the benefit of
patients and their families, and nurses, as integral members of the health care
team, are no exception. New nursing roles have evolved that have signalled the
move from a functional to a holistic focus and from a task-based to a peoplefocused orientation. Nurses have gradually received greater recognition for their
professional autonomy and expertise, and the establishment of the Nurse
Specialist and Advanced Practice Nurse positions within the career structure of
nursing reflects the organisational acceptance that has been accorded these new
roles and responsibilities.
It is important to evaluate the many changes that have been implemented
by the Hospital Authority within the context of the nursing profession in Hong
Kong. The Hospital Authority governs 44 public hospitals and 29,188 beds. As at
March 2004, over 55% (19,147) of Hong Kongs 34,574 practising nurses, which
means those with practising certificates (December 2004), work in various
departments or units of the Hospital Authority (Hong Kong Nursing Council,
2004; Hong Kong Hospital Authority, 2004). Based on findings from the 2000
Health Manpower Survey (Department of Health, 2002), it can be inferred that
no fewer than 25% of Hong Kongs practising nurses are either inactive or
practising overseas,1 and the remaining 20% work either in the private sector or
for the government. Therefore, it is not unreasonable to assume that any changes
which affect nurses who practise with the Hospital Authority will also affect those
who practise elsewhere in Hong Kong. Of the 19,147 Hospital Authority nurses,
7% work in the community in areas such as General Outpatient Clinics, Specialist
Outpatient Clinics, Community Geriatric Assessment Teams and Community
Nursing Services, and another 11% work in hospitals that do not have accident
and emergency departments, that is, in non-acute, infirmary and rehabilitation
care. The remaining 82% work in acute care settings, with over 1,100 working in
Hong Kongs two major psychiatric hospitals.
When the Hospital Authority was founded, a major initiative was undertaken
to streamline the structure of nursing as a career. Chief Nursing Officers became
General Managers in Nursing, the primary role of which is to oversee the practice
of nursing in a hospital, and most of the administrative duties that are related to
human resources have been removed from the position. Furthermore, there is
no line function between the General Managers in Nursing and the Department
Operation Managers, or what were known as Nursing Officers I under the old
structure. The Department Operation Managers work under the supervision of
the Chief of Service, who is the doctor in charge of a department. Each
department has a Ward Manager, which is the new designation for a Nursing
Officer II, whose role is to manage the everyday operation of the ward.
The required staff mix has also changed along with the roles of the senior
nurses. Consequently, the Hospital Authority has conducted a study to examine
nursing manpower requirements with the objective of establishing a manpower
indicator. The study generated much controversy, as manpower has always been
a major concern of the nursing trade unions. The study was only able to produce
some guidelines to estimate nursing manpower needs, and nurses continued to
demand additional manpower. The Hospital Authority responded by introducing
another type of quasi-nursing position for clinical departments, the Health Care
Assistant, thus defusing the manpower shortage issue. However, nurses were often
too busy to train these Health Care Assistants or to adjust their working practice
to include them.
At the same time, the Hospital Authority felt the need to reward nurses who
excelled in their clinical work. A new grade Nurse Specialist was created to
reflect the importance of clinical competency in the nursing profession. There
are currently 190 Nurse Specialists, or approximately 1% of all Hospital Authority
nursing employees, practising in public hospitals (Hong Kong Hospital Authority,
2004). It is interesting to note that the roles of these specialists vary across hospitals
and departments. In some hospitals, Nurse Specialists work independently of the
clinical departments and visit patients wherever they are admitted if a patients
problems fall within their specialty. For example, a diabetes Nurse Specialist may
see patients in wards other than those of the medical departments. Therefore, it
is not unusual for nurse specialists to report to the General Manager in Nursing
of the hospital, although this is obviously not the case for all specialties. For
example, renal Nurse Specialists primarily practise in nephrology departments
and report to the corresponding Chiefs of Service. This variation across specialities
has further fuelled the debate on role differentiation.
Because of the structural adjustments and other developments in the Hospital
Authority, the nursing profession is now poised to consider another series of
reform of Hospital Authority nursing grades and career structure. A new grade
Advanced Practice Nurse was introduced in 2002, which allows hospitals to
promote very experienced nurses to a senior position without having to delegate
patient care to less experienced colleagues. There are 1,707 Advanced Practice
Nurses, or approximately 9% of all nursing employees including those who carry
the title of Nursing Officer, now practising in the Hospital Authority (Hong Kong
Hospital Authority, 2004). However, as the grade is still new to nursing and
hospitals, its effectiveness cannot yet be determined.
Another initiative of the Hospital Authority has been its support for the
development of nurse-led interventions that contribute to the care that is given
to patients and their families. Current initiatives include the nurse-led
management of chronic diseases such as diabetes, and of chronic health problems
such as urinary incontinence. Although nurse-led initiatives have been developed
in the General Out-patient Clinics with interventions in smoking cessation and
the monitoring of diabetes, there are currently no community-based nursing
programmes, such as home-based or clinic-based interventions for older people
with chronic heart failure, yet there is no doubt that nurses can play an important
role in improving quality of life and reducing readmissions, morbidity, and even
mortality and health care costs. (Thomson & Stewart 2002).
The Drivers of Advanced Nursing Practice

The advancement of nursing practice depends to a large extent on contemporary
societal health care needs and demands such as an ageing population, new
knowledge and technology, and increased patient and professional expectations
and its responsiveness to them. Nursing in Hong Kong, as in other parts of
the world, is re-inventing itself to meet these new challenges, and over the past
decade there have been significant developments in advanced nursing practice
in a range of clinical settings. These developments have focused on two particular
areas: the definitions of advanced practice and the competencies that are required
to practise at this level, and the contribution of advanced practice to patient
outcomes. It has become necessary to conceptualise and clarify the boundaries
and scope of the plethora of new roles in nursing, such as Advanced Nurse
Practitioner, Nurse Practitioner, Clinical Nurse Specialist and Nurse Consultant
(Thompson & Watson 2003). In terms of patient outcomes, advanced nurse

practitioners have been shown to effectively manage pain and anxiety, and to
improve knowledge, satisfaction and self-care activities (Horrocks et al. 2002).
There is also evidence that they are cost-effective (Byers & Brunell 1998).
In Hong Kong the development of nursing practice has focused mainly on
clinical nurse specialists and the contribution of this role to patient care. A recent
case study of primary care settings in Hong Kong identified four important issues
that determine the development of advanced nursing practice (Twinn et al. 2005):
the definition of advanced nursing practice and the level of autonomy that is
available, the skill mix and its implications for development in practice, the
perceptions of individual nurses and their contribution to practice and the
expectations of patients regarding care. Twinn et al. proposed a model of
advanced nursing practice that highlights the importance of the skills that are
needed for a registered nurse to triage patients for consultations with either
physicians or advanced nurse practitioners. The model highlights the significance
of agreed protocols between nurses and physicians for the process of consultation,
assessment, prescription and discharge.
The Nursing Workforce

There are 34,574 nurses with practising certificates in Hong Kong, which means
that Hong Kong, with its population of 6,803,100 (Hong Kong Annual Digest of
Statistics, 2004), has one nurse for every 197 people, or 5.08 nurses per 1,000
people. This ratio is lower than that of many developed countries, such as Japan
(5.15 per 1,000 in 2000), Singapore (5.12 per 1,000 in 2001), Australia (10.56
per 1,000 in 2001), New Zealand (8.5 per 1,000 in 2001), the United Kingdom
(5.6 per 1,000 in 2001), Canada (7.5 per 1,000 in 1999) and the United States
(7.99 per 1,000 in 2000), but higher than that of mainland China (1.01 per 1,000
in 2001), Taiwan (3.69 per 1,000 in 2001), South Korea (3.61 per 1,000 in 2001)
and Thailand (1.17 per 1,000 in 2000) (Hospital Authority, 2003).
Do these figures imply that Hong Kong does not have enough nurses to meet
its health needs? Is the practice of nursing in Hong Kong different from that in
other countries and therefore requires less manpower? These are not easy
questions to answer. Nevertheless, repeated studies have shown that lower numbers
of hospital nursing staff are associated with more adverse health outcomes, such
as pneumonia, shock, cardiac arrest and urinary tract infection, and that higher
numbers of registered nursing staff are associated with a 3% to 12% reduction
in adverse outcomes (Agency for Health Care Research and Quality, 2004). A study
by Aiken et al. (2003) showed that both lower patient-to-nurse ratios and a higher
proportion of nurses who have been educated to baccalaureate level or higher
appeared to be jointly associated with substantially lower mortality and failureto-rescue rates in surgical patients. These findings suggest that the traditional
perception that the experience of nurses is more important than their educational
preparation may be incorrect, and that investment in nursing education is
necessary to achieve better health outcomes. Furthermore, insufficient staffing
levels for nurses have significant implications for financial costs. According to a
report by the Agency for Health Care Research and Quality (2004), all of the
adverse events that were studied (pneumonia, pressure ulcer, urinary tract
infection, wound infection, patient fall or injury, sepsis and adverse drug events)
were associated with increased cost. In particular, pressure ulcers and adverse
patient events that are related to nursing care are estimated to cost US$8.5 billion
per year (Buerhaus and Needleman, 2000).
Many variables can alter the demand for nurses. For example, staff mix, role
expectations, disease patterns, the use of technology and human geography can
all affect demand. The worldwide nursing shortage is a complex and multifaceted
phenomenon. In Hong Kong, the underlying tensions that have led to this
shortage have been debated in the correspondence columns of major newspapers,
with leading proponents and opponents of various schools of thought on nursing
education from both the public and private sectors sparring over whether to revive
traditional hospital-based, sub-degree nursing courses (which were the norm
throughout Hong Kong for decades but are now relegated to just a handful of
private hospitals) or to completely switch over to admitting university-trained
graduates into the profession in line with the rest of the developed world. Given
our positions in academia, we must declare that there may be an apparent conflict
of interest. However, studies since the 1990s, such as those of Aitken et al. (since
then repeated in many other settings), have demonstrated unequivocally the
probable positive causal link between the quality and the quantity of nursing staff
and direct observable clinical outcomes. To revert back to the previous system
would be almost akin to asking surgeons to accept barbers as junior colleagues
in the operating theatre. There is simply no place for any spurious, economicbased, or historical anachronisms to be sustained in twenty-first century Hong
Kong, which boasts an annual gross domestic product that is higher than that of
most OECD member states. Thus, we believe that existing nurse staffing levels
should be urgently reviewed, and that any adjustments should be made by
increasing recruitment and the development of a vigorous scheme for retention.
However, ensuring an adequate supply of nurses is but one part of the problem.
The provision of a conducive environment for appropriate professional and career
development is also a key issue that needs to be tackled, and to improve clinical
care outcomes, nurses need to take a more active role in developing empirical
evidence to influence health policy. Nurses are in a good position to conduct a
systematic review of nursing manpower and its impact on patient outcomes.
Measures of acuity and quality and data on nurse staffing are needed to explain
the complex relationship between staffing levels and quality of care in Hong Kong.
In addition, further research is needed to examine the critical issues of how
staffing, fatigue, stress, sleep deprivation, organisational culture, shift work and
other factors can lead to errors (Agency for Health Care Research and Quality,
2004). Stakeholders in the government and the private sector are aware of the
lack of qualified nurses, and are actively working to find ways to solve the problem.
The Cost/Quality Nexus in Nursing Education

Scientific and medical advances have resulted in new and complex challenges that
require professional nurses to have a practice qualification at bachelors degree
level. Hong Kong started its first nursing degree programme in 1990, and the
universities now play an important role in contributing to the quality of health
care outcomes through their nursing programmes, which prepare nurses for the
increasingly complex demands of the health care sector. Whether or not nurses
need a degree to provide optimal patient care has been hotly debated for many
years, and strong opinions are held on both sides of the argument. A recent largescale study that was conducted in the United States demonstrating that seriously
ill patients are less likely to die when cared for by degree-trained nurses (Aiken
et al., 2002) is at odds with recent communications in Hong Kong newspapers
about nurses not requiring degree-level training. Why does this matter? It matters
because the education debate is one dimension of a deeper and more troubling
issue, which is the chronic and seemingly intractable shortage of nurses worldwide.
This is a matter of grave concern for government authorities, hospitals and health
care facilities, who cannot keep up with the demand for nurses.
Nursing is both a science and a practice discipline. It is the study and practice
of the human health experience, and aims to promote, maintain and restore
health. Professional nurses need a sound knowledge base in the art and science
of nursing, a caring attitude and the necessary critical thinking and
communication skills. The reform of nursing education to require nurses to have
a degree to practise is critical to enhancing the quality of health care in Hong
Kong. University schools of nursing are committed to producing graduates who
can provide high quality and cost-effective care. The Hong Kong government has
given a clear indication of its support for a quality nursing workforce through its
commitment to the four-year degree level preparation for practice, and has also
recognised the importance of additional educational preparation at Masters level
and beyond for nurses who want to move into advanced practice, education,
research and policy roles. However, with the global shortage of nurses there are
increasing pressures upon the profession to support additional educational
programmes that produce nurses more quickly. With the ever increasing
requirements for both financial stringency and accountable practice in health
care, current work practices need to be continuously examined to ensure that
they are both cost-effective and in line with international best practice. University
nursing programmes are preparing graduates to practise in environments that
are driven by the demand for high quality, cost-effective health outcomes, and
university schools of nursing in Hong Kong have an important role to play in

providing evidence to influence policy decisions to support the four-year entry
to practice degree.
There is a fine balance that must be struck between what university
departments of nursing are producing and what is required or demanded by the
health service of Hong Kong. One of the criticisms that is levelled at universities
is that they are too theoretical, and put too little emphasis on practice issues or
the needs and demands of the health care service. It is often difficult to strike a
balance, especially with the current pressures of the nursing shortage, but
universities are mindful of producing nurses who are deemed to be fit for practice.
However, it is vital that service colleagues understand that nursing students also
need a strong theoretical grounding. Nursing education should be challenging,
self-developing and motivating, not just a supply convoy for the staffing of
hospitals.
In the United States, a report on quality in nursing set forth six national
quality aims: safety, effectiveness, patient-centredness, timeliness, efficiency and
equity in an effort to solve the problem of the mismatch between what is known
to be good quality care and the care that is actually delivered (Kenebel and
Greiner 2003). Core competencies must be identified to develop a new vision
for the education of health professionals. To allow this vision to be achieved, all
health professionals should be educated to deliver patient-centred care in a
multidisciplinary team in which evidence-based, quality improvement approaches
and informatics are emphasised, and both the academic and practice settings need
to work together to meet the needs of the twenty-first century health system.
Multidisciplinary Collaboration
Although a high quality nursing workforce is of paramount importance to any
health system that purports to achieve optimal patient outcomes, it is equally
important to recognise that nursing does not operate in isolation or in a specific
sphere. In an era of increasing specialisation and cost containment, nursing is
moving into an interdisciplinary, team-based and consumer-oriented arena. Issues
such as scope of practice and boundaries need to be clarified, standards need to
be established, and accountability and authority, including legal status, need to
be determined. This is difficult in some countries, where a model of multiskilling and role substitution is being pursued and where there is a blurring of
traditional boundaries.
The culture, structure and process of the health care delivery system,
including policy, purchasing and management, also need to be taken into account.
Not only will issues such as cost-effectiveness (value for money), workforce capacity
and quality outcome assessment need to be considered, but also factors such as
accessibility, patient preferences and cultural diversity. It must also be
acknowledged that there are important challenges that face the health system,
including poor access to services, a shortage of nurses and the poor distribution
of nurses.
Policy decisions affect the nursing workforce, but nurses often perceive
themselves to be excluded from health policy making. Nurses in the twenty-first
century should possess the necessary knowledge and skills to participate in policymaking activities, and are in a good position to develop empirical evidence to
increase their influence on health policy. Des Jardin (2001) suggested that the
word nurse is synonymous with the words patient advocate, which gives the
profession an important image to live up to. However, the public may not
recognise nurses as patient advocates until they come across concrete evidence
of change. A case in point involves some of our previous work in smoking
cessation.
Here, we outline a multidisciplinary initiative that was successfully undertaken
to create a new professional role for nurses in the treatment of tobacco
dependency and the influencing of policy development. In this demonstration
project, the knowledge, attitudes and practice of nurses was assessed, and selected
nurses were trained as qualified smoking cessation counsellors. Through a joint
medico-nursing effort, a smoking cessation health centre was set up that was
staffed by the smoking cessation counsellors, which provided direct evidence of
the efficacy of the interventions of the nurses in helping their clients stop smoking
(Chan, 2002). The success of this multidisciplinary initiative has inspired policy
makers with the confidence to provide resources to set up the first nurse-run
smoking cessation clinics in the formal health care system, thereby creating a new
role for nurses and integrating smoking cessation counselling interventions into
routine care services. This example highlights the importance of multidisciplinary
collaboration and its success in influencing policy development.
However, many nurses are sceptical about working in teams, as they
sometimes perceive themselves to be excluded or feel uneasy about how best to
contribute. Longstanding medical dominance and the feminist movement that
highlights the independence of women may have contributed to this
phenomenon. Nurses should be empowered not only to be members of a
multidisciplinary team, but also to possess the knowledge and skills to work
effectively as leaders of such teams and to take an active role in contributing to
the corporate good of the mission. Being able to work collaboratively in a team
should be one of the core competencies for nurses and other allied health
professionals, and a more integrated approach of collaboration with mutual values
and common goals as a starting point is the key to the success of such teams.
Nurses should be able to appreciate the overall health care goals of achieving
high-quality, clinical outcomes and how these have an impact on heath policy and
costs, but their counterparts should also appreciate the traditional nursing values
of providing care and restoring the health of patients. Furthermore, clinicians
and administrators need to collaborate to iron out the problems of quality care
and cost containment (Meliones, 2000). In addition, to improve clinical

outcomes, nurses need to take a more active role in working with other health
professionals to develop empirical evidence to influence health policy.
The Future
Hong Kong deserves high-quality nursing care, but this can only be achieved if
there are adequate numbers of nurses who have been properly educated and
trained in a mix of skill and theory that is appropriate, relevant and fit for its
purpose. It is critical to ensure that responsive, flexible, knowledgeable and
competent nurses are produced, and that they work collaboratively in
multidisciplinary teams to function effectively in the new era of health care reform.
Recommendation 1: Develop Innovative Nursing Roles

Despite the considerable expansion of the different roles of nurses in the past
decade, the future development of these roles to attain quality health outcomes
remains a challenge. The scope of practice of such roles needs to be clarified
and defined, and clear targets with performance indicators should be set along
with the appropriate decision-making power of each role. Innovative nursing roles
that aim to improve quality of life, reduce readmissions, reduce morbidity and
mortality and ultimately control health care costs should be our goal for the
future.
Recommendation 2: Cultivate the Next Generation of Nurses

The need to cultivate the next generation of nurses by increasing both quantity
and quality has been widely acknowledged and discussed, but nursing leaders are
still expressing concerns about the lack of manpower to deal with the daily delivery
of care in hospitals. The current manpower shortage allows no latitude to properly
groom and nurture the next generation of nurses, let alone to train the nursing
leaders of the future. There is an urgent need to review existing nurse staffing
levels, to ensure an increase in recruitment and to design strategies for the
retention of nursing staff. A key question for the future is whether the younger
generation of nurses will be willing to accept the existing design and structure of
nursing work. The challenge for nursing leaders is to understand the values and
beliefs of this new generation of nurses and the factors that influence current
nursing roles so that they can be better designed to accommodate the needs of
the new generation (Sherman, 2005). Further research is needed to examine the
critical issues of staffing levels, work stress and other factors that may cause errors
or damage the occupational health of nurses. Collecting evidence on nurse

staffing levels and measures of acuity and quality must be a priority, so that the
complex relationship between staffing levels and quality of care in Hong Kong
can be elucidated.
Recommendation 3: Invest in Nursing Higher Education

There is a need to invest in university nursing education through adequate
funding with a view to expanding the number of quality nursing graduates in the
future. Universities are places for inculcating knowledge and developing the art
and science of the nursing discipline, not merely factories that produce nurses
en masse on a college conveyor belt. Appropriate resources are vital to train future
nurses who can contribute intelligence and competence to the nursing workforce
of the twenty-first century. It remains a challenge for nurse educators to attract
the best and the brightest to nursing. The question of what it is about nursing
that is professionally attractive to young people remains unanswered.
Recommendation 4: Promote Multidisciplinary Collaboration

Todays health system requires a broad spectrum of knowledge that no one
practitioner can provide alone. Health care technology and advanced knowledge
have changed the roles of many health care professionals, and high-quality health
care depends on these professionals working together well. Shared goals and
mutual values are critical in the delivery of care to maximise the benefits for
patients. Furthermore, there is established evidence to show that the cost of health
and medical care is reduced by nurses working in teams with doctors to
accomplish the highest quality of care in the most economic way. Developing and
implementing a curriculum that promotes collaborative behaviour is the first and
most important step. Nursing initiatives should move away from
compartmentalisation to enhance communication to combine the best of features
of all of the medical disciplines.
Conclusion
Nursing will continue to be the largest health care workforce, and the capacity
of nurses to achieve optimal health outcomes and be agents of change remains a
challenge that requires the collective effort and wisdom of all stakeholders: the
universities, the Hospital Authority, the Department of Health and the private
sector alike. The common aim should be the production of high quality nurses
for the twenty-first century to serve the people of Hong Kong.
Quality Indicators and Health Targets 303
CHAPTER
15
Quality Indicators and Health Targets

Geoffrey Lieu
Geoffrey Lieu, a former deputy director of the Hospital Authority and

currently a health care consultant and strategist, discusses how quality
improvement should be implemented on the system level. He cites
successful overseas experience with macro target setting in terms of
health and related process outcomes, such as Healthy People 2010 in
the US and the National Service Frameworks in the UK. Lieu traces
the history of quality measurement from the Donabedian way to the
present day. He then leads readers through the why, what, when, where
and how of health targets, drawing from international best practice
while staying grounded in the local health policy scene. The chapter
closes with his thoughts on where Hong Kong stands and how it should
proceed towards a coherent, transparent and responsive quality
improvement strategy. In Lieus recommendations are loud echoes of
the Harvard Reports call for an independent Office for Quality
Assurance. Overseas equivalents are the UKs National Institute for
Health and Clinical Excellence and the Commission for Healthcare
Audit and Inspection. Whether Hong Kong will have the foresight and
can summon the political will to bring such an infrastructure into being
remains our collective challenge.
Introduction
Quality of care has always been an integral concern in health service planning,
management and provision. How to improve and maintain quality are key aspects
of the health care reform agenda in many countries. Yet, quality must relate to
explicitly stated goals or targets to have a meaningful influence. A number of
health systems internationally have adopted the concept of health targets as an
overarching inter-sector approach to both guide their reform initiatives and
enhance quality and health. This chapter reviews the concept of health targets,
including how the UK, Germany and the US have integrated the concept in
advancing the development of their respective health systems, and examines why
and how Hong Kong should use health targets in developing its future health
system.
What Are Health Targets?

The concept of health targets is not new. In 1979, the World Health Organisation,
through its Health for All by the Year 2000 campaign, introduced the concept to
redirect health policy and improve outcomes (World Health Organisation, 1981).
From this campaign, health targets became prominent policy instruments and
led to the definition and partial implementation of national, regional and local
health target programmes that often address a wide range of intervention areas
from health promotion to health protection.
Quantifiable Objectives
Health targets are specific, quantifiable objectives that aim to improve the health
of individuals and populations (Marinker, 2002). They describe the current health
status, trends and challenges that must be addressed, the outcome to be achieved
for the population and the resources required. They emphasise measurable
outcomes. The quantification in health targets allows comparisons to be made
and an expected level of achievement to be determined.
Health targets stress the importance of tackling the determinants of health
and the underlying causes of disease. They provide the criteria for deciding
priorities for action. They synthesise the interplay between moral values and biomedical, social and epidemiological evidence.
Two Types of Health Targets

There are usually two types of health targets. The first, health system targets, are
structure and input orientated, such as targets for the provision of more funding
or the employment of more doctors. They can also be process related, such as
targets for shorter waiting times. The second, health status targets, can be lifestyle
oriented, including targets for the reduction of cardiovascular disease, or outcome
oriented, such as targets for reductions in mortality or morbidity. Although each
serves its own useful purpose and health status targets tend to be more directly
relevant to improving or maintaining peoples health, health system targets are
frequently used because of their ease in setting quantifiable performance
measures. They are also frequently used as indirect measures of health care quality.
A People and Community-Based Approach to Health Policy Development

Health targeting involves people; it is a people-based approach to understanding
and appreciating health. It means helping the community and other sectors to
take part and contribute to decisions about what health problems and issues
should be addressed, and what outcomes are meaningful and feasible to achieve.
It is about the involvement of people and the community in policy and decision
making. It is also about sharing the responsibility for making interventions work.
Hence, health targets are a health policy approach that defines the responsibilities
of key stakeholders in achieving or sustaining better health and higher quality.
They allow policy makers to assess where the greatest problems are, analyse what
needs to be done to reverse setbacks and offer concrete proposals on how to
accelerate progress towards achieving health target goals. Health targets form the
anchors to which health care professionals and the public can adhere in
improving quality and health. They provide the basis for health care providers
and the community to measure their performance in supporting and achieving
better health outcomes. They also offer the community an opportunity to affirm
its commitment to and purpose in health.
A Transparent Resource Planning and Performance Management Tool

Health targets provide an integrated framework in which to increase accountability
and demand results. They help make health policy transparent by providing a
common language for communication, informing the public of why and how the
goals can be met, and heighten awareness of health issues and positive outcomes.
Health targets can enhance planning and the allocation of resources to improve
peoples health and promote the overall well-being of the community. They serve
as an effective tool to inform key stakeholders and the public about the expected
outcomes to be achieved, the quality of care to be delivered and the progress in
performance. They make transparent the bases for allocated budgets and
resources.
Setting and Implementing Health Targets in Three Selected

Countries
Health systems have always implemented some form of health targeting in their
service planning and development. Yet, taking a disciplined and comprehensive
approach to assess health improvement through a targeted approach is of fairly
recent origin. Only a few countries, mostly in Europe and North America, have
committed to this approach. Three countries the UK, Germany and the US
are reviewed here as their health systems represent the three models that are
seen frequently throughout the world. The UK health system, which originated
in the Beveridge model, is highly centralised. Germanys health system, which
originated in the Bismarck model, is highly decentralised. The US health system,
while highly decentralised, has strong market and managed care attributes. Hence,
the lessons learned from the three systems can have meaningful reference for
others who are contemplating, evaluating or preparing to implement the concept
of health targets.
The UK Approach
The UK has a centralised, top-down approach to formulating policies and setting
health targets for implementation. The Department of Health is responsible for
monitoring the implementation, which is the responsibility of local health
authorities. Only several health targets are set each year and the unfinished targets
are rolled forward into the next or future years. This is a cautious approach,
focusing on achieving something visible before moving on to other targets.
Top-Down Priorities
The first serious attempt to setting health targets for the explicit aim of improving
the health of the population began in 1992 with the publication of The Health of
the Nation. The strategy focused on five key areas that represented major causes
of premature death or avoidable ill health (Hunter, 2002): coronary heart disease
and stroke, cancer, HIV/AIDS and sexual health, mental health and the
prevention of accidents. Twenty-seven quantified targets were set across these key
areas; see Table 1 for examples of these targets.
In Our Healthier Nation, which was published in 1998, the UK government
identified four priority areas for health targeting in the form of national service
Table 1
Examples of The Health of the Nation Targets
Reduce the rates of coronary heart disease and stroke in under 65s by at least 40
per cent by 2000.
Reduce the death rate for lung cancer by at least 30 per cent in men and 15 per
cent in women by 2010.
Reduce the overall suicide rate by at least 15 per cent by 2000.
Reduce the rate of conception amongst under 16s at least 50 per cent by 2000.
Reduce the death rate from accidents for under 15s by at least 33 per cent by
2005.
Source: Hunter (2002)
frameworks: coronary heart disease and stroke, cancer, mental health and
accidents. A rolling programme was established. Each year, usually only one new
framework is developed, with the assistance of an external reference group
comprising health professionals, service users and carers, health service managers,
partner agencies and other advocates. External reference groups adopt an
inclusive process to engage the full range of views. The Department of Health
supports the external reference groups and manages the overall process.
Since 1998, national service frameworks have been developed for coronary
heart disease, cancer, mental health, accidents, paediatric intensive care, older
people, diabetes, people with neurological and other long-term conditions, renal
services, children and the involvement of the pharmaceutical industry. In 2002,
the National Health Service planning framework changed from one-year to threeyear cycles.
Local Decisions
Each planning cycle incorporates the national service frameworks and allows
individual organisations in the community to examine their own services, plan
change and implement improvements year on year. It sets out the expectations
of transforming the quality of services by raising standards, tackling inequality,
becoming more accessible and flexible and designing services around the needs
and choices of the people that the National Health Service serves (Department
of Health, 2002).
The German Approach

Relative to other European countries, Germany is a late starter in implementing
health targets as a health policy instrument. Perhaps because of its diversity and
division of power and responsibilities between the federal government and the
16 Laender, it has been difficult for the German health system to achieve some
kind of consensus about the need for and value of health targets at all political
levels (Stein, 2002). Even if health targets are decided at the federal level, the
authority for implementation still resides with each Laender and its nongovernment agencies.
The German approach to developing health targets is systematic and focused.
Its adoption of a broad-based participatory approach and the engagement of a
private think-tank to propose a framework for implementation are particularly
noteworthy. Although the process has yet to produce health targets for the health
system, the strategy and considerations that are given to mobilising the various
key players and stakeholders in and related to the German health system thus
far seem to have been well received.
Professionally-Led Process
In 1983, the European Region of the World Health Organisation identified 38

health targets as part of the Health for All strategy. Germany responded and the
Health Ministry appointed a working group on priority health objectives,
comprising representatives from the Health Ministry and the medical profession,
to determine the national health targets that were to form the basis of future
resource allocation decisions. About 70 health problems were identified, but by
the time the report was issued the problems were already outdated because of
the German reunification.
A second publication, entitled Indicators of the Health Status of the Population
of the Former German Democratic Republic, was prepared and published in 1993. No
attempt was made to integrate the two reports to arrive at common targets for
the two parts of the reunited country. As a result, the attempt to implement health
targets was incomplete.
Outcome-Focused Targets
In 1997 there was growing dissatisfaction with the lack of progress and doubts
about whether the German health system could achieve the necessary changes
(Stein, 2002). Many decision makers felt that only outcome-related health targets
could encompass and reflect the varied perspectives of evidence-based care, quality
assurance, health technology assessment and clinical guidelines. There were
intensive and transparent dialogues between the public health community and
health policy decision makers. The medical profession and health funds also
contributed to the development, and the potential of health targets was
recognised.
Non-Government Agency Facilitation
In 2000, the German Federal Ministry for Health asked the Association for Social
Security Policy and Research (GVG) to propose by 2002 a strategic framework to
implement health targets as a supplement to existing health policy instruments
in Germany. Accordingly, health targets were to include disease oriented targets,
defined population-group targets, citizen/patient oriented targets and prevention
oriented targets
The GVG is a self-funded research organisation that was founded in 1947.
Its membership comprises statutory social insurance institutions, private insurers,
health care professionals, hospitals, labour unions, the pharmaceutical industry,
government officials and academic experts. The main aim of the GVG is to
research developments in the field of social security and to be a constructive
influence on social policy.
Explicit Selection Criteria
The GVG, through a number of working groups, developed a framework for

selecting and implementing health targets in Germany. The results were presented
at a conference in May 2000. The criteria and indicators used to determine if a
health problem is to be given priority attention are comprehensive and detailed
(Table 2). To be selected, health targets had to meet certain requirements (such
as being patient-oriented and evidence-based) and to have meaningful effects on
the health of the person or the health care system, such as strengthening selfhelp and the stronger integration of health provision and care (Figure 1).
Table 2
Criteria and Indicators for the Selection of Priority Problems
Criterion
Indicators
Scale of problem
Prevalence, incidence
Gravity of problem
Premature death, risk of delayed complications, permanent

dependence on life sustaining interventions, early
retirement, restriction of quality of life (mobility, pain,
cognitive skills, sensory skills, mood and capacity to live up
to social roles)
Health policy relevance

of the groups affected by
the problem
Increased incidence of the problem in individual target

groups of health policy such as age groups, socioeconomic
groups and socially marginalised groups
Priority of the problem

as rated by the population
Rate of persons seeing a doctor for the problem, willingness

to pay
Resources expended on
the problem so far
Treatment costs, investment costs and research costs
Possibility of involving
patients and relatives in
problem solving efforts
Readiness, competence and compliance
Source: Stein (2002).
Broad-base Participation
The method by which to set health targets was also discussed at the May 2000
conference. A pragmatic and balanced approach was proposed in the form of a
working panel, involving representatives of health services and related
organisations at both the federal and state levels, patient organisations, ethics
commissions, the scientific community and the federal ministries, that could
mobilise all relevant resources and expertise. A top-down process was excluded
because it would conflict with Germanys structured and pluralistic system.
Source: Gesundheitsziele.de (2002)
Figure 1 Health target requirements and impact
The US Approach
The US health targeting approach is enthusiastic and elaborate. It offers detailed
guidelines for implementation, including performance measurement and data
gathering. Although it takes a top-down and centrally coordinated approach, it
involves a large number of stakeholders and adopts an open process whereby the
public can offer their views and comments. More than 350 organisations and many
individuals across various communities participate in the process.
The first recent US effort to introduce health targets began in 1979 when
Healthy People: The Surgeon Generals Report on Health Promotion and Disease Prevention
was published. This document provided national goals for reducing premature
deaths and preserving independence for older adults. In 1980, another report,
Promoting Health/Preventing Disease: Objectives for the Nation, set 226 targeted health
objectives to be achieved over the following 10 years. Healthy People 2000: National
Health Promotion and Disease Prevention Objectives, released in 1990, identified health
improvement goals and objectives to be reached by 2000.
Nationwide Consultative Approach
The Healthy People 2010 initiative, which arose from the Healthy People 2010:
Understanding and Improving Health report that was published in November 2000,
continues to serve as an instrument to improve peoples health. The document
represents the ideas and expertise of a broad range of individuals and
organisations gathered through an open, broad-based consultative process. An
alliance of more than 350 national organisations and 250 state public health,
mental health, substance abuse and environmental agencies the Healthy People
Consortium conducted three national and five regional meetings on the
development of Healthy People 2010. Public consultations were also conducted in
1997 and 1998. More than 11,000 comments were received from people in every
state by fax, the internet, letters and in person through several public meetings
(US Department of Health and Human Services, 2000). All of the comments
received were posted on the Healthy People website.
Individual Determination and Community Partnership
Healthy People 2010 is grounded on the belief that individual health is closely
linked to community health the health of the community and environment
in which individuals live, work, and play. Likewise, community health is profoundly
affected by the collective beliefs, attitudes, and behaviour of everyone who lives
in the community. (US Department of Health and Human Services, 2000) It also
holds true that community partnerships, particularly when they reach out to nontraditional partners, can be among the most effective tools for improving health
in communities.
The Healthy People 2010 document is intended to serve as the guiding
instrument for addressing current and emerging health issues, reversing
unfavourable trends and expanding past achievements in health. It is also
designed to help individuals to determine what they can do individually and how
they can participate most effectively in their home, community, business or state
to help improve the nations health.
Systematic Approach to Guiding Health Improvement
The Healthy People 2010 initiative seeks to build on a systematic approach to

improving health. The approach (Figure 2) involves the development of goals
that provide focus and direction. The goals then serve as a guide for developing
a set of objectives that will measure actual progress within a specified time frame.
The objectives focus on the determinants of health, which encompass the
combined effects of individual and community physical and social environments
and the policies and interventions that are used to promote health, prevent
disease and ensure access to quality health care. The ultimate measure of success
is the health status of the target population.
Source: US Department of Health and Human Services (2000)
Figure 2 The US approach to health improvement
Time-based Outcome-Focused Targets
Two overarching goals are developed in Healthy People 2010: to increase the quality
and years of healthy life, and to eliminate health disparities. These two goals are
supported by 467 objectives that are consolidated into 28 focus areas (Table 3).
Each objective has specific targets that are to be achieved or improved by the
year 2010.
The targets are defined in terms of leading health indicators, which aim to
help individuals and communities to focus their actions to improve health and
to track progress towards meeting the two overall Healthy People 2010 goals. The
leading health indicators are physical activity, being overweight and obesity,
tobacco use, substance abuse, responsible sexual behaviour, mental health, injury
and violence, environmental quality, immunisation and access to care. These

Table 3
The Healthy People 2010 Focus Areas
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.
27.
28.
Access to Quality Health Services

Arthritis, Osteoporosis, and Chronic Back Conditions
Cancer
Chronic Kidney Disease
Diabetes
Disability and Secondary Conditions
Educational and Community-Based Programs
Environmental Health
Family Planning
Food Safety
Health Communication
Heart Disease and Stroke
HIV
Immunization and Infectious Diseases
Injury and Violence Prevention
Maternal, Infant, and Child Health
Medical Product Safety
Mental Health and Mental Disorders
Nutrition and Overweight
Occupational Safety and Health
Oral Health
Physical Activity and Fitness
Public Health Infrastructure
Respiratory Diseases
Sexually Transmitted Diseases
Substance Abuse
Tobacco Use
Vision and Hearing
Source: US Department of Health and Human Services, 2000
indicators reflect the major health concerns in the United States. They represent
the important determinants of health for the full range of issues in the 28 focus
areas. They are selected on the basis of their ability to motivate action, the
availability of data to measure progress, and their importance as public health
issues. They are used to measure the health status of the American people.
Lessons Learned
Both the US and the UK governments adopt strong top-down approaches and
play active roles in the development and implementation of health targets.
Germany has taken an intermediate approach, involving key industry players

under the leadership of a non-governmental agency to develop an implementation
framework and focus on reaching consensus on the targets before
implementation.
The number of health targets identified for implementation also varies
considerably. The US has 467, whereas the UK and Germany have set targets in
only a few areas. The argument for having a large number of targets is that all
health problems and concerns are being addressed. The argument for having a
small number of targets is that only those health issues that represent priority
areas are addressed.
The three countries have approached the concept of health targeting very
differently (Figure 3). All three governments play a leading role in developing
targets.
Top Down
U.K.
Few
Selected
Targets
U.S.A
Germany
Several
Hundred
Targets
Bottom up
Figure 3 Health targets setting approaches of the UK, Germany and the US
Although there are significant variations in the number of health targets

developed, all three governments involve and engage key industry players and
the community to participate in both the development and implementation of
health targets. The importance of individual involvement and responsibility in
understanding how health targets can be of use to individuals and society as a
whole and hence the importance of individuals taking responsibility to improve
or sustain good health is emphasised in the US but appears less in the UK
and Germany.
Notwithstanding the different strategies that these countries have adopted
in developing and implementing health targets, they offer the following lessons.
The adoption of health targets sends an explicit message that the government
is accountable for peoples health and is willing to take proactive measures
to identify and address those problems and issues that are either critical or
of top-priority concern.
Irrespective of whether a bottom-up participatory approach or a top-down,

centrally-led approach is used in setting health targets, each country invariably
ends up seeking bottom-up input and support to gain or ensure legitimacy
of the concept, thus highlighting the importance of a vertically iterative
approach.
Health targets have generally been set at the political level and, perhaps due
to the lack of reliable and comparable data, especially those involving
morbidity and quality of life, few have applied health targets to influence
policy or individual practices.
A small number of health targets makes resource prioritisation and provision
easier, whereas a large number of health targets makes the tasks considerably
more difficult, although the issue of how best to respond to the concerns of
those whose interests are not reflected in a small number of targets should
be addressed.
Finally, successful health targeting demands that the political will and policy
ideas underpinning the attempt to achieve better health outcomes are
translated into community owned and driven development strategies, guided
by sound science, professional goodwill, good economics and transparent,
accountable governance.
Health targeting is not a panacea, but the experiences from these countries
suggest that health targeting makes sense. It is also clear that successful health
targeting means that no one who has a stake in this important aspect of the
communitys life and development is excluded from the process. The involvement
of political decision makers and the gaining of legislative support, using surveys
and opinion gathering methodologies to collate the needed information,
facilitating economists and epidemiologists to use available research to develop
targets, and mobilising health care consumers and the community to provide
input or even make decisions are integral components of the approach. Hence,
an open, inclusive and integrated approach is meaningful in implementing health
targets.
Is Health Targeting Good for and Needed in Hong Kong?

Health targets have not been featured in any of Hong Kongs consultation
documents on health system reform. How health is measured seems to have
received relatively little attention or emphasis in Hong Kong even though key
indicators of mortality and life expectancies are frequently cited to describe
peoples health. At the individual patient level, the process is erratic. Both the
government and the Hospital Authority, notwithstanding their dominance of
Hong Kongs health care service provision, have not been aggressive in measuring
or reporting the quality of public health care services.
Coherent Health Policy Framework Needed

Hong Kongs health system is facing the unprecedented challenges of public and
private sector imbalance, long waiting lists, discongruent manpower supply and
demand, rising public expectations and budgetary constraints amidst the shift to
a service economy. There are an increasing number of complaints that quality is
deteriorating in public hospitals. There is increasing apprehension, especially
among the economically less advantaged, about the increasing financial burden
of care and the governments commitment to upholding its responsibility for
peoples health.
Yet, it was Hong Kongs 2003 health policy agenda to:
enhance the health of the population by promoting lifelong wellness
and care, improve health outcomes through self management and carer
support, and improve the cost-effectiveness of the health care system
through rationalisation of service delivery and strengthening
collaboration with other community-based health care providers.
(Health, Welfare and Food Bureau, 2003)
The intention of achieving better health and higher quality is clearly discernable,
but how to move forward and where to place valuable resources seem to be
unclear. Hong Kong simply does not have but badly needs a coherent health policy
framework.
At this critical juncture of calling for a clear direction and agenda to reform
Hong Kongs health financing strategy, infrastructure design and manpower
policy, the potential benefits and contributions of health targets are clear. A
broadly participatory people-based approach to understanding and appreciating
health and to developing common goals for health is a pragmatic and effective
approach to supporting and achieving quality health outcomes. Health targeting
is what Hong Kong needs now. A study completed in 2002 by the Institute for
Health Policy and Systems Research found that Hong Kongs general public and
key health care stakeholders would welcome the use of health targets to shape
future policy formulation and set priorities in enhancing peoples health (Institute
for Health Policy and Systems Research, 2002).
Clear Direction and Aligned Efforts Needed

In determining where and how to develop the health system, Hong Kong can
benefit from properly developed and clearly delineated health targets. Health
targeting is about making explicit, with clearly delineated targets and measurable
outcomes, where the health system should go. It is also about prioritising health
care resources to enhance, protect and optimise peoples health. This means that
without targets, the three fundamental components of health systems financing

and funding, infrastructure and delivery, and human resources and manpower
training and development will lack a common focus. Consequently, the health
systems per formance could easily be sluggish, often with conflicting
developmental priorities and competing interests (Figure 4). In the end, quality
would suffer.
With health targets properly developed, health system objectives and
development priorities become clear and will have broad-based people support.
Implementation efforts and initiatives can then be more focused, resource
allocation better planned and performance management more outcome-based.
In other words, health targets can provide a coherent set of parameters in aligning
interests, priorities and initiatives for improving health and advancing various
components of the health system (Figure 5).
Uncertain Direction
FINANCING
INFRASTRUCTURE
HUMAN
RESOURCES
Conflict
INFRASTRUCTURE
HUMAN
RESOURCES
Conflict
HUMAN
RESOURCES
FINANCING
INFRASTRUCTURE
FINANCING
Uncertain Direction
Figure 4 Health system performance and development without explicit health targets
CLEAR DIRECTION WITH TARGETS
FINANCING
INFRAINFRASTRUCTURE Aligned STRUCTURE
HUMAN
RESOURCES
HUMAN
RESOURCES Aligned
FINANCING
HUMAN
RESOURCES
FINANCING
INFRASTRUCTURE
Figure 5 Health system development with explicit health targets
Explicit Health Outcome and Quality Measures Needed

Hong Kong has yet to develop explicit health targets. Apart from political rhetoric
and vague policy statements, it has not delineated with broad community
participation, input and understanding what the health system is to achieve and
what quality is to be attained. Much of what performance the health system is to
deliver is left to individual interpretation or opinion. Consequently, health
financing reform initiatives that have been proposed in the past two decades have
either stalled or been suppressed after losing political or public support. A review
of the most recently published information contained in the Performance Pledge
of the Department of Health (2003) and the 2003-2004 Annual Plan of the Hospital
Authority (2003), two highly visible documents which are readily accessible on the
internet, reveal that the per formance targets or indicators used are
overwhelmingly health system oriented, and very few are health status related
(Table 4). This suggests that very little emphasis is given to health outcome
indicators.
A targeted approach to health and health system reform is indicated. There
is clear evidence that health targets can help to temper the daunting task of
addressing the broad mix of health determinants for the full range of health
issues. By setting health targets for the leading causes of death or illnesses such
as cardiovascular diseases, cancer, stroke, accidents and injuries, and even SARS
and avian flu governments can begin to address those factors that will improve
outcomes and prevent disease. Better quality and improved health may result.
There is inconsistent quality, preventable error not prevented and a
significant level of patient dissatisfaction even in the worlds most technologically
advanced health systems (see for example National Committee for Quality
Assurance, 2003; Blendon et al., 2003; Newhouse, 2002; Leatherman and
Table 4
Types of Health Targets Used in Hong Kong
Health System
Targets
Organisation
Health Status
Targets
Structure
and Input
Oriented
Process
Related
Lifestyle
Oriented
Disease
Group
Linked
Outcome
Focused
Department of
Health (n = 38)
39%
61%
0%
0%
0%
Hospital Authority
(n = 255)
77%
19%
2%
1%
Sources: Hong Kong Special Administrative Region Government, Department of Health,

(2003); Hospital Authority (2003).
Sutherland, 1998). Hong Kong has similar problems. According to the Harvard
team in a study commissioned by the Hong Kong government in 1997, there is
considerable evidence of widespread substandard medical practice that adversely
affects the quality of its health care and the health of Hong Kong residents. While
it has some of the Asia-Pacific regions best health care practitioners and facilities,
Hong Kong does not have effective measures to ensure that patients receive
comprehensive, high quality medical care. There is also the absence of
information on the outcomes of medical services and the performance of
providers:
There is little transparency or public input in assuring quality of health
care, and [this] raises a fundamental question: are the interests of
patient and the public best served by the current system?
(Hsiao, Yip et al., 1999)
How health is measured seems to have been given relatively little attention or
emphasis in Hong Kong, even though key indicators of mortality and life
expectancies are frequently cited to describe peoples health. At the individual
patient level, the process is erratic. The government and the Hospital Authority
have not been aggressive in measuring or reporting the quality of public health
care services. Health targets offer specificity and transparency in defining and
reporting what constitutes quality of care and how the system performs
accordingly.
Effective Performance Management System Needed

A recent World Bank study of public hospital reforms in selected countries
provided the following observations of Hong Kongs public hospital reform results:
The Hong Kong reform was relatively successful on a number of fronts,
but of mixed success in improving quality. Consumer responsiveness
and queues in particular remain issues. Accountability relied almost
entirely on the effectiveness of the performance measurement system,
since there was no other source of performance pressure such as outputrelated payment, hierarchical control, or consumer choice. Evidence
to date shows that this system, though improving, still falls short in
making the Hospital Authority truly accountable for performance. As
yet there appears to be no penalty for failing to meet performance
targets.
(Preker and Harding, 2003)
With nearly 14% of the recurrent public expenditure in 2004-2005 devoted to

health care (Hong Kong Special Administrative Region Government, 2004), the
government should implement an effective and transparent performance
management system to assure that Hong Kongs health care spending provides
value for money and is producing health and quality outcomes that Hong Kong
residents deserve. Properly defined and clearly communicated health targets can
help the public to better understand the priorities of the health system and
appreciate its performance. In addition, a transparent performance system can
provide a necessary and objective basis for steering the system to better meet needs
and improve outcomes.
Implementing Health Targets for Hong Kong

Health targets can provide a meaningful and productive framework to actively
engage the broader health care community and the public in deliberations on
Hong Kongs health policy, issues to address, methods to address the issues and
health quality and outcomes to be achieved. However, the successful
implementation of health targets requires clear strategy and disciplined execution,
as well as strong political will and community support.
Adopt an Inclusive Balanced Implementation Strategy

Setting health targets should be an inclusive, democratic and systematic process.
This democratic process assumes and assures the full participation of all
stakeholders who are involved in defining concrete endpoints to be pursued. In
so doing, it mobilises the societal forces and resources that are needed to address
those aspects of the health determinants and to achieve the health outcomes that
are given top priority. A balanced and inclusive approach, taking into account
and involving the political, professional, technical and community dimensions and
their respective contributions, such as that advocated by Wismar and Busse (2002),
should be adopted.
Incorporate Discipline and Structure

The systematic and thorough nature of developing health targets implies the
necessity for health care leaders to have the unusual skills to discern the
underlying patterns of things and focus on addressing the right issues. They must
be able to discover the crux of the matter with perceptiveness and rationality. To
prevent unnecessary diversion, the process of setting health targets should be
systematic and disciplined. It should be iterative and cyclical, involving multiple
steps, with each interacting and feeding its outcome into the next (Figure 6). It
should start with a participatory and inclusive approach that focuses on facilitating
and integrating input from key stakeholders, including policy makers, health care
Figure 6 The cycle of health target and quality indicator development
providers, health care consumers and the community. Then, the process should
determine the health care and quality needs of the health system or community;
set the systems goals in terms of priorities and emphasis for improving or
maintaining health; delineate the health targets or specific objectives in terms
of health outcomes that are to be accomplished within a defined time frame for
improving or maintaining health; map out strategies in actionable terms and
identify quality or performance indicators to provide the basis for assessing
progress or performance; and monitor performance and communicate results
to all affected stakeholders to facilitate decisions on what needs to be done and
how issues ought to be addressed in the next cycle.
The implementation of health targets, like all initiatives, requires effective
leadership. The former Health and Medical Development Advisory Committee,
which was disbanded without announcement under the former Secretary of
Health, Food and Welfare, could have been a meaningful forum to help
implement the concept of health targets for Hong Kong. The currently
reconsituted committee should oversee the implementation of health targets and
to monitor the performance and guide the development of Hong Kongs health
system, in addition to its priority remit of assessing new reform proposals.
To achieve the fundamental purpose of health targeting improving
peoples health through setting clear objectives to be reached within a defined
period the government must assume dual accountability not only for the
resources that it invests in health care and the manner in which those resources
are allocated, but also for the improvement in the health status of the population.
The government must take an active role in motivating and facilitating the full
participation of all relevant parties throughout the process. It should also mediate
and resolve conflicts, provide data for evaluation and coordinate interagency
resources to enhance and sustain health.
Health targeting will always be a political process. The politics surrounding
the implementation of health targets may engender arguments and dissatisfaction
among key stakeholders. The unnecessary politicisation of health targets is one
of the greatest threats to success. The government, as the principal steward of
the health system, and health care leaders, as guardians of patients rights, have
a particularly important role in assuring that harmful interference is minimised.
One method that is currently adopted in the health target implementation
demonstration project of the Institute for Health Policy and Systems Research is
the Delphi Method (Linstone and Turoff, 2002; Sheridan 2002), which was
developed by the RAND Corporation in 1969 for technological forecasting. It is
an efficient, disciplined and structured multistage decision and consensus making
process that can be applied to small or large groups of individuals. When webbased, for example, it can play a major role in bringing the pubic together,
communicating and participating in decisions, not only to help the decision
makers but also to educate the public. As participants responses in this process
are anonymous, the pitfalls of ego, domineering personalities and the bandwagon
or halo effect in responses can be minimised.
Seek Total but Effective Solutions

Health targets should be set for both the system and individual levels. This
multilevel approach is important. Researchers have found that most quality
improvement efforts have largely been unsuccessful, as they have tended to rely
on relatively narrow, single-level programme changes. To achieve a successful
transformation, they advocate that policy makers and practitioners must focus on
four levels of change (Ferlie et al., 2001): the individuals physician or health care
professional; the small group of individuals within a hospital or provider
organisation that can muster the human, financial and technological resources
to do its work; the overall organisation; and the larger system in which the
individuals or organisations are rooted. Health targets should be directed at
significant health problems that are meaningful and attractive to the public,
politicians, administrators and professionals. The solutions to the problem should
be simply and clearly expressed, realistic and reliable, and politically acceptable.
To optimise success, the implementation of health targets must address the
following potential drawbacks (Hunter, 2002):
Perverse incentives a disease oriented, target-based approach may achieve
quicker results but be less effective in reducing inequalities.
The distortion of data, which leads to goal displacement and the
manipulation of results.
Target setting in the absence of power and resources to bring about change.
Too many targets priorities become meaningless if they include everything.
Measurability there is a risk that whatever is quantifiable and can be
measured gets the attention so that targets are set for those areas in which
data is easily collected, such as acute medical services, rather than those areas
in which data is patchy, such as long-term care or rehabilitative services.
Like all things, health targets have both pros and cons. Their contribution
and benefits must not be subverted by a fixation with achieving them, which may
stifle innovation and creativity. Furthermore, it is important that health targets
incorporate goals that are possible and realistic. Even though there have been
striking improvements in health care and innovation is continuing, some of the
targets will continue to be hard to hit. It is critical to discard those that do not
work. Moreover, the solution to improving and sustaining health goes beyond the
health sector. There must be community-based strategies, involving the housing,
environment, transportation, education and welfare sectors to identify problems
and possible interventions. An integrated partnership approach is particularly
important in enhancing success in improving and sustaining peoples health
because better health can only be achieved or sustained by developing health
services in parallel with improvements in economic measures, education and social
infrastructure.
Report Quality and Performance Data

For health targets to achieve their desired effects, there must be timely availability
of information on the systems performance, especially quality of care:
Information about quality is necessary to identify priority areas, create
a common understanding of the gaps, and point to reasonable strategies
for improving the health care system.
(Leatherman and McCarthy, 2002).
During implementation, measuring and reporting to the stakeholders the quality

of health care services at both the individual and aggregate levels are particularly
important as this feedback will enrich the stakeholders input on what needs to
be done and how issues ought to be addressed in the next cycle. With that, the
cycle starts all over again.
Some health systems have disclosed to the public the performance
information of health care provider organisations in terms of quality, effectiveness
and safety. The public reporting of comparative information about health care
quality is becoming an accepted way of improving accountability and quality. In
the US, hospitals must publicly report their quality data, and those that did not
in the 2004 fiscal year received 0.4% smaller Medicare payments in the 2005 fiscal
year than hospitals that did report quality data (Kohn and Henderson, 2004).
The measurement of health and quality in Hong Kong is minimal, crude and
indirect. There are few common standards promulgated. The indicators used are
indirect, have not changed over time and do not provide meaningful
understanding of the current health systems effect on or contribution to peoples
health and quality of care. With the funding of public hospitals moving towards
a population-based method, the development of meaningful and quality of care
or hospital performance indicators is exigently needed.
The public reporting of quality and the performance of the health system
also remains crude and limited. The indicators that are published in Hong Kong
offer little useful information to both providers and consumers on the significance
of the link between health resource consumption and quality or health
achievement. These deficiencies should be addressed along with the
implementation of health targets.
In the transition to a transparent system, and even if it is not ready to fully
embrace the concept of health targeting, the government should start to provide
regular, independent reports of the performance of the health system in the
domains of effectiveness, safety, responsiveness, equity, efficiency and access. It
should also develop explicit targets and quality standards, and a new system of
clinical governance. Annual quality of care reports should be published to reflect
Hong Kong-wide standards and targets. A coherent and responsive strategy should
be developed to involve patients and the public and to engage the community in
health care quality governance and policy making. Furthermore, the government
should promote greater transparency, to allow consumers and others to see and
compare quality information.
Conclusion
Hong Kongs health system is at a crossroads. The governments deficit budget is
having drastic effects, and sustaining high quality care under resource constraints
is a challenge to the systems leadership and management. When funding is
reduced, allowing quality to deteriorate is simply unacceptable. Maintaining

quality during adverse circumstances must be a paramount concern of any
accountable and responsible leadership. This means that bold objectives and good
planning must be instituted, which are even more necessary in the light of the
social, economic, and environmental effects of high unemployment and budget
deficits. Appropriately developed health targets will help to direct reduced
resources towards sustaining and improving the health of the community.
Health targeting makes good sense for Hong Kong. It can set out clear
definitions for the developmental direction, priorities and outcomes of the health
system. It can establish an informed and politically acceptable basis for providing
resources to the health system. It can offer a disciplined and systematic process
to engage the community to participate in identifying its own health priorities
and stimulate the development of innovative and culturally acceptable solutions
with locally available resources. More importantly, it can provide an objective basis
with specific performance criteria for guiding the development, tracking the
progress and evaluating the expected effects of reform initiatives, including, for
example, the effect of high user fees on the access, health services utilisation and
health status of the affected population. Health targeting is an effective way to
more sharply formulate the ends that the hard and difficult work of health sector
reform should aim to achieve.
Health targeting should be made a community affair, facilitated by the
government. Even though Hong Kong has little experience in setting health
targets and in the use of health targets to shape policy development, the
government has the fundamental responsibility, as the steward of peoples health
and the effective functioning of the health system, of guaranteeing social security
and essential health services to all, as well as promoting, restoring, and maintaining
peoples health. A top-down non-transparent non-inclusive approach, as witnessed
by the negative reactions of Hong Kong residents to health system reform
proposals introduced in the past two decades, is no longer acceptable.
The community and related stakeholders must be fully involved to participate
and make decisions. Prescribing how to improve and sustain health and what to
expect from the health system is not and does not need to be the sole
responsibility of the government or a selected few. The principles of selfdetermination, solidarity and compassion suggest that the community must be
fully informed and given meaningful opportunities to participate actively in
making decisions that affect health policy development, system performance and
outcome. Frequently, individuals and communities have their own priorities for
health, and solutions for their health problems cannot be effective unless they
feel that their opinions and input are genuinely respected or taken into
consideration.
Adopting and implementing the concept of health targets will be a change
for Hong Kong. Deciding whether to make that change and how best to introduce
and sustain it will be very challenging. One can be realistic or cynical, giving all
the reasons why things are too hard to change. Yet, to change for the better is
the responsibility of all governments. If a decision is not in sight, then the
following advice from Jeffery D. Sachs, Chairman of World Health Organisations
Commission on Macroeconomics and Health, may be a useful reminder:
We must dream a bit, not beyond the feasible but to the limits of the
feasible, so that we inspire.
(World Health Organisation, 2001)
Are health targets beyond what is feasible for Hong Kong? What is withholding
their promulgation and adoption as a policy initiative for Hong Kongs health
system?
Clinical Governance and Quality Management 327
CHAPTER
16
Clinical Governance and Quality Management

Vivian Wong, Liu Hing-Wing and Helen Poon
Vivian Wong, Liu Hing-Wing and Helen Poon, senior executives

responsible for clinical effectiveness at the Hospital Authority, give an
account of clinical governance and its realisation in Hong Kongs public
hospitals. This is a meso-level analysis that parallels Lieus chapter on
system-wide quality improvement. They show how Hong Kongs efforts
draw on the latest international evidence of organisation-wide quality
improvement and risk management with clear lines of responsibility and
accountability. In particular, they highlight how each of the key
stakeholder groups patients, care providers, managers and policy
makers contributes to and maintains the quality equilibrium. Hong
Kong has made good progress since the establishment of the Hospital
Authority in the early 1990s, and private hospitals have now begun the
same process of criterion-based benchmarking. However, there is still
a large margin for improvement across the system, particularly in the
ambulatory care setting where there has been little parallel activity to
date.
Introduction
The promotion of clinical governance in health care management signifies a
fundamental shift in the focus of clinical quality assurance away from the
traditional profession-led paradigm, which emphasises self-governance, autonomy
and a professional standard of care, to accommodate a client perspective that
emphasises patient rights, transparency and accountability. Clinical governance
sets out to ensure that effective systems are in place to monitor the quality of
clinical practice, and in particular that practitioners are meeting standards and
that health systems are enabling care delivery as intended. The objective is to
enhance clinical practice and thus patient outcome through a systematic
approach.
Clinical governance unites what were previously rather disparate and

fragmented approaches to quality improvement. By repackaging established
concepts and practices in a more comprehensive manner, it charges both health
administrators and health care practitioners with clinical and managerial
accountability.
Overseas Development
Concern about health care quality is global. In 1985, the World Health
Organisation set a target that, by 1990, all member states should have built
effective mechanisms for ensuring the quality of patient care within their health
care system. Quality patient care as defined by the World Health Organisation
includes four dimensions: professional performance (technical quality), resource
use (economic efficiency), risk management (the identification and avoidance
of injury, harm or illness that is associated with the service provided) and patient
satisfaction (WHO, 1985).
In the late 1990s and the early part of the new millennium, several high
profile medical errors that were featured in the UK media1 led to the belief that
the National Health Service had no system for monitoring quality, no reliable data
and no agreement about what constituted quality.2 This invigorated the move
towards the adoption of clinical governance as the key element of a framework
to support a quality health care service.3,4
The United States has a long tradition of using accreditation schemes to
manage health care service standards. Recent studies have identified medical error
as a leading cause of death and injury. Many of these errors did not result from
individual recklessness, but from basic flaws in the way that the health system was
organised, and were potentially preventable, although that would have required
making changes to the system design.5,6 The Institute of Medicine concluded that
health care was a decade or more behind other high-risk industries such as the
aviation industry in the attention that it gave to basic safety. In response to the
Institute of Medicine report, the President of the United States issued an executive
order on 7 December 1999 requesting the Quality Interagency Coordination Task
Force to make recommendations on the improvement of health care quality and
the protection of patient safety.
Local Development
Other than primary care, the bulk of health care services in Hong Kong are
delivered through the public sector, and thus the quality of public health services
has always topped the community agenda. It was under the premise of improving
the quality of public hospital services that the Hospital Authority was established
in 1990.
Given this background, quality improvement has always been a central theme
of the Hospital Authority since its inception. Indeed, one of the objectives of the
Hospital Authority Ordinance was to use hospital beds, staff, equipment and
other resources efficiently to provide hospital services of the highest possible
standard within the resources obtainable (Hospital Authority Ordinance, 2002).
Upon taking over the 16 public hospitals, much effort went into improving the
hospital environment and upgrading facilities to ease congestion in public
hospitals. The successful elimination of hospital camp beds, which had for a long
time been a blemish in an otherwise modern society, was an early achievement
of the Hospital Authority. After over a decades hard work, hospital services have
now much improved, and can boast tidy premises and modern facilities. In
addition to enhancing hardware, the Hospital Authority recognises the need to
build up software for quality development, and has begun to address system and
human factors, to better define standards of care in an explicit and transparent
manner and to monitor performance.
In the second half of the 1990s, a number of clinical incidents aroused media
attention and prompted Hong Kong to take a more determined approach to
assure the quality of its health care7. A risk management office was set up within
the Hospital Authority to systematically examine health care risks and to
coordinate and drive the corporate direction in this area. In particular, incident
reporting mechanisms were developed and clinical auditing encouraged. Similar
developments in the private hospitals led to the establishment of the Hong Kong
Private Hospitals Association in 2000. A major achievement was the introduction
of a unified hospital accreditation scheme for members of the Association.8
A First Class Service Steered by Four Parties

The key components of clinical governance, as defined by the UK policy
document A First Class Service, are clear lines of responsibility and accountability
for the overall quality of care, a comprehensive programme of quality
improvement activities, clear policies that are aimed at managing risk and effective
procedures to identify and remedy poor performance. Health care in Hong Kong
has been progressing in each of these areas through discrete effort and the
interaction of four groups of stakeholders: patients and the public (users and the
watchdog), health care professionals (practitioners and field workers), health care
managers (administrators and facilitators), and the government (guardian of
public health care, peoples advocate, policy maker and regulator). The following
discussion will focus on their roles, past contribution and possible future
development.
Patient/Public Participation
It is self-evident that clinical governance is incomplete without the involvement
of patients and the public. However, meaningful development will not occur
without first changing the paternalistic mentality and culture of health care
workers. The establishment and promulgation of the Patients Charter, followed
by the training of all grades of staff in customer service and the setting up of
patient resource centres in hospitals, which are supported by patient relations
officers, were ground-breaking initiatives in the early days of the Hospital
Authority. These initiatives helped to address patients rights and to meet the
individuals immediate needs at the point of contact through enhanced
communication and access to suitable services. Under the influence of evidencebased medicine, and particularly as a result of the development of clinical practice
guidelines that are readily available on the Internet, the public is becoming better
educated and informed about medical advances and the health care options that
are available.
With increasing calls from the public for more equity and transparency in
health care services, lay participation at various levels of the Hospital Authority
governance structure, such as the Hospital Authority Board, the Hospital
Governing Committees, the Regional Advisory Committees and the Public
Complaints Committee, has increased. Apart from the internal efforts that are
being made by health care providers to strengthen their accountability structures,
public organisations are increasingly subjected to scrutiny by official bodies such
as the Ombudsman, the Independent Commission Against Corruption, the Equal
Opportunities Commission, the Legislative Council and the District Councils, in
addition to pressure groups and the media. Indeed, the Medical Council, which
adjudicates on the standard of care that is provided by doctors, has included lay
members since 1997. Hence, being more open and accountable is the direction
that should be taken, rather than an option, for Hong Kongs health care services,
be they public or private.
From the patients perspective, there are patient groups that provide mutual
support for group members and also monitor and provide feedback on clinical
service quality and outcome. Their influence on the process of care is expected
to increase. Patient participation in the setting of priorities for health care services
and in resolving contentious ethical issues is being practised in most Western
countries, and the Oregon Health Plan (Conviser, 1996) is a prominent example.
The plan was launched during the 1989 legislative session by a coalition that
included consumers and representatives of health care providers, insurers,
business and labour groups, and was a fundamental reform of Oregons health
system. Under the plan, the state of Oregon pioneered the method of prioritising
funding for health care through the systematic and public ranking of medical
services. The legislation called for the formation of an eleven-member Health
Services Commission that consisted of consumers and providers of health and
social services to rank health care services for Medicaid coverage using a costbenefit methodology. The views of citizens were also obtained through a telephone
poll and a series of community meetings and hearings, and the views that were
articulated at the community meetings provided the primary basis for the
formulation of the prioritised list. Coverage was provided for all conditions above
a threshold on the list, with the threshold being set for each section by the state
legislature on the basis of actuarial estimates and budgetary constraints. Lay
involvement in the setting of health care priorities not only brought forth
understanding and co-operation, but also allowed health care providers to better
gauge evolving societal values in planning services to meet patient needs. This
helped to dispel mistrust and antagonism within society.
Professional Leadership
Evidence-based medicine provides a platform of interaction for researchers,
decision makers, health care providers, practitioners and the public. One initiative
that has modified the practice and behaviour of health care practitioners is the
development and promotion of care protocols or clinical practice guidelines.
Derived from an evidence-based process and with due consideration given to local
and systemic factors, clinical practice guidelines aim at closing the gap between
what practitioners do and what scientific evidence supports, and in making care
more consistently achievable in real life settings. An evidence-based guideline
clarifies which interventions are of proven benefit, and the quality of evidence
that is needed to support claims. It also alerts health care practitioners about
ineffective, dangerous and wasteful practices. Clinical practice guidelines will
inevitably contribute to expectations about standards of care, and through the
control of practice variation will provide a reference for clinical audits to be
conducted. Other evidence-based medicine practices, and in particular health
technology assessments, help practitioners and administrators to evaluate new,
evolving or uncertain health technologies. In the UK, the National Institute for
Health and Clinical Excellence provides national guidance on treatments and care
in the National Health Service through a process of systematic appraisal and
consultation. Its guidance has effectively binding powers and helps to set public
health care priorities. In Hong Kong, the development of evidence-based
medicine and health technology assessment takes a soft approach to influencing
health care practitioners within the Hospital Authority. Nevertheless, a formal
review mechanism with administrative power was established in 2000/2001 to
safeguard patients from new invasive technologies.9
A practical point to note is that any standard or guideline is only as good as
the extent to which it is executed. In promoting clinical practice guidelines, it is
crucial to have designated personnel assume ownership of the implementation
and monitoring of the guidelines at every level of operation. In the Hospital
Authority, special coordinating committees are given the responsibility of

developing clinical practice guidelines and conducting clinical audits. However,
these activities are extremely demanding of resources and skills. Recent
developments in health care information technology will help to assure
compliance and quality performance through the building and linking of clinical
databases that can capture important process indicators and patient outcomes.
It is important to mention that some professional bodies, such as the Hong
Kong College of Obstetricians and Gynaecologists, have long been involved in
the development of clinical guidelines and in conducting audits on a Hong Kongwide basis. Such practice has its origin in the UK, where a confidential enquiry
into maternal deaths paved the way for the establishment of the National
Confidential Enquiry into Perioperative Deaths, which has recently expanded its
scope to include physicians and primary care, and to review near misses as well
as deaths, and has been renamed the National Confidential Enquiry into Patient
Outcome and Death (NCEPOD). The Enquiry operates independently of the
Department of Health and the professional associations, and is made possible by
two government acts: the Data Protection Act 1998 and the Health and Social
Care Act 2001, which ensured the strict confidentiality of the information that is
obtained. Its objectives, as registered with the Charity Commission, are to assist
in maintaining and improving standards of medical and surgical care for the
benefit of the public by reviewing the management of patients, by undertaking
and providing the undertaking of confidential surveys and research, and by
maintaining and improving the quality of patient care, and by publishing and
generally making available the results of such activities. The Enquiry conducts
confidential surveys in which practitioners voluntarily complete and return
questionnaires. The circumstances surrounding undesirable patient outcomes are
examined and analysed to assess whether they are preventable and to recommend
remedial measures. Through such enquiries, improvements in clinical care can
be identified, and vital information can be provided to the medical profession to
re-evaluate and improve the standards of care for the benefit of patients.
The health care profession has a tradition of maintaining high standards of
care through self-discipline, which has and will continue to contribute to clinical
governance. The formation of the Hong Kong Academy of Medicine in the 1990s,
with designated colleges for different medical disciplines, helped to set formal
standards for training, practice and continuing professional development. At the
hospital level, supervisors should be aware of their managerial responsibility for
ensuring staff competence and performance, and management and peer review
processes should be in place to evaluate system and service-wide processes and
individual case management both regularly and when failure or non-compliance
arises. Staff who are identified as being consistently below standard should be
managed according to preset regulations, which may include remedial
programmes and redeployment.
Management Responsibility
Quality system management emphasises the building of quality into a system at
every level of operation and for all personnel. There is no doubt that the delivery
of quality service is the responsibility of every health care worker, but when
something is everyones business, it often becomes no-ones responsibility. It is
crucial that clear lines of responsibility and accountability be drawn up for all
issues that have significant implications for the quality of health care services, and
that they be widely communicated to the relevant personnel. Ideally, each health
care organisation should set up a dedicated team to be responsible for monitoring
performance and quality development, to be headed by a senior executive
reporting directly to the Chief Executive Officer. Such a team could help to
develop a strategic approach to quality, and could act as a base for information,
education, communication, monitoring and auditing. Within the Hospital
Authority, specialty and interdisciplinary committees were put into place to
provide coordination, support and guidance in service planning and development.
A management initiative in the mid-1990s clarified the line responsibility between
the Hospital Chief Executives and the Chiefs of Service in individual Clinical
Management Teams. This was an important step towards the empowerment of
both parties and the creation of an interface between managerial and clinical
accountability.
Other supportive measures were also developed, including information
technology and health informatics, health statistics, clinical database development,
health technology assessments and risk management to help decision makers to
prioritise, plan and develop services. Significant process enhancement has been
achieved through the large-scale training of staff in management skills and
evidence-based medicine skills and through the promotion of continuous quality
improvement programmes and clinical audits as core activities.
The process of care can also be monitored through formal accreditation. The
private hospitals have chosen a UK-based accreditation system. Without going
through the whole process of accreditation, the Hospital Authority drew reference
from the Joint Commission on Accreditation of Healthcare Organisations in the
United States and developed local reference standards that cover topics from
access to care, continuity of care, patient communication and consent, human
resources management, facilities management, occupational safety and
information management to patient clinical assessment, documentation and care.
Hospitals are required to monitor and report their performance in these areas
on a regular basis.
Overseas studies have repeatedly shown that the majority of medical errors
have causes that are traceable to system flaws (Reason, 1997), such as local
workplace factors, information-processing factors and organisational factors,
rather than the failure of an individual. The combating of error requires proactive
and organised efforts to systematically screen, assess and reduce risk, be it directed
at patients, visitors, staff or an organisations assets. The National Health Service

has developed a comprehensive risk management programme,10 and similar risk
management practices have evolved over the years in the Hospital Authority in
areas such as medication incidents, blood transfusion safety, infection control,
occupational safety and informed consent. All hospitals have established structures
to set priorities for risk reduction, supervise risk management activities and report
to a central committee at head office. A crucial part of risk management is to
learn from mistakes, near misses and patient feedback (Reason, 1997). An
Internet-based management system, the Advanced Incident Reporting System,11
was recently piloted by the public hospitals to enhance their ability to capture,
track, monitor and respond to incidents and patient feedback.
The auditing of outcome indicators is a powerful tool for the management
of performance and control practice variation through the objective measurement
of explicit and pre-agreed requirements. An open process to involve all of the
relevant personnel in setting key quality outcome indicators, establishing common
definitions and planning data collection and analysis will encourage participation
from and aid information dissemination to the parties involved. Having a
pre-agreement is critical to the aligning of values and the promotion of
acceptance. Given the value of auditing, it is important to realise that indicators
are intended to highlight issues that demand attention, rather than to draw direct
inferences about the quality of care. They may not be truly indicative of
performance because of differences in case mix, individual patient characteristics,
unidentified confounding factors and disparity between expertise and delivery
models across hospitals and geographic clusters. Auditing data must be handled
carefully and used judiciously.
Government Accountability
The government has established by statute various health care professional
councils to handle the registration and discipline of practitioners,12 thus helping
to maintain the desired standard of practice. Nevertheless, attention should be
drawn to the proliferation of complementary and alternative medicine and to the
establishment of professions such as clinical psychology, family therapy, art therapy
and music therapy. It is high time that standards of practice for these professions
be defined and regulated to aid consumer choice.
An accreditation practice has been evolving in the health care sector in recent
years. In the late 1990s, the medical laboratories in many public hospitals and
the Hong Kong Red Cross Blood Transfusion Service joined various accreditation
schemes, including the International Standards Organisation, laboratory
accreditation programmes under the American College of Pathologists, the
Australian National Association of Testing Authorities, and the Good
Manufacturing Practice guidelines of the Australian Therapeutic Goods
Administration. In February 2004, the Hong Kong Accreditation Service launched

a voluntary Medical Laboratories Accreditation Scheme for both the public and
the private sector. To protect the public, the government should make this type
of accreditation mandatory. The experience that is gained from the accreditation
of medical laboratories and diagnostic services will be valuable for application to
therapeutic services.
The standard of service in private hospitals is overseen by the Department
of Health through its power to grant and renew licences, supported by site
inspection and information reviews. Since 1999, all private hospitals have
participated in the Trent Accreditation Scheme, which provides evidence of quality
assurance to the Department of Health. As local benchmarking systems develop,
there may come a time when Hong Kong will determine the desirability of a
uniform accreditation system for all sectors.
The balance between service quality and system sustainability is a fine one,
and decision makers must not, and cannot, sacrifice either of them. In view of
the ever increasing proliferation of health technology and the resultant escalating
costs, these topics should be high on the agenda for any policy discussion on
sustainable health care development. When faced with competing bids for scarce
health care resources, a system should be developed to set priorities, taking into
consideration the robustness of available medical evidence of risks and benefits,
improvement in the achievable quality of life and the cost of the new technology.
This would entail a standard process of deliberation among patients, relatives,
health care providers and managers, with due input from sociologists, ethicists,
scientists and funding bodies to balance individual rights against public values in
a transparent and rational manner. This is the ultimate form of societal
accountability, which overrides clinical governance. If the government were to
play the role of peoples advocate and guardian of public health care, then the
development of a mechanism to allow consultation among all of the stakeholders
in policy formulation, service planning and priority setting would be high on the
agenda of the Secretary for Health, Welfare and Food.
Conclusion
Clinical governance is assuming an increasingly important role in health care
management. Its many components permeate everyday practice in all health care
disciplines. In the future, the effective health care organisations will be those that
can integrate clinical governance at every level of their operation.
Hong Kong has been steadfastly addressing the issues of health care service
provision and quality in the past decade, and the concept of clinical governance
is beginning to take root. Nevertheless, the full realisation of the benefits of clinical
governance involves not only the efforts of health care providers and existing
professional leaders, but of all health care practitioners and members of society.
It is hoped that under the governments drive, principles and a mechanism for
priority setting in public health care will be developed, especially in the face of
budget constraints and escalating health care costs. Greater involvement of the
public in the deliberation on health policy is also needed, particularly over issues
that have value and ethical considerations. This would entail a change of culture
through the education of the community, so that the views of citizens could be
obtained and the societal values towards health-related issues gauged. All
institutions that provide health care should be accredited to aid the objective and
independent assessment of performance and standards. New and emerging health
care professions, including those in complementary and alternative medicine,
should be registered. Only with a good registration system that covers all health
care practitioners can the quality of professional performance and standards of
practice in the field be ensured. Finally, a mechanism should be developed to
produce a set of Hong Kong-wide clinical practice guidelines similar to those of
the National Institute for Health and Clinical Excellence, and an enquiry should
be conducted along the lines of the National Confidential Enquiry into Patient
Outcome and Death in the UK.
The rapid changes that have taken place over the past few years have led to
a metamorphosis of the Hong Kong health service. Reforms have been introduced
that integrate clinical care and modern management concepts and quality drives
supported by technology and culture changes which have created an
environment of quality assurance and improvement that will continue to shape
the system and the process of care delivery. Steered by the four gatekeepers of
health care quality patients, health care professionals, managers and the
government and supported by the various tools of clinical governance, Hong
Kong will be in a better position to encourage creative thinking and measures to
enhance its health care to put it on a par with international best practice.
PART
IV
The Financing of Health Care
Commentary: Health Financing Reform 339
Part IV
Commentary
Health Financing Reform

Introduction
The last section of the book deals with perhaps the most important policy tool
that is available in the health reform arsenal that of health financing reform.
Financing strategies certainly yield the most immediate results in health care
as in all other fields because market agents, such as health care professionals
and institutions, respond quickly when financial incentives are changed to realign
their activities to maximise gains in the form of revenue, market share and other
intangibles.
There are three key inter-related dimensions in health finance revenue
collection, fund or risk pooling and purchasing or provider payment. Revenue
collection refers to the mobilisation of money from primary (e.g. households and
firms) and secondary sources (e.g. government and insurers). Fund or risk pooling
refers to the accumulation of revenues for the common advantage of participants
meaning that contributors share financial risk. Purchasing or provider payment
refers to the process through which revenues that have been collected are
allocated to providers who deliver a set of interventions (Murray and Frenk, 2000).
We first review salient and locally relevant features of the various generic types
of financing instruments for revenue collection and risk pooling and then we
examine the prototypes of provider payment methods, which together determine
the inflow and outflow of money in a health financing system. Of course, these
pure typologies of financing and payment methods are never the only method
deployed in a system. Rather, each health system has evolved a unique
combination of idealised methods to raise funds and remunerate providers. We
restrict our attention here to applications in developed economies, with a
particular focus on Hong Kong, because the circumstances and implications are
quite different for countries that are at less advanced stages of economic
development.
Generic Types of Financing Instruments

Government General Revenue
The first type of financing instrument is government general revenue. The British
system is perhaps the most familiar example of tax-financed health care. Since
the Beveridge Report, which led to the establishment of the National Health
Service in 1948, the primary method of raising funds has remained essentially
unchanged. Because of its colonial history and the evolution of the local political
and economic systems, Hong Kong has relied heavily on this form of financing
source since the post-war years through the development of the welfare state in
the 1970s and 1980s under the governorship of Sir Murray MacLehose (see
Chapter 1 by Derek Gould for a historical account of the development of Hong
Kongs health system).
The mix of taxes that is used to finance health care very much depends on
local circumstances and the level of sophistication of the tax assessment and
collection system. In Hong Kong, direct taxes contribute about half of the
governments general revenue (Table 1). This tends to be a highly progressive
(pro-poor in the redistributive sense) way of raising funds especially given that
only 55% of the working population (3.3 million out of a total population of
almost 6.9 million) in Hong Kong pay any income tax and only the richest 1.4%
of the working population fall into the top tax bracket (i.e. 16% flat tax)
contributing 38.8% of total salaries tax receipts. In addition, Table 1 shows that
corporate taxes make up half of all direct taxes. The remaining direct tax is
property tax, which applies to the 50% to 60% of the population who live in
private housing, but not to the remaining 40% to 50% that live in governmentprovided subsidised housing.
The SAR has yet to introduce an indirect goods and services tax, which is a
more regressive financing instrument in that the proportion of income that is
spent, and therefore taxed, is less for the rich. Other territories, such as China,
Taiwan, Korea and Japan rely extensively (35% to 80% of government general
revenue) on this kind of consumption tax (ODonnell et al., 2005). However, there
is currently much debate in Hong Kong among the public and in the Legislative
Council on the introduction of such a tax to tackle the structural deficit, which
during the boom in the 1980s and early to mid-1990s was supplemented by regular
windfalls from land sales and redevelopment premiums.
Risk pooling can function well when public health care is available to all,
and in Hong Kong there is universal access to both Hospital Authority and
Department of Health direct patient services, although there is certainly no
uniformity of need, demand or utilisation across the socio-economic strata.
However, a formal analysis, such as a benefit-incidence approach, is needed to
empirically test whether this risk pooling would indeed work well in practice.

Table 1
Total Health Expenditure by Financing Source
Financing source
Proportion of total health

expenditure
Government general revenues

Direct Taxes:
Personal income tax
Corporation tax
Property tax
Other
Indirect Taxes:
General sales / Value-added tax
Import duties
Stamp duty
Other
Non-tax revenue
Profits from public enterprises / resources
Fees from public services (non-health related)
Other
Private insurance premiums
Private purchases
Employer provided
Out of pocket payments
Others
Total
55.40%
26.62%
9.91%
13.32%
2.94%
0.45%
12.32%
0.93%
2.61%
4.28%
4.50%
16.47%
8.13%
4.91%
3.43%
12.86%
3.59%
9.27%
30.83%
0.90%
100%
Sources: Hong Kong Domestic Health Accounts (1999/00); Hong Kong General Revenue
Account (1999/00)
Funding health care by government general revenue in a democratically

elected system with a clean and efficient government has the added advantages
of political accountability and public mandate, and indeed, many governments
rise and fall because of health care. Health care is often a top election issue in
countries such as the US, the UK and Canada, and the success or failure of
political candidates often hinges on it (Blendon et al., 2003; Carroll, 2004;
Godfrey, 2004; Kondro, 2004). In the last US presidential elections, health care
ranked higher in importance among voters than most other domestic issues, and
came fourth in importance overall in deciding their vote for president (Blendon,
2004). Although Hong Kong has a clean and efficient civil service, its political
system has yet to achieve equal suffrage, with half of the 60 seats being returned
through small-circle functional constituencies that mostly represent the elite
(including the seat reserved for the medical profession) and tend to be more
pro-government. Legislators need approval from the Chief Executive if they wish
to put forward legislation with public spending implications and their main power
in turn comes from the Chief Executive needing their approval for major public
spending. As a consequence of this, the function of the political parties is to vie
for the opposition benches, where they can score easy publicity points criticising
government policies. This lack of opportunity and therefore perspective in
governance does not deliver the proper incentives to legislators to propose realistic
and workable alternative policies. With little prospect of being able to deliver
through policy output or achievement in government, the major political parties
have not invested in real research on key social issues, which thus leaves a great
deal of room for the government to direct the policy agenda without proper and
effective supervision that is based on a genuine ideological stance, as opposed to
partisan political grandstanding.
Hypothecated Taxation
A closely related type of government revenue is hypothecated taxation. Hypothecated
taxation is similar in most aspects to government general revenue, except that it
is often specially collected and specifically dedicated to funding health-related
expenditure. It is often marketed as a way of connecting the public with the taxes
that they contribute, and is particularly suited to spending programmes that are
popular with the public and to which the public attach great importance. However,
empirical studies have so far shown that the willingness of consumers to pay for
health care improvements fails to exceed current taxation thresholds in most of
the locations studied. This is particularly true in Hong Kong, where most residents
currently pay no direct taxes at all and would be very unhappy about the
introduction of new taxes. An additional levy for health care purposes will not
be an easy sell to the middle classes either, who bear the bulk of the direct tax
burden. Politically, this method would also prove unpopular among government
bureaucrats and even politicians, because governments as a rule do not want to
relinquish control over public expenditure. A hypothecated tax may also tempt
the Treasury to reduce the baseline growth in government general revenue for
health programmes if the public were to accept a higher rate of hypothecated
tax. Moreover, it often creates the fiscal illusion that the money that is raised will
be spent on health, whereas in reality this is rarely so, as such monies are often
borrowed in emergencies for other programmes. In France for instance, such
funds are often inadequate, and have to be subsidised out of government general
revenue. Nevertheless, many have called for sin taxes on such goods as tobacco
and alcohol to be hypothecated or earmarked for health-related purposes.
Although the primary motivation of sin taxes is laudable from a public health
perspective in that they have been conclusively shown to reduce the demand for
tobacco products, they are also highly regressive due to the marked social gradient
of consumption, and thus hit the poor the hardest. It is a difficult political sell
and trades present regressivity with future health benefits, which may however
be well worth the effort.
Social Insurance
The third type of financing instrument is social insurance, which is traditionally a
form of hypothecated taxation that is levied through the payroll. A distinguishing
feature of social insurance schemes is that they have compulsory enrolment. Social
insurance is often thought of as a social contract between the government and
the citizenry, in which collective decisions are made about trade-offs that concern
health care. During the 1990s, Bob Rae, the former socialist (New Democratic
Party) Premier of Ontario in Canada predicated much of his agenda on health
on such a social contract. This is perhaps the most obvious way in which the
community can have a direct say in how they believe that health care should be
funded, but in return the community must be prepared to put such aspirations
into action by paying a social insurance premium.
Typically, employers and employees pay mandatory contributions towards
health care costs, and those in the economically inactive sectors (the unemployed,
retirees and the socially indigent) are sometimes covered through government
general revenue. If the scheme covers the entire population, then the maximum
pooling of risk is maintained. However, this is not the case if the scheme only
covers those in employment, who are usually healthier and younger than the
uninsured. Such schemes can follow the European or Bismarckian organisational
model, in which co-operatives or similar agencies (such as sickness funds in
Germany) take over the administration of the social insurance funds according
to occupational or geographic constituencies. In alternative schemes, the
government or parastatal bodies manage the operation of the social insurance
funds of the whole population social insurance, as in Canada and Taiwan. This
arrangement, although perhaps less responsive to local small-area needs, is
generally more efficient because of economy of scale and scope, because it avoids
the problem of adverse selection. For Hong Kong, the distinction between the
two organisational models is a moot point, given our limited geography and
population size.
Some have claimed that although social insurance makes the rich pay more
in absolute terms, the system is regressive because the richer pay less in terms of
proportion of income, and that proportional social insurance contributions have
little effect on the income distribution. Certainly this would be true in Hong Kong,
where social insurance would broaden the contributor base from just the middle
and upper-middle classes to virtually the entire working population and their
immediate families. The corollary is also true of direct taxation however, which
becomes less progressive as the tax base is broadened, especially in light of the
governments search for new ways in which to bring more workers into the tax
net to ease Hong Kongs structural budget deficit. In addition, some have argued
that social insurance cannot manage cost containment as effectively as other forms
of financing, such as government general revenue, citing the numerous upward
revisions of Taiwans premium levels to compensate for spiralling costs since the
introduction of its National Health Insurance programme in 1995 as an example
(see also Chapter 6 by Fan and Holliday). However, more recent evidence
indicates that the single-payer social insurance system has actually enabled Taiwan
to manage health spending inflation, and that the resulting savings largely offset
the incremental cost of covering the previously uninsured (Lu and Hsiao, 2003;
Cheng, 2003). Social insurance is the main financing instrument that was
proposed for Hong Kong by the Harvard team (see Chapter 20 by William Hsiao
and Winnie Yip, the architects of the Harvard Report).
***
The three types of financing tools that have been covered thus far are susceptible
to the tragedy of the commons, in which commonly owned properties face the
risk of depletion from overuse by individuals seeking to maximise their own wellbeing without regard for the common good (Hardin, 1968; Hiatt, 1975; Cheng,
2003). This is a consequence of moral hazard that was first described by Arrow
in 1963. In a nutshell, if individuals do not face payment (as a disincentive) at
the point of care, then they will demand a greater quantity of services given equal
levels of a priori need (see the following section on payment methods for a fuller
discussion of this topic). Hiatt (1975) presciently warned in the 1970s that should
social insurance be implemented in the US, it is imperative that physicians and
other health providers work closely with professionals from many fields, and with
consumers, to ensure the availability and dissemination of information that will
permit decisions that are in the best interests of society. The challenge remains
for government to educate, persuade and inculcate in the citizenry a sense of
collective responsibility to ensure that a publicly financed system is sustainable
and does not fall prey to demand-side moral hazard. Co-payments, deductibles
and other payment methods have been designed to minimise this phenomenon
with varying degrees of success.
Private Insurance
Private insurance differs from social insurance in that it is largely voluntary, except
when linked to employment. Private insurance schemes are usually offered by
competing insurers that charge different premiums for different coverage
packages based on the baseline health risk of the insured. Private insurance can
be purchased by individuals or by groups in such forms as corporate insurance
coverage for employees. These schemes are popular in developed economies,

Table 2
Medical Insurance or Benefits Coverage, 2002
Type of coverage
Any form of insurance or medical benefits

(including CSSA)
Any form of insurance or medical benefits
(excluding CSSA)
Civil servants and HA staff plus household members*
CSSA (welfare recipients)*
Employment-based*
Individually purchased (as a rider to other insurance policies)*
Individually purchased (non-rider)*
Proportion of population (%)
45.7
42.9
14.5
5.0
34.1
35.9
10.5
* overlapping categories
Note:
HA = Hospital Authority; CSSA = Comprehensive Social Security Assistance
Source: Thematic Household Survey 2002
because they apparently offer a free choice of differentiated products to willing

buyers. They form the backbone of the US health financing system, and fund a
myriad of private health maintenance organisations or similar managed care
providers. In Hong Kong, about one-third of the population (excluding civil
servants, Hospital Authority staff and family and welfare recipients) have private
insurance or benefits schemes coverage, mostly through employment-based
programmes. The majority of individually purchased indemnity plans come in
the form of riders on other types of insurance schemes, most commonly life
policies (Table 2). Moreover, a recently popular form of insurance in Hong
Kong, called income protection plans, charges a small premium but only pays
out usually between HK$5001,000 per day of hospitalisation in cash with no
coverage for the actual medical expenses. Obviously, these plans do not perform
a proper insurance function in the traditional sense of the term and indeed
promotes keeping such insured individuals in the public sector.
A major failure with private insurance, at least as a main financing vehicle,
is the abnormal economics of adverse selection by consumers and risk selection
or cream-skimming by insurers (Hsiao, 1995a). Health risks and therefore
utilisation are not distributed uniformly. The 10:90 or 20:80 rule applies in
that the sickest 10% to 20% of individuals consume 80% to 90% of health care
episodes and expenditure. Therefore, in a free market economy in which most
major insurers are listed companies with an overriding profit motive, the aim is
to exclude the sick and to preferentially insure the healthy, who are less likely to
file for claims. Some governments have regulated private insurance through
community pricing and rating bands, which means that insurers are required to
provide coverage to all comers at a uniform premium, but then the average rate
is so high that the majority of relatively healthy people spurn the scheme because
of their much lower self-perceived actuarial risk of incurring a health-related
expense. As a supplemental financing tool however, private insurance can arguably
provide a choice for those who can afford better amenities and peripheral service
quality as in the local context. From an equity standpoint, private insurance is
fundamentally regressive, because premium setting is unrelated to income levels
and ill-health is largely determined by socio-economic factors.
The government would have to be prepared to bear a large and expensive
regulatory burden should Hong Kong decide to increase the role of private
insurance in financing health care. A traditional laissez-faire approach, or even
the existing generic regulatory framework that operates through the Office of
the Commissioner of Insurance, would not suffice, due to the very strong
abnormal economics of adverse and risk selection that are specific to health care.
Even with such supervision in place, there is no guarantee that there would be
no repeat of the politico-economic gridlock that has gripped the insurance-led
financing system of the US. For now, private medical insurance plays a trivial role
in risk pooling in Hong Kong, as there are usually tight limits on private hospital
cover on the (currently safe) assumption that any catastrophic cases can easily
be transferred back to the public hospital system. Instead its local importance
thus far has primarily been a convenient organisational tool for paying for private
ambulatory care for companies.
Out of Pocket Payments

So far, different forms of pre-payment schemes have been discussed. Out of pocket
spending differs from this preceding group of schemes in that it entails direct,
non-reimbursable payment at the point of service. Except for the very rich, out
of pocket payments cannot be the mainstay of inpatient care financing because
of the prohibitive costs that are associated with modern hospital care. However,
it is a very common type of financing instrument for ambulatory services. In Hong
Kong for instance, out of pocket payments make up about one third of the total
health expenditure (Table 1), mostly in the private out-patient market, which has
80% market share.
In high and middle-income economies, out of pocket payments are generally
a regressive means of financing, and are even more so than private insurance.
Because absolute poverty is less common in rich economies, out of pocket
payments do not usually pose a prohibitive barrier to health care consumption.
Thus, income-related health inequality, or the correlation between health and
socio-economic status, can make out of pocket payments highly regressive.
However, Hong Kong is a marginal exception that seems to engage in substantial
positive discrimination in favour of the worse-off, which is mostly due to the rich
opting out of the universally accessible public sector that is funded by government
general revenue and seeking care from private providers, paying out of pocket
(Besley and Coate, 1991).
However, out of pocket payments at an affordable and acceptable level at
the point of care termed user charges can be effective disincentives against
the moral hazard of inappropriate consumption. This is entirely different from
relying on out of pocket payments as a major fiscal instrument to raise funds.
Indeed, the Health, Welfare and Food Bureau raised user charges following a
willingness to pay and impact study by Hu Teh-Wei in 2002 (see Part II) to counter
the widespread over consumption of public sector services as a result of minimal
co-payments in the past.
Medical Savings Accounts

Since the launch of Singapores medical savings accounts in 1984, there has been
renewed interest in this type of financing instrument, notably in Hong Kong. Pilot
programmes have been running since 1994 in the cities of Zhenjian and Jiujiang
in China, and there are phased plans for the implementation of medical savings
accounts for urban formal sector employees nationwide (Yip and Hsiao, 1997).
In the US and South Africa, smaller scale experiments are taking place based on
voluntary enrolment. Quite unlike the cross-sectional or vertical risk pooling of
government general revenue, hypothecated taxation, social insurance and private
insurance, medical savings accounts are a form of individual (or household)
horizontal risk pooling or inter-temporal health expenditure smoothing, in which
young people are encouraged (or compelled) to save for future medical expenses.
Originally conceived as a direct payment method in Singapore, the government
soon discovered that many households could not afford the high fees that are
associated with in-patient admissions or even chronic diseases, and thus the
catastrophic insurance programme MediShield was added in 1990 to pool risk
vertically and thereby increase equity. In this scheme, the premiums are paid out
of the MediSave accounts. A third component, MediFund, was introduced in 1993
as an endowment fund or safety net to pay for the expenses that are incurred by
the socially indigent who cannot afford the heavily subsidised charges despite
MediSave and MediShield. The most recent add-on, which was adopted in 2002,
is ElderShield, which is an opt-out scheme for all MediSave account holders that
insures against severe disability and long-term care.
Along the lines of the evolution of the Singaporean medical savings accounts
experience, contemporary thinking tends to regard these personal savings
accounts as an intermediary system that handles and manages the accounts for
individuals, rather than as a direct payment tool. Savings can then be channelled
into any one of the aforementioned options of health care financing: government
general revenue, social insurance, private insurance and out of pocket payment,
but usually only towards the middle two categories. For example in the US,
medical savings accounts are the newest type of pre-payment managed care
product. They receive favourable tax treatment (i.e. are exempt at the time of
purchase and consumption if coupled with a managed care product such as a
high-deductible preferred provider plan to cover the costs of catastrophic illness).
When using the plan, the enrolled individual first draws on the savings account
until it is exhausted, then direct out of pocket payments (commonly referred to
as the doughnut hole) take over until expenses reach the deductible threshold
when the managed care programme pays for 70% to 80% of costs (i.e. 20% to
30% copayment). Finally the insurance scheme completely takes over all costs
when the ceiling for total out of pocket payments is exceeded (Robinson, 2005).
This line of thinking also underlies the 2005 new pharmaceutical coverage plan
for Medicare beneficiaries.
The sustainability of medical savings accounts depends on the ability and
willingness to save, which is in turn highly ethno-culturally sensitive. In Hong
Kong, which is a society that values thrift and a Confucian sense of responsibility
despite its Western leanings in many other ways, this may be possible. Although
medical savings accounts have a relatively high responsiveness to individual
preferences because price-sensitive consumers have an incentive to choose
appropriate and cost-effective care (which also minimises moral hazard in the
process), they are in reality a form of hypothecated taxation with all of its
attendant drawbacks, albeit minus the cross-subsidisation of others. There is also
no redistribution or equity between individuals, although this drawback can be
somewhat buffered by other financing instruments downstream of the collection
point, as the Singaporean experience illustrates.
Access, particularly for non-life threatening events, may be dependent on the
level of savings, despite built-in safeguards such as a catastrophic insurance
scheme. Historically from the RAND experiment findings, patient-consumers did
not appear to be able to differentiate between necessary from unnecessary care
where cost sharing reduced the percentage of low-income adults who sought
highly effective care for acute conditions by 39% (Lee and Zapert, 2005). More
recently, a systematic review of current evidence from experiences in the public
systems of Singapore and China and from simulations using United States
Medicare data suggests that the medical savings accounts approach has not
controlled costs, and may increase inequalities in publicly funded systems (Shortt,
2002). This is consistent with the earlier evaluations of Hsiao (1995b) and Barr
(2001) of the lack of cost containment in the Singaporean experience. Most
current research on medical savings accounts centres on efficiency of cost
containment and the reduction of the welfare costs that are generated by moral
hazard (Hsiao, 2001; Pauly, 2001).
Lastly, unlike the medical savings accounts scheme in Singapore, which was
able to leverage the Central Provident Fund with its 20-year history and cash
cushion at the time of launch, Hong Kongs equivalent Mandatory Provident Fund
only came into existence in 2001, and it will therefore be years before these
Figure 1 Health financing instruments (GGR = government general revenue;

HT = hypothecated tax; SI = social iinsurance; PI = private insurance;
OOP = out-of-pocket payment; MSA = medical savings account)
accounts can accrue a sufficient balance to be able to contribute to the financing

of health expenditure in a significant way. Related to this observation, some
economists have questioned whether the benefits of such a scheme are worth the
dead weight loss that is associated with locking up a substantial sum in medical
savings accounts for possibly decades to achieve compulsory inter-temporal
consumption smoothing. Interest accrues to Singapores MediSave accounts at a
rate that is based on 80% of the annual fixed deposit and 20% of the savings
deposit of the four local banks, subject to a floor of 2.5% that is guaranteed by
the government. The overall interest rate is pegged at 1.5% above the interest
rate of ordinary accounts. Although detailed accounting of the costs that are
associated with the floor interest rate is guaranteed and the 1.5% premium is
opaque to external parties, it may well be a substantial sum in an environment
where there is a low interest rate. These hidden costs are not explicitly shown in
any books, nor are they usually factored into the calculations of the efficiency of
medical savings accounts.
Figure 1 summarises the characteristic features of the principal financing
instruments described above.
Generic Types of Provider Payment Methods

Fee-for-Service
Fee-for-service is the most direct and simplest payment method. Under a purely feefor-service remuneration system, every unit of health care activity (such as an
operation, a clinic visit, an injection or medication) is associated with a discrete
price tag. This most primitive form of payment arrangement underpins the private
hospital system in Hong Kong, where there is a separate charge for items as trivial
as a box of tissue paper. The fee-for-service approach inherently structures in the
incentive to render more services or increase the intensity of care because of the
linear relationship between income and quantity of service. This leads to the welldocumented and recognised phenomenon of supplier-induced demand.
Supplier-induced demand, which is sometimes called the moral hazard of
providers, occurs when health care providers use their superior knowledge to
influence demand for services to thereby achieve a higher income. Because of
the asymmetry of information (Hsiao, 1995a) between patients and providers, it
is difficult for patients to distinguish medically necessary interventions from more
discretionary recommendations that are fuelled in part by the self-interest of
physicians or hospitals. In the local context, an additional component comes into
play when there is price discrimination for privately hospitalised patients that
depends on ward class, which means that the doctors fees for ward rounds and
surgical procedures are pegged to the room charge, even though the level and
quality of service are apparently similar. This amplifies the effect of supplierinduced demand due to the higher intensity of the incentives that are involved
in treatment decisions. At one extreme, supplier-induced demand completely
transfers the financial risk of treatment to patients or third-party payers while
preserving flexibility and profitability for providers. From a medical and preventive
health viewpoint, a fee-for-service approach encourages the consumption of bigticket items where the margins are often far higher compared to the
commodification of out-patient care for minor conditions, for example. There is
thus little incentive for providers to keep patients healthy.
Hong Kongs private sector is mostly made up of solo practitioners cum
entrepreneurs and the perverse incentive to increase patient demand for care as
a result of the fee-for-service payment arrangement can artefactually inflate
utilisation compared with other systems with different forms of provider
remuneration systems, such as salaried or capitated physicians, given similar
normative levels of need (Hsiao, 1995a). This can be explained by the theory of
agency that describes the relationship that arises when a principal delegates
authority to an agent, which in this case means the patient deferring to the
superior medical knowledge and judgment of the health care provider (Dranove
and White, 1987). This phenomenon is accentuated by a presumed high target
income (Chan et al., 1998) for physicians in Hong Kong, who are among the
best paid in the world (Hsiao, Yip et al., 1999; Leung, 2001). It is widely believed
that their professional behaviour is determined, in part, by how much they are
paid and the way in which they are paid. The target income hypothesis has been
empirically demonstrated for physicians who operate in a fee-for-service
environment (Rosen, 1989; Rizzo and Blumenthal, 1996).
For example, in Hong Kong it is not uncommon for doctors to prescribe a
two- or three-day course of antibiotics for a mild viral upper respiratory tract
infection initially, and then to ask the patient to return on day three for
reassessment and renewal of the prescription (Lam and Lam, 2003; Lam and Lam
2001). In addition, the widespread belief that there is a cure that the doctor can
prescribe for every ill characterises the attitude of Hong Kong residents towards
health and health care (Lam, 2003). Anecdotally, the paternalistic view that
doctors know best is still surprisingly pervasive in Hong Kong, despite the level
of socio-economic development and the high level of literacy and education of
the general population. This belief is distinct from the traditional Chinese
medicine theory that there is a hypothetical cure for all ills. Empirically, we have
preliminary local evidence to demonstrate that the apparent over-consumption
of health care is at least partially attributable to the fee-for-service payment
structure (Leung et al, 2005).
A further peculiarity of a fee-for-service remuneration system is the relative
payment rates between different specialties, where the surgical disciplines are
almost always paid (much) more than their medical counterparts whereas
frontline primary care doctors are the lowest paid. Thus some internists have in
recent years increasingly offered interventional services, such as colonoscopy,
bronchoscopy or cardiac catheterisation, to boost their income. While most of
these procedures are performed for bona fide clinical indications, undoubtedly
some are carried out for no apparently good reason and an as yet undefined
number of iatrogenic events have occurred as a result. Responding to such
distortions in payment rates between services, one innovative method that was
developed by Hsiao and colleagues (1988a, 1988b) in the mid-1980s, passed by
Congress in 1989 and implemented by the then Health Care Financing
Administration (now Centers for Medicare and Medicaid Services) in the US
concerns the systematic and rational foundation for determining physician fees.
The cornerstone of the new payment reform is the Medicare Fee Schedule, which
is based on the Resource-Based Relative Value Scale (RBRVS). The RBRVS is a
measure of relative levels of resource input expended when physicians produce
services and procedures. It is a function of the physicians work input, the
opportunity cost of specialty training, and the relative practice costs for each
specialty. If it had been fully implemented and assuming budget neutrality and
absence of volume changes in services as proposed, the RBRVS-based fee schedule
would have increased Medicare fees for evaluation and management services by
15% to 45%, while fees for invasive services and diagnostic tests would have been
reduced by 20% to 30%. These changes would have increased the Medicare
income of family practitioners by more than 30% while decreasing the income
of most surgical specialties by 10% to 20% (Hsiao et al, 1992). Hong Kong can
take stock of the decade-long empirical lessons learned in the US, Canada and
Europe which have by and large adopted the RBRVS system, especially if we
pursue an insurance (especially social insurance) financing route in the 2006
health care reform exercise.
Capitation
In response to the economic deficiencies of the fee-for-service approach, some
health systems have shifted provider payment mechanisms so that they are defined
on a per-person or capitation basis. Briefly, this entails the establishment of patient
lists, whereby individuals from a defined population (geographic, work-related
or otherwise) are enrolled into a particular practice that provides, at minimum,
primary care services. However, there are also models in which capitation is used
for specialty or in-patient services, or for a continuum of services in combination.
In such a system, care providers are paid depending on the number of enrolees,
usually adjusted for case mix using a formula that takes into account age, sex and
other medical risk profile indicators, but irrespective of their actual utilisation of
an agreed package of services for a fixed time period typically renewable annually.
This financing arrangement transfers most of the risk to the providers, in contrast
to the patient-borne risk structure that is associated with a fee-for-service system.
However, there are usually stop-loss ceiling provisions that limit the maximum
liability of providers in cases of inaccurate premium setting or case-mix
adjustment. This is mostly applicable in the in-patient setting, in which costs are
considerable.
Under a capitated system, it is in the interest of providers to keep patients
healthy, which thus minimises the consumption of health care. This is often a
delicate balancing act, and some may fall into the gap between overt undertreatment and optimal care provision. For instance, capitated systems often make
heavy use of the gatekeeping function of primary care providers for access to
specialists. The primary care trust model of the UKs National Health Service is a
well-known example of such an arrangement. However, the issue is of particular
concern in Hong Kong and elsewhere in Asia, where infrastructures and data
systems are not well developed enough to adequately monitor the quality of care
or protect patient interests. Brudevold et al. (2000), in a local study of risk-bearing
provider networks in an environment of unregulated contract medicine,
emphasised the need to structure pre-paid provider networks and managed care
organisations so that the quality of care is not compromised. Ideally, capitation
works best when there is vertical integration of services such that its providers
are discouraged from shifting the burden of care to the next level in a
compartmentalised system.
Salary
Salaried providers are paid the same fixed amount of wages regardless of the
volume of services that is delivered or the number of patients on the roster, which
is how all public sector health care workers are remunerated in Hong Kong.
Although any potential for supplier-induced demand is virtually removed, this
remuneration strategy is devoid of any incentives to perform well since promotions
or salary adjustments are generally too blunt and infrequent as an effective human
resource management instrument. Crude measures, such as a daily quota of
patient throughput, have been adopted in the general out-patient clinics to
mitigate low productivity in the form of unnecessarily long patient visits, fewer
appointment slots, and unenthusiastic responsiveness to patients and co-workers.
Slightly more sophisticated human resources management tools that entail more
administrative work, such as performance evaluations and, more recently in Hong
Kong, short fixed-term contracts are additional safeguards, although their
effectiveness has yet to be proved (Gosden et al., 2001).
There have been recent developments in flexible bonus structures on top of
the basic remuneration package to maximise the financial incentive to provide
optimal care for providers that are retained on a capitated or salaried system. In
the UK, for instance, general practitioners can now accumulate points for
achievement in relation to the Quality and Outcomes Framework, which consists
of a complex set of clinical, organisational and patient satisfaction indicators. The
points translate into cash earnings that correspond to a potential annual increase
in gross earnings of up to 42,000 (about HK$600,000) per doctor. These bonuses
are expected to make up as much as one-fifth of the governments total primary
care budget (Roland, 2004).
Per Diem or Illness Episode

To counter the supplier-induced demand that is associated with a fee-for-service
payment system, and because of the potentially large sums that are involved for
hospital admissions and in-patient procedures, with this method a fixed amount
is paid for each day that is spent in hospital or per admission episode. The
financial risk that is borne by the provider increases in proportion to the
comprehensiveness of the coverage. A per diem approach means that the payment
amount is directly dependent on the total length of stay. This is a fairly crude
way to dampen the moral hazard of providers, and has the perverse incentive of
prolonging hospitalisation. A more satisfactory and popularly adopted strategy is
the diagnosis-related group system. The diagnosis-related group method is a
prototypical example of the per illness episode payment method for in-patient
services, and was first adopted by the US Medicare administration in 1983. It
classifies hospital case types into groups that are expected to have similar hospital
resource usage based on International Classification of Diseases (ICD) diagnoses,

procedures, age, sex and the presence of complications or co-morbidities. The
diagnosis-related group system works by grouping the more than 10,000 ICD codes
into a smaller number (~500) of patient categories. Each category consists of cases
with similar profiles of clinical and resource use. Under this system, hospitals have
an incentive to limit the length of stay, provide less care and admit more patients,
especially those who would generate maximal profits. The Hospital Authority
initiated work on a similar mechanism by costing patient-related groups in the
mid-1990s, but this effort has since been sidelined by apparently more urgent
budgetary and accounting concerns in recent years.
In Hong Kong, all private hospitals and in-patient service providers continue
to charge on a predominantly fee-for-service basis, with a few exceptions for
volume discounts. This is regrettable given the many shortcomings that are
associated with the fee-for-service approach, although it is hardly surprising in
light of the long history of benign neglect by the government (Hsiao, Yip et al.,
1999) and consequently lax regulatory framework in place. Coupled with a
powerful and closed medical lobby, the provider payment system is heavily skewed
in favour of physicians and hospitals, and imposes an almost one-sided risk-bearing
burden on patients. On top of this primitive payment system, what is perhaps more
troubling is the opacity of fees and charges, although the Hong Kong Medical
Association has taken concrete steps to address this obvious deficit in recent years.
One-Line or Global Budget

Another general type of cost containment measure is the deliberate limitation of
the resources that are available in a health system. For a defined sum (the annual
operating budget), providers have to deliver an agreed care package that satisfies
both the dimensions of quantity and quality. This form of all-inclusive budgeting
transfers all of the risks that are associated with care to the provider and away
from the patient or payer. Regarding capital budgets under this system, it is
pertinent to review Roemers law, which may be succinctly summarised as a bed
built is a bed filled. Roemer (1961) reported a natural experiment in which a
sudden increase in hospital beds in one county, with no changes in other relevant
factors, led to a sharp increase in utilisation. It was the first description of this
special form of supplier-induced demand. As a result of his findings, any new
capital injection to expand current capacity, such as the total number of beds, is
usually scrutinised with the utmost attention and caution.
As a parastatal organisation that was established by government ordinance,
Hong Kongs Hospital Authority is funded through a population-based formula
that combines features of the capitated system with the historico-political
circumstances of the annual budget exercise in the form of a one-line vote that
comes directly from the government Treasury. However, its responsibilities are
virtually limitless given the universal access and popular demand for more and
better services. Fuelled also by the heavy public sector subsidy that means that
only a nominal out of pocket payment needs to be made at the point of care, a
global budgeting approach is less effective as a means of cost control unless there
is a pre-defined, closed-ended package of services beyond which the Hospital
Authority will not provide. The alternative is, of course, to subject the Hospital
Authority to market fiscal discipline, in that it would be allowed to go bankrupt
should the situation arise, although this is politically inconceivable.
In Chapter 19, Raymond Yeung and Chan Wai-Sum summarise the current
state of health financing in Hong Kong, discuss the relative merits and demerits
of the status quo in meeting common policy objectives of equity, efficiency and
cost containment, and look forward to new prospects for the diversification of
the means of resource mobilisation and redistributive instruments as reform draws
closer.
Table 3 summarises the different types of provider payment methods.
Hong Kongs Health Accounts What Do They Show?

An understanding of the financial dimensions of health systems is increasingly
recognised as an important contribution to the development of health policy. The
old adage no decision without information should certainly apply to the health
sector as much as to other areas. In the developed world, and especially those
countries that belong to the Organisation of Economic Cooperation and
Development (OECD), systematic accounting of national health expenditures has
been carried out for several decades, whereas this is a relatively new area of intense
focus in the rest of the world, including Hong Kong. In Chapter 18, Ravi RannanEliya highlights and reinforces the central importance of a regular set of national
or domestic health accounts for any health system, especially one that is currently
facing different reform options, such as that of Hong Kong.
The creation of standardised definitions and accounting methods across
countries and the routine collection of data has provided the means for
informative and productive inquiry into the financial and health implications of
macro patterns of health financing. Health accounts are an important tool to
demonstrate how a territorys health resources are spent, what services these
resources are spent on and who pays for them. National or domestic health
accounts can be used by policy makers to monitor health expenditure patterns
and may serve as policy instruments to re-orientate these patterns.
Briefly, national or domestic health accounts are a set of descriptive accounts
that systematically and accurately describe all health expenditure flow in both the
government and non-government sectors. They achieve this by identifying the
sources of all funds that are utilised in the sector, and by ascertaining the uses of
these funds and demonstrating how they are spent. Overall, these accounts
None
Salary
None; but incentive

to expand patient
roster
Capitation
Fee-for-service
Adapted from Roberts et al (2003)
Adverse selection
(cream-skimming)
Financial risk borne by:
Purchaser
Provider
Applicable to:
Individual providers
Institutional providers
Abnormal economic forces:
Supplier-induced demand
Payment method
Per diem/episode
Incentive to increase
length of stay/
number
of illness episodes
but not intensity of care
per episode
X per diem
Risk of number
of bed-days/episodes
Risk of intensity of
Table 3
Characteristics of Different Provider Payment Methods
None
Global budget
provide essential data for health sector planning and management, in the same
way that national income accounts provide essential data for macroeconomic
planning, and vital statistics provide data for population and service planning
(OECD, 2000; World Bank/WHO/USAID, 2003),
Properly constructed national or domestic health accounts that conform to
international standards can achieve the following:
1. Track secular changes in health resource inflow and outflow and provide timeseries estimates.
2. Provide national, international and cross-regional comparisons and
benchmarking so that best practices can be learned and adopted.
3. Serve as the baseline before any major reforms to the health financing
infrastructure are initiated, and are useful for the evaluation and monitoring
processes that are associated with the introduction of new macro financing
policies and instruments, such as those that Hong Kong is currently facing.
4. Support and promote good governance and stewardship of the health system.
5. Provide the necessary fiscal data infrastructure to study and examine
condition-specific (e.g. for major disease groups) health accounting and
resource allocation.
6. Strengthen the link between research and policy, and reinforce the
importance of integrating research and development in the policy
formulation process.
In June 2002, the China National Health Accounts Task Force of the China Health
Economics Institute of the Ministry of Health in Beijing released their first set of
National Health Accounts for the years 1990 to 1999. In Hong Kong, the first set
of Domestic Health Accounts (the SARs equivalent of the national accounts) were
developed as part of the consultancy to review the local health system in November
1997 that was commissioned by the then Health and Welfare Bureau and
undertaken by the Harvard School of Public Health. The Harvard team
subcontracted the Institute of Policy Studies, Sri Lanka to perform the actual
estimation of domestic health expenditure between 1989/90 and 1996/97, and
reported the results in January 1999 (Special Report No. 1, The Harvard Report).
Hong Kongs Domestic Health Accounts were developed using the draft OECD
standards, which are based on the Principles of Health Accounting for International
Data Collection, OECD 1997, and contributed to the overall deliberations of the
Harvard consultancy. The results pointed to the questionable long-term financial
sustainability of the existing health system, which prompted actions by the Health
and Welfare Bureau and its successor, the Health, Welfare and Food Bureau. Since
then, the University of Hong Kong has taken over the updating exercise.
According to the latest set of Domestic Health Accounts that were released
in 2004, Hong Kongs total domestic health expenditure grew at an average annual
rate of 7% from HK$30,284 million in 1989/90 to HK$70,424 million in 2001/
02, in real terms at constant 2000 prices (Figure 2). However, real gross domestic
product (GDP) grew at a rate of only 4%, which means that total health spending
as a share of GDP increased from 3.8% to 5.5% during the period. Taking the
growth of the population into account, the total per capita health expenditure
increased by 6% per annum on average, whereas the per capita GDP declined in
the late 1990s as a result of the economic downturn, with an average annual
growth rate of 3% (Table 4). In terms of public versus private expenditure, the
share of public spending grew from 43% to 57% of total health expenditure
between 1989 and 2002 (Figure 3), which reflects the utilisation statistics that are
80,000
70,000
HK$ million
60,000
50,000
40,000
30,000
20,000
10,000
0
1989/90 1990/91 1991/92 1992/93 1993/94 1994/95 1995/96 1996/97 1997/98 1998/99 1999/00 2000/01 2001/02
Fiscal year
Nominal
Constant 2000 prices
Figure 2 Total domestic health expenditures for 1989/90 through 2001/02
100%
90%
80%
57%
64%
52%
53%
51%
51%
50%
48%
48%
45%
45%
44%
43%
43%
46%
48%
47%
49%
49%
50%
52%
52%
55%
55%
56%
57%
70%
60%
50%
40%
30%
20%
10%
0%
1989/90 1990/91 1991/92 1992/93 1993/94 1994/95 1995/96 1996/97 1997/98 1998/99 1999/00 2000/01 2001/02
Fiscal year
Public
Private
Figure 3 Public and private share of total health expenditures
4,335
21%
At Constant 2000 Prices

TDHE per capita (HK$) 5,326
6,000
Annual increase in
13%
TDHE per capita (%)
GDP per capita (HK$) 140,610 146,919
Annual increase in
4%
GDP per capita (%)
At Current Market Prices

TDHE per capita (HK$) 3,596
Annual increase in TDHE
per capita (%)
1989/90 1990/91
6,807
3%
5,904
12%
154,207 163,040
5%
6%
6,607
10%
5,250
21%
1991/92 1992/93
170,518
5%
7,237
6%
6,787
15%
1993/94
175,541
3%
7,609
5%
7,519
11%
1994/95
177,495
1%
8,297
9%
8,477
13%
1995/96
Fiscal year
178,319
0%
8,385
1%
9,093
7%
1996/97
9,151
6%
10,267
5%
182,277 171,731
2%
-6%
8,599
3%
9,791
8%
1997/98 1998/99
Table 4
Per Capita Health Care Expenditure for 1989/90 through 2001/02
182,526
6%
9,539
4%
9,999
-3%
1999/00
194,325
6%
10,133
6%
10,072
1%
2000/01
192,022
-1%
10,472
3%
10,204
1%
2001/02
presented in Part II. It is difficult to precisely attribute the underlying reasons

for this temporal change, although clearly the establishment of the Hospital
Authority and the consequent improvements in public in-patient services are a
major explanatory factor. The relative increase in the public share of total health
expenditure from 1989/90 through to the early 1990s reflects the initial expansion
of services that were offered by the newly established and consolidated Hospital
Authority system. A victim of its own success, the Hospital Authority has attracted
the middle class, which used to consume private health services rather than
withstand the camp beds of public hospitals. However, now that both clinical
quality and, perhaps a more important factor in influencing patient choice,
amenities have been upgraded with no concomitant appreciable value for money
marginal improvements in private hospitals, this small but financially mobile group
has opted for the public sector. The Asian financial crisis in 1997 that plunged
Hong Kong into a prolonged recession followed by a deflationary economic cycle
until the last quarter of 2004 also affected the ability to pay and spending
confidence of these consumers, as is reflected by the stepped change in the
relative proportions of total health expenditure between 1997/98 and 1998/99.
Stratified by provider categories, the largest share of expenditure in 1989/
90 was spent on ambulatory services (42%) and the second largest on hospital
services (27%). However, as a result of a gradual decrease in spending on
ambulatory services and the corresponding increase in the number, service
spectrum and quality of hospitals during the period, hospitals accounted for the
largest (45%) and providers of ambulatory services the second largest (30%) share
of total spending in 2001/02 (Figures 4a and 4b). This observed service
consolidation at institutions (as opposed to free-standing ambulatory clinics, most
of which are staffed by solo providers) was similar across both the public and
private sectors. Public expenditure was mostly incurred at hospitals, which
accounted for 70% of health care spending in 2001/02, whereas private
expenditure was mostly incurred at providers of ambulatory services (56% in
2001/02). Other industries that represent the providers of investment in capital
formation and medical facilities constituted between 7% and 26% of the total
public expenditure. As with private expenditure, the other significant element
was retail sales, which constituted 15% of total private spending, and other
providers of medical goods, which constituted 24%.
Figure 4a summarises the conundrum that is currently faced by the
government in overcoming the structural budget deficit of Hospital Authority.
Hospitals consume about 70% of public expenditure on health. Although capital
works spending (other industries) has slowed considerably since the early 1990s
due to the rapid expansion that was associated with the establishment of the
Hospital Authority, and spending in the rest of the public provider categories has
remained essentially static throughout the last 12 years, the relative proportion
of hospital spending has continued to climb, which suggests that recurrent
operational spending has been taking over the budget that was previously
80%
70%
60%
50%
40%
30%
20%
10%
0%
1989/90 1990/91 1991/92 1992/93 1993/94 1994/95 1995/96 1996/97 1997/98 1998/99 1999/00 2000/01 2001/02
Fiscal year
Hospitals
Providers of ambulatory health care
Provision and administration of public health programmes
Other industries (rest of the economy)
Nursing and residential care facilities

Retail sale and other providers of medical goods
General health administration and insurance
Rest of the world
Figure 4a Public health expenditures by provider, 1989/902001/02
80%
70%
60%
50%
40%
30%
20%
10%
0%
1989/90 1990/91 1991/92 1992/93 1993/94 1994/95 1995/96 1996/97 1997/98 1998/99 1999/00 2000/01 2001/02
Fiscal year
Hospitals
Providers of ambulatory health care
Provision and administration of public health programmes
Other industries (rest of the economy)
Nursing and residential care facilities

Retail sale and other providers of medical goods
General health administration and insurance
Rest of the world
Figure 4b Private health expenditures by provider, 1989/902001/02
allocated for the commissioning of new facilities or hardware. On the private side
(Figure 4b), the mix of spending has registered small, positive changes to
hospitals, retail sales (mostly pharmaceuticals) and insurance products, but there
has been a relatively sharp decrease in the consumption of out-patient care,
primarily as a result of the further expansion of the ambulatory market share of
the Hospital Authority (from 15% to 30% during the period). These findings
clearly highlight the disconnection between primary and secondary/tertiary care
along the lines of the public versus private ownership of providers, or the
fragmentation of services, as the Harvard team (Hsiao, Yip et al., 1999) termed
it. As a means of levelling the playing field and re-establishing a new equilibrium
in the private-public provider mix, we proposed in Part II a primary care-led
system in which secondary and tertiary care is commissioned by larger purchasing
blocs that are composed of different primary care group practices on a district/
regional basis. These groups assess and buy services from vertically integrated
specialty and in-patient care organisations, regardless of ownership. This proposal
deserves deeper exploration and wider discussion.
As with any initiative, the prevention of disease and the promotion of health
require the allocation of scarce resources. A close examination of the 2001/02
Domestic Health Accounts reveals that only 3% of the total health expenditure
was targeted at disease prevention and health promotional activities (Figure 5).
This minimalist approach to resourcing the prevention of the next disease
outbreak, whether it be a communicable disease, such as SARS or dengue fever,
or one of the many silent chronic conditions, such as obesity or diabetes, has
Total health expenditure
Ecology of health care

0.1% - Academic
medical centres
27.2% - Hospitals
2.3% - Community hospital

6.8% - Specialist care
Ambulatory
services
35.5% Ambulatory Care

(Primary and Secondary Care)
37.2% - Primary care
5.5% - Some form of illness

but do not seek medical care
34.3%
Adiministration
& Other Health
Related
Functions
48.1% - No illness
3.0% - Health Promotion
and Disease Prevention
Source: Hong Kong Thematic Household Survey 2002
Source: Hong Kong Domestic Health Accounts 200102
Figure 5 The Health Financing Paradox (expenditures by health care functions)
remained stagnant for years. More generally, the extent to which the entire
reimbursement structure in the health sector is tied to patterns of disease
diagnosis and treatment, rather than to preventive health, deserves special
attention and reconsideration. The HK$1 billion SARS fund that was earmarked
for the establishment of a Hong Kong Centre for Health Protection based on
the models of the UK Health Protection Agency and the US Centers for Disease
Control and Prevention and for research into the science and health implications
of SARS was a very welcome recent development. However, despite the immediate
relief that this lump sum may have offered, single injections of cash, however large,
usually doom a project to failure unless sustained by recurrent operating budgets.
The litmus test of disease prevention capability will be whether the next wave of
infectious diseases can be prevented. To achieve better environmental health for
more people in Hong Kong on a broader level, a major realignment of priorities
is needed, and a fair and equitable remuneration system is required for health
professionals in preventive disciplines to provide health education, disease
prevention counselling, risk assessment monitoring and evaluation. Provided that
we can measure impact and outcomes, the government should encourage all thirdparty payers, both public and private, to be reimbursed for disease prevention
and health promotional activities. Such activities should no longer be an
afterthought.
The public and private shares of expenditure by function as derived from
the latest Domestic Health Accounts (Figure 6) reveal an important message. Inpatient and day hospital services, home care, rehabilitation care and long-term
0%
20%
40%
60%
80%
100%
Inpatient curative care

Day patient hospital services
Ambulatory services
Home care
Rehabilitative and extended care
Long-term care
Ancillary services to health care
Medical goods outside the patient care setting
Prevention and public health services
Health programme administration and health insurance
Investment in medical facilities
Public
Private
Figure 6 Public and private shares of expenditure by health care function, 2001/02
care are currently predominantly provided in the public sector. These same
services are also particularly affected by demographic (ageing) and epidemiologic
(chronic diseases) transitions. Therefore, clearly thought out policy decisions and
a community consensus are needed to address how best to deal with this
anticipated increase in expenditure as a result of a greater need for health care.
Some have argued for a more libertarian approach whereby the funding for such
services is shifted to the private sector, and thus individuals who can pay will have
to pay more, rather than relying on population risk pooling through taxation or
social insurance. International experience, however, tells us that the community
is unlikely to back this option. With the exception of the US (where 1 in 6 are
uninsured), virtually every OECD country has maintained public spending at
between 60% to 90% of total health expenditure. It appears that well-off
communities share a universal preference for health spending to be
predominantly drawn from the public purse, probably because of the well-known
market failures of insurance, such as moral hazard and adverse selection. It is
important to note that this does not in any way preclude the private provision of
health care using publicly pooled funds. If this route of public risk pooling
and thus funding and private provision were pursued however, the challenge
would be to decouple the commissioning (financing) and provision of care roles
that are currently played by the Hospital Authority, or at least to structure some
form of internal market to suit this National Health Service type arrangement.
Compared to other regions, particularly in the West, Hong Kong devotes a
relatively small percentage of its GDP to health expenditure. Singapore reports
a much lower figure (3.9%), although it remains unclear how this is computed
given the governments cross-subsidisation to guarantee yields in the Medisave
accounts. Anecdotal evidence also suggests that there is a significant undercounting of private health expenditure in the Singaporean numbers. Moreover,
Singapore has the highest savings rate in the world, with an aggregate rate of
around 50% compared with Hong Kongs 30% or so. This variation in the savings
ratios gives an artefactually lower estimate for Singapore, and the difference almost
disappears once it is compared with consumption. China has a similar ratio of
health spending as a proportion of productivity, but only one third of it is derived
from the public sector. In Taiwan two thirds of the total spending on health comes
from the public purse, with a similar percentage of GDP health expenditure to
Hong Kong and China (Table 5). On the face of it, it is difficult to judge how
such differences in macro-financing affect the health system. Therefore, it is
important to undertake a detailed econometric dissection of the potential impact
of different financing strategies with respect to the end system goals of equity,
efficiency, cost containment and quality (Roberts et al., 2003).
One such example is the pan-Asian Equity in Healthcare Financing, Delivery
and Health Status in Asia-Pacific Countries (EQUITAP) project, in which the
health financing structures of 15 territories that account for a large proportion
of the Asian population were analysed for their impact on equity. The territories,

Table 5
Total Health Care Expenditure for Selected Regions in 2001
Territory
As a percentage of GDP (%)
Share of public spending (%)
3.9
5.5
5.5
5.8
5.9
7.5
7.8
9.1
9.4
13.9
33.5
37.2
56.9
65.0
54.4
83.0
81.7
68.2
70.1
44.9
Singapore
China
Hong Kong SAR
Taiwan
South Korea
United Kingdom
Japan
Australia
Canada
United States
Sources: WHO and OECD.
or social laboratories in which different financing infrastructures have evolved,

span the whole range of development, from Japan, which is rich, urban and
healthy, to Nepal, where the population is predominantly poor, rural and less
healthy. This diversity makes it possible to explore the links between economic
development, the structure of health financing and the distribution of payments.
Not only does the structure of health financing vary with the level of development,
so too does the distributional burden of any given source. An examination of a
heterogeneous group of territories gives some insight into how health financing
systems and their distributional consequences might be expected to evolve. This
evolution is readily apparent in Asia, parts of which have experienced rapid
economic development recently, with immediate consequences for health
financing. We present some local results from this exercise.
The distribution of the financing burden is a major consideration in the
appraisal of the fairness of the status quo and the assessment of the equity
consequences of reform. The impact of the health system on the economy is
determined not only by its size, but also by the way in which it is financed. To a
large extent, the distribution of the economic burden of health care is determined
by the structure of financing, and specifically the split between direct payment
and pre-payment and the relative contributions of taxation, social insurance and
private insurance to the latter. The balance between direct payment and prepayment determines the extent to which actual or potential users pay for health
care. Direct payments are charged in relation to actual costs, whereas private
insurance premiums are related to (pooled) expected costs. Taxation and social
insurance break the link between the use of health care, either realised or
expected, and financial liability. Instead, liability can become a function of the
ability to pay. Taxation passes the bill for health care to the taxpayer and,
indirectly, it is mostly workers and consumers who pick up this bill. Social
insurance places the main burden on workers, and private insurance accumulates
funds from those that choose to insure against the cost of future illness.
In Hong Kong, as elsewhere, there is widespread, although not unanimous,
agreement with the principle that the financial burden of health care should be
distributed fairly across the population. One general notion of fairness is the
extent to which contributions towards health care finance are related to the ability
to pay. More specifically, fairness in health care finance may be conceived of as
proportionality or as progressivity in the relationship between payments and the
ability to pay. Whatever the precise conception of fairness, a description of the
association between health care payments and the ability to pay is of interest from
a wide variety of equity perspectives. Health care can be financed from a mixture
of four sources: government general revenue, social insurance, private insurance
and out of pocket payment. The equity of each source of finance can be further
analysed. A progressive system is one in which payments towards health care
comprise an increasing proportion of the measure of the ability to pay. In a
regressive system, the financial liability for health care is a decreasing proportion
of the ability to pay. A proportional system is one in which payments towards
health care remain constant in proportion to the ability to pay.1
Table 6 presents the Gini coefficient for the ability to pay variable, the
concentration indices and the Kakwani indices for each of the four main sources
of health finance. The Gini coefficient and all of the concentration indices are
positive, which indicates that a higher proportion of the total value (in this case,
income) is distributed towards the better-off population. All of the Kakwani indices
are also positive, which implies that the share of health payments that is made by
the poor is less than their share of the total ability to pay. Table 7 shows that direct
taxation is the main driver of the overall progressivity. The Kakwani index (K =
0.3940) of direct taxation is much higher than those of the other financing
sources. In fact, the richest 10% of the population contributes almost 70% of
direct tax, which constitutes about one-quarter of total health finance. Private
sources (private insurance and out of pocket payments) appear to be broadly
proportional, as their Kakwani indices are close to zero. Together, these
observations confirm that Hong Kong has a very equitable distribution of health
financing, in which the rich pay disproportionately (in terms of the ability to pay
or income) more compared with the less well-off. Further, compared with the
other Asian countries in the EQUITAP study, Hong Kong is an exception a
rich territory that relies heavily on a very progressive system of direct taxation.
As a result of this overall reliance on direct taxes, the redistributive effect of such
a policy, or the change in the Gini coefficient under the assumption of horizontal
equity, is greatest in Hong Kong of all 15 regions that were analysed. In Hong
Kong, payments are more concentrated on the rich than would be expected, given
its income level. A likely explanation is that out of pocket payments are mainly
for private care, which is mainly consumed by the rich. Although there are charges

Table 6
Decile Shares of Ability-to-Pay and Health Care Payments
ATP
Share of
Direct
Indirect
Private
OOP
ATP
taxes
taxes
Insurance
payments
Poorest 10%
2
3
4
5
6
7
8
9
Richest 10%
2.68
3.92
4.88
5.87
6.90
8.26
9.57
11.84
15.36
30.73
0.61
0.85
1.13
1.46
2.09
2.45
3.39
4.89
13.23
69.90
2.08
3.66
4.63
6.00
5.15
6.96
5.25
11.74
13.56
40.97
0.48
1.66
3.68
6.82
5.42
10.60
13.41
13.65
16.42
27.87
2.77
3.69
4.68
5.44
5.87
7.58
8.78
12.30
20.46
28.43
Total
Gini / CI
Robust SE
Kakwani
Robust SE
100%
0.3901
0.0112
100%
0.7670
0.0649
0.3769
0.0505
100%
0.4764
0.0553
0.0863
0.0524
100%
0.4304
0.0793
0.0403
0.0794
100%
0.4014
0.0319
0.0113
0.0322
decile
Note: CI = concentration index, SE = standard error; OOP = out of pocket
Table 7
Kakwani Indices for Different Financing Sources
Kakwani
Robust SE
Direct
Indirect
All
Private
OOP
Total
taxes
taxes
taxes
insurance
payments
payments
0.3940
0.1102
0.3645
0.0403
0.0794
0.0113
0.0322
0.1689
Note: SE = standard error; OOP = out of pocket
in the public sector, these are very modest and the poor are exempt. In sum, the
achievements of Hong Kong in financing equity are largely attributable to the
adoption of a tax, rather than social insurance, as the model for funding health
care (ODonnell et al., 2005).
Another key question is whether public subsidies for health care are
appropriately targeted at the medically and socially indigent, as Hong Kongs
societal values indicate (Fung et al., 1999). Table 8 demonstrates the regressive2
associations between the distribution of the share of living standards and the share
of public health care utilisation. The poorest 10% of the population consume
31% of in-patient, 28% of out-patient and 23% non-hospital visits to health
professionals. Although the living standard variables increase in the decile

Table 8
Decile Shares of Living Standards and Public Health Care Utilisation
Living
Hospital
Hospital
standards
inpatient
outpatient
Visits to
health
care
care
professionals
Poorest 10%
2nd poorest
3rd
4th
5th
6th
7th
8th
2nd richest
Richest 10%
3.17
5.51
6.74
7.64
8.40
9.18
10.14
11.52
13.78
23.91
31.07
16.56
11.29
8.14
7.22
8.66
3.86
5.92
4.32
2.97
27.58
13.52
11.72
10.65
6.23
5.54
5.29
8.91
6.16
4.39
23.44
13.17
10.46
10.89
10.89
7.12
8.49
5.73
6.01
3.79
Total
100%
100%
100%
100%
CI
Robust SE
Kakwani Index
Robust SE
0.2835
0.0028
-0.3853
0.0397
-0.6688
0.0378
-0.2970
0.0258
-0.5805
0.0253
-0.2664
0.0214
-0.5499
0.0210
Note: CI = concentration index, SE = standard error
distribution (concentration index = 0.2835), the utilisation variables exhibit a

decreasing trend (contraction indices < 0). The regressivity in the utilisation of
public health care can be summarised by the negative Kakwani indices (K = 0.6688
for in-patient, 0.5805 for out-patient and 0.5499 for non-hospital visits). As there
are minimal differences in the per unit subsidies across users for each particular
service, the regressivity in the utilisation of these services is directly translated into
a regressivity in public health care subsidies. The overall regressivity can be
summarised by a weighted Kakwani index of 0.6537. This benefit-incidence analysis
suggests that public care subsidies in Hong Kong are strongly targeted towards the
worse off. Figure 7, which shows the concentration curve of public health care
subsidies and the Lorenz curve of the ability to pay variable, confirms this
observation.
Together, the progressivity and benefit-incidence analyses indicate a highly
vertically equitable system in the financing and target subsidy of health care in
Hong Kong. Socio-cultural norms and expressed government policy direction that
no one shall be denied adequate medical care due to a lack of means support
the current arrangements regarding equity goals. Another important equity
concern in systems with egalitarian goals is to ensure that the horizontal equity
standard is met such that equals are treated equally, in addition to the vertical
Cumulative proportion of expenditure and subsidy

100
90
80
70
60
50
40
30
20
10
0
11
21
31
41
51
61
71
81
91
Cumulative proportion of individuals ranked in ascending order of expenditure

Lorenz curve
Total subsidy
Figure 7 Concentration curves for public health care subsidies
norm that unequals are treated appropriately unequally. In health care, the
horizontal equity principle is usually translated as equal treatment for equal need
(ETEN). Although Hong Kong has long achieved (nominal) universal coverage
of its population for a fairly comprehensive package of health services, it remains
unclear to what extent it has fulfilled the goal of equal access or utilisation for
equal need, irrespective of income or other socio-economic characteristics.
We are interested in the overall equity of the health system, in which two
distinct components, finance and delivery, should be jointly evaluated against
equity principles. Often, these are considered in isolation which limits the
inferences that can be drawn. For example, if much of health finance is from
private, voluntary payments, then a finance analysis can show that the rich pay
most. But without simultaneously examining the delivery side, we cannot see that
the rich also get most private care. With respect to the public system, there is an
additional reason to link finance and delivery. Examining who pays the taxes
without simultaneously identifying who receives the benefits from those revenues
does not give a full picture of the redistributional impact of the public system.
Therefore, there is a need to carry out further work to examine the direction
and extent to which Hong Kongs health financing arrangements depart from
proportionality in parallel to studying potential violations of the ETEN principle
in the delivery of health care, by linking progressivity with benefit incidence
analysis to identify the distribution of the net benefits from public intervention.
Furthermore, the medium to long-term financial sustainability of the present
financing system is questionable, a fact over which all parties unanimously agree,
although the Health, Welfare and Food Bureau (2001) and the Harvard team
(Hsiao, Yip et al., 1999) differ on their respective interpretation of the degree of
urgency. The Harvard team projected an annual average growth rate of total
expenditure from 1997 to 2016 of 13.5% (14.3% for the public sector and 12.4%
for the private sector). However, the set of assumptions that underlies these
projections now seem unrealistic. For example, the growth in economy-wide price
inflation for 1997 through 2016, as measured by the GDP deflator, was assumed
to be at a constant 7.0% per annum. This was derived by taking the arithmetical
average of the same indicator from 1990 to 1997, which was one of the highest
growth periods in Hong Kongs history. However, if we average the GDP deflator
from 1990 to 2003, the annual growth rate is just 2.2%. In addition, the Hospital
Authority has always maintained that the Harvard teams projected utilisation
growth was based on data from 1990 to 1996, which was a period of rapid
expansion in the public health care sector as a result of the establishment of the
Hospital Authority and of catching up with unmet demand from the 1980s
(Hospital Authority, 1999). One further caveat concerning this modelling
approach bears mentioning. The Harvard projection method is not a true
actuarial cost model, but more of an econometric regression model. There is good
evidence suggesting that actuarial models, such as those adopted by the US Center
for Medicare and Mediaid Services and the UK Wanless Report, perform better
in terms of predictive accuracy. Hong Kong has all of the requisite data elements
to perform a more rigorous, up-to-date actuarial projection, and this should be
an urgent priority.
Restricting focus on the Hospital Authority accounts which consume almost
half of total domestic health expenditure locally, the successive (structural) deficits
incurred in recent years as shown in its income statements (summarised
longitudinally in Table 9) confirm the highly questionable sustainability of public
health care finances. There is absolutely no reason to believe somehow this will
resolve spontaneously and that the widening spiral of operating deficit can be
easily eliminated with minor tinkerings such as modest point-of-care fee increases
or further management belt-tightening. Indeed the theme of the outgoing
Hospital Authority Chief Executives keynote speech at their annual convention
in 2005 focused on this very problem where he projected a doubling of the current
deficit within the next five years if the system were to remain on course without
a major overhaul. We now examine the merits and demerits of major financing
reform proposals in the last decade, none of which have yet been adopted, let
alone implemented, and now grace the shelves of official archives and public
libraries.
Financing Reform Proposals Past, Present and Future

Harvard Proposal
In 1997, the government commissioned a team from Harvard University to carry
out an external review of health financing, and by extension the macro-
12,014
66
3,565
134
Expenditure
Surplus/deficit
*all figures in HK$million
11,433
646
12,080
3,454
245
3,699
Income
Government subvention
Recurrent
Capital
All other sources
Total
1991/92 1992/93
135
14,306
13,646
795
14,441
52
16,792
15,764
977
16,740
1993/94 1994/95
46
20,203
18,950
1,206
20,157
1995/96
23,810
22,300
1,516
23,816
1996/97
67
26,595
24,747
23,309
1,438
1,916
26,663
1997/98
Fiscal year
173
28,940
27,294
26,213
1,081
1,819
29,113
1998/99
362
29,243
27,758
27,337
421
1,846
29,605
256
30,080
28,159
27,898
261
2,177
30,336
1999/00 2000/01
Table 9
Income and Expenditure of the Hospital Authority, 1991/922003/04
261
31,735
29,123
28,873
250
2,351
31,474
2001/02
220
31,546
29,071
28,657
414
2,254
31,325
2002/03
374
32,232
29,124
28,769
355
2,734
31,858
2003/04
organisation structure of the health system (Hsiao, Yip et al., 1999). The Harvard
consultants reported back in 1999 and identified strengths, such as a highly
equitable and cost-effective system and major improvements in hospital services
as a result of the formation of the Hospital Authority in 1990. Several
shortcomings of the current system were also raised, which included the
compartmentalisation of service delivery between different levels (primary,
secondary, tertiary) and types (private versus public and Western allopathic versus
traditional Chinese medicine) of care with undue emphasis on secondary and
tertiary care, a lack of long-term sustainability in the financing infrastructure due
to the single-piped general revenue funding source for public services, the
underdevelopment of private insurance products and managed competition in
the private sector, the varying quality of care between different providers, and
insufficient supervision of self-regulating health professions, particularly
physicians. As potential solutions to these identified concerns, they proposed
phased options that would ultimately lead to higher user fees or co-payments at
the point of care, a population-wide social insurance scheme, medical savings
accounts for long-term care of the elderly, and a managed care system whereby
vertically integrated private and public provider organisations would compete for
patient enrolees (Hsiao, Yip et al., 1999).
Specifically on financing, the Harvard consultants recommended the Health
Security Plan, which is a social insurance programme that would cost 1.5% to 2.0%
of income to be jointly funded by employers and employees. The Health Security
Plan benefit package would include in-patient services and out-patient care for a
defined list of chronic diseases (such as diabetes, coronary artery disease and
cancer) that are likely to be associated with catastrophic expenditure that cannot
be realistically borne by most people from out of pocket funds. Under the Plan,
an administrative intermediary the Health Security Fund Inc would be
created. In addition to pooling risk, the Fund would act as the informed purchaser
of health care on behalf of consumers, and would buffer against supplier-induced
demand and the agency problem. Individuals would buy services from both private
and public providers through the Fund according to a negotiated standard fee
schedule with the possibility of balance billing (extra charges on top of the agreed
prices for additional amenities or higher real or perceived quality). Deductibles
and co-payments would be instituted to minimise demand-side moral hazard, and
to moderate the potential oversupply of health care to insured individuals on the
supply side, the Harvard consultants suggested a payment system that is similar
to the diagnostic-related group system for hospital services, and a similar bundled
care package approach for specialist out-patient services. Details of this plan can
be found in Chapter 20.
Although comprehensive in scope and technically coherent, the Harvard
Report shared the same fatal flaw as the Clinton Health Plan that was championed
by the then US First Lady Hilary Rodham Clinton: neither was tactfully marketed
to the public and opposing vested interests ultimately carried the day. The lack
of leadership and deafening silence of the government, which left the consultants
to defend their proposal alone when the report was released, were remarkable.
Combined with widespread lay and even professional ignorance and apathy about
the complex set of underlying issues, the recommendations were doomed to
failure almost from the start. The powerful medical lobby was predictably incensed
(Hong Kong Medical Association, 1999; Choi et al. on behalf of the Practising
Estate Doctors Association and the Association of the Licentiates of the Medical
Council of Hong Kong, 1999) about the mostly justified criticisms of the variable
quality of care (especially in the private sector) and supplier-induced demand,
which are commonly observed in most countries and circumstances. The
politicians were at best confused, and sometimes even obfuscated the issues for
the public to appeal to popular sentiments about the status quo of an almost free
and apparently well functioning public system with universal access, despite its
unsustainability in the long term (Gauld and Gould, 2002). This last prediction
was realised as early as 2002 (barely three years after the report was published),
when the Hospital Authority reported its first operating budget deficit, that has
since become progressively larger.
Leading the charge against the Harvard Report on behalf of the Hospital
Authority was its then Chief Executive Yeoh Eng-Kiong, who soon afterwards
became the Secretary for Health and Welfare. His argument was based on three
fundamental premises:
1. that the Harvard recommendations were incompatible with prevailing societal
values (Fung et al., 1999),
2. that there was enough room in the current system to further improve
technical efficiency and that making incremental changes at the margin
would suffice, and
3. that the projections of the Harvard team on financial sustainability projections
were flawed due to overly pessimistic empirical assumptions (Hospital
Authority, 1999) that were based on data from the early 1990s during the
rapid expansion phase of the Hospital Authority.
Privately, many speculated that a fourth contributory factor of self-preservation
was at play, because the Harvard Report recommended the disbanding of the
Hospital Authority into 12 to 18 regional systems under the competitive
integrated health system option.
Some readers of the Harvard Report perceive the risk pooling of the Health
Security Plan to be inherently inequitable, and point out that the healthy
population would subsidise the sick, the young, the elderly and the poor, which
is a rather unusual way of considering and defining equity that is clearly at odds
with generally accepted liberal norms (Rawls, 1993). The objection to the risk
pooling and the adjustment of average premiums of such an approach is that a
relatively small proportion is at the highest risk. Similarly, although services are
not well matched to need, a small proportion of the population consumes most
of the resources (the 20:80 rule). This argument holds sway in some quarters,
and indeed has been used as justification for the rejection of the Harvard
recommendation of social insurance on the grounds that Hong Kong people
generally dislike the compulsory redistributive nature of the proposed scheme.
In contrast, the government counterproposal of health protection accounts, which
are a form of medical savings accounts, is cited as being much more compatible
with local societal values of saving for oneself and ones family over time (Health
and Welfare Bureau, 2001). However, what is seldom realised, let alone
mentioned, is that eventually such savings would be used to buy insurance (that
is, to risk pool) to protect against catastrophic expenses, which is precisely what
the community was trying to avoid in the first place by rejecting the Health
Security Plan. Medical savings accounts are now generally viewed as an
intermediate financing tool that usually diverts the funds that are collected into
other forms of financing instruments, as is the case in Singapore, where money
that is collected through MediSave is used to buy catastrophic (MediShield) and
disability insurance (ElderShield). In fact, the present government general
revenue financing mode is already the most progressive form of risk sharing,
although it is mostly invisible and therefore imperceptible to the general public
because such taxes are not hypothecated.
On the supply side, another issue in the Harvard Report that caused great
consternation was the idea of having a standard fee schedule that would determine
the reimbursement levels from Health Security Plan funds, which is a common
feature of most social insurance systems, such as those in Canada and Taiwan.
Some consider it inequitable that the standard fee proposal for public and private
providers would probably lead to a regression to the mean of the fees in the
private (lower) and public (higher) sectors. However, it seems that there must
be at least a more level playing field between public and private services to
promote the greater use of improved private services. Doctors will probably always
disagree with fee schedules. The arguments in favour of standard fee schedules
should be made clearer, given that this is a fairly sensitive and highly political
issue.
From the political economy perspective, the Harvard Report was a useful and
necessary catalyst for change. Most health systems that are based on a mixed type
of medical economy have their origins in arbitrary health and social welfare
policies, and are often characterised by a laissez-faire approach that is heavily
dominated by professional interests. Such situations need independent challenges
based on radical thinking that are supported as far as possible by data from good
quality empirical research and operational studies. However, despite its explicitly
evidence-based nature, the Harvard Report did not clearly explain the
methodology that was used for the principal analyses (the variables and
procedures), despite the many appendices and special reports, and thus these
analyses appeared largely as a black box, were rather difficult to understand, and
had to be taken largely on trust. We think that there is scope for an independent
review of the methods that were used if the conclusions are to be better
understood. A related issue concerns the level of detail that is provided in the
recommendations. For instance, it is far from clear how Medisage would work
and much more detail needs to be provided for discussion. It would be
enormously helpful for readers of the report to see what the actuarial analysis
looks like and whether there would be sufficient funds for the plan. Other
questions include when insurance would be purchased, whether the plan would
be phased in, and if so whether it would need pump priming, whether premiums
would fund contemporary costs, what the risk is of the fund becoming exhausted,
whether the plan is demographically viable and whether the estimates are robust
enough.
Lastly, we agree with the assertion that it is appropriate to protect the public
from the financial burden of catastrophic illness or more expensive in-patient care.
However, a radical health care policy should consider strategies to prevent chronic
disease using already available knowledge in an attempt to compress morbidity
towards the end of the lifespan, as was first proposed and demonstrated by Fries
(1989), thus giving people more disease-free, quality years. Policy makers must
now consider how and where resources could be reallocated to address the
promotion of health, rather than simply focusing on the care of the incurable
sick. It is likely that a high proportion of the funds of such a reallocation would
not necessarily go to the health sector.
Government Response and Counterproposal

In response to the Harvard Report, the government issued a consultation
document entitled Lifelong Investment in Health in 2001 and counter-proposed the
increasing of fees and charges in the public sector, the maintenance of the status
quo government general revenue funded model, the establishment of a medical
savings accounts scheme (called health protection accounts) for acute care after
age 65, and the improvement of the patient redress and complaint system (Health,
Welfare and Food Bureau, 2001). All of these are demand-side measures that are
designed to dampen health care consumption to improve the financial
sustainability of the current system. Gate keeping, or preventing the unnecessary
escalation of care that leads to a mismatch between real need and the use of scarce
resources, is the third part of the governments three-pronged strategy to temper
the upward cost spiral. It aims to create a solid network of primary care or family
medicine doctors who would minimise the inappropriate use of more expensive
specialist services. In addition, spurred on by post-1997 political realities and the
then Chief Executives vision of a traditional Chinese medicine hub, traditional
Chinese medicine has now been introduced in select public hospitals as a result
of the recommendations in the consultation document. Finally, Hong Kongs
public health care system, which is the dominant provider of health services in
the SAR, is proud of its pledge that no one shall be denied adequate medical
care due to a lack of means (Health and Welfare Bureau, 1993). This universalist
concept has, of course, long been an exaggeration, because care is rationed
through other non-monetary mechanisms such as waiting times and variable
quality of service. To further ration or target public services, the consultation
document called for a deepening of public-private partnership initiatives at all
levels so that those who can afford fee-for-service private care will seek such
alternatives to avoid the long queues in public hospitals. Low and Lo explain the
governments position further in Chapter 21.
What was glaringly absent from the consultation document, however, was the
issue of the appropriate application of supply-side constraints. Supply-side
instruments are commonly used in OECD countries to control the quantity and
kinds of services that are produced (Gray, 1998). They include caps on the
spending of health care providers (which has been imposed on the Hospital
Authority budget), price controls on pharmaceutical products, regulations
governing clinical practice and the use of health care technology, organisational
initiatives such as managed care and capitation, and the distribution and
reallocation of resources between services to improve efficiency. The reallocation
of resources from less efficient to more efficient services is an exercise that is
difficult to achieve without strong political will. It always involves leaving one or
more services and its providers with fewer resources than it had previously, and
often the cessation of established activities. It is frequently perceived negatively,
and will be obstructed if the providers involved have the power to resist. However,
it is impossible to achieve allocative efficiency without being able to move
resources from less efficient to more efficient services.
We can consider as an example the shifting of care from acute services, such
as specialist in-patient and out-patient services, to community-based services, which
has been shown over many years to be an efficient move. The idea of substitution
between different kinds of health professionals and between drugs, hospitals beds
and medical staff is not fully explored in the consultation document. Further
efficiency can be gained from appropriate substitutions in existing services, in
both the private and the public sectors (McGhee et al., 2001). The title of the
consultation paper, Lifelong Investment in Health, sums up the governments
overarching demand-side approach to health care reform. The public should
contribute more towards their own health care. Supply-side reform means creating
competitive pressures that may hurt specific professional interests. It also means
disrupting powerful lobbies. Neither of these options looks particularly appealing
to a government that has seen an unprecedented series of protests from all walks
of society in the last few years. The debate over the cost containment of health
reform has traditionally set up an arbitrary ideological divide between the demand
and supply-side approaches. Expenditure can become excessive if there is no
effective constraint on aggregate demand. However, the lack of appropriate
supply-side forces can also preclude the achievement of allocative efficiency. Paul
Gross, in Chapter 17, analyses key statistics which show tell-tale signs of supply-
side excesses. With political adroitness and a negotiated contracting process, the
government can and should forge a consensus among health professionals and
the public to constrain market demand and harness provider incentives to create
an affordable and sustainable system (Leung, 2001). Alan Maynard echoes this
view in Chapter 22, and urges Hong Kong to look at the reform of the provider
payment system and other supply-side measures to complement financing reform
in terms of resource mobilisation and (re)distribution.
Although standard fees for all health services, or at least a transparent fee
schedule, may not be entirely compatible with laissez-faire economics for normal
goods that are characteristic of Hong Kong, the abnormal economics of health
care require such measures to ensure transparency in the health care market.
The consultation document could have been more explicit in articulating this
concept. More fundamentally, there could have been an exploration of funding
models other than the predominantly fee-for-service mechanism in Hong Kong.
International experience with capitation, fund holding, and a reformed fee for
service mechanism has proved their viability, and in some cases their superiority,
to the largely market-driven fee for service system. These funding models could
incorporate stipulations for continuous professional development, incentives for
the provision of health promotion services, and volume modifiers to maintain
the competitive advantage of the fee-for-service system (see Part II for details).
There was scant mention of health care human resources planning in the
consultation document, which is an issue that is closely related to the maintenance
of an adequate supply of physicians to meet patient demand in the medical
market. Proper medical manpower planning needs to be rigorously and
scientifically considered. Hong Kong is currently understaffed in terms of the
number of doctors per capita compared with other similarly developed economies.
However, the University Grants Council has decided to cut 15% of the medical
student intake at the two local medical schools over three years since the release
of the 2001 document, apparently without adequate input on the decision from
the Health, Welfare and Food Bureau and the Department of Health. In addition
to being an educational issue, this will have a long-term and profound impact on
the efficiency and effectiveness of the health care system. There should be wide
consultation and an evidence-based rationale for scaling back on the training of
medical doctors, and the planned cutback should be reversed. We dispute the
argument that supplier-induced demand will neutralise any potential benefit of
lower medical costs with an increase in physician supply. Although the final verdict
on this phenomenon in international literature is inconclusive, it is clear that
further restrictions on the supply of physicians will drive overall costs higher.
Projections of the supply of health professionals have long been known to be
fraught with pitfalls and difficulties. This, however, should not preclude an
evidence-based review of the status quo. For instance, the UK learned its lesson
when it cut medical school class sizes a decade or so ago. It is now suffering from
a systemic shortage of doctors, and new schools are sprouting up all over the
country to compensate for the shortage, although it will take another dozen years
to replenish the supply pool. The Department of Health carries out periodic
Health Manpower Surveys although they have been used as a monitoring tool
rather than to directly inform planning exercises. The Hong Kong Academy of
Medicine, under the current President Grace Tang, has asked its constituent
Colleges to prepare manpower analyses and is working on a blueprint for specialist
manpower supply in the medium to long term for the territory.
Although heavy on ideological persuasiveness and intensely marketed by the
government, there is (at least apparently) a lack of explicit data-driven evidence
and statistics to support these policy directions. The government could have
provided technical reports and specific data to complement its recommendations.
For instance, following on from the broad policy strokes of the health protection
accounts, there needs to be discussion on contingencies, such as for example what
would be done if the saving accounts diminish; whether we need a broader risk
sharing approach, either to prevent this or deal with it should it arise; and what
the expected economic dead-weight loss that is associated with forced savings over
such a long period would be. Such details would have facilitated an evidence-based
appraisal of the contents of the policies by professionals and the general
community. Nevertheless, we agree with one essential premise of the medical
savings accounts scheme: the avoidance of the intergenerational transfer of risk
and financial burden in light of the ageing population and low fertility rate in
Hong Kong. Opponents of the Harvard Report have rightly pointed out that
although the concept of risk pooling is appealing, it would involve intergenerational subsidisation. Given the demographic transition that is leading to a
rapid reversal of the population pyramid, such an approach would put
unsustainable funding pressure on future generations. This concept was
championed by the late Nicholas Prescott of the World Bank, who lent much
needed intellectual credibility at crucial moments to the government.
Prescott (1999) also articulately separated the two goals of a financing system
into resource mobilisation and redistribution. He pointed out that one option
that was not identified in the Harvard Report was that of raising the contribution
rate to a pre-funded savings vehicle, which in the proposal was set at only 1%
because it was designed to finance long-term care only. There was no discussion
of the financing of acute care in old age. However, he argued that the
fundamental problem that is posed by ageing would also involve the financing
of acute care for the elderly in the future. By logical extension, as in the
Singaporean example, he urged Hong Kong to consider a savings vehicle that
would generate assets over time on a larger scale. Prescott asserted that the
Harvard teams Health Security Plan proposal is an example of a payroll taxfunded pay-as-you-go financing system that was on par, from an intergenerational
transfer viewpoint, with a government budget that is financed by government
general revenue, which is the status quo. This brings with it the natural
consequences of and attendant questions about sustainability over a longer term
time horizon. Moreover, Prescott cited the design of the local Mandatory
Provident Fund framework, which very clearly separates the pre-funding objective
from the redistributional objective. He drew the analogy of a savings-based pillar
that works alongside a redistributional pillar that includes the social welfare safety
net or comprehensive social security assistance programme. He suggested the
maintenance of the separation of the redistribution goal for the health sector, so
that redistributive subsidies are not sent down the demand side (or the money
follows the patient concept that was espoused by the Harvard team), but may
be sent down the supply side by the option of self-targeting using price
differentials, as is practised in Singapore (Prescott, 1999).
Other Proposals
A number of policy analysts have proposed different financing systems for Hong
Kong in the last decade. We highlight three notable examples here for discussion
purposes. First, Joel Hay (1992) from the Hoover Institution in the US, at the
invitation of Chinese Universitys Hong Kong Centre for Economic Research, first
floated the idea of a competitive private insurance programme to run parallel to
the publicly funded Hospital Authority system in 1992, just after the establishment
of the latter and predating the Harvard Report and both the 1993 (Rainbow
Report or Towards Better Health) and 2001 (Lifelong Investment in Health)
government consultation papers. His basic idea was to offer all Hong Kong
residents the voluntary option of enrolling in government-approved private
insurance plans (termed ChoiceCare), during annual, open, community-rated
enrolment periods, which would thereby harness the benefits of competitive
health care markets and disengage the monopolistic commissioning and provision
roles of the Hospital Authority. Individuals would be subsidised from the public
purse for the basic minimum coverage of catastrophic (and chronic) conditions,
whereas higher-level coverage and greater choice would be options that could
be bought for an additional premium. Those who do not enrol would default
back to the Hospital Authority system.
Fundamentally, Hays proposal to bring competitive pressures to bear on
providers, regardless of whether they are public or private, and to level the playing
field between the two sectors was remarkably similar to the Harvard Reports fifth
option of competitive integrated health care. However, the financing modes that
were recommended by Hay and those that were recommended by the Harvard
team in terms of private versus social insurance respectively offer two distinctly
different ways of resource mobilisation. Unless the Hospital Authority scales back
substantially the scope and perhaps even the quality of care (both of which have
been greatly expanded and improved since 1992), which is arguably an unethical
or at least a highly dubious move, a very significant degree of adverse selection
will remain, despite the safeguard of government subsidy for base level
entitlement, as outlined in Hays report. Sick patients, as opposed to healthy

individuals, will still be preferentially drawn to the Hospital Authority, because
many are now receiving care that is equivalent to the optional extras that would
be purchased using out of pocket funds from private insurance plans under Hays
framework. Given the strong correlation between socio-economics and health
status, the healthy, who are also the financially better-off, would be
disproportionately attracted to the private ChoiceCare schemes. Therefore, even
in the theoretical absence of risk selection by insurers through open enrolment
and community premium rating (a doubtful proposition in any case), self-selection
by individuals would render the proposal untenable in the long run because
utilisation would no longer be a random event, which is the essence of the
insurance concept.
Hay (1992) cited the Swiss experience with competitive private insurance and
a consumer-driven market culture, which were latterly supported by Herzlinger
and Parsa-Parsi (2004), as a powerful justification for the replication of such a
scheme in Hong Kong, which has a similar population size and stage of economic
development. However, as Reinhardt (2004) has astutely observed, some gestures
to competition aside, the Swiss system so far has remained mainly a de facto cartel
of insurers and health care practitioners who transact with one another in a tight
web of government regulations. Casting aside the imperfections of the Hay
proposal and updating it to suit present circumstances, if we were to adapt the
Swiss system to the local health sector, we would in essence be pursuing a variant
of the highly government-regulated social insurance systems of Europe that rely
on ostensibly private, non-profit health insurers that also are subject to uniform
fee schedules and myriad government regulations (Reinhardt, 2004). Whether
Hong Kong should go down this path is for the community to decide, but it
appears to be a perhaps unnecessarily more complex version of the Harvard
Reports Health Security Plan although it seems to be more compatible with
Confucian ethics, Chinese family values, Hong Kongs immigrant history and our
laissez-faire macro-economy. These societal values may suggest a preference for
personal responsibility (including towards ones immediate family members), i.e.
horizontal or inter-temporal risk pooling, over overt collectivist welfarism (see
Chapter 3 by Julia Tao). However, in such a case, the government would need to
devise elaborate regulatory processes to protect health care consumers, and the
administrative overheads that are generated could outweigh any potential benefit
to be derived from the (perceived) competition. We further caution the
irreversibility of this system once implemented, could lead to a situation in which
Hong Kong finds itself in the conundrum that is currently faced by the US,
another system that is almost entirely reliant on private insurance, albeit without
the proper regulatory supervision of the Swiss system. Lastly, we note several issues
which are often cited as the Achilles heel of private insurance including:
1. a pluralistic model necessarily entails higher administrative transaction costs
than single-pipe systems, e.g. social insurance (Harvard) or GGR financing
(status quo) in fact, Switzerland and the US are consistently the top two
health spenders in the world;
2. fully one-sixth of the American public goes without insurance at any point
in time due to the inequitable distribution of coverage that is often tied to
formal employment by larger employers and the large gaps before people
qualify for Medicare or Mediaid; and
3. Switzerland is the most regressively financed system of 12 European OECD
countries mostly owing to the per capita premium arrangement.
Despite all these caveats about the Swiss model, the Dutch parliament has recently
passed legislation to essentially reproduce this method of financing in the
Netherlands. Currently, private insurance is the sole source of coverage for a third
of the population earning above a set income threshold. Social insurance
(together with limited tax-based financing) covers the remaining majority of the
population, where most socially insured individuals also purchase supplementary
private insurance coverage. However, in response to increasing pressure exerted
by recent and anticipated future spiralling health care costs, employers desire
for freedom of choice for consumers and business freedom for insurers, while
also guaranteeing the public interests of availability and solidarity, the government
will consolidate the Dutch health financing system into a unified system of
mandatory private health insurance in 2006.
Ho Lok Sang, an economist from Lingnan University, published his set of
recommendations in 1997, and called on the government to adapt the model of
Sweden. His universal excess burden health insurance plan consisted of a large
annual deductible (capped at 3% to 6% of annual income) to be paid out of
pocket at standard marginal direct costs, whereas fixed and indirect costs would
continue to be met by government general revenue as per the current
arrangement. If this cap is exceeded, then patients would be entitled to free
Hospital Authority care. Ho suggested that individuals could buy private insurance
to cover spending below the deductible cap or for additional services over and
above what would be covered by the Hospital Authority after the cap had been
exceeded. The former proposition completely defeats the purpose of the
deductible, which is to contain demand-side moral hazard. In fact, this is exactly
what has happened in France, which has a similar supplemental insurance scheme
to offset out of pocket co-payments and deductibles, in which those that are
covered have been shown to have substantially more physician visits than those
who are not covered (Buchmueller et al., 2004). Moreover, as with the Hay
proposal, unless the government makes a policy decision for the Hospital
Authority to retreat from the excellent quality and comprehensive range of
services it currently provides, there is little incentive for individuals to buy topup private insurance rather than defaulting back to the public sector. The only
remaining viable niche market for such a proposal would be to cover better
amenities, such as private accommodation.
Further, Ho proposed that the Hospital Authority should commission services

from private hospitals by subsidising fixed, infrastructure costs from the public
purse, which would thereby make use of the excess capacity in that sector. Patients
who have yet to exceed the spending cap would then pay out of pocket to cover
the marginal costs of the services that they received. However, it is unclear why
the Hospital Authority or indeed the government should take on the
commissioning role of contracting services from private providers. Public subsidies
should be sent down the demand side where the money follows the patient, rather
than diverting funds to suppliers. It seems to us that the principal goal and
consequence of Hos proposal is to raise additional resources from individuals
to cover the financial inadequacies of the government general revenue-funded
status quo. As such, it is a piecemeal remedial patch, rather than a sustainable
solution.
The last of the three selected contributions came from Peter Yuen of the
Polytechnic University. He favoured maintaining the status quo of a tax-financed
system with minor adjustments, such as raising user fees and other patchwork
solutions (Grant and Yuen, 1998). To justify his case, Yuen cited overwhelming
public support for the status quo and Hong Kongs excellent population vital
indices of life expectancy and infant and maternal mortality. He also disputed
the urgency of system reform, because the demographic, epidemiological,
technological and economic transitions (Leung, 2002) were moving slower than
most had feared. In sum, it was a classical if it isnt broken, dont fix it argument.
Aside from rhetorical persuasions, there was little in the way of empirical analysis
to support this contention. However, it is well-known that population vital
indicators are at best imprecise measurements of health system performance
(Murray and Lopez, 1996), especially in the case of developed economies in which
the threat of childbirth-related deaths is extremely uncommon, and the plateau
pattern of life expectancy can hardly possess adequate discriminatory power. We
should assess health systems based on novel, sensitive and standardised tools to
measure the burden of disease (Ezzati et al., 2002). Although not without
controversy, the World Health Report 2000 has proposed such a framework. In
addition, if there is one issue on which most parties agree irrespective of political
or other vested interests, it would be the systems lack of financial sustainability
in the long term. Whether this will happen in 20 years rather than 10 is largely
irrelevant. More importantly, the deterioration in the quality and scope of services
can slowly and imperceptibly creep in over time in a way that is difficult to quantify.
Lastly, due to the very narrow tax base and essentially free service at the point of
care, the community will always prefer the status quo not to change, because
reform will invariably lead to increased financial contributions in one form or
another, be it direct out of pocket charges, higher taxation, social or private
insurance premiums, or mandatory individual savings.
The Way Forward

Several important lessons that can be drawn from these five sets of proposals which
deserve particular emphasis. First, echoing Marc Roberts opening preamble in
Chapter 2, at the outset of any reform exercise, the community will need to face
difficult decisions about burdens and benefits, priorities and responsibilities.
Societal values as explicitly discussed, debated and agreed upon by common
consensus must underpin these decisions. It is important that such moral and
ethical choices are distinguished from, although they must necessarily be filtered
through, the political process. Only then will those choices command popular
respect and community solidarity in shouldering the burden of health care.
Next, a common refrain in the reports of Hay, Ho and the Harvard team is
the separation of the commissioning and provision roles of the Hospital Authority.
In effect, this would blur the distinction regarding ownership of the facilities and
would subject all providers to the same competitive pressures in the health care
market. Although many have argued in favour of the status quo, citing the
apparent self-discipline and cost-effectiveness of the Hospital Authority as reasons,
this is a case where the end should not justify the means. A system should not be
designed to rely on discretionary characteristics, such as good intentions, wise
stewardship or organisational restraint, especially when its monopolistic power
virtually dominates the entire in-patient and one third of the out-patient market.
Rather, as explained in Parts II and III, proper incentives and a regulatory
infrastructure should be instituted to ensure that the system is shielded from
potential abnormal economic forces as much as is possible.
Another commonality that underlies these three reports is the idea of a
standard, negotiated fee schedule that would determine reimbursement rates for
basic level services, ideally bundled on a per episode basis to reduce supplierinduced demand by transferring some of the risk of the care process to providers.
This is a highly contentious and emotive issue within the medical lobby, locally
and elsewhere in the world, although the economics behind the recommendation
are unquestionably sound. The difficult tasks of reaching a consensus and of
implementation are well defined enough for politicians and policy makers to use
popular pressure to persuade providers of the relative merits of the scheme.
An important, though oft-neglected issue in setting the fee schedule concerns
Hos (1997) distinction between fixed and variable costs, which means charging
patients marginal rather than average costs. Economic efficiency is optimised when
buyers (patients) and sellers (health care providers) trade at the margin or on
the Pareto efficiency frontier, or up to the point at which the marginal benefit
and cost are equal (Folland et al., 2003). However, a key prerequisite to the
achievement of this condition is the acquisition of near-perfect information on
the part of patients, which thus avoids the abnormal economics of asymmetric
information between providers and patients and the related agency problem, as
have been described. A solid primary care network, the remuneration of which
is independent of case volume (salary or capitation) that acts as a patient advocate,
coupled with more open disclosure of quality and clinical outcomes, can facilitate
this ideal. In addition, the Hospital Authority, and indeed all providers, should
renew their efforts to complete a set of patient-related group costs that are based
on explicit fixed versus variable cost accounting. This is an idea that is worth
pursuing in future reform proposals.
The idea of using medical savings accounts as a real savings tool as per
Prescotts recommendations (1999) should be better researched and more
carefully considered. Medical savings accounts, such as the health protection
accounts that were proposed by the government in 2001, can be a very useful
resource mobilisation tool to counter the common pitfall of inter-generational
cross-subsidisation, especially in light of the demographic changes (see Chapter
4 by Paul Yip) that Hong Kong is projected to face. However, it would probably
remain an intermediate financing instrument that feeds into an (social or Swisstype compulsory private) insurance scheme for redistributional and risk-sharing
purposes. However, the proper calculation of whether and by how much the
forced savings policy would crowd out other non-health domestic consumption
is an issue of importance. Another is the explicit acknowledgement and further
consideration of the potential of cost inflation, inefficiency and reduced equity
that would result from the introduction of medical savings accounts, as Maynard
argues in the last chapter.
Finally, a key lesson that must be drawn from the 1999 Harvard and 2001
government proposals concerns the complementary and essential attributes of
both technical merit and communication or popular appeal. Whereas the Harvard
recommendations were technically competent, theoretically sound, and even
feasible in practice if they had been implemented, the lack of professional,
government and ultimately community support relegated the proposal to the
archives, as happens so frequently with commissioned consultancies. In the
government proposal, however, the recommendations were couched in such vague
terms and expressed in such sweeping rhetorical statements that it was difficult
for readers to figure out what the real policy directions were. Moreover, there
was little in the way of scientific evidence or well researched arguments to support
the governments case, at least as it was presented to the public. It appeared to
have been based more on ideology than reasoned propositions at the time of
release, although a lot of work has gone into filling in the gaps since 2001. In
sum, as the then Secretary for Health, Welfare and Food emphasised in his address
to the Legislative Council on 14 January 2004, the public acceptability and
political deliverability of any reform option are as important as its worthiness in
the sustainability dimension.
Building a Healthy Tomorrow (20052006)

The newly reconstituted Health and Medical Development Advisory Committee
(HMDAC) under health secretary York Chow released, in two parts, their
recommendations on the service delivery and financing models respectively in
2005 and 2006. Underlying the design of the proposed financing model is the
explicit retargeting of public service delivery on four specific segments of the
population or types of care, namely acute and emergency care, low income and
underprivileged groups, illnesses that entail high cost, advanced technology and
multi-disciplinary professional team work and training of health care professionals.
Operationally, this is likely to mean that the government is committed to keep
financing at least 80% bed-days and 20% out-patient episodes (reverting back to
the pre-Hospital Authority market share levels during the late 1980s and early
1990s), and remaining the largest single source of total expenditure on health
through government general revenue financing.
To better understand the magnitude of overall health spending and
specifically the portion for which the government will be responsible, we projected
likely expenditure patterns through the year 2033 based on this new fundamental
shift in public care subsidy retargeting. We adapted the UK Treasurys Wanless
projection method (Wanless, 2002), which requires health expenditure to be
broken down by age, sex, unit cost and activity level (or volume). Activity levels
are projected to reflect demographic changes assuming that age-sex-specific use
of care and the quality of care remain constant at the baseline level. The activity
levels implied by demographic change are further incorporated to account for
changes in the age-sex-specific use of different types of care over future years,
resulting from changes in health status and demand for a given level of need
related to public expectations. Finally, the projected activity levels are multiplied
by the projected unit costs (the growth of which is captured through a net
medical inflation parameter, i.e. the per annum increase over and above GDP
growth), which would have incorporated the impact of certain key drivers of
health expenditure such as public expectations, technological changes and
potential productivity gains, to obtain total cost projections. Figure 8 shows the
results. Cases 1 to 6, in different combinations, assume a transfer of public inpatient market share from 95% of bed-days to 85% or 80%; out-patient care from
30% of episodes to 20%, to be attained over 10, 15 or 20 years, while holding
the overall level of utilisation constant at the 2001 level, with net medical inflation
rates of public, private and other services at 1.5%, 2.5% and 2.0% per annum
respectively and ceteris paribus (Leung et al, 2006).
Four key lessons can be drawn:
1. Technology diffusion (reflected in the net medical inflation rate) is the major
long-term cost growth driver. Expenditure control through global budgeting,
technology assessment and demand-side constraints can slow such growth but
the imperative to innovate and deliver higher quality care almost always
overcomes the effort to economise.
Total expenditure on health as a % of GDP
20
15
Cases 13
10
Cases 46
Harvard projection
2000
2005
2010
2015
2020
2025
2030
2035
Year
Case
1
2
3
4
5
6
TDEH as % of GDP (Public share %)

6.6
6.4
6.3
6.5
6.3
6.3
(46.1)
(50.6)
(52.5)
(48.7)
(52.0)
(53.4)
7.4
7.3
7.1
7.1
7.2
7.0
(44.7)
(45.9)
(49.4)
(47.8)
(48.7)
(51.2)
8.0
8.1
8.0
7.8
7.8
7.8
(45.3)
(45.4)
(46.0)
(48.5)
(48.5)
(48.8)
8.8
8.9
8.9
8.5
8.6
8.7
(45.7)
(45.7)
(45.5)
(48.9)
(48.9)
(48.6)
9.8
9.9
9.9
9.4
9.5
9.6
(45.8)
(45.8)
(45.6)
(49.2)
(49.2)
(48.9)
Figure 8 Total health expenditure (TEH) projections as a percentage of GPD through 2033
2.
3.
4.
Although a significant number of scenarios lead to substantially higher

spending levels compared to the present 5.5% of GDP, it is possible to limit
that growth to below 10% by 2033 which is low by international standards.
There is little sensible reason to preset an arbitrary level of health spending
and related growth. Instead the aim should be a health system that results
in a Pareto optimum incremental value commensurate with that provided
by other sectors (such as education, housing, security) of the economy (see
below and Figure 11).
It is clear from these results that the Harvard projections (1999) are at the
lowest end of the present forecast estimates although it is difficult to specify
exact reasons accounting for such given the very different methodological
approaches between the two models.
If we were to hazard an educated guess, the Harvard model is mainly driven (or
dominated) by economy-wide inflation. Therefore although their numerator
grows at a high rate, the denominator increases even faster and hence the relative
spending as a percentage of GDP turns out to be very moderate through 2016.
Unless we truly believe that Hong Kong will experience real year-on-year GDP
growth of 5.33% through 2016 (as stipulated in the Harvard model), thereby
expanding the denominator that supports the growth in the numerator, otherwise
the projections produced by their fitted model would have been seriously affected
(upwardly biased) by this optimistic assumption.
If one accepts and follows the logic of the overarching market share shift as
espoused in the HMDAC document, the key challenge will be to identify an
equitable and efficient way of leveraging the extra funding derived from any new
supplementary financing instruments such as savings accounts and/or the
deployment of insurance vehicles. Also how can the government shift patient
volume back to the private market? Presumably, public services will remain
universally accessible regardless of means because denying such would be an
unnecessary provocation for political instability and also morally and economically
wrong-headed. This leaves incentives and the power of economic persuasion as
the only feasible options. There is currently no mechanism for public subsidy to
follow the patient as opposed to the provider (i.e. Hospital Authority and
Department of Health direct services): the status quo of more than 70% to 90%
subsidy in the public system versus 0% in the private system (see Parts II and III
commentary). There could instead be a gradation in the subsidy levels and a
careful re-examination of the merits of the money following the patient concept
that has been a constant refrain of numerous previous external consultants.
Indeed, through this process, the government could facilitate the setting of
standards and promote quality care if public subsidy can follow patients to the
private sector whereby a public health agency can have better oversight and peer
assessment of the delivery of care, which has remained opaque and closely
guarded by the profession to date.
In addition, the government renewed its emphasis on the demand-side
constraint of gate keeping in the HMDAC report (2005) which should be
applauded. However, operationalising this goal is questionable when the dominant
majority of ambulatory care is delivered through the private market. Currently,
anyone can seek specialist care directly without a referral from a general
practitioner or family doctor. It is hard to see how the economic fruits of gate
keeping can be reaped through simply rhetoric on the part of the government
alone, unless it is accompanied by nothing short of wholesale reforms.
In terms of options for the way ahead, the Singaporean model of resource
mobilisation through personal (or household-based) savings, then risk pooling
using the Swiss or Dutch model of mandatory individual enrolment in private
insurance plans may be a viable compromise solution to the current impasse and
two-decade long inertia. All this should however be supplementary to a mainly
tax-financed in-patient and secondary care system (currently provided for by the
Hospital Authority), which has delivered highly equitable and efficient health
outcomes for Hong Kong in the past. The crux of successful reform is of course
figuring out how best to harness the built-in demand-side or consumer-driven
benefits of these supplementary financing strategies and making them compatible
with the current collectivist system, aside from their obvious advantages in
resolving the financial sustainability problem by bringing in much-needed
additional cash.
***
Another major issue that requires much discussion and new thinking concerns
the financing of long-term care. The Harvard Report deferred the discussion of
long-term care financing (as did the government consultation document of 2001),
except for a brief mention about the use of medical savings accounts (Medisage)
as a horizontal risk-pooling instrument in which savings from a persons younger
days could bridge inter-temporal needs in the twilight years. Employers and
employees would contribute jointly a total of 1% of wages to the Medisage savings
accounts (Hsiao, Yip et al., 1999). This is essentially the Singaporean approach,
in which the long-established Central Provident Fund provides a strong
foundation upon which medical savings schemes (MediSave, MediShield and
MediFund) have been built, and existing funding arrangements have been
extended to cover some long-term care and disability services (ElderShield).
Coupled with the Confucian philosophy of maintaining the primacy of family
support for the elderly, a number of financial and other incentives for families
and an emphasis on community care have sustained the Singaporean model
(Phua, 2001). This convergence of long-term care financing and retirement
planning is proving to be quite popular in the US, where the employer-sponsored
segment of the long-term care insurance market has recorded the highest rate
of growth in recent years (Silva, 2004). Supply-side factors that include access to
employer-sponsored programmes and high quality coverage are likely to increase
subscription rates in the near future (Swamy, 2004).
Another East Asian country, Japan, has implemented a different financing
strategy in the form of social insurance (Long Term Care Insurance; Ikegami et
al., 2003). A 0.9% premium on monthly income is levied on all those aged 40 to
64 years, and an average of US$23 is deducted from pensions for those 65 and
over, both of which are matched by government general revenue. Long Term Care
Insurance brings together health and social welfare benefits under one
administrative umbrella and a single funding formula with universal coverage for
all elderly people aged 65 and over according to six eligibility levels, regardless
of income or family support. Individuals can choose either community care or
institutional care, with only the cost of food as an additional payment for the latter.
Some have questioned the sustainability of such a generous system, as individuals

tend to preferentially select a higher level of care with little demand-side control
based on need (Ikegami et al., 2003). Moreover, the continuing shortage of longterm care facilities and the lack of quality incentives for providers are additional
concerns.
Whatever model Hong Kong eventually adopts, it is obvious that a clearly
articulated plan for long-term care financing and provision is needed, as Chu and
Chi have convincingly advocated in Chapter 11. The status quo in Hong Kong
relies almost exclusively on personal out of pocket payments and public welfare,
whereas the uncertain need for long-term care is a risk that is best protected by
insurance (Chen, 2003). The issue of whether we collect the money initially
through personal savings accounts and then pool the communitys collective risk
through insurance, or directly converge retirement planning with long-term care
insurance should not detract from the central importance of some form of
population risk sharing. Moreover, the present health care financing reform
exercise should bear in mind future directions in long-term care funding and
allow room for the proper integration of the two inter-dependent strategies.
Furthermore, Hong Kong needs to carefully consider the portability of longterm care and medical benefits as an increasingly large and mobile group of
elderly people emigrate and settle on the mainland after retirement. As economic
cooperation and social interaction between Hong Kong and the Pearl River Delta
intensifies, there is a growing trend of Hong Kong people living, working and
retiring across the border. At present, the Comprehensive Social Security
Assistance has been made portable for some 3,000 elderly recipients living in
Guangdong province. Elderly social security recipients outside the portable
scheme and Old Age Allowance recipients can also spend up to 180 days a year
outside Hong Kong without affecting their eligibility for receipt of the allowance.
Public benefits are heavily subsidised by the government. Whether the concept
of portability should be extended to other public benefits such as welfare services,
medical services and housing thus requires very careful consideration. In its report
of February 2003, the Task Force on Population Policy recommended the review,
in the longer term, of access to subsidised benefits by residents who are absent
from Hong Kong for a long period of time; the addressing of the issue of the
portability of public benefits, taking into account the pace of Hong Kongs
economic integration with the Pearl River Delta; and the examination in detail
of the cost implications of portable benefits for the governments fiscal position
and the local economy.
Changes in the political leadership vis--vis Leong Che-Hungs chairmanship
of the Elderly Commission, coupled with his recent appointment into the
Executive Council (Hong Kongs highest decision-making political body) will likely
usher in a period of hyperactivity in terms of long-term care planning and
reengineering from 2006 onwards, especially if Donald Tsangs administration is
extended beyond 2007 to at least 2012 thereby allowing his new cast of politicos
to see their reforms through. Long-term care financing will be the next major
frontier as health financing reform proposals are eventually agreed and
implemented.
***
As described, a major strategic direction of the Health, Welfare and Food Bureaus
financing reform proposal (2001) involves the introduction of a mandatory savings
scheme (the health protection accounts) to horizontally risk-pool with oneself
and ones family, which prepares contributors to pay for their own health care
expenditure over the longer term, with individuals putting a certain percentage
of their monthly earnings into a personal account during their working years to
assist them to pay for medical services at public sector rates in old age. To this
end, a study group that involved medical doctors, epidemiologists, actuaries,
economists, statisticians and social scientists from local universities, the Health
Welfare and Food Bureau, the Hospital Authority and the Department of Health
was convened in 2001 to assess the feasibility of the health protection accounts
scheme. The feasibility assessment comprised six major sub-components, including
studies on overseas health care financing options, savings behaviour, the
determinants and projection of health care utilisation, public views and opinions,
performance and the economic impact of the scheme (Health, Welfare and Food
Bureau, 2004). One of the sub-studies, which was conducted by our team, on
health care utilisation and cost projection is described in the following to illustrate
the potential contribution of scientific empiricism to evidence-based policy
development.
As Hong Kong is about to embark on reforming its health financing system,
it is important to identify the key utilisation drivers so that appropriate policy
strategies can be devised, implemented and evaluated to maintain equity,
efficiency and quality of care for the population. More importantly, a
comprehensive assessment of Hong Kongs medical ecology and utilisation
patterns before the introduction of potential financing and structural reforms as
previously outlined is critical. The objectives in this sub-study were to describe
the incidence and determinants of health service use in terms of in-patient
admissions and out-patient episodes, and to predict such patterns of utilisation
using the associated explanatory econometric models by applying Andersens
health behavioural framework (1995) based on a Thematic Household Survey
that was carried out in 2002. Overall, 6.4% of the weighted population sampled
reported at least one hospital admission in the previous year and 17.0% reported
one out-patient episode in the previous 30 days. The corresponding rates for
public and private hospitalisations (and out-patient consultations) were 5.2% and
1.5% (6.1% and 11.3%), respectively. Most of the predisposing (age, sex,
education, income, economic activity, home ownership, smoking status), need
(self-perceived health, presence of chronic condition) and enabling factors
(medical benefits and insurance coverage stratified by the public versus the private
sectors) that were considered were independent predictors of in-patient and outpatient use, although in different directions and to varying degrees in the various
regression models. Projections for the annual per capita in-patient and out-patient
expenditure among users of such care were HK$18,938 and HK$9,079,
respectively (Figures 9 and 10).
(b)
Figure 9 Projected inpatient expenditure overall by (a) age group and (b) monthly
household icome among ever users of inpatient services
(b)
Figure 10 Projected outpatient expenditure overall by (a) age group and (b)
monthlyhousehold income among ever users of outpatient services
The concept of the mutability of the identified predictors is important when

using Andersens framework to carry out policy change that promotes equity and
efficiency. That is, a variable must be considered mutable or must point to policy
changes that may influence care-seeking behaviour. Sociodemographics often
demonstrate a low mutability, as age and sex cannot be altered. However, they
can be useful in guiding targeted strategies to change health beliefs and behaviour
in specific population subgroups. For instance, the findings of the sub-study
indicated that men tend to underutilise health services relative to women.
Renewed efforts to promote mens health and related social marketing campaigns
may be considered. Generally speaking, educational or income structures are
probably not a viable short-term policy either. In this study, no detectable
differences in utilisation, adjusted for need, were found between these two social
class indicators. This confirms previous findings (Hsiao, Yip et al., 1999) of a high
degree of equity in Hong Kongs health care system, which is not surprising given
the universal entitlement to public sector care with almost zero co-payments. At
the other end of the mutability spectrum, current smokers systematically sought
fewer services than ex-smokers and non-smokers. This can be rectified on two
levels: the encouragement of tobacco cessation through counselling and therapy
to stem this root cause of ill-health, and the attempt to alter the beliefs of smokers
about health, which can sometimes cause behavioural change. Similar to altering
the underutilisation pattern of men, these strategies may turn out to be more
cost-effective in the long run by steering away from expensive curative care towards
disease prevention and health promotion.
The enabling variables that were studied regarding medical benefits and
private insurance coverage were strongly associated with utilisation patterns, and
can also be potentially quite mutable. For example, the RAND health insurance
experiment demonstrated the impact of changing insurance structures on health
care-seeking behaviour (Newhouse, 1994). Similarly significant effects of moral
hazard in the Hong Kong health system were found, whereby such excess
demand was realised by higher utilisation rates among those who had benefits
or insurance coverage for both out-patient and in-patient care. There was also
very obvious adverse selection by both patients and private hospitals (probably
more so in the case of the former), whereby public hospitals are the predominant
provider for the old and infirm, which results in a highly unbalanced case mix
between the public and private providers. This set of observations has important
implications for Hong Kongs financing reform options. The community needs
to recognise and acknowledge that the funding of the majority of in-patient use
in the public sector by a very narrow tax base is unsustainable, and that either a
massive increase in payroll taxes needs to be effected over time or that government
subsidies should only be targeted at those who are unable to pay, leaving those
who can pay to the private hospitals. In fact, those who are able and willing to
pay are already preferentially using more private services. At the same time, a
new financing instrument, such as population-based insurance or savings accounts
(or combinations thereof) should be introduced to protect the latter group from
the catastrophic expenditure that results from major illnesses. The challenge will
be to minimise the moral hazard that is already apparent in these econometric
models.
Having completed the initial exploratory step of forward planning through

detailed scientific study of the feasibility of health protection accounts by
simulation and projection studies, the key way forward in Hong Kongs health
financing reform exercise is the rigorous empirical evaluation of several pilot
programmes of different real-world strategies. The RAND study by Joseph
Newhouse and the Insurance Experiment Group (1994) in the US demonstrated
the practicality and utility of such an approach, although it is arguably easier to
implement a small pilot that avoids contamination or spill-over effects in a total
population of 250 million than it would be in Hong Kongs population of 7
million. However, the civil servants/Hospital Authority staff medical benefits
scheme provides a perfect sample and setting for such an experiment, especially
given the impending change to this scheme that is already in the advanced stages
of planning. Such a scientific approach to health policy development is crucial
and long overdue. As Esther Duo from the Massachusetts Institute of Technology
has argued, creating a culture in which rigorous randomised evaluations are
promoted, encouraged and financed has the potential to revolutionise social
policy during the twenty-first century, just as randomised trials revolutionised
medicine during the twentieth (The Lancet, 2004). Hong Kong has started off
well with the feasibility assessment, but it must continue to operate using this
evidence-based approach in implementing and evaluating reform packages in
health financing.
Ultimately, chasing the perfect system is an illusory dream that few can
afford in the real world of political economy. The evolving product of health
financing and system reform involves multiple trade-offs between equity, efficiency,
affordability, quality and acceptability. Health reform is inherently difficult because
it comes loaded with heavy historical baggage; vested interests from bureaucrats,
technocrats, providers and consumers; and often evokes strong emotions from
the community, as was witnessed in Hong Kong during and after the 2003 SARS
epidemic.
Moreover, health and health care cannot and should not be considered in
isolation from other essential public programmes, such as education, social welfare
and public security. All four of these programmes are hallmarks of a modern,
civilised liberal state. Security and police functions guarantee minimum or
negative rights to individual property and personal liberty, as libertarians
conceive them (Nozick, 1974), but egalitarian liberals argue that the right to
equality of opportunity must be accompanied by a minimum level of services.
Health care, social welfare and education are the positive rights that are
advocated by this group (Kant, 1956; Rawls, 1993; Roberts and Reich, 2002).
Health spending must therefore be seen through the prism of competing
demands on the government budget. Figure 11 shows the secular trends in
programme spending as a proportion of total government expenditure. Although
security expenditure has been continually reduced from 1989/90 through 2002/
03, spending on health, education and social welfare have all demonstrated
Figure 11 Public spending as a proportion of total government expenditure

by policy function, 1989/90 through 2002/03
relative increases. In particular, welfare and education have shown the largest rises.
This has mostly been due to changing demographics as a result of ageing and
immigration (also see Chapter 4), the economic downturn since 1997 and the
reorientation of our knowledge-based economy. Of course, these increases are
inevitable as the process of the maturation of the welfare state, which was initiated
in the 1970s, is completed. The key to our successful transformation into a
sustainable egalitarian society will be finding the optimal balance between
different but equally important social programmes, including health, and the
avoidance of a crowd out or dominance effect by any one priority, especially
when driven by political myopia. We should be asking questions such as what
are Hong Kong people getting for all the money that is spent on health or
education or social welfare? Not only should cost-effectiveness studies be
performed within the micro or meso-environment of health care to differentiate
between interventions that work and those that do not, but also government and
policy analysts should be carrying out cross-programme efficiency studies to assess
the relative benefits and costs of different policy initiatives. The government, and
in particular finance and treasury officials, should inculcate an evidence-based
evaluative ethos throughout the public sector and in its annual funding allocation
exercise. This is not to negate the role of politicians or popular demand. Rather,
science must underlie policy formulation in the development of valid and viable
options for the political process.
Health Financing Trends in Greater China 397
CHAPTER
17
Health Financing Trends in Greater China

Paul Gross
Paul Gross, from Australia, is an international health care consultant.

In this chapter he argues that Hong Kong faces difficult choices in
devising health financing policies that support the care needs of an
ageing population with more chronic illness. He cautions that the
limitations evident in recent health system reforms in Taiwan should
be avoided in future policy reforms in Hong Kong. He then identifies
six imbalances in resource use and planning in the Hong Kong health
system that require the sustained attention of policy makers in
government and managers in the private health sector. These
imbalances impede policies to sustain one of the few well resourced
public hospital systems in the world while creating new services outside
the hospital walls.
Introduction
Despite several inquiries into its financing system since the late 1990s, there has
been little concerted action to redress critical gaps on the supply and demand
sides of health care in Hong Kong. I first review some current trends in health
reforms in Taiwan and mainland China and draw lessons for Hong Kong in the
second half of the chapter.
Generally, new strategies for containing the growth of health expenditure
are evident at two levels. First, payers (mainly governments and health insurers)
are changing their organisational structures for health care, informing patients
about the price and quality of care, using advanced techniques to negotiate
payments with hospitals and doctors, and tying those payments to measured health
outcomes and other performance indicators. Second, these payers are applying
other policy levers to ensure that access to medical technology occurs in new sites
that influence the price, volume and quality of care (Table 1).

Table 1
Use of Four Policy Levers in Health Financing
Lever
Major policy
levers
USA
1. Site of
Case
health care management
UK
Singapore
Taiwan
China
Hong Kong
Limited
payment
Case
payment
experiments
Experiments
in Shanghai
Limited
Payment
incentives
Limited
Medical
savings
accounts
Perverse
Perverse
Limited
Patient
incentives
Limited
Medical
savings
accounts
User
charges
User
fees
Limited
changes
in fees
charged
Disease
management
/integrated
care
Formally
embedded
in
Medicare
reforms in
2004
New
contracts
with
United
Health
Limited
Zero
Zero
Zero
Privatisation
All services
Limited
Minimal
Private
No formal
investment
policy
in a few
large hospitals
Health
National
management Health
organisations, Service
commercial,
Medicare risk
Medisave/
Medishield
National
Health
Insurance
copayments
and
coinsurance
Copayments
and
coinsurance
under basic
medical
insurance
User
charges
GP
gatekeeper
Health
Maintenance
Organisations
mainly
Limited
Minimal
GP
numbers
limited
GP
numbers
limited
Utilisation
review
Limited
Limited
Minimal
Zero
Zero
Primary
care case
management
GP
Public
Fee-forfundholder hospital
service
benchmark
Fee-forservice;
Case
payment
trials in
Shanghai
Fee-forservice;
Supplier
payment
Ancillary
services
Bundling
Cardiac
Limited
catherisation,
cataracts
2. Use rate Benefit plan

of health
design;
care
Government
charges at
services
3. Price of Provider
health care payment
Limited
Drug
pricing
controls
Drug
pricing
regulated
Contracting
Limited
Zero
Zero
Zero
Table 1 (to be continued)

Table 1 (continued)
Lever
Major policy
levers
USA
Administrative
efficiency
4. Quality
of care
UK
Singapore
DHS
Taiwan
China
Hong Kong
Corporatis- Minimal
ation
Minimal
Hospital
Authority
guidelines
Competition
between
providers
California;
GPs,
Minneapolis; hospitals
Albuquerque
Limited
Limited
Minimal
Clinical
practice
guidelines
Limited
Limited
Zero
Zero
Limited
Consumer
satisfaction
measures
Limited
Limited
Zero
Zero
Limited
Report cards
Limited
Limited
Zero
Zero
Zero
Outcome
studies on
large samples
Limited
Limited
Zero
Zero
Zero
Table 2 lists some economic incentives and policy levers that influence the
demand and supply sides in health care in the Greater China region.
Taiwan
After extensive review from 1989 to 1994, Taiwan introduced legislation for a
National Health Insurance system to replace almost a dozen health insurance
schemes,1 implementing a universal National Health Insurance scheme in 1995.
The decision to launch the scheme (which included compulsory universal
coverage, comprehensive benefits, payroll tax financing with government subsidies
and a low premium2) was made at the highest political level, generally ignoring
professional advice that it needed more careful planning. Although some foreign
observers suggest that the strength of the Taiwanese economy in 1995 and a
government faced with a strong opposition may have played a major role in its
rapid implementation (Cheng, 2003), the scheme was the end of a period of
political democratisation and social welfare reform3 that began under the
Kuomintang party in 1984 when Premier Yu Kuo-hwa promised universal health
insurance by 2000. Subsequently, the Executive Yuan accelerated its
implementation to 1995, one year before Taiwans first direct presidential
election,4 followed by a universal pension in 2001. As in China, Taiwans health

Table 2
The Economic Incentives That Affect the Demand and Supply Sides:
Taiwan, Hong Kong and China
Measure
Taiwan
Hong Kong
China
1. Moral hazard
associated with
social or private
health insurance
Modern under the

National Health
Insurance scheme
No social health
insurance and minimal
private health insurance
Moderate in Urban
Workers Basic
Medical Insurance
Scheme
2. Cost-sharing by
patients
Moderate and capped
Minimal payments in
government hospitals
and clinics, significant
in private clinics
Moderate in Urban
Workers Basic
Medical Insurance
Scheme, significant
elsewhere
3. Choice of
providers
Self-referral
Self-referral to
government or private
clinics
Non-existent in
government health
services
I. Demand-side
incentives
II. Supply-side
incentives
1. Effect of third
party payment on
probability of
technology
adoption/
ownership/use
Increased probability
2. Patient payment
of provider
- primary care
- out-patient
- in-patient
Fee-for-service
Fee-for-service
Fee-for-service
Fee-for-service
Fee-for-service
Fee-for-service
Fee-for-service
Fee-for-service
Fee-for-service
3. Hospital staff
payment
Bonus tied to
productivity
High salary +
generous retirement
benefits
1. Low basic salary

2. Sharing of
hospital revenue
for diagnostic
services and drugs
Regulated
High profit
margins on
diagnostic services
and drugs (Red
Book)
Limited case
payments and hospital
budgets
Global budgets
(Shanghai)
Capitation
experiments
(Shanghai)
Prospective
payment (Hainan)
4. Hospital supply
pricing
5. Budget
constraints
Limited case
payments to hospitals
Sources: Adapted from Eggleston K, Hsieh G R (2004). Healthcare payment incentives: a

comparative analysis of reforms in Taiwan, South Korea and China. Appl Health Econ
Health Policy; 3(1): 4756; and Chou S-Y, Liu J-T, Hammitt JK (2004). National health
insurance and technology adoption: evidence from Taiwan. Contemporary Economic
Policy; 22: 2638.
insurance reforms did not emerge in isolation from broader social welfare
reforms.
There are two viewpoints on the relevance of the Taiwanese National Health
Insurance scheme to health financing reforms in Hong Kong. Proponents assert
that there were no measurable increases in costs at its launch,5 despite its coverage
of 8 million citizens who previously lacked insurance;6 the subsequent costs of
utilisation increases were largely offset by administrative savings under a single
payer;7 there were no increases in the length of hospital queues or waiting times
(Lu and Hsaio, 2003);8 there have been major improvements in the health status
of the elderly, especially among the poor (Yip and Hsaio, 2003); the scheme has
contained the growth of medical expenditure (Tsai et al., 2003), with the
percentage of health expenditure in GDP still around 5.8%, which is far below
the figure of most OECD nations (Chen, 2003); and it has high public
acceptance.9 Advocates who quote this data suggest that other Asian nations and
even the US might follow Taiwan down this social insurance path.10
There is little doubt that the introduction of a single-payer national health
insurance scheme achieved improvements in equity,11 coverage and the number
of hospitals and clinics that were contracted to the National Health Insurance
scheme. However, the net effect of the reforms was an increase in the usage rates
of hospital and medical services that quickly converted budgeted surpluses into
deficits by 1998, three years after its launch. From 1995 to 2002, the compound
average growth rate of health expenditure was over two percentage points higher
than the average growth rate of premium revenues (6.3% versus 4.1%).
The reimbursement incentives that were embedded within the scheme also
seemed to shift patients from in-patient to out-patient care, with expenditure on
out-patient care constituting 68% of total expenditure, which continues to grow.12
The average per capita visit rate rose rapidly to 15 visits per person in 1998. Two
major problems were the low co-payments and the lack of constraints on hospitals
that were competing with clinics13 under a fee-for-service payment system (Cheng
and Chiang, 1997). This resulted in the newly insured having twice the use rate
of out-patient visits than before the implementation of the scheme (0.21 versus
0.48 in a two-week period). The newly insured also had nearly three times the
hospital admission rate than before the implementation of the scheme (0.04
versus 0.11 in a two-week period).14 In addition, the previously insured had a small
but statistically significant increase in the use rate of out-patient clinics.
A recent study (Chou et al., 2003) evaluated the effect of the introduction
of the National Health Insurance scheme on household savings and consumption.
The scheme had two major effects in 19951996: average household savings
dropped by 6.9%, and average household consumption expenditure increased
by 2.4%. The heaviest effect on precautionary savings was on households with
low savings, which is consistent with decreasing absolute prudence.15 However,
there is also some evidence that the scheme yielded larger welfare improvement
through consumption smoothing, particularly for households with smaller savings.
One cause of the decline in household savings may have been the 4% decline in
the labour force participation rate among the spouses of government employees
who received health insurance coverage in the 1995 reform (Chou and Staiger,
2001). The decline was higher in women from low-income households. In
addition, 31% of health care expenditure in 2003 comprised out of pocket
payments. Thus, social protection via the National Health Insurance scheme had
some adverse side effects on the poor.
There is also evidence that payments to providers increased the probability
that new medical technology would be adopted and used more widely (Chou et
al., 2004). This finding encouraged some commentators to believe that weak
supply-side controls were in place, and that the preferred fix is to introduce riskshared capitation payments (Hu and Hsieh, 2001). However, as others have
pointed out, the data required for predictive modelling of different risk-adjusted
formulas is not yet accessible (Chang et al., 2002). It also seems that the economic
incentives for hospitals have not yet influenced competition between public and
for-profit hospitals, with cross-sectional data showing that costs per discharge for
six surgical procedures were higher in high-competition markets (Xirasagar and
Lin, 2004).16
Notwithstanding any retrospective justification of the actuarial assumptions
underpinning the scheme at its inception in 1995, by 1997 the Department of
Health of the Executive Yuan began seeking reform ideas from experts and
devised nine alternative proposals to deal with potential cost blowouts. One
proposal, favoured by the then Minister for Health, was for a publicly
administered, privately owned insurance system that embedded more controls on
the supply side than existed in the 1995 scheme, including the regulation of
payments by government and outsourcing the insurance functions to the private
sector.
With a new health minister favouring private sector competition in late 1997,
this proposal was displaced by a proposal for a privatised multiple carrier system
in which a basic health care package and fee schedule would be determined,
private health insurers would compete to offer the package and other
supplemental services, and a single government fund would pay these carriers,
which would then pay the providers (Hwang, 1998). The government would thus
be one step removed from the health debate, and government subsidies would
go only to low-income and self-employed groups. The model was essentially a
variant of the managed competition model of Alain Enthoven, with equity of
access assured by the existence of a core package. This model had wide support
in the Planning Task Force of the Council for Economic Planning and
Development. A National Health Insurance Coalition, created in 1998 by
organised labour groups, opposed the legislation and it did not pass the Executive
Yuan. Labour movement intransigence and community resistance to premium
increases let the scheme bleed capital up to 2002, something that would not be
tolerated in a competitive private health insurance system.
By 2002, proposals were floated to raise premiums from 4.25% of gross wages
to 4.55%, increased co-payments were levied at out-patient facilities, across the
board cuts were made to drug prices, and there were reductions in government
subsidies to medical schools, all of which sat uncomfortably alongside proposals
by the National Health Insurance Bureau to pay its staff performance bonuses
that were worth 4.6 months of salary (Chao, 2002). Belated attempts were made
to increase the number of diagnosis-related group case payments to hospitals, and
global budgets were introduced in hospitals. The most immediate effect of such
belated controls was to bring revenue and expenditure into balance, and there
was no premium increase in 2004.
The relevance of the Taiwanese social policy reforms for Hong Kong can be
summarised as follows. Taiwans National Health Insurance reform came at the
end of a long gestation of social policy reform, and the scheme had significant
flaws. The effectiveness of the scheme as a form of social protection was
diminished by its reductions in the labour force participation rate of poor
households, household savings and household consumption. The economic
incentives did not include case payments at the outset, and fee-for-service was the
dominant method of provider payment, which meant that efficient pricing of
hospitals was not achieved. Evidence-based guidelines were not in place, and thus
the volume of out-patient services exploded. In the absence of pricing incentives
and with little forethought about other mechanisms that could lead to care being
provided at the most appropriate site,17 the patterns of use before the scheme
was implemented changed in out-patient care, in-patient admissions declined, the
care of the chronically ill remained uncoordinated and databases were not
maintained to enable integrated care. Although there have been some attempts
since 2002 to introduce quality considerations into hospital payment, the quality
of care is unfathomable in Taiwan, a characteristic shared with mainland China
and Hong Kong. This renders impossible the application of economic incentives
that are now evident in other health systems.
China
Various major pressures (Min, 2001), external to the health and welfare systems
per se, are forcing changes in the social security system in China. With oil exceeding
US$70 per barrel in 2006 and a US current account deficit of about 5.8% of GDP,
the US Federal Reserve Bank is the de facto central bank of China, placing pressure
on China to devalue its currency as the US dollar spirals downwards. Debt is
accruing in the existing under-funded pension system,18 which could until recently
only earn investment income from Treasury bonds and bank deposit earnings.19
With its trade surplus with the rest of the world, China is now more open to
international trade than at the beginning of the 1990s, and WTO requirements
that allow foreign market entrants will place pressure on non-competitive state-
owned enterprises and on the welfare benefits that are paid on behalf of
employees (Barfield, 2004). User charges for health care have pushed poverty
up by 44% to 7% of the 910 million people who are living in rural areas in China.
With the demise of Chinas rural cooperative medical system from the mid-1970s,
the government has introduced a voluntary community financing scheme for the
rural areas with 80% financed by members and with no-risk pools, and there are
reasonable fears that it will not achieve its goals (Liu, 2004). The urban
unemployment rate of 3.1% in 2000 will be pushed closer to 5% over the next
five years as the total labour supply expands by 50 million. Available jobs will be
only 40 million, and an additional 40 million excess labourers will move out of
rural areas. Finally, by 2030, China will have 400 million elderly residents who
will require health care, up from 78 million in 1997.
The leaders of China understand the challenges that are posed by such
economic growth, unemployment and population ageing. Soon after his
appointment, President Hu Jintao made many speeches about economic
inequality, a concept that was also popularised by Deng Xiaoping in 1979 when
he endorsed xiaokay: the notion of an ideal society that provides well for all its
citizens (Hale and Hale, 2003). At that time, health insurance for low-cost basic
care was available to nearly all urban residents and 85% of rural residents through
employment-based health insurance and agricultural cooperatives (Akin et al.,
2004). More recently, Premier Wen Jiabao promised to focus national resources
on the millions of people (mainly in rural areas) who have been left behind by
more than two decades of market-oriented reforms and the economic boom of
the last decade (Kahn, 2004).
Private pension accounts and individual medical savings accounts were
introduced to reduce the financial burden falling on enterprises in China.20 A
national social security foundation was set up in 2003 to develop a central mandate
for the social security fund, including the appropriate legal framework. Apart from
the breadth and complexity of its social welfare reforms, the evolution of health
care financing in China is unique in at least three ways. Life expectancy gains in
the last 20 years have been exceptional as the nation has made the transition from
barefoot doctors in the Cooperative Medical System to a high-cost, high-tech
health care system. China has shown a commendable willingness to learn from
two well designed health insurance experiments in the 1980s. Unlike Taiwan it
did not pursue a big-bang reform without prior evaluation of the economic
incentives that are embedded in new models of social health insurance, and unlike
South Korea it did not introduce a scheme that guaranteed an increase in the
volume and costs of medical and hospital services. Finally, from the early 1990s
there has been a steady development of a national capacity to undertake health
service research and health economics studies.
From the 1990s, China experimented with new forms of health insurance in
two provinces, and in 1998 the Urban Workers Basic Medical Insurance Scheme
was introduced in urban areas. By 2003, about 109 million people in urban areas21
were covered by the scheme, which incorporated personal medical savings

accounts linked to catastrophic health insurance with deductibles. In some cities
(such as Shanghai), innovative governments have instigated a form of case
payment for specific high-cost diseases.
With average annual premiums of 6% and 2% paid by the worker and the
employer respectively, the funds are pooled in a mutual fund linked to an
individual medical savings account. The mutual fund charges deductibles of
RMB5001,000 and the coinsurance rate is 20% to 30%. There is a yearly
maximum reimbursement of RMB40,00070,000. The medical savings account
covers out-patient service payments. Family dependents of the insured worker are
not covered.
In 2002, the government introduced the New Cooperative Medical System,
which is intended to cover high cost treatments of all rural residents by 2010. It
is a voluntary scheme, with contributions of RMB30 per person (RMB10 each from
the central government, the local government and the household). The pooled
contributions are managed at the county government level, with pilot projects in
each province, and the whole scheme is being implemented under the Ministry
of Health. In 2003, the government announced a second scheme for low-income
families (the Medical Financial Assistance System) to be run by the Ministry of
Civil Affairs. Since 2005, it has pooled contributions from the central government,
local government and donations, and is now combined with the New Cooperative
Medical System.
The major sources of health financing that existed in urban and rural China
in 2003 are shown in Table 3.22
Table 3.
Major Sources of Health Finance
Type of coverage
Total %
Urban %
Rural %
Cooperative insurance
8.8
6.6
9.5
Basic insurance
8.9
30.4
1.5
Catastrophic diseases
0.6
1.8
0.1
Government
1.2
4.0
0.2
Labour insurance
1.3
4.6
0.1
Others
1.4
2.2
1.2
Commercial insurance
7.6
5.6
8.3
Self-payment
70.3
44.8
79.0
The government has indicated its intent to allow commercial health insurance
schemes that may complement or replace the Urban Workers Basic Medical
Insurance Scheme (Gross, 2002). The estimated market value of this scheme is
about RMB23 billion, against a potential value of about fifteen times that, once
the scheme is fully operational in all urban areas (Tao, 2004). Six levels of health
insurance are evolving in China:23
the Urban Employees Basic Medical Insurance Scheme;
commercial supplemental medical insurance or major medical assistance
funds, which will cover medical expenditure that is over the ceiling payment
levels of the basic medical insurance system;
enterprise supplemental medical insurance that will cover medical
expenditure beyond the maximum payout levels of the basic medical
insurance;24
commercial medical insurance that can be either a replacement of, or a
supplement to, basic medical insurance;
regionally based medical assistance funds in areas where the local economy
allows them;25 and
civil servant medical assistance that is designed to help low-income civil
servants to pay for medical expenditure.26
A major problem facing these reforms is the growth in the average costs per
admission and per out-patient visit, staffing levels and applications of medical
technology in a health system where doctor productivity is declining. For example,
it is very difficult to imagine that the following combination of factors will not
cause financial problems by 2010.
In the three decades before the creation of the Urban Workers Health
Insurance Scheme, urban workers had access to low or zero-cost health care. With
the new insurance-based funding of access to care, hospital-based care has
replaced care that was previously given in lower cost community health centres
and clinics. The average number of out-patient and health centre visits per capita
in 2003 was 1.7 per person, 60% of which occurred in hospital out-patient clinics,
versus 41% of such encounters in 1980. The expectations of older government
employees and older workers in state-owned enterprises in urban areas are that
such access is the norm, and their expectations are reinforced by rule-based
entitlements (Bloom et al., 2002). The employees of profitable enterprises and
their families use services at a higher rate than employees of loss-making
enterprises, and chronic disease prevalence in the poor of two cities was observed
to be two to three times the rate of employed persons (Institute of Development
Studies, 2003). Equity issues are emerging early in the new insurance scheme.
In the following changes from 1995 to 2002, there were early warnings of
hospital cost blowouts associated with the high use rates of acute hospitals,27 a
long average length of stay (18 days in some classes of acute hospital), a decline
in the numbers of in-patients and out-patients treated per doctor per year, an
increase in the average expense per hospital stay from RMB1,668 to RMB3,598,
and an increase in the average expense per out-patient visit from RMB39.9 to
RMB99.6 over the seven years.
With the government share of total health funding below 15% and mainly
used for staff payments in hospitals and clinics, the current reimbursement of
doctors in hospitals is based on a low salary topped up by a bonus system that is
based on a share of revenue generated from drugs, pathology and radiology. The
prices of many hospital services are often less than their true costs. This system,
driven by fee-for-service payment by patients, guarantees that the volumes
dispensed or ordered will rise, together with the cost per admission and cost per
out-patient visit.28
The premiums that are required to launch the urban workers basic medical
insurance are already at levels where some companies cannot afford them, and
some local governments are not transmitting the premium payments to the
regional fund. The employer share of health insurance premiums is a cost of
business, and in a competitive world and domestic market, higher premiums may
render some firms less competitive.29
There is some evidence that some mutual funds are drawing down the
medical savings account pool to pay for care. If such inappropriate draw-downs
are allowed to continue, then there will be a danger that future claims by young
beneficiaries may not be paid (Bloom et al., 2002).
These trends are not likely to be ameliorated in the absence of a strong
primary care network that is currently unprepared to treat the rising incidence
of chronic disorders which in turn will reduce the viability of any health insurance
scheme unless the current care patterns are modified. Compared with Australian
acute care for chronic conditions, the average stay is 34% to 73% higher in China,
and a 15% reduction in admissions would be feasible with disease management
strategies being introduced in the US, UK, Germany and Australia. The high
concentration of health expenditure in the treatment of chronic disease is such
that 10% of the population generates about 66% of expenditure.30 As adult
females who are not covered by health insurance are often responsible for the
care of two pairs of elderly parents, there are profound implications for elderly
care if the adult female of the household falls sick.
The urban poor and rural residents still have no health insurance coverage,
and government policies for care of these groups are still unclear. The threat of
infectious diseases31 such as SARS and/or pandemic influenza remains high in
the absence of funding from the government, the share of total health care
expenditure of which continued to decline to under 15% in 2004.
Chinas health system and its financing is work in progress, but it is relevant
to Hong Kong because it emphasises the need to experiment before embarking
on large system changes. However, the Chinese health system shares problems
with that of Hong Kong, which should experiment with alternative sites, pricing
models, volume controls and quality assurance systems before it embarks on bigbang reforms of the type recommended in the 1999 Harvard Report.
Hong Kong32
I have estimated the contributions of three major drivers of health expenditure
from 1990 to 1999: inflation in the prices of goods and services and the wages of
staff, population growth and growth in technological intensity. The relative
contributions of these three drivers are roughly 22%, 10% and 68% over the
decade, although the dominant effect of technological diffusion was less marked
from 1995 to 1999.33 In the same decade, there were increases in the private
consumption of medical care and health according to the household surveys,
and as indicated below the use of Hospital Authority hospital services grew at per
capita annual rates not often seen in OECD nations,34 driven in part by the higher
use of high-cost medical technology in out-patient clinics.
Table 4 lists the compound annual growth rates in some key measures that
signal particular supply-side problems.
This data illustrates trends in the use of particular types of care that are likely
to be in even higher demand as the population ages and as the chronic disease
burden falls on health care. We can also see glimpses of the increased rates of
use of services with heavy technological intensities.
The ratio of all acute beds per 1,000 population increased steadily over the
decade, and it is already above the levels seen in OECD nations such as Australia
and Sweden.35 It is unclear whether all beds in Hong Kong are used for acute
care, but day-patients were only 22.7% of the users of all Hospital Authority
hospitals in 1999/200036 The discharge and death rates in Hospital Authority
hospitals, which is the hospital admission rate if inter-hospital transfers are
minimal, rose from 14.5% to 20.8%. This rate places Hong Kong near the top of
the hospital use rates of developed nations.37
The per capita use rates of accident and emergency rooms increased steadily
in Hospital Authority hospitals from 0.22 to 0.35 visits, whereas the use rates of
general out-patient clinics stayed steady at about 0.12 visits per capita. The total
use rate of government ambulatory care clinics (items 4, 5 and 6) rose from 1.3
visits per capita to 1.48 visits per capita. Significantly, the annual average growth
rate of this composite measure doubled in the last half of the decade.
The per capita use rates of specialist out-patient clinics rose at nearly 6% per
year over the decade, accelerating in the last half of the decade. This acceleration
does not seem to suggest a significant movement of large numbers of patients to
private sector clinics.
The per capita use rates of two very expensive medical technologies, radiology
and radiotherapy, in Department of Health and Hospital Authority facilities
increased at annual rates of 8.9% and 5.4% respectively over the decade, with
the rate of use of radiotherapy accelerating in the last half. The growing incidence
of some cancers will require more facilities, and these are very expensive units.
When looking at the trend in the number of these two services ordered per
ambulatory visit or per out-patient visit, we can see these two indicators of

Table 4
Compound Annual Growth Rates (CAGR) (%) of Key Supply-Side Indices
Measure
1. Total number of acute beds

per 1,000 population
2. Total number of doctors,
Department of Health + Hospital
Authority, per 1,000 population
3. Total discharges and deaths in
government, Hospital Authority and
private hospitals, per 100 population
4. Total general out-patient services,
Department of Health, per capita
5. Total accident and emergency services,
Hospital Authority institutions,
per capita
6. Total general out-patient services,
per capita
7. Total government ambulatory care
services per capita
8. Total specialist out-patient services,
per capita
9. Radiodiagnostic exams, Hospital
Authority and Department of
Health, per capita
10. Radiotherapeutic services,
Hospital Authority and
Department of Health, per capita
11. Radiotherapeutic services per patient
12. Radiodiagnostic services per
ambulatory contact
13. Radiodiagnostic services per
specialist out-patient visit
1990/1
1995/6
1999/00
CAGR % CAGR %
1990-1999 1995-1999
4.48
4.60
5.10
1.4
2.6
0.473
0.523
0.631
3.3
4.8
14.6
16.5
19.2
3.1
3.9
0.96
0.88
0.94
-0.2
1.6
0.23
0.27
0.35
5.1
7.0
0.13
0.12
0.11
-1.4
-1.5
1.31
1.27
1.41
0.8
2.6
0.51
0.59
0.81
5.3
8.1
0.24
0.40
0.51
9.0
6.1
0.99
1.15
1.57
5.3
8.1
29.6
0.18
32.7
0.32
39.9
0.36
3.4
8.2
5.1
3.5
0.46
0.68
0.63
3.6
-1.9
technological intensity (in this case the amount of technology ordered per clinic
visit) rising at 8.2% and 3.6% per year. Recall that over this decade the share of
government health care expenditure associated with technological intensity was
over 60%, perhaps because the use rate per visit for two very expensive
technologies has been increasing at 3% to 7% per year.
Obviously, Hong Kong has yet to experiment with alternative sites, pricing
models, volume controls and quality assurance systems. It would be a very
expensive step to embrace any form of social health insurance without prior
adjustment of these policy levers.
The Hong Kong health system has six imbalances that need redressing by
policy reforms that have regard for the lessons of the Taiwanese and mainland
Chinese experiences, and which change the price, volume, site and quality of care.
Imbalance in the Expenditure and Revenue of the Hospital Authority

The Basic Law under which Hong Kong operates exerts a major effect on the
growth of government health expenditure because it requires balanced budgets,
at least in the medium term. It does not require government spending to grow
only in line with GDP, but when the government indicated that it was looking at
a value-added tax, the resistance of the voters caused it to return to its standard
policy that government spending should not exceed 20% of GDP. This linkage
of economic growth and government budget targets influences the planning of
government health services.
Two questions need to be debated more widely. At the current rates of
hospital service use, what is the necessary growth rate of government budgets for
hospital and related social welfare services? If government budgets are not
sufficient to meet the needs of the public, then how much can the public afford
to pay out of pocket or in private health insurance premiums? Using the hospital
use rates for 1999 and adjusting for population growth and ageing, the budget
of the Hospital Authority would need to grow by 2.2% per year to keep pace with
public demand. If, as the Financial Secretary indicated in 2001, the Hong Kong
economy grew at 3%,38 then there is only a small margin to sustain the government
budget for hospital and related care. The Financial Secretary indicated his intent
to limit the growth to 1% per year, and with salary cuts likely to be less than
budgeted, the governments room to manoeuvre would decrease further.
Government forecasts in 2002 anticipated deficits in the budget for the next
three to four years, and the 2003/04 Budget set the goal of achieving fiscal balance
by 2006/07.39 In the government health sector, a major cause of the deficit was
budgeted growth in the salaries of staff; this salary creep would have cost about
HK$500 million in 2002. Historically, salary creep has pushed the rate of
government health expenditure growth to about 2 to 3 percentage points above
the rate of GDP growth. In 1995, the Hospital Authority began to employ medical
staff on contracts, allowing doctors to go to the private sector after six years. This
strategy was intended to reduce the cost of salary creep by about 2004. In 2004,
the Hospital Authority reported a budget deficit of HK$600 million.
With such deficits, the Hospital Authority cannot meet the health care needs
of the Hong Kong population unless there are expenditure cuts, new sources of
revenue are created or new sources of private sector funding and health insurance
are created to reduce the demand for government services. With ageing and
medical technology each adding about one percentage point in the real annual
growth of health expenditure in industrialised nations, the assumed 2.2% growth
rate in Hong Kong seems likely to be exceeded. Two expenditure items will
influence future financing options.
Imbalance in Hospital Authority Staffing Policies

Eighty per cent of the Hospital Authority budget is consumed by staff costs. In
1997, doctors were offered contracts rather than permanent appointments. The
annual medical staff turnover rate is about 2%. Each year, about 250 intern
graduates are taken on. Interns require more than one six-year term to obtain
their specialist qualifications and then set up office in the private sector. Around
2002, a policy was introduced which effectively said that the Hospital Authority
would not employ doctors without full specialist qualifications. One outcome is
that many medical students will be deprived of relevant training if they cannot
obtain their qualifications in one contract of 6 years.40 This problem is a complex
one to resolve. At first glance, it requires a careful review of specialist numbers
because the policy will lead to gaps in the age structure of specialists, and Hospital
Authority hospitals may end up with younger specialists working long shifts while
older specialists do the rounds and teach.
The control of staff numbers is critical to any balancing of Hospital Authority
budgets in the next few years. The long-term solution is probably to introduce
the delineation of government hospital roles, designate teaching hospitals for
specific teaching roles and develop shared services within private hospitals, with
experienced private doctors offered part-time teaching appointments in a smaller
group of teaching hospitals. If the staff budget and the supply of nurses are core
problems, then the current imbalance of the supply of services in the government
and private sectors must be addressed.
Imbalance in the Public and Private Sector Supply of Health Care

The government finances most of the hospital care and the education of health
personnel, while the private sector funds most of the ambulatory (clinical) care
and administration costs. Elsewhere in the world, recent policy changes have
transferred some of the governments funding burden to the private sector
through privatisation, corporatisation and other shared-care and shared-risk
vehicles. A starting point for reviewing some of these options would be for the
government to declare a formal policy or initiate a public debate on how
to better balance the use of resources of the public and private sectors in health
care.41 The 2001/02 Budget foreshadowed possible movement in this direction
as follows:
Consideration is also being given to further corporatising or privatising
individual assets to enhance efficiency and service quality, and bring
to the market additional high-value investment opportunities.
(Hong Kong Special Administrative Region Government, 2001)
It is not yet clear what forms of hospital privatisation would achieve specific policy
goals such as improved patient access, higher quality care, more cost-efficient
services and lower government staff budgets. Before any expansion of the private
sector role in hospital care (Parry, 2002),42 the government should initiate a role
delineation study of all hospitals in Hong Kong so that the private sector
understands what types of hospital facilities are being anticipated and planned.
There is an urgent need for a formal process of health care technology assessment
in Hong Kong, by which the public can be informed about the costs, risks and
benefits of high technology procedures and interventions, and government
policies to privatise parts of the hospital sector can be shaped by the need to have
in place processes to review new medical technologies before they are widely
diffused in Hospital Authority or private hospitals. As noted earlier, medical
technology is the major driver of health care expenditure.
Imbalance in the Charges, Fee Structures and Incomes of Public and Private Health
Sector Providers
The increasing rate of use of government hospitals, despite the growth of limited
private insurance coverage, is related to the prices that are faced by consumers
of care. The wide differential between charges in the public and private sectors
causes imbalances in the use of facilities. Government services that are supplied
at zero or minimal cost to the patient are likely to be used inappropriately. The
fiscal consequences of such highly subsidised care by the Hospital Authority are
that whereas the share of public health and hospitals in the Hong Kong
government budget was 14.7% in 2001, the Harvard Report predicted that the
figure would rise from 2.5% of GDP in 1996 to between 3.4 and 4% by 2016
(Health and Welfare Bureau, 2000).
The total annual income of doctors in the government and private sectors
also varies. Among doctors at the top level of the government system, the net
income is HK$3 million plus HK$0.5 million in the provident fund. These
reimbursement levels probably explain the relatively low annual turnover rate of
2% by Hospital Authority doctors. The annual income of doctors in the private
sector is not known with certainty, although the Harvard Report provided crude
estimates.43
A limiting factor in moving hospital doctors to private practice is the absence
of a fee schedule. Open-ended reimbursement will send the health care budget
into the red. It is unrealistic to advance private health insurance as a funding
option until such a fee schedule is available and accepted by the medical
profession, preferably a schedule based on a resource-based relative value scale44
as in the United States. The validation of such a schedule in Hong Kong is at
least a three-year task once its appropriateness has been determined. In the
interim, Hong Kong should introduce a pay-for-performance system for hospitals
and doctors. The lead-time required is about two years, including careful
experimentation with different measures of performance and the use of
performance dashboards in hospitals.45
Imbalance of Government and the Private Health Sector in Aged Persons Care
As in other parts of the world, the elderly use hospital and medical services in
Hong Kong at a rate that is three to four times higher than the non-elderly
population. Two statistics are relevant: the growth rates of the elderly population
and the relative use rates of in-patient care by the elderly and non-elderly.
First, those over 65 years were about 11% of the Hong Kong population in
mid-1999 and they are forecast to constitute 20% of the population by mid-2020
(Hospital Authority, 1999), reaching 25% or 2.12 million by 2030, and 5% of them
will need long-term care. Second, the inappropriate placement of the elderly in
acute hospital beds in Hong Kong, a major cause of bed block, is compounded
by delays in providing alternative sites of care in the private health care system.
In 2000/02, those over 65 years (11% of the population) constituted 36.8% of
the admissions to Group 1 (acute care) and Group 2 (rehabilitation) hospitals
(35% in Group 1 hospitals and 62.2% in Group 2 hospitals), and their shares of
acute hospital bed days were 53% (47.9% in Group 1 hospitals and 77% in Group
2 hospitals). In Group 1 hospitals, their average length of stay was 5.8 days (versus
4.3 days for the whole population), but in Group 2 hospitals it was 15.5 days
(versus 12.6 days for the whole population). These figures46 are a stark reminder
of the disproportionate burden of ageing when acute care facilities are used as
the care of first resort. The average 53% figure for the share of patient bed days
represents 55% of 5.23 million total bed days in the Group 1 and 2 hospitals, or
over 2.6 million bed days. One immediate question is whether a large proportion
of these elderly patients need to be in acute hospitals. Data on the appropriateness
of their care in Hong Kong is generally inaccessible, and Hong Kong spent HK$3.6
billion on long-term care services in 2003/04.47
Could some or most of this care be provided in alternative facilities in the
private sector?48 Hong Kong has taken some tentative steps to contracting
residential care beds in the private sector. Despite the achievements of the Elderly
Commissions report, which pushed the number of subvented residential care
places in Hong Kong from 17,000 in 1997 to 27,000 in 2002/03, there were 23,000
applicants on the waiting list on 31 March 2003, and only 125 home-help teams
are operated by welfare agencies (and so they are not seen as health care services),
which care for 20,000 people (Ho, 2004). The Enhanced Bought Placement
Scheme (administered by the Department of Social Welfare) contracted in 2002
for 2,750 beds, but there were 2-3 times that number on the waiting list, and it
often takes from four to six months for a placement to be made. There were only
30 day centres to care for 1,200 frail elderly in 1997, with minimal respite care.
There are more beds in the private sector than in the subvented sector. One
minimal reform, extending the Enhanced Bought Placement Scheme, would be
to accelerate access by outsourcing to the private and voluntary health sector, a
path already taken under the Bought Places Scheme, where prices in private
residential care homes are 30% cheaper than in subvented homes (Ho, 2004). A
second, more radical reform would be to delegate the Hospital Authority role in
care of the aged to other entities. A starting point might be to review the care of
all patients in Hospital Authority-controlled infirmaries and assess the true costs
of caring for them in more appropriate step-down care units in the private sector.
A third strategy, which would come at a low cost if private general practitioners
were paid for the services as they are in Australia, would be to require annual
care plans for all elderly people in Hong Kong, including those in institutional
care. The community geriatric and psycho-geriatric assessment teams and gate
keeping process introduced in 2002 are a start, but there are only 10 community
geriatric assessment teams serving about 16,500 people and 9 psycho-geriatric
assessment teams serving 42,000 people per year in a population where there will
be 840,000 people aged over 65 years in 2006 (Chan and Phillips, 2004). More
general practitioniers and community nurses should be involved in care planning.
Care plans would then become a powerful tool for anticipatory case
management,49 preventing or reducing downstream hospital admissions by better
integrated care.
Recently, proposals by private sector providers were submitted to the Hospital
Authority showing that savings in Hospital Authority budgets could be made with
appropriate step-down care. Two hospitals had agreed to test the concept, but
the Hospital Authority stopped the experiment. Notwithstanding this action, it
seems inevitable that Hong Kong will be forced by budgetary pressures to
introduce carefully designed and evaluated pilot projects in which the care of
elderly patients is subcontracted to high quality private sector providers. The home
and community care packages introduced in 2002 are a start, but Hong Kong
lacks the equivalent of the UK National Service Framework for older people in
which the development of intermediate care and the prevention of disability from
falls, stroke and mental disorders have a high priority (Chadha and Young, 2002).
As in Taiwan and China, there is little cohesion in social welfare policy and social
protection for the elderly, with Hong Kong preferring to finance a health care
system, a long-term care system and a safety net (the Comprehensive Social
Security Assistance Scheme), with the Elderly Commission offering only guidelines
to the three core agencies (the Hospital Authority, the Department of Health and
the Social Welfare Department).
In future reforms,50 Hong Kong authorities51 will need to decide how the care
of the elderly should be financed (whether it will be a Hospital Authority, Social
Welfare Department or other departmental responsibility, and whether some form
of long-term care insurance feasible); whether a greater private sector role could
push hospital infirmaries towards administration by the Social Welfare
Department; whether the experience of the Social Welfare Department in

eldercare is more relevant than the predominantly medical experience available
to guide eldercare in the Hospital Authority; and whether the care of the elderly
in the government or private health sector will be impeded by the world shortage
of nurses,52 and if so, what other reforms are required now to encourage families
to care for their elderly members.53
Imbalance in the Data Available to Public and Private Sector Decision Makers
Hong Kong does not have a large insurance market, as the comparative data for
2000 in Table 5 suggests.54
Table 5
Comparative Insurance Data
Territory
Taiwan
Source:
Insurance premiums/GDP (%)

7.4
Hong Kong
4.9
China
2.2
WORLD
7.8
Swiss Re, quoted in CC McLeod. China and India new markets for life insurance. Actuary
2002; 36(8): 3.
A major impediment to the entry of private health insurance companies into

the wider Hong Kong market is the absence of data on the use rates of hospitals
and clinics by major target groups such as civil servants, pensioners, elderly
dependents, the working-age employed and indigent households. Hong Kong
insurance groups lack a full understanding of the operations or financing of the
Hospital Authority or the management of public sector hospital patients. A second
impediment to any expanded role for private health insurance is that advisers at
all levels of the government and private sectors need more understanding of the
basics of health insurance design, operation and sustainability when there is a
pre-existing government health sector.55
While the public-private divide has been bridged by the new policies of
promoting public-private interface initiatives (including the sharing of patient
information with private practitioners),56 in the insurance sector information gaps
block future reforms and an informed dialogue between the two sectors. These
gaps can be bridged by astute government policies to ensure the sharing of
essential data, continuing education programmes for Hospital Authority staff and
private insurance staff, and guidelines from government on the types of health
insurance options that it might countenance.
I conclude this chapter with four broad health financing options that seem
more feasible than the others as at the second half of 2005.
Outsourcing of Health Care for Civil Servants
This option would reduce the demand and queues at Hospital Authority hospitals
and clinics while creating a controlled market for private health insurance in
Hong Kong. All care of civil servants and their dependants would be outsourced
to the private health sector, with the costs of care funded by a new private health
insurance scheme. Both the Hospital Authority and Health, Welfare and Food
Bureau have looked at this option, and its potential justifies both their effort and
further systematic study.
Long-Term Care Insurance
Two changes in existing policies might alleviate strains on the government budget,
reduce waiting times for residential places, improve the overall quality of
residential care, create new funding sources and make more efficient use of
available government and private residential places. The changes would involve
the accreditation of all residential care before expanding the role of the private
health sector in residential care, and a feasibility study of new long-term care
insurance models by private sector insurers.
Medical Savings Accounts
Although the government did not act on the 1999 Harvard Report
recommendations, in 2001 the Health and Welfare Bureau released a consultation
document (Health and Welfare Bureau, 2000)57 that canvassed an alternative
scheme: health protection accounts, by which the young could be encouraged
to save for lifetime planning. The scheme assumes that private households will
need to pay for the care of their members at public hospitals until the age of 80
(at which age the government would pay for all care), requiring individuals to
create a savings account by contributing 1% to 2% of gross income from 40 years
of age. The proposal was sent to a government study group,58 the final report of
which was generally positive about the model, but not at a time when Hong Kong
faced economic difficulties (Health, Welfare and Food Bureau, 2004).
Briefly, the group concluded that if contributions began at 20 to 29 years of
age, with a 2% contribution rate and the savings account accessible at 65, the
account balance would be positive over a lifetime.59 Recalling the effects of
Taiwans National Health Insurance scheme on consumption and savings
behaviour in households, the group estimated that health protection accounts
with a 2% savings rate would reduce consumption and savings by 1.2% to 1.4%
of income in the 2034, 3549 and 5064 age groups. It concluded that the
younger group (with a high propensity to save) might face a higher contribution
rate while the older groups (with a lower propensity to save) might face a lower
rate (Health, Welfare and Food Bureau, 2004). Although debate on the findings
waned with the recent departure of the previous Secretary of Health, Welfare and
Food, the groups basic assumptions and simulation model deserve closer scrutiny,
with alternative modelling of the new data collected in the 2002 Thematic
Household Survey (Health, Welfare and Food Bureau, 2004).60 The model
findings are affected by the assumption that the higher utilisation rates of people
aged 65 and above will occur in the public sector (particularly the age group of
75 and above where the current use rates are 80% higher than in the age group
of 1524 years61). Any new models should assess how such rates can be reduced
by alternative care outside the hospital walls. In addition, the model assumptions
about the burden of chronic illness assume no changes in disability and health
care use, and such assumptions justify alternative paradigms.
Adjustments to the Current Formula for Population-Based Funding
It seems likely that the government will need to consider two types of action fairly
soon. First, it must engage the Hong Kong population in a public debate62 about
the rising costs of health care, the ongoing ageing of the population, the inability
of tax revenue and government in particular to meet rising public demand, and
the need to create new sources of funding while raising the possibility that the
rationing of some type of care is a consequence. Second, the population-based
funding formula needs to be adjusted to recognise the inflationary effects of the
introduction of new medical technology. The current formula is driven by
population growth with adjustments for ageing, but ageing is not the major driver
of total health expenditure, and technological intensity should be included in
the formula. It is unrealistic to argue that the government health sector is not
facing a budget deficit, but it is equally unrealistic to ignore the fact that the
current population-based formula is producing the deficit. A more realistic
formula, including allowances for the expected effect of medical technology, is
now justified.
CHAPTER
18
The Origins of Hong Kongs Domestic Health Accounts

Ravindra P. Rannan-Eliya
Ravindra P Rannan-Eliya, an analyst of health systems in the Asia-Pacific

region and a national health accountant, compiled Hong Kongs first
set of domestic health accounts as part of the Harvard consultancy. In
this chapter, he reviews the experiences of his team when it was charged
with developing a conceptual framework for Hong Kong even before
the OECD or the World Bank/World Health Organisation released
their first set of guidelines, thereby creating a world first for Hong Kong.
He then details the results of the 1989/90 to 1996/97 fiscal years, and
highlights the discrepancies that have been revealed in previous
knowledge of Hong Kongs health spending. He shares his international
outlook on how systematic health accounting by a credible, neutral
third party with strong institutional memory can enhance and inform
policy decision-making for government and other health agencies. The
chapter concludes with Rannan-Eliyas evaluation of the challenges that
Hong Kong faces as it recently released its second set and started work
on the third set of domestic health accounts. Routinisation,
institutionalisation, improved coverage, the estimation of private
expenditure and transparent reporting are significant hurdles that the
domestic health account team must overcome in the future.
Background
Health accounts are a statistical representation of health expenditure flow in a
country or territory that are comprehensive in the expenditure that they count,
which includes both public and private sector expenditure. They represent the
health sector counterpart to the national income and product accounts, which
are the standard statistical framework for measuring and reporting overall
economic activity in a country, and from which such macroeconomic aggregates

as gross domestic product, national savings and private consumption are derived.
In a similar manner, health accounts report aggregates such as total national
health expenditure, their breakdown by source and use, and trends over time.
However, in contrast to the national income accounts, health accounts are a
relative newcomer in terms of production, standardisation and use by policy
makers, not only in Hong Kong but elsewhere in the world. This is partly a
reflection of the entrenched attitudes that exist in many countries, in which
attention is focused only on the public sector, but also on the time lag that is
associated with the adoption and development of any new technical methodology.
Suitably constructed health accounts can provide a wealth of information for
policy development and the monitoring of policy interventions. In addition to
simply reporting the total levels of spending and their sources, health accounts
that are produced on a regular basis enable the tracking of trends in the financing
of health services and the understanding of how changes in financing have
affected health care markets. Such trend data can be utilised to build forecasting
models to project future health expenditure or resource requirements. The
disaggregated data that is contained in most health accounts can be extended to
obtain more detailed sub-analyses. Examples include looking at how a specific
service category or disease condition is funded and how much it costs, or the
examination of the distribution of expenditure by population sub-group, such as
income category or age group. When available in an internationally comparable
format, health accounts can permit a comparison of both the level and the
composition of expenditure across countries.
Although it would probably be accepted in Hong Kong today that a detailed
understanding and knowledge of all of the health expenditure flow in both the
public and private sectors is a necessary input into the formulation of health policy,
this has only recently become the case. As elsewhere, official concerns in the area
of health financing have historically focused on the level of government spending
and the allocation of the government budget. This was in keeping with the
governments traditional laissez-faire policy stance, which kept the private sector
at arms length. Before the 1990s, reliable information on health spending that
was available to Hong Kong policy makers was restricted to the governments own
data on its annual expenditure, which was available publicly through the annual
budgetary estimates (Government of the Hong Kong Special Administrative
Region, various years). No statistics were routinely compiled for private
expenditure. The Census and Statistics Department did publish an annual
estimate of private expenditure on health in its annual estimates of national
income (Census and Statistics Department, 1997), but that was more of a
projection than a figure based on actual data.
The Origins of Hong Kongs Domestic Health Accounts 421
Hong Kongs First Set of Domestic Health Accounts

The development of Hong Kongs Domestic Health Accounts system 1 was an
outcome of the health system review that the Hong Kong government
commissioned from Harvard University in 1997. This marked the shift from a
purely public sector policy focus to one in which the whole health system was
seen as being the object of policy. The Harvard Teams mandate was to examine
both the financing and structural organisation of the health care services, and to
undertake this, detailed and internationally comparable information on health
spending was deemed to be necessary. Yet in late 1997, internationally comparable
estimates of health expenditure in Hong Kong did not exist. It was not possible
to say whether expenditure in Hong Kong was high or low by international
standards, whether it was growing faster or more slowly than average, or what the
likely future trend in health care costs was likely to be, which remain important
questions today. Accordingly, on the advice of the Harvard team, the Health and
Welfare Bureau determined that Hong Kong would establish a system of health
expenditure estimates that met international standards. The task of building these
estimates was entrusted to a team at the Institute of Policy Studies in Sri Lanka.
Development of the Domestic Health Account Framework

As it transpired, the objective of international comparability was not
straightforward. Although numerous countries produced annual estimates of their
national health expenditure, this practice was not universal, even among the
advanced economies of the Organisation of Economic Cooperation and
Development (OECD). Countries that produced health expenditure estimates or
accounts did so using national standards, which were based on local traditions,
health system characteristics, regulations and needs. There were differences in
what was counted and reported, definitions, classifications and estimation
methods. There was no international standard, and international comparability
remained a largely elusive goal.
The closest to a comparable set of national health expenditure estimates was
the OECD health statistics database, which was initiated in 1982 and was published
annually as OECD Health Data (OECD, 2003). This was compiled by staff of the
OECD secretariat in Paris from the annual submissions of OECD member states.
Although OECD staff would make considerable modifications to individual
national statistics to ensure greater comparability, the statistics suffered from
problems of comparability between countries, as well as comparability over time
when countries changed the way that they measured health spending (van
Mosseveld, 2003). Recognising these difficulties, the OECD embarked in 1997
on a process to develop a statistical standard for the uniform reporting of health
accounts in OECD countries. This culminated in 2000 with the publication of A
System of Health Accounts (OECD, 2000). Although this was still ongoing in 199798, Hong Kong benefited, as the OECD secretariat shared drafts of its prototype
standard, enabling these to be a significant input into the development of the
Domestic Health Accounts.
The development of Hong Kongs putative Domestic Health Accounts was
driven by a review of best practice as represented by the United Kingdom, the
United States, Canada and Japan, which were determined by the Bureau, and by
the ideas that emerged from the OECD process (OECD, 1998). This review was
then used to develop a framework and a set of classifications and definitions that
were appropriate to Hong Kongs own health care system and the stated need of
international comparability (Institute of Policy Studies, 1998).
The Domestic Health Account framework that emerged was essentially an
adaptation of the 1998 OECD draft proposals, with selective modifications where
it was thought that elements in the OECD draft were likely to be revised by final
publication. An important consequence of this approach was that the 1998 Hong
Kong Domestic Health Account system, although it did not correspond exactly
to any other national system, was largely consistent in its major features and many
of its details with the OECD standard that was later published in 2000. Hong
Kongs Domestic Health Accounts can be reasonably described as the first health
account system to be based on the OECD System of Health Accounts, and
appeared three years before the first such estimates were compiled in any OECD
country.
Domestic Health Account Framework

The provenance of the Domestic Health Account framework in the OECD System
of Health Accounts resulted in the incorporation of several features that were, at
the time, relatively innovative. They were the systematic categorisation of all health
expenditure according to sources, functions and providers; the systematic
separation and counting of in-patient, out-patient and residential care
expenditure; and the disaggregation of health spending into expenditure on
personal medical care and expenditure on collective health services,
administration and investment.
For each of these three major dimensions, a classification system was defined,
as is illustrated in Table 1. Although the OECD System of Health Accounts 2000
classification systems are somewhat different to those that were used in the 1998
Domestic Health Accounts, their similar conceptual basis meant that when the
Bureau moved to revise the Domestic Health Account system to achieve full
compatibility with the OECD System of Health Accounts in 2003, the required
modifications were minimal.
Estimating Hong Kongs Health Expenditure

The data collection strategy for the compilation of the first estimates was mapped
out by the Institute of Policy Studies team after extensive consultation with Hong
Kong government agencies and local experts. Committees were established to aid
this consultation process, and they provided both a mechanism to consult others
on potential data sources, and a means of obtaining a consensus about the
methods to be used. This consensus building was important in protecting the
eventual estimates from perceptions of bias, because it was recognised that in many
instances arbitrary or subjective judgments were required to produce much of
the detail in the estimates. Representatives of the private sector participated in
several of these groups, and this input was particularly important for medical
insurance and pharmaceutical expenditure. The emphasis was placed on using
readily available data, which was likely to be available in future on a routine basis.
The estimates of government expenditure were largely derived from the data
that was available from the governments annual expenditure estimates
(Government of the Hong Kong Special Administrative Region, various years),
which was supplemented by additional information from the Finance Bureau and
the responsible officers of the relevant spending departments and agencies. The
profile of government health expenditure that was built-up in this way differs in
several key respects from the budgetary estimates that are annually published by
the government. First, the Domestic Health Account definition of health
spending, which in turn was based on the OECD System of Health Accounts concept,
was more comprehensive, in that it included expenditure that was usually reported
by the government as falling within the area of health policy. Examples of such
expenditure include the expenditure on ambulance services by the Fire Services
Department and the expenditure by central administrative departments in
providing services to the Department of Health and the Hospital Authority, such
as the technical services that are provided by the Architectural Services
Department. Second, the decision to adopt the OECD approach entailed
considerable work to disaggregate expenditure in particular government
programmes by functional area, which in many cases was the first occasion that
this had been attempted. Third, early on in the process, the Hospital Authority
expressed concerns that a comparison of expenditure trends before and after its
establishment would be potentially misleading, such as when hospital staff lost
their implicit civil service benefits upon transferral to the Hospital Authority, and
received a package of benefits that was funded directly by the Authority. The
implicit staff benefits of civil servants were not directly funded, and so did not
appear in the health expenditure of the government, yet when transferred to the
Hospital Authority, they became explicit. For example, pensions for hospital staff
were unfunded under the old regime, and thus resulted in no expenditure in
the current year, but under the Hospital Authority, all staff were beneficiaries of
a Hospital Authority funded pension plan, which was funded by outlays in the

Table 1
Outline of the Classification Systems Used in the Domestic Health Accounts
Sources of funding
General government
Social security funds
Private
Employer-provided
group medical
benefits
Private insurance
Out of pocket
expenditure
Non-profit institutions
Corporations
Rest of the world
Functional uses of spending
Providers
Personal health care
General hospitals
In-patient hospital services

Acute care hospital
services
Psychiatric care hospital
services
Day patient hospital
services
Public general hospitals

Private general hospitals
Ambulatory services
Primary ambulatory
services
Dental services
Specialised ambulatory
services
Other ambulatory
services
Home care
health and substance abuse)
Mental health and substance

abuse hospitals
Speciality (other than mental
hospitals
Nursing and residential care
facilities
Offices of medical
practitioners
Western
Chinese
Rehabilitative and extended

care
Long-term care
Offices of dentists
Allied and other health care
professionals
Ancillary services to health

care
Laboratory services
Diagnostic imaging services
Other out-patient facilities

Laboratories and diagnostic
imaging facilities
Patient transport
All other ancillary services
Providers of home health care

services
Medical goods outside the

patient care setting
Other providers of
Pharmaceuticals
ambulatory health care
Other medical supplies and

consumables
Therapeutic appliances and
other medical durables
Ambulance services
Blood and organ banks
Providers of all other
ambulatory health care
services

Table 1 (continued)
Sources of funding
Functional uses of spending
Providers
Public health
Retail sales and other
Maternal and child health
providers of medical goods
Family planning and

counselling
Pharmacies
Other retail outlets
School health services

Prevention of
communicable diseases
Prevention of noncommunicable diseases
Occupational health care
All other miscellaneous
public health services
Provision and administration

of public health programmes
Other industries (rest of the
economy)
Rest of the world
Health programme
administration and health
insurance
Investment in medical
facilities
Note:
The outline refers to the revised framework used in Doemestic Health Accounts from
2003
current year. To permit valid comparisons, it was decided to impute the unfunded
cost of civil servant benefits and add these to the definition of what constituted
current year health expenditure. The end result was that overall government
expenditure on health as estimated in the Domestic Health Accounts was modestly
higher than the level that had been previously published by the government.
The estimates of private spending on health entailed a different strategy. As
a first step, private health spending was decomposed into its constituent elements
(spending at private practitioner clinics, private hospital revenues, pharmacy sales,
retail sales of traditional Chinese medicine products, etc.) and each of these was
tackled separately. Whenever possible, multiple estimates were then produced for
each element using different independent data sources to ensure that all of the
estimates could be cross checked. The construction of estimates for expenditure
at private hospitals, at pharmacies and by private insurers was relatively
straightforward, and relied largely on data that was collected or supplied by the
respective industry. The estimation of expenditure at private clinics was much
more problematic. Simply asking the relevant actors for details of their spending
or their revenue was not a viable approach, as it was expected that they would be
reluctant to report the truth. The method that was eventually adopted was to
separately estimate the volume of patient visits to these clinics and the average
price paid. To do so, household survey data that were collected by the Census
and Statistics Department was utilised, but care was taken to adjust the data for
the under-reporting of health care visits that is common in such data.
Domestic Health Account Estimates of Hong Kongs Health

Spending, 19901997
This first phase of Domestic Health Account compilation eventually produced
estimates of annual health expenditure for the fiscal years 1989/90 to 1996/97
(Institute of Policy Studies, 1999). The chosen period was intended to be long
enough to provide the Harvard team with sufficient time series data to develop
an expenditure forecasting model, and to cover the important period from before
and after the establishment of the Hospital Authority.2
The estimates revealed that total domestic health expenditure had gradually
risen from 3.7% to 4.6% of GDP during the period covered (Table 2), and that
this increase was driven by an increase in public expenditure levels from 48% to
54% of total expenditure (Table 3).3
Table 2
Total Domestic Health Expenditure and GDP at Current Market Prices, 1989/901996/97
Gross domestic product
Financial year
GDP
(HK$ million)
1989/90
1990/91
1991/92
1992/93
1993/94
1994/95
1995/96
1996/97
$538,533
$604,040
$696,218
$808,867
$925,819
$1,027,450
$1,105,948
$1,226,026
Annual
increase (%)
12.2%
15.3%
16.2%
14.5%
11.0%
7.6%
10.9%
Total health expenditure
Health
expenditure
(HK$ million)
$20,058
$24,383
$28,640
$32,865
$37,810
$43,424
$49,529
$56,237
Source: Table 1.3 in Institute of Policy Studies (1999)
Annual
Health as a
increase (%) proportion
of GDP
21.6%
17.5%
14.8%
15.0%
14.8%
14.1%
13.5%
3.7%
4.0%
4.1%
4.1%
4.1%
4.2%
4.5%
4.6%

Table 3
Total Domestic Health Expenditure (HK$ million), Public and
Private Shares and Per Capita Amounts, 1990/911996/97
Fiscal year
1990/91 1991/92 1992/93 1993/94 1994/95 1995/96 1996/97

Total domestic
health expenditure
24,383
28,640
32,865
37,810
43,424
49,529
56,237
Public expenditure
11,772
13,968
16,045
19,146
22,186
25,824
30,218
Private expenditure
12,611
14,672
16,820
18,664
21,238
23,705
26,019
Public share of total
48%
49%
49%
51%
51%
52%
54%
Total domestic health

expenditure as a
percentage of GDP
4.0%
4.1%
4.1%
4.1%
4.2%
4.5%
4.6%
Total domestic health 4,274

expenditure per capita
4,979
5,666
6,407
7,195
8,045
8,911
Total domestic health 4,178

expenditure per capita
(constant 1990 HK$)
4,452
4,631
4,845
5,144
5,571
5,847
Source: Table B in Institute of Policy Studies (1999)
The Domestic Health Account estimates illustrate the utility of internationally

comparable data. They reveal a pattern in Hong Kong health care expenditure
that differs substantially from the pattern in the comparable economies of the
OECD. Computed as a share of GDP, total health expenditure in Hong Kong is
substantially less than in the OECD, where national health expenditure is typically
between 7% and 14% of GDP. This low level of expenditure is accounted for
mostly by a much lower level of public expenditure, as private expenditure in
most OECD countries lies within the range of 1% to 3% of GDP, which is no
different to that of Hong Kong. At the same time, total health expenditure was
rising during the 1990s, driven by an increasing share from public sources. The
shift to an increased public share in financing is consistent with the expectation
that Hong Kongs health system should converge with those OECD economies,
in which public financing generally represents 75% to 95% of total expenditure.
At the same time, the overall increase in spending was, in fact, substantially less
than was experienced by most of the OECD economies during the same period,
which suggests that in the 1990s the Hong Kong system managed to constrain
overall cost increases better than most OECD nations.
Composition of Hong Kongs Health Expenditure

As was intended by the framework adopted for the Domestic Health Accounts,
the estimates of health spending went considerably beyond the accounting of the
overall levels of public and private spending (54% public and 46% private in
1997). By source, 53% of expenditure in 1997 was funded from the governments
revenue budget, which represented an increase from the level of 49% at the start
of the decade. During that period, there was a decline in household out of pocket
expenditure from 42% to 39%, and a smaller decline in the expenditure share
of employers from 8 to 7%. Funding from non-profit agencies remained at less
than 1% of total expenditure throughout the period. This long-term shift from
out of pocket expenditure to public financing parallels the historical trend in
OECD nations.
In addition to the disaggregation of spending by source, health expenditure
was also broken down by function and provider, which revealed a pattern of
expenditure that was not dissimilar to that of many OECD countries. The
proportion of spending that was accounted for by personal health services was
76% to79%, half of which was incurred at hospitals and half at private clinics.
Overall, expenditure on administration (including the administration of private
health insurance) was low by international standards, at 2% of the total, and
capital expenditure averaged between 5% and 10% of total spending.
When the functional breakdown of spending is examined by source, a picture
of duality emerges. As in the OECD generally, the predominant source of funding
for hospital services was public source funding (75% in Hong Kong). At the same
time, unlike in most OECD economies, ambulatory care services in Hong Kong
were mostly privately funded (75%), as they were provided for the most part by
private medical practitioner clinics.
Discrepancies Revealed in Previous Knowledge of Hong Kongs

Health Spending
Although the Domestic Health Account estimates generated new information on
health spending in Hong Kong, they also revealed weaknesses in the conventional
understanding of the pattern of spending. The two most notable failures related
to the trend in private financing, and to the effect of the Hospital Authoritys
establishment on the governments health expenditure.
Before the publication of the Domestic Health Accounts, it had generally
been assumed, at least by policy makers,4 that private expenditure on health as a
share of GDP was increasing in Hong Kong. The source of this perception was
the estimates of private medical expenditure that were published annually in the
national income and product accounts of the Census and Statistics Department.
The Domestic Health Account estimates put private spending at 2.0% to 2.1% of
GDP, in contrast to the income accounts estimate of private spending, which rose
from 2.0% to 2.9% of GDP between 1989/90 and 1996/97. This served to illustrate
the value of the Domestic Health Account exercise, which involved a far more
intensive analysis of a wider range of primary data sources than was possible for
the national income accounts.5
The second area in which a different picture would emerge was the trend in
Hospital Authority spending. From the governments perspective, the
establishment of the Hospital Authority had not led to a slow-down in the
escalation of public expenditure as had originally been hoped for, but an increase.
Part of the response of the Hospital Authority to this criticism had been to argue
that much of the increase was not real, and that it merely reflected a process by
which expenditure that had previously been hidden or implicit in the old system
had been made explicit by transfer to the Hospital Authoritys budget. The
Domestic Health Account estimates, which attempted to capture all of this implicit
expenditure by government, did provide some support for the contention that
the cost increase was merely an artefact. Yet, it also showed that a substantial part
of the increases in budgetary expenditure involved a real increase in Hospital
Authority spending.
Equity in Health Spending

The Domestic Health Account estimates proved that their value goes beyond a
simple understanding of the actual pattern and level of spending. They supported
two other related analyses of equity in health spending and a projection of future
health care costs. The projection exercise involved the development of an actuarial
cost model to forecast future health expenditure, in which a key data input was
the historical trend in expenditure as estimated in the Domestic Health Accounts.
This is discussed in more detail in Chapter 20 by Yip and Hsiao.
The analysis of equity in health spending involved a classical benefit-incidence
analysis of health care spending with the added feature that the estimates were
anchored to the Domestic Health Accounts. The traditional approach of
economists who employ benefit-incidence analysis has been to focus only on public
expenditure, and if examining private household expenditure at all, to take as
given the estimates of spending that are reported in household surveys. In the
Domestic Health Account exercise, the estimates of public and private
expenditure on in-patient and out-patient medical services were derived directly
from the Domestic Health Accounts, and household survey data was used to
determine the distribution of expenditure across income quintiles.6
Two sets of distributional estimates were prepared, one for 1989/90 (Table
4) and one for 1996/97 (Table 5). These illustrate a significant positive feature
of Hong Kongs health system: public expenditure is well targeted towards the
lower income groups. Public spending accounts for more than 80% of total health

Table 4
Distribution of Health Expenditure by Source (Percentage), 1989/90
Per capita
Government subsidy
Household expenditure
TOTAL
income
quintiles
1st
2nd
3rd
4th
5th
Total
Hospital
IP
Hospital
OP
DH OP
Private
IP
Private
OP
Government
user fee
68%
59%
57%
42%
40%
53%
8%
6%
3%
5%
3%
5%
10%
7%
7%
5%
3%
6%
2%
3%
4%
7%
10%
5%
11%
25%
28%
40%
44%
30%
1%
1%
1%
1%
1%
1%
100%
100%
100%
100%
100%
100%
IP = in-patient
OP = out-patient
DH = Department of Health
Source:Table 4.7 in Institute of Policy Studies (1999).
Table 5
Distribution of Health Expenditure by Source (Percentage), 1996/97
Quintiles
Government subsidy
Hospital Hospital
IP
OP
Bottom
2nd
3rd
4th
Top
Total
63%
51%
50%
40%
27%
44%
14%
12%
10%
9%
4%
9%
DH
OP
Private
IP
Private
OP
7%
6%
4%
3%
2%
4%
6%
6%
8%
9%
14%
9%
8%
20%
20%
32%
32%
24%
TOTAL
Medical
Chinese Government
supplies medicine
user
and
fees
therapeutic
equipment
0%
0%
1%
1%
8%
3%
1%
3%
6%
5%
9%
5%
1%
2%
2%
2%
4%
2%
100%
100%
100%
100%
100%
100%
IP = in-patient
OP = out-patient
Source: Table 4.8 in Institute of Policy Studies (1999).
care expenditure in the poorest quintile, compared with only 33% in the richest
quintile. Importantly, this targeting of subsidy expenditure actually improved
during the 1990s. At the same time, it should be noted that overall health
expenditure was significantly higher in the richest quintile, because of the
substantial private expenditure on in-patient care services (Table 6). Public inpatient expenditure was relatively equally distributed across all income quintiles,
which reflects that public hospitals are the predominant place of hospitalisation
for most Hong Kong people, and that government expenditure on out-patient
services was more concentrated on the poorer quintiles, as richer individuals
generally opted for private clinics.
Table 6
Distribution of Health Expenditure by Source, 1996/97 (HK$ million)
Quintiles
Bottom
2nd
3rd
4th
Top
Total
Government subsidy
Hospital Hospital
IP
OP
DH
OP
Private
IP
Private
OP
4,739
3,534
3,951
3,750
3,143
19,118
550
421
283
276
216
1,746
483
404
607
806
1,665
3,965
572
1,411
1,578
2,956
3,826
10,344
1,051
818
796
886
451
4,002
TOTAL
Medical
Chinese Government
supplies medicine
user
and
fees
therapeutic
equipment
11
31
60
63
945
1,110
64
190
495
431
1,093
2,273
99
122
120
183
461
985
7,533
7,271
7,900
9,447
11,391
43,542
IP = in-patient
OP = out-patient
Source: Table 4.6 in Institute of Policy Studies (1999).
Subsequent Developments
The 19971998 Domestic Health Accounts exercise proved its value not only in
informing the Harvard Consultancy Report exercise, but also in providing Hong
Kong policy makers with a more accurate understanding of their own system.
Despite the public and internal controversy that the Harvard report generated,
there appears to have been little, if any, that was associated with the Domestic
Health Accounts exercise. To that extent, the first effort was successful in achieving
credibility among all of the key stakeholders and the public,7 which is an important
asset for any new national statistical system that is designed to illuminate matters
with direct relevance to policy. It should be noted that the first Domestic Health
Accounts report was careful to avoid taking positions on specific policy issues for
this very reason. The first report was also successful in demonstrating the feasibility
of producing annual estimates of health expenditure using readily available data
and at low cost.
However, although Hong Kong was delivered a health accounts system in 1999
that was three to four years ahead of any system in the OECD, the Bureau did
not update the system until 2003. Other than administrative concerns with the
identification of permanent budgetary resources and the resolution of the issue
of whether the Domestic Health Accounts should be updated annually or less
frequently, a key issue was the location of a putative Domestic Health Accounts
unit. The Bureau lacked a technical cadre and the ability to maintain staff in
position for long periods, both of which are critical requirements for the
maintenance of a permanent statistical system. The other alternatives to the
Bureau were the Census and Statistics Department, which had the requisite
statistical expertise but lacked the preferred interest and expertise in the health
system, the Department of Health and the Hospital Authority. The latter two
clearly possessed the necessary interest and could mobilise the required capacity,
but they presented a different problem in that their Domestic Health Account
estimates might suffer from the perception of a lack of impartiality. In the end,
the Bureaus Research Office, which had been established in the wake of the
Harvard Report, contracted out the Domestic Health Accounts compilation to a
group at the University of Hong Kong. This location has the advantages of greater
perceived institutional neutrality, and the ability to develop an institutional
memory of the technical process.
Future Challenges for Hong Kongs Domestic Health Accounts

System
At the time of writing, work is underway to revise and update, for the second
time, the Domestic Health Account estimates that were produced in 1997-1998.
Two sets of challenges exist for the next phase of Domestic Health Accounts
development in Hong Kong: technical challenges and institutional challenges.
The technical challenges will result from the revision of the Hong Kong
Domestic Health Account framework to ensure its compatibility with the latest
international developments, and in particular the 2000 release of the OECD System
of Health Accounts. The OECD System of Health Accounts is now being pilot-tested
in more than 22 OECD countries, but it is anticipated that it will be eventually
mandated in some revised form for annual reporting by OECD member states
to the OECD secretariat. The System of Health Accounts framework has also been
adopted widely in the Asia-Pacific region by many non-OECD economies,
including China, Malaysia, Taiwan, Sri Lanka, Samoa and Mongolia, and
represents the emerging global standard that is endorsed both by the WHO and
the World Bank (World Health Organisation, 2003). Although the basic structure
of the Domestic Health Accounts framework is comparable to that of the OECD
System of Health Accounts 2000 standard, there are some minor differences. To a
large extent, these can be accommodated by the revision of the classification
systems of the functions and the providers to support direct mapping between
the Hong Kong categories and those in the classifications of the System of Health
Accounts.
The modifications to the Domestic Health Accounts classifications in turn
dictate that new data sources and methods will have to be developed. For example,
in the first Domestic Health Account estimates, no attempt was made to
distinguish between spending on medical laboratory services and spending on
diagnostic services, but this is now a requirement for OECD System of Health
Accounts compatibility. However, such problems are mostly minor, and should not
prove insurmountable. In addition to revising the Domestic Health Account
framework for a new set of estimates to cover the period since 1998, the University
of Hong Kong team is revising the earlier estimates to bring them into line with
the revised framework. This should yield a time series that covers the period from
1989 to 2004, which will have other benefits. Most important of these is that it
will permit analysts to develop more sophisticated and reliable models to forecast
future trends and to model the effects of potential policy changes.
The institutional challenges concern the arrangements for ensuring that the
Domestic Health Accounts are regularly updated, and that the estimates produced
are used in practice and considered useful by policy makers and stakeholders. At
the current time, the basics of such arrangements appear to be in place, and thus
the potential for Hong Kong to produce annual updates has now been realised.
The new home of the Domestic Health Accounts compilation in the University
of Hong Kong is technically appropriate, and avoids potential institutional
concerns that might have arisen if it had been based in one of the key health
sector agencies. The Bureau has a research office that is in a position to mandate
and commission the annual updates, and, more importantly, to coordinate the
input and feedback from relevant government and private agencies that have an
interest in the matter.
Health Financing in Hong Kong: The Current Status 435
CHAPTER
19
Health Financing in Hong Kong: The Current Status

Raymond Yeung and Chan Wai-Sum
Raymond Yeung, an economist, and Chan Wai-Sum, an actuary, both

formerly at the University of Hong Kong, offer an overview of Hong
Kongs health financing system and discuss the merits and disadvantages
of the current strategies in meeting the common policy objectives of
equity, efficiency and cost containment. As with the Harvard Report and
the governments own projections, which were made implicit in Lifelong
Investment in Health, they concur that the way to achieve the long-term
sustainability of Hong Kongs general tax-based resource mobilisation
is questionable at best, even in the absence of any unforeseen
catastrophic drop in general revenue and further cyclical or structural
deterioration in fiscal health. They echo the late Nick Prescotts call
for the current young to pre-fund the future old within an
overlapping inter-generational, family-based framework. The challenge,
of course, remains in the actual design and the detailed
implementation, where issues such as economic dead-weight loss from
the long-term sequestration of large sums, the disbursement of
accumulated funds and the role of risk pooling must be properly
considered and resolved.
Introduction
Health financing has been on the political agenda around the world for more
than a century (Starr 1982). As health systems worldwide grow both in their
capacity to improve human well-being and in their cost, governments must
increasingly pay attention to the financial aspects of these systems. Recently, health
financing has moved to the forefront of Hong Kongs policy agenda (Hong Kong
Special Administrative Region (HKSAR) Government, 2000; Hsiao, Yip et al.,
1999), as it did in the 1980s and 1990s (Scott, 1985; Hay, 1992). As with many
post-colonial economies, Hong Kong has established a dual medical economy in
which the government has been significantly involved in both the funding and
provision of health services mainly through tax financing, whereas the private
sector operates in a loosely organised manner as individual clinics that dominate
the ambulatory care sector (Gauld, 1998).
From an academic perspective, one does not have to resort to moral
principles or arguments about the welfare state to justify the governments
involvement in health (Preker, 2001). The conventional belief of most economists
in such ideas as free market competition cannot apply to the efficient provision
of health services (Newhouse, 2002). Health care is a very different commodity,
and the differences between health care and other goods were first articulated
in Kenneth Arrows seminal article on moral hazard (Arrow, 1963). Simply put,
the problems that are associated with information asymmetry between the supply
and demand sides have long been recognised as being the major justification of
the visible hand in health financing (Donaldson and Gerard, 1993).
However, it is the heavy involvement of the government that has triggered
the recent health financing debate in Hong Kong. Although the recent economic
downturn and consequent reduction in fiscal revenue has prompted health care
providers to find ways to balance their books in the short term, the presence of
longer term challenges, such as ageing, advancement in medical technologies and
shifting epidemiological patterns, all question the long-term sustainability of the
current financing system. There is a pressing need to address this concern.
According to the medium term projections of the Harvard team, public health
care expenditure will take up at least one-fifth of the fiscal budget by 2016 to
meet local health care needs. However, a withdrawal of the fiscal commitment to
health care investment would imply a greater dependence on private sector care
through the current fee for service arrangement if no alternative form of financing
is found. Whether such a proposal would induce the formation of a prepaid, risksharing sector that prevents the population from being exposed to the high risk
of out of pocket payments becomes an important empirical problem that requires
a quantitative assessment.
To this end, our chapter offers a general appraisal of the current status of
health financing in Hong Kong as a basis for discussion about future reforms to
the financing system. Specific attention is paid to the extent to which various
sources of finance are deployed, and their implications for efficiency, equity and
sustainability.
Features of Hong Kongs Health Financing

Where Does the Money Come From?
Financing information is an essential input for strengthening policies to improve
health system functioning. To identify distinguishing features of the financing
systems in Hong Kong, it is instructive to compare the portfolio of funding sources
with those of other economies. Such a comparative analysis requires a common

standard. By far the most internationally recognised approach to the analysis of
the financial flow of the health sector is the National Health Accounts, which
provide a rigorous classification scheme that applies to most health systems in
the world. Within the terminology of the National Health Accounts, financing
sources are distributed through financing agents, which are intermediary
institutions that collect financial resources and use them to purchase health care
goods and services. Common financing agents that apply to most developed
countries include the government taxation system, social security systems, private
insurance, non-profit institutions and direct out of pocket expenses.
Table 1 compares the health financing system in Hong Kong with those of
the US, UK and Singapore. The data show that the Hong Kong government is
the principal financing agent. Hong Kong has a higher ratio of tax financing
(54%) than the United States (30%) and Singapore (28%). However, out of
pocket payments occupy a larger share in Hong Kong (36%) than in the UK
(11%), although both medical economies are dominated by the public sector.
Behind these numbers lie different institutional arrangements. In the UK,
both primary and secondary care are tax-funded, which makes the proportion of
Table 1
Sources of Finance for Health Expenditure in Selected Economies (%)
Tax and government revenue

Social insurance
Private insurance
Out of pocket payments
Others (e.g. charitable organisations etc)
Hong Kong
US
UK
Singapore
54%
0%
9%
36%
1%
30%
15%
34%
16%
5%
73%
10%
3%
11%
3%
28%
7%
0%
65%
0%
Note:
Data on Hong Kong are from 19961997; Data for other countries are from 1998
Sources: Hsiao, Yip et al. (1997); World Health Report 2001 Annex 5
tax-financed health care very high (73%). However, the National Health Service
of the UK has created an internal market in which primary care physicians act as
agents to purchase further services for patients. In Hong Kong, the government
also assumes the role of service provider, but the secondary care sector is directly
funded. The government deploys the revenue that is collected, and redistributes
it mainly to the operations of the Hospital Authority and the Department of
Health. In the 2001/02 financial year, taxpayers contributed almost HK$30 billion
to the Hospital Authority and HK$3 billion to the Department of Health (HKSAR
Government, 2003a). The Hospital Authority offers hospital-based secondary care
(i.e. hospitalisation and specialist out-patient services) and the Department of
Health focuses on disease prevention and regulation.
The majority of primary care needs are delivered through private medical
practitioners, which explains the higher level of out of pocket expenditure that
is found in Hong Kong than in Western countries. Although Hong Kong does
not have government-administered social insurance, local residents still do not
have the incentive to enrol in a private health insurance scheme. Government
health care services, which range from hospitalisation to specialist and general
out-patient care, are highly subsidised (over 90%). Hence, waiting times act as a
price for rationing services (Yeung et al., 2005). Out of pocket funding mainly
comprises fee for service transactions for doctors consultations by the majority
of the population that do not wish to wait.
The out of pocket component in Singapore is much larger than it is in Hong
Kong, but should be interpreted differently. These payments in Singapore operate
through mandatory saving accounts, and this can also be interpreted as an income
tax that is earmarked for health, although the accounts are nominally owned by
individuals.
Is the Government the Only Agent That Offers Financial Protection?

Public sector care offers universal coverage to all local residents in Hong Kong.
Those who are in the labour force and their spouses may be entitled to medical
benefit schemes that are offered by their employers, but this mostly occurs in
established organisations. Employees of private corporations often enjoy
subsidised care in the private sector. Civil servants or staff of the Hospital Authority
(and their family members) are entitled to complete fee waivers when they seek
care in public hospitals and clinics. In this sense, contributions from employers
are an important source of finance.
Employers offer a variety of medical benefit schemes, and a recent
government survey offers a broad picture of this financing source. The data offers
a more up to date and detailed picture of the medical benefit coverage of the
local population than is available in the National Health Accounts exercise that
was conducted in 1998. Table 2 shows that 30% of the Hong Kong population is
covered by employer-provided medical schemes, two thirds of which are offered
in the private sector. Because employer-provided schemes are mostly tied to the
seniority of staff, the coverage is regressive. More high-income earners are covered
by these schemes than low-income earners.
A further question that may be asked is exactly what these medical benefit
schemes cover. In Hong Kong, hospitalisation and out-patient visits in the public
sector by civil servants and Hospital Authority employees are free of charge. For
employees in the private sector, those who are covered can seek care from private
practitioners for all sorts of services, such as general doctor consultation (96%),
specialist consultation (55%), hospitalisation (65%) and Chinese medicine (19%).
About half of those who are covered (52%) are required to pay a co-payment,

Table 2
Covered by Medical Benefits Provided by Own or Family Members Employers
No
Monthly personal
Yes
Private sector
Government
income
Hospital
Authority
(HK$)
<5000
50009999
1000014999
1500019999
2000024999
2500029999
3000039999
>40000
Total
%
85.7
71.3
50.1
35.3
33.5
24.6
29.2
22.9
69.6
%
7.4
25.5
43.3
52.8
45.7
50.5
50.9
54.5
22.3
%
6.0
2.9
6.1
11.4
21.4
23.1
17.0
21.2
7.4
%
0.9
0.8
2.0
2.9
2.3
6.4
7.4
7.7
0.8
Source: Thematic Household Survey 2002. Census and Statistics Department
such as a fixed percentage of the consultation fee and excess fees above a capped
amount, for doctor consultations.
Personal insurance is another source of financing. As explained, personal
insurance is still unpopular in Hong Kong compared with the United States (Table
3). The majority of the population does not hold a medical insurance policy on
a personal or family basis, although the medical benefits that are offered by most
private sector employers are arranged through insurance companies. Of those
who hold a medical insurance policy (26%), 80% simply hold a medical rider
that is attached to their life policy or an accident insurance policy. In other words,
only 5% of the Hong Kong population holds pure health insurance.
Table 3
Population Currently Holding Medical Insurance Policies in Hong Kong
No medical insurance policy
Pure medical insurance policy
Medical rider attached to other insurance policy
73.3%
5.2%
21.5%
Sources: Thematic Household Survey 2002, Census and Statistics Department
The Financial Risk of Hospitalisation

Protection from major financial risk is an important goal in health policy.
Hospitalisation can represent a significant financial burden for households. In
Hong Kong, approximately 6% to 7% of the population are hospitalised every

year (Table 4). Of those hospitalised, three quarters are required to pay the highly
subsidized and thus minimal ($100 per diem) fees from their own pockets. Only
a tiny proportion of the population actually receive partial coverage from the
medical benefit schemes of employers or insurance companies (3%), because
most of those who are hospitalised are aged and retired. However, about 15% of
the hospitalised enjoy free of charge status, primarily because they are civil
servants, Comprehensive Social Security Allowance recipients or staff of the
Hospital Authority.
Table 4
Hospitalization and Payments
% of population hospitalized in the past 12 months
6.4%
Co-payment among hospitalizaed

100% paid by the patients
100% covered by insurance or medical benefit
CSSA / Civil servants / other who do not need to pay
Co-pay part of the bill
75.0%
7.5%
14.8%
3.0%
CSSA = comprehensive social security assistance

Sources: Thematic Household Survey 2002, Census and Statistics Department
The major financial risk has a typically skewed distribution (Figure 1). Perhaps
due to the relatively short average length of stay, almost 50% of the hospitalised
who need to pay are subject to a payment of less than HK$300. Notably, public
hospitals are responsible for as much as 96% of all hospitalisation bed-days in
Hong Kong. As most of the cost of hospitalisation is funded by the taxpayer (there
is a 97% subsidy rate), most residents are subject to a reasonable amount of
out of pocket expenditure when they are hospitalised.
% of population
40
30
20
10
0
<100
100299
300399
500599
1000
4999
5000
9999
10000
2999
30000+
Out of Pocket Payments (HK$)
Figure 1 Out of pocket financial risk for hospitalised patients in the past 12 months
Does the Current Financing Arrangement Achieve the Policy

Objectives?
Equity
Equity, or fairness, is another important policy objective. Equal access to services
is guaranteed in Hong Kong, and thus is not a problem. There is a widespread,
although not unanimous, agreement with the principle that the financial burden
of providing health care should be distributed fairly across the population. One
general notion of fairness is the extent to which contributions towards health care
are related to the ability to pay. More specifically, fairness in health financing can
be conceived of as proportional or progressive in terms of the relationship
between payment and the ability to pay (Wagstaff and van Doorslaer, 2001).
Whatever the precise conception of fairness, a description of the association
between health care payment and the ability to pay is of interest from a wide
variety of equity perspectives.
Although employment-based medical benefit coverage is positively associated
with seniority in corporations in Hong Kong, the tax-funded, highly subsidised
public sector care makes Hong Kongs health system very equitable. Most users
of public services need to pay only a small amount or do not need to pay at all.
The tax system detaches users from payers, and hence the link between the ability
to pay and the amount paid. In addition, the highly skewed income distribution
implies that only a small proportion of the working population are taxpayers, and
most of them do not utilise public sector services. The tax system redistributes
societal resources from this group to the sick and poor.
Efficiency
Most health care reforms in developed countries around the world are concerned
about efficiency. The National Health Service of the UK, for example, was
transformed to create an internal market with the primary intention of addressing
efficiency (Enthoven, 2002). Within the context of health financing, efficiency
refers to whether the arrangement offers sufficient incentive to players, and to
the whole community, to achieve more benefit per dollar by streamlining
procedures (technical efficiency) or through the redistribution of resources
(allocative efficiency). Thus, economic principles address the problem of how best
to produce the goods or services and also what to produce. The conventional
wisdom of public sector economics tells us that inefficiencies are common in a
typical state-funded health system, although Maynard (1994) pointed out that
there is little evidence from the National Health Service reform in the UK that
competition in health care produces improvements in resource allocation, as
liberalisation can undermine the ability to contain cost through the erosion of
single payer constraints and quality competition.
We can obtain a general impression of the overall efficiency performance of

a health system by looking at how much an economy is spending on health. In
terms of the conventional methods of measuring health system performance,
namely the infant mortality rate and life expectancy, Hong Kong led selected
OECD countries in 2000, but spent the least on health care as a percentage of
GDP. However, without a comprehensive item by item comparison of specific
health services with other countries, it is difficult to draw a definite conclusion
about the efficiency of Hong Kongs health system. In other developed countries,
economic evaluation has become an integral part of the overall assessment of
health technology (Mears et al., 1999). One should compare the cost-effectiveness
of a specific medical technology, treatment or other health intervention with a
comparable system, although this would be a demanding and resource-intensive
exercise.
Table 5
Health Spending and Helath Outcomes in Selected OECD Countries
Hong Kong
Australia
Canada
New Zealand
Sweden
United Kingdom
United States
Japan
South Korea
Health spending as
Infant mortality
% GDP in 2000
per 1000 live births
Life expectancy (years)

Male
Female
5.0
8.9
9.2
8.0
8.4
7.3
13.1
7.6
5.9
3.0
5.2
5.3
5.8
3.4
5.8
7.1
3.4
6.0
78.0
76.6
76.0
75.7
77.4
75.1
74.1
77.6
71.7
83.9
82.0
82.0
80.8
82.0
80.0
79.5
84.6
79.2
Source: OECD Health Data 2003; Hospital Authority
In principle, the government provision of health care, which is tax funded,

can exert greater supply-side control than when services are privately provided
(McGhee et al., 2001). The tax funded, public sector dominated system in Hong
Kong should be more able to contain cost than alternative arrangements, such
as demand-side management. After reviewing 20 years of reform experience in
the UK and US, Enthoven (2002) concluded that market competition in the
United States, which is generally advocated by most economists, has not led to
the supposedly more efficient performance relative to the UK.
If the government possesses better knowledge than the general public, it can
act as a purchasing agent to cope with inefficiency arising from supplier-induced
demand. Although tax financing is a prepaid arrangement that detaches the user
from the payer, potential excess demand for the initial contact, or moral hazard,
can be controlled through the proper prescription of financial co-payment (fees

and charges) or non-financial co-payment (waiting time). The Hong Kong system
has such an advantage, although finding the most efficient level of output depends
on constant tinkering by the authorities.
Pooling Risk
A related health policy goal is the ability to pool risk. For the individual, illness is
unpredictable. Ideally, the market would respond to this problem by developing
insurance mechanisms whereby enrolees could pay a premium to a risk-pooling
agency for the guarantee of some form of financial protection when using the
health care system. However, this market solution may not work. The problem of
adverse selection, in which some groups in a population with a poorer health
status have a higher tendency than the healthier to enrol in health insurance
schemes, has now become a textbook case. Social insurance is justified. Universal
coverage for all citizens is a guiding principle for health policy makers on
humanitarian grounds.
From the actuarial perspective, risk pooling is the spreading of the losses that
are incurred by the few over the entire group so that average loss is substituted
for actual loss. Risk pooling can often increase social welfare. The major social
and economic benefits of risk pooling include indemnification for loss, which
permits individuals and families to be restored to their former financial position
after a health loss occurs; the reduction of worry and fear; and loss prevention,
because risk pooling agencies, such as insurance companies or the government,
are often actively involved in health promotion and prevention programmes.
Because the payment of tax is mandatory, the tax-funded public sector
effectively acts as a risk-pooling agency in Hong Kong, and offers universal
coverage to all local residents. The tax system also provides a means-tested
mechanism to adjust the rate of the premium that is applied to individuals with
different economic statuses. As the sick are often also the poor, tax financing
probably provides the maximum financial protection for the population.
Alternative risk-pooling programmes, such as individual and group health
insurance plans, managed care plans, health savings accounts and long-term care
insurance, are currently absent or in their infancy in Hong Kong.
Is the System Sustainable?

Based on what has been discussed, the health financing system in Hong Kong
seems to be able to achieve common policy goals in health care. So why is reform
needed? The most alarming issue is the problem of ageing, which puts huge
pressure on the tax-financing system. It is projected that the proportion of those
aged 65 and over in Hong Kong will rise markedly, from 11% in 2001 to 24% in
2031 (HKSAR Government, 2003). At present, Hong Kong society is spending
$17.5 million on public sector care per annum for every 1,000 elderly people
(aged 65 and over) at present. Doubling the proportion of the aged also means
a reduction in the number of taxpayers. If the future workforce also shrinks by
half, then the average taxpayer in future generations may need to contribute four
times as much to health care as the current generation. Financing such an increase
in health spending on a pay as you go basis could turn Hong Kong into a welfare
state.
This alarming concern was pointed out in the Harvard Report (Hsiao, Yip
et al., 1999). In their projection, public health care expenditure may take up 20%
to 23% of the total government budget by 2016, which is a significant increase
from the present 14%. The Harvard projection is based on two key parameters:
a 5% annual real GDP growth rate and the historical trend of public health
expenditure between 1989 and 1996. Although the Hospital Authority challenged
these assumptions,1 they did agree with the conventional wisdom that ageing will
take a heavy toll on future generations, as the elderly population consumes about
three times as much medical services as the general population (Hospital
Authority, 1999).
Sustainability concerns societys future ability to finance health care for an
ageing population and to meet community expectations. Sustainability is therefore
a longitudinal, rather than a horizontal, issue. Introducing a social insurance
scheme may effectively expand the tax base by earmarking public health spending,
but sustainability is still dependent on whether non-users (mostly taxpayers) can
provide sufficient funds to cover all expenses on an actuarial basis. Economists
would view such a problem using an overlapping generation framework, the key
question of which would be whether societal productivity growth can match the
overall rate of ageing. Detailed studies are required to evaluate the possibility of
such an assumption. In the case of Hong Kong, the outlook is pessimistic. Another
way to address the issue would be to raise fees and charges to reduce the demand
for health care. This demand-side approach would, however, diminish the ability
to maintain equity. An appropriate health financing scheme should be able to
strive for a compromise between these multidimensional goals within an overall
health policy.
Conclusion
In this chapter, we offer an appraisal of the current health financing system in
Hong Kong. Data show that general revenue is the major source of finance for
the health system, followed by out of pocket expenditure. We argue that although
the tax-funded public health care system is able to meet common policy objectives
such as efficiency, equity and risk pooling, its sustainability is questionable, and a
new arrangement is required to maintain the quality delivery of health care in

Hong Kong.
The most obvious solution to this problem is for individuals to pre-fund this
expenditure of old age with their own savings (Feldstein and Samwick, 1997).
Although in economics the life-cycle model of rational individual behaviour
implies that individuals would save on a voluntary basis if the government did
not provide the current universal benefits for old age, in reality many individuals
do not save adequately for retirement, either because of short-sightedness
(Bernheim and Garrett, 2003) or because they explicitly decide to consume all
of their earnings during their working years and then rely on whatever meanstested public and private assistance is available after retirement, such as the
Comprehensive Social Security Allowance.
The government has recently proposed a mandatory savings scheme called
Health Protection Accounts, which may be operated in a similar manner as the
Mandatory Provident Fund. The proposed scheme will require every individual
to put approximately 1% to 2% of their earnings into a personal account to cover
future medical needs. Withdrawals from the accounts would be used either to
pay for medical and dental expenses at public sector rates in either the public or
private sectors, or to purchase health insurance plans from private insurers. The
major criticism of this proposal is that a tremendous amount of resources will be
locked up for a defined purpose, which would entail a loss of economic
efficiency.
Rather than compulsory measures, the government should consider offering
an incentive scheme, such as tax incentives, to encourage voluntary saving and
enrolment in private insurance schemes. Although the government may be able
to address the financing of public health care services as an element of the overall
fiscal finance reform through a broadening of the tax base (e.g. a sales tax), the
funding models of the government bureaux and the delivery bodies should be
reviewed to minimise the likelihood that these agencies will become selfexpanding organisations, which is a pitfall of many statutory bodies. The
government should have a detailed cost-benefit model in mind to determine the
services that should be provided by the public health care sector.
Regardless of the reform package that is proposed, designing an appropriate
way to finance health care for the Hong Kong population will probably be the
most important challenge to government finance in the coming decades. If reform
is carried out wisely, then future generations will enjoy comfortable retirement
and the advantages of improved medical technology, and the working population
will avoid the explosive growth in taxes that could otherwise occur. However, an
institutional arrangement such as the Health Protection Accounts should be
considered with great care, because a forced saving scheme could suppress the
resources that are available for other forms of consumption. The future
sustainability of such a system should also be established, and detailed and serious
assessment is thus required.
A Systematic Approach to Reforming Hong Kongs Health Financing 447
CHAPTER
20
A Systematic Approach to Reforming Hong Kongs

Health Financing: The Harvard Proposal
Winnie Yip and William Hsiao
Winnie Yip and William Hsiao, international health economists and

authors of the Harvard Report that reignited the debate on health care
reform in Hong Kong during 1999, outline their diagnosis of the
current system and their prescription for change.
Compartmentalisation, supply-side subsidy distribution, the conflicting
role of the Hospital Authority as both a purchaser and provider of
services, and the asymmetry between the public and private sectors are
all cited as system ills. For financing, Yip and Hsiao propose a social
insurance system for acute care, with long-term care being funded
through compulsory individual savings accounts. In addition, they
suggest that the levelling of the playing field between providers from
different sectors requires the disengagement of the dual role of the
Hospital Authority as both purveyor and supplier. They further consider
local reactions to their recommendations seven years on, and deliver a
negative review of the governments Lifelong Investment in Health green
paper in response to the Harvard Report. They differentiate the two
documents as being patient-centric versus provider-dominant, and warn
that changes as currently proposed will further exacerbate the problems
within the system.
Introduction
On the eve of the return of Hong Kongs sovereignty to the Chinese government,
the then Hong Kong government commissioned a team from Harvard University
to evaluate the performance of Hong Kongs health system and propose reforms.
As the title of the final report, Improving Hong Kongs Health Care System: Why and
for Whom? indicates, the reform proposals only make sense if we know the
objectives that the reform is to achieve and the problems that the reform is
intended to alleviate. The answers to these questions will differ depending on
the perspective from which the assessment is made. The Harvard study used a
patient-centred approach, and the findings were mainly based on the patient
perspective.
This chapter follows a diagnosis-treatment framework. In the second section,
we present a critical assessment of the performance of Hong Kongs health
system. We then delineate the guiding principles as deliberated upon by the
steering committee of the Harvard study. These form the foundations upon which
we designed our proposals for improving Hong Kongs health system, which we
discuss in the next section. The final section provides a brief summary of what
has happened since the Harvard Report was first published in 1999, and an
assessment of what the current governments proposal does and does not do to
address the fundamental problems of the system.
A Diagnosis of Hong Kongs Health System

Does the current health system suit the needs of the Hong Kong population and
satisfy its expectations? Is the system financially sustainable? In this section, we
provide a critical assessment and draw comparisons with global trends in health
system development.
A Compartmentalised, Hospital-Based Delivery System

Hong Kongs demographic and epidemiological profiles closely mirror those of
most advanced economies: its population is ageing and increasingly suffers from
chronic diseases. In 2003, the proportion of the population that was aged over
65 years was about 10% to 11%, which was projected to increase to 13.3% in 2016.
With increased life expectancies and a diet that is typical of affluent countries,
its population is increasingly suffering from illnesses such as diabetes, heart disease
and cancer. In addition, like other advanced economies, Hong Kong faces sociohealth problems such as mental disorders, alcoholism, sexually transmitted
diseases, violence and substance abuse. These conditions require a health system
that emphasises primary and community care and integrates prevention, outpatient, in-patient, community and other social services.
Given the health needs of the global population, the trend in health reform
has been towards integrated care systems. For example, the UK has developed
an integrated system using general practitioners as gatekeepers. General
practitioners are required to undergo vocational training under the auspices of
the Royal College of General Practitioners, and to serve as family doctors who
are responsible for the total care of their patients at the primary, secondary and
tertiary levels. The latest National Health Service Plan identifies the further
integration of community health services and between health and social services
as a top priority. Primary care trusts have been established to integrate primary
and community care services into a single organisation, and a national framework
for a partnership between the private and public sectors for elective and critical
care will be instituted.
In stark contrast, Hong Kongs health system has undergone few functional
changes since the 1960s. It remains compartmentalised and led by the public
hospital system, with little communication between the secondary and tertiary
levels, which are dominated by the public sector, and the primary and out-patient
levels, which are dominated by the private sector. The majority of private doctors
that provide out-patient services do not have family medicine training; neither
do they perform gate-keeping functions or make referrals to higher levels of care.
Most of them work as solo practitioners on a fee-for-service basis. Patients often
doctor shop, and their medical records are not transferred from one provider to
another. The lack of coordination among providers often results in duplicated
services, repeated tests, discontinuity of care and confused patients. This adversely
affects the health of patients, and unnecessarily increases health expenditure.
The current delivery system has also limited Hong Kongs capacity to cope
with major epidemics, as was highlighted during the SARS outbreak in 2003, which
affected 1,755 individuals and caused 302 deaths at a major psychological cost to
the population. Providers and officials from different government agencies all
pointed the finger at one other. At the peak of the outbreak, when both human
and facility capacities in the public sector were under great strain, there was no
effort to coordinate with the private sector to relieve the pressure. A hospital-led
system that concentrates its resources on specialty and high-technology care has
left Hong Kong unprepared for any community-level outbreak. Indeed, the
government-appointed SARS Expert Review Panel identified the poor interface
between the public and private sectors and the lack of coordination among the
different government agencies as critical weaknesses of the health system in coping
with the SARS outbreak.
Incoherent Financing
Hong Kong has an incoherent financing strategy that has created inequity and a
lack of universal medical insurance. Public funding from general government
revenue primarily funds acute and specialty care. It cannot be used to purchase
private care, and there is no universal medical insurance scheme. Meanwhile, the
private sector collects fee-for-service revenue from patients, and primarily provides
out-patient services. The two sectors are not coordinated. The government adopts
a laissez-faire policy towards the private sector, and allows physicians and hospitals
to charge exorbitant fees that are unaffordable for most of the population. There
is no fee schedule, and fees can differ variously from one provider to the next.
In the absence of any universal medical insurance scheme, patients mainly pay
out of pocket, and are left vulnerable to major financial risks, and thus equal
access to care is also compromised. The choice of provider is dictated by the ability
of the patient to pay. Those who can afford it seek treatment in the private sector
and can choose their own doctors. Those without means seek care from the
overcrowded public sector, where they face no choice of doctor and long waiting
times.
The financial sustainability of Hong Kongs health system is also highly
questionable. Hong Kong expanded its public sector during the 1980s and 1990s,
which was a time of unprecedented economic growth. Public health care
expenditure, however, grew even faster than GDP. Between 1991 and 1996, the
average annual growth rate of public health expenditure was between 16% and
18%, which was at least 6% faster than the growth rate of GDP, which grew at an
average annual rate of 10.5% during the same period. Similarly, as a percentage
of the government budget, public expenditure has increased significantly, from
11.1% in 1989/90 to 16.6% in 1997/98 (Table 1). However, GDP growth has fallen
drastically in recent years, which has caused immense financial pressure on the
public budget. Meanwhile, a slower GDP growth coupled with higher
unemployment has driven more people towards public care, which has further
exacerbated the financial pressure that is faced by the government. The private
share of out-patient services has recently been eroded from 85% to 70%. In the
long run, the ageing of the population and new expensive medical technology is
likely to put a further strain on the government budget.
Table 1
Public Health Care Expenditure as a Share of Total Public Expenditure
Year
89/90
90/91
91/92
92/93
93/94
94/95
95/96
96/97
97/8
11.1%
12.4%
12.9%
13.0%
12.3%
13.4%
13.5%
14.3%
16.6%
Source: 1998 Budget Speech (18 February 1998), Finance Bureau, Government Secretariat,
Hong Kong Annual Reports 1989 to 1997.
This incoherent financing strategy also partly explains the existence and
persistence of a compartmentalised health care system. In designing its financing
strategy, the government is concerned only with its own budget, and pays little
attention to managing the growth of private health expenditure or examining
the effect of its policies on the private sector. For example, when the Hospital
Authority improved service quality without raising user fees, it attracted more
patients from the private sector. As a result, public hospitals are overcrowded,
whereas the occupancy rates in some private hospitals have fallen to 30% to 35%.
Supplier-Dominated Decision Making

Although the global trend in health care reform amongst advanced economies
has been moving towards patient-centred decision making since the late 1980s,
Hong Kong has made no such progress. Stimulated by Alain Enthovens concept
of managed competition (Enthoven, 1988), the UK initiated patient-centred
health care in its 1989 reform of the National Health Service. Building on the
principle of money following patients, the reform separated the purchasing and
provision functions of the district health authorities, and transformed hospitals
into trusts to compete for National Health Service contracts. Fund holding has
empowered general practitioners to act as agents to purchase hospital and
specialty care for their patients. In the most recent reform, Primary Care Trusts
were formed to further strengthen the purchasing power of primary care
providers. The UK has also recognised that professional self-regulation alone
cannot assure quality and in 1997, new organisations, such as the series of National
Service Frameworks and the National Institute for Health and Clinical Excellence,
were instituted for this purpose (UK Department of Health, 2000). The National
Health Service Plan of 2000 goes further, and states the explicit objective of
designing the system centred around the patients and giving the Commission
for Healthcare Improvement and Audit a mandate to carry out independent
quality-assurance inspections throughout the National Health Service. Other
patient-centred reform efforts are also taking place around the world, such as in
New Zealand and the United States.
In contrast, the system in Hong Kong is still provider-dominated, and the
lack of responsiveness to the needs and demands of patients adversely affects
quality and efficiency. When public hospitals were reformed in 1991, there was
no separation of purchasing and provision. The Hospital Authority receives its
budget directly from the government, and is both the buyer and supplier of health
services. On the one hand, it acts as the patients agent in purchasing care from
individual public hospitals, and on the other hand it is responsible for managing
all public hospitals, for assuring that they are financially sound and for ensuring
job security for the physicians and staff. The Hospital Authoritys dual role raises
serious questions about the rights of patients and the Authoritys accountability
to patients. For example, patients have no choice of doctor in the public sector.
In Hong Kong, doctors are subject only to professional self-regulation without
any independent and external monitoring to safeguard the welfare of patients.
Discipline rests with the Medical Council, whose members are mainly graduates
of Hong Kongs two medical schools. It is often criticised for protecting fellow
practitioners, rather than upholding the complaints of patients. As a result, health
care services in Hong Kong suffer from highly variable quality. Although Hong
Kong boasts some of the best health care practitioners and facilities in the region,
there is evidence of widespread sub-standard medical practices. For example, there
is ample evidence to indicate that medical practice in Hong Kong often involves
excessive multiple prescriptions of only two or three days duration. Antibiotics
are prescribed too often and for too short a duration. Such practices have led to
the major emergence of antibiotic resistance in Hong Kong. There is also a
chronic lack of information about medical outcomes and provider performance
to guide patients. In most instances, sub-standard treatment and medical
negligence are uncovered only as a result of patient complaints, yet the complaint
process is non-transparent and difficult for patients to understand (Hsiao and
Yip, 1999).
Guiding Principles
As resources are limited, every society must make trade-offs in its health care
system when pursuing multiple goals, such as equity, efficiency, quality and cost
control. The benefits that a society is willing to give up in exchange for other
advantages will depend on its beliefs and values, and on the prevailing political
possibilities. The Harvard team worked with the steering committee to clarify the
values that underlie the health system that Hong Kong desired, and the following
guiding principle emerged:
Every resident should have access to reasonable quality and affordable
health care. The government assures this access through a system of
shared responsibility between the government and residents where
those who can afford to pay for health care should pay.
The Basic Law specifies that over time, government expenditure and revenue
should be balanced, and that a budget deficit is to be avoided whenever possible.
The budget growth should be commensurate with the growth rate of Hong Kongs
GDP. For the Harvard team to develop an analysis and strategic options for health
system reform, the Finance Bureau indicated that it would accept a working
assumption that government spending on health care would grow in line with
the overall growth in government spending. In other words, the governments
allocation of health care financing would be kept as a constant share of GDP.
The Harvard Proposal

Our diagnosis clearly points out that a number of cost, quality and efficiency
problems that are inherent in the health system of Hong Kong had their roots
in the organisation of health care delivery, and that financing alone will not solve
these problems. To serve the best interests of the population, Hong Kong needs
a community-based health system that integrates prevention, out-patient, inpatient, community and other social services. More importantly, Hong Kong needs
a system in which there is an appropriate balance of power between providers

and patients. To achieve such a system, it is necessary to pool existing public and
private funds into a single and powerful purchaser that will represent the interests
of patients, and will allow public and private providers to compete for the funds
equally by demonstrating that they will respond to the preferences of patients.
In this section, we discuss an integrative proposal that combines financing,
organisation and payment to help Hong Kong improve its health system.
Financing
The Harvard Report proposed two complementary financing strategies. The first
was a compulsory insurance scheme to pool risk across the entire population to
protect people against unexpected large medical expenses, such as hospitalisation
and specialist out-patient services for certain serious chronic diseases (Health
Security Plan), and the second was a system of individual savings accounts to be
used to purchase long-term care insurance upon retirement or disability to provide
financing for an ageing population (Long Term Care Savings Accounts
MEDISAGE).
The Health Security Plan
The Health Security Plan is a social insurance scheme that pools existing public
and private funds into a single and powerful purchaser. The benefit package is
intended to include services that are likely to incur major medical expenses, such
as in-patient hospital services and specialist out-patient services for certain chronic
diseases, for example, cancer, diabetes and stroke. Employers and employees
would jointly pay the premiums and jointly decide on the exact benefit package.
Some provision for patient cost sharing should also be incorporated to reduce
incentive to overuse. Under the plan, patients would be free to choose any
provider, regardless of whether it is public or private.
The Health Security Plan would achieve the goal of equity that the guiding
principle explicated by promoting risk pooling and providing equal insurance
coverage to every resident. Everyone would be assured of health care when they
need it, and could pay in when they are healthy and receive care when they are
ill. For those who cannot afford to pay, the government would provide full or
partial subsidies, and for those who can afford to pay, everyone would pay an equal
percentage of their income. By allowing a free choice of provider, effective choice
can be assured, because it would no longer be constrained by the ability to pay.
This proposed financing scheme would enhance the equity of health care
by targeting public resources towards those who cannot afford to pay. When fully
implemented, most of the current Hospital Authority budget for in-patient services
would be re-channelled to subsidise those who cannot afford to pay, and to fund
more primary out-patient services and community medicine for the poor and for
people with low incomes (see Figure 1). The government would pay the full
premium for those who cannot afford to pay, subsidise premiums for the elderly
and those with low incomes, and pay the cost-sharing requirement for poor and
low-income households. Employed workers would pay their premiums into this
social insurance scheme jointly with their employers. In addition, government
resources would be targeted to fund more preventive, rehabilitative and
ambulatory services for the poor and those on low incomes. In this way, public
health services, which are currently heavily subsidised and benefit both the rich
and the poor, would benefit only those who cannot afford to pay.
Status Quo
Harvard Proposal
Goverment
subsidy
$$
Goverment
subsidy
$$
Public
hospitals
Users of
public hospitals
Primary care
for lower
income
households
Pay full premiums

or deductible
premiums and copayment for the poor
and umemployed
Partial subsidy of
premiums for
elderly and/or lowincome households
Figure 1 Reallocation of government subsidy
The Health Security Plan also would remove the fundamental problems of
compartmentalisation and supplier-dominated decision making through the
separation of financing and the provision of public services. A Health Security
Fund Incorporated would be established to pool risks and to serve as the informed
purchaser of health services on behalf of the insured. This would be a quasigovernmental body that would be supervised and managed by a board with
representatives from the government, employers, employees and patients. Public
health sector providers would no longer receive funding from the government
automatically, as is currently the case, but would be paid by the Health Security
Fund when patients choose to obtain care from them according to a standard
payment rate. Likewise, if patients choose to seek care from private providers,
then the Health Security Fund would reimburse the private providers at the same
payment rate as for the public providers: that is, the money follows the patient.
The separation of purchasing from provision with the money following the
patient would lay the foundation for fair competition between the public and
private sector providers, and would improve the quality and efficiency of health
care and accountability. The money follows the patient concept means that
regardless of whether patients seek services from the public or private sector, their
care is paid for. It would also mean that patients do not have to use providers
that do not satisfy their needs. This arrangement would provide a level economic
playing field between public and private providers. Neither the public nor the
private sector would be given a financial advantage, which thus promotes fair
competition between the two sectors, and also reduces the compartmentalisation
of health care delivery. The Health Security Fund would provide accountability
to patients and the public, and serve as a check against the professional
dominance of the providers.
Long-Term Care Savings Accounts
The long-term care savings account, or MEDISAGE, was proposed to meet the
future needs of the population. Under this reform option, Hong Kong residents
would be required to contribute to an individual savings account, called a
MEDISAGE account. Contributions to this account would be invested, and the
funds from MEDISAGE could only be used to purchase an individual long-term
care insurance policy upon retireable or disability. This insurance would cover
the costs of long-term care, which would usually include a combination of nursing
home days, visiting nurse services and home-aid visits. Private companies could
offer these insurance policies. The purchase of long-term care insurance would
be mandatory at the age of 65 to reduce adverse selection and increase risk
pooling amongst the elderly, who require different levels of care to the rest of
the population. International experience indicates that contributions over the
working life of an individual at the rate of 1% of wages may be sufficient to pay
for a single-premium insurance policy for long-term care at the age of 65.
Employers and employees would jointly contribute a total of 1% of wages to the
savings accounts. If a worker dies before reaching retirement age, then the
accumulated fund in the workers MEDISAGE account would become part of her
estate.
MEDISAGE would enable the frail elderly to live at home with home care
services that are paid for by long-term care insurance benefits. It would also enable
individuals to plan for their financial needs in their old age, and would help to
meet the changing needs of Hong Kongs ageing population while simultaneously
limiting the governments liability. Government resources could then continue
to target those who are least able to pay for themselves.
Organisation
In proposing strategies for reforming the organisation of Hong Kongs health
system, the objective was to remove the compartmentalisation of health services
and to offer high quality health care and greater efficiency in treating chronic
diseases, thereby meeting the future needs of a population that shows an
increasing tendency to suffer from chronic illnesses.
The Harvard Team proposed the formulation of competing integrated health
systems. The Hospital Authority would be reorganised into 12 to 18 regional
integrated health systems that could contract private general practitioners and
specialists (or physician groups) to provide a defined benefit package that would
include preventive, primary, out-patient and hospital care. Similarly, private
hospitals and physician groups could also form integrated systems to provide the
defined benefit package. The integrated health systems could be hospital or
general practitioner-based, but providers would be responsible for monitoring the
quality of services. Unlike managed care, there would be no intermediaries to
oversee or second-guess the treatment decisions of providers; instead, providers
themselves would balance costs and quality in delivering services to meet patient
needs. In addition, with regulations and money following the patients, there would
be external checks and balances.
Payment
To moderate the supply-side tendency to oversupply high-technology diagnostic
test procedures or expensive drugs for insured patients, hospital in-patient services
should be paid for on a case by case basis, and specialist out-patient services on a
per episode or packaged basis. The payment rates would be established through
negotiations between the Health Security Fund and providers.
Payments made for a package of services or per episode of care would give
providers an incentive to provide those services efficiently. The provider would
receive a prospectively agreed upon payment for each package or case, regardless
of the actual cost of individual services within the package, or the overall cost of
the services for a particular patient. Such bundled payments would give clinics
and hospitals the incentive to be efficient, and would also be an effective policy
instrument for controlling cost. By transferring a portion of the financial risk to
the provider, the provider would become more cost conscious in its
recommendation of services for the patient.
Reflections
Seven years have lapsed since the Harvard Report was first published. A natural
question is: if we were to conduct the study again, would we arrive at the same
assessment and the same proposal as in 1999? Our answer is a definite yes. In
this section, we briefly outline the reform efforts that have been introduced since
the publication of the Harvard Report and assess their potential in addressing
the fundamental problems that are inherent in Hong Kongs health system.
Since the Harvard Report

Since the publication of the Harvard Report, Hong Kong has made attempts to
reform its health system. In terms of financing, the governments budget for health
care has been capped at approximately 16% to 17% of GDP (Table 2), user
charges for public facilities have increased and a committee has been
commissioned to examine the feasibility of health protection accounts. The health
protection account proposal would require the public to save a certain percentage
of their income in an individual savings account to be used to pay for fees for
services (which would be increased at public health care facilities).
On the delivery side, the Hospital Authority took over the general out-patient
clinics that had been previously run by the Department of Health, and efforts to
further cluster services within the Hospital Authority were introduced. On paper,
various forms of shared care programmes have been introduced. Private
providers who voluntarily choose to participate in these programmes have agreed
to adopt the same care protocol as the public sector, and in return receive patient
referrals from the public sector. However, in the absence of shared financing,
patients are generally reluctant to go to the participating private providers to seek
care, as the charges in the private sector are often several times higher than in
the public sector. Thus in practice, no shared care exists.
Table 2
Public Spending on Health between 1997 and 2003
97/98
98/99
99/00
00/01
01/02
20,831
23,032
22,852
24,173
25,729 26,238
Health spending as a share of total

government spending (%)
16.6
16.6
17.4
16.7
16.5
16.2
Allocation to the Hospital Authority

as a share of total public health care
spending (%)
89.3
89.5
89.5
89.9
89.9
89.5
Allocation to the Department of

Health as a share of total public
health care spending (%)
10.7
10.5
10.5
10.1
10.1
10.5
Governments total spending

(US$ million)
02/03
The Governments Proposal: What It Does and What It Does Not Do

The most striking difference between the Harvard proposal and the 2001
government proposal is that the former is patient-oriented and the latter is
government budget-driven. Capping the government budget and raising user fees
may seem to be a straightforward way of managing the governments health
budget, but it does not address the fundamental deficiencies of Hong Kongs
health system. Furthermore, capping the budget will lead almost inevitably to
longer waiting times, a lower quality of care and less access to public health
services. The experience of the UK is instructive here. Capping the health budget
in the UK led to exceptionally long queuing times for non-emergency surgery,
explicit rationing rules and under-investment in the renovation of facilities and
certain medical technologies. As quality in the public sector deteriorates in Hong
Kong, healthier and more affluent people will find that the services in the private
sector more attractive, and will be able to afford to purchase private health
insurance to cover private medical services. The public sector will then be left
with the less healthy, the poor and the elderly. As the experience in the United
States shows, the middle and upper classes will be reluctant to support public
health services with adequate tax dollars if they do not directly benefit from these
services.
The health protection account proposal that was proposed under Yeoh EngKiongs administration is essentially a compulsory savings scheme. Under this
proposal, individuals must contribute a certain percentage of their earnings to
an individually owned savings account for use at the age of 65 and after. However,
in contrast to MEDISAGE, funds that accumulate in the health protection
accounts will not be used for the purchase of long-term care insurance policies,
but for paying for medical services, and thus long-term care risk will not be pooled
and insured. Hong Kong will have to face this problem as its population ages. In
addition, funds in the accounts will only be used to pay at public rates, and
individuals who choose to seek care at private facilities will be left to bear the
full financial risk of private charges above the public rates. Finally, the government
intends to allow the purchase of private insurance with funds from the account
with the hope of increasing demand for private insurance.
The health protection accounts help to pave the way for future increases in
user fees at public facilities, and thus limits the governments outlay on health
care while continuing to provide the Hospital Authority with additional resources.
However, again, they will do nothing to tackle the fundamental problems of
compartmentalisation and supplier-dominated decision making in the delivery
of health care. There is no built-in mechanism to improve quality or efficiency.
Private providers will set their own charges, leaving patients vulnerable to major
financial risk. Given the large differences in public and private rates, especially
for hospitalisation, the choice of providers is, in effect, still dictated by the ability
to pay.
The health protection accounts will continue to favour public facilities by

directly providing them with a government budget and protecting them from
competition with the private sector. As has been experienced by other health
systems, such as the National Health Service, financing that favours public facilities
leads to a deterioration in quality and efficiency as a result of bureaucratic inertia,
which does not innovate or respond to the changing needs and demands of the
population. It was precisely this experience that prompted the UK to separate
the financing and provision of their health services to create incentives for
providers to respond to the preferences of patients, thus increasing accountability
and the quality and efficiency of care.
Furthermore, in contradiction to the guiding principle that underpins the
Health Protection Accounts proposal that everyone should have equitable access
to quality health care for comparable needs, the proposal is highly inequitable.
There is no risk pooling between the rich and the poor, or between the healthy
and the unhealthy. The rich will accumulate more funds in their saving accounts,
and will thus enjoy greater financial risk protection than individuals with lower
incomes. The healthy will end up having savings in their accounts, whereas the
unhealthy will deplete their savings and face the financial burden on their own.
Finally, although the government anticipates that the Health Protection
Accounts will facilitate the development of private insurance, this is unlikely. Those
who choose to purchase private insurance are those who expect their medical
spending to exceed their savings in the account. They are likely to be individuals
who are less healthy. Both theory and international experience have proven that
the private insurance industry selects against bad risks, and does not offer any
insurance policies to this group of the population. Thus, the government will be
left to bear the financial burden of the unhealthy and those who are unable to
pay.
Conclusion
In conclusion, all of the current financing changes that have been attempted or
proposed are band-aid solutions aimed at addressing the governments budgetary
concerns. This will only postpone the day of reckoning for the fundamental
deficiencies in the system. Nothing that has been proposed addresses the
objectives of improving quality and efficiency, meeting the future needs of the
population and managing the overall inflation of health expenditure. The health
system continues to be compartmentalised and hospital-based. Decision-making
continues to be dominated by providers, and the imbalance between the public
and private sector remains unaddressed. The longer Hong Kong delays dealing
with these fundamental and systemic problems, the harder it will be to address
them effectively in the future. It remains to be seen if the 2006 reform proposals
under new minister York Chow will finally address these root problems.
Health Financing and Resources: New Government Proposals 461
CHAPTER
21
Health Financing and Resources: New Government

Proposals
Looi-Looi Low and Su-Vui Lo
Looi-Looi Low, senior research scientist, and Su-Vui Lo, head of the
Research Office, at the Health, Welfare and Food Bureau, which was
established in response to the Harvard Reports recommendation for
an independent Institute for Health Policy and Economics outside the
civil service, give a detailed rebuttal of the Harvard proposal and outline
the governments vision for an improved health system based on
individual, pre-funded savings accounts and incremental macroorganisational changes to the status quo. In particular, they question
the internal market concept, taking stock of lessons learned in the
UK. More importantly, they query the economic soundness of the
vertical risk pooling that is inherent in a pure social insurance design,
and its compatibility with the underlying socio-cultural base of the local
population charges that Yip and Hsiao have not directly countered.
Whether this policy direction is maintained with the new cast of players
on the health policy and political circuit since 2004 remains to be seen.
For instance, it appears that user fees in the form of out of pocket
payments, a rather blunt economic instrument that is also highly
regressive, will play a much larger role in the present administrations
agenda to re-divert the middle class to the private sector, which was the
equilibrium in the 1980s a back to the future scenario. They
emphasise the need to avoid jeopardising the systems existing strengths
and consider that the communitys social values and aspirations are key
to the governments evidence-based and evolutionary approach to
health care reform.
Introduction
As with many developed economies, Hong Kong is reviewing options for ensuring
the sustainability of its health services in the face of population ageing and rising
community expectations. Since the 1980s, the government has commissioned

studies covering the many aspects of sustainability: resource aspects such as cost
or financing arrangements and other health care resources, range of service and
delivery models, and citizens health needs. A major reform was undertaken in
1990 after a comprehensive review of the health care system. The Hospital
Authority was established to take over the management of all public hospitals while
the Department of Health continued to carry the public health portfolio, manage
the primary care clinics and implement health policies such as the regulation of
private health services. In December 2000, following another comprehensive
review, the government released a consultation document entitled Lifelong
Investment in Health, and with public support proceeded with a series of health
care reforms.
This chapter gives an overview of the reform strategies and measures that
have been implemented in Hong Kong since the release of the 2000/01
consultation document. For a better understanding of the rationale of the
measures, the preceding review and the reform proposals that the government
has considered are briefly discussed. The overview begins with a summary of the
salient features of Hong Kongs health system.
Salient Features of Hong Kongs Health System

One of the cornerstones of the governments health policies is that no one should
be denied adequate medical treatment through lack of means. Accordingly, the
public sector provides a range of highly subsidised, universal health care services
that offer protection for citizens from the potentially high financial risks of
catastrophic or prolonged illnesses. Public health services are accessible to the
whole population, and the subsidy level is among the highest in developed
economies, at about 96% of the total cost for inpatient care in 2003. As there
are no social insurance taxes, all public finances for health services come from
government revenues.
The private health care sector, in contrast, is largely financed by out of pocket
payments and, to some extent, private insurance. The private sector plays a
complementary role in providing comprehensive health care, and offers patients
greater choice and convenience. A territory-wide survey in 2002 showed that 82%
of all hospital admissions were managed by public hospitals, and 72% of outpatient consultations were provided by private doctors.
Compared with OECD countries, Hong Kongs health expenditure is low as
a percentage of GDP, although the level rose from 4.3% in 1991/92 to 5.5% in
2001/02. Public spending constituted 56% of health expenditure in 2001/02,
which was also lower than most OECD countries. However, Hong Kongs health
indices compare favourably with those of most developed economies. The infant
mortality rate has been declining over the past two decades and reached a low of
2.3 per 1,000 live births in 2003. In the same year, life expectancy at birth was
78.6 for men and 84.3 for women. These favourable health indices reflect the
quality of the health system and its ability to provide people with the care that
they need.
Health Care Reform Proposals

In 1997, the government commissioned the School of Public Health of Harvard
University to conduct a comprehensive review of the health system. The study
identified the weaknesses of the system as variable quality of health care,
particularly in the private sector, compartmentalisation, a heavy reliance on
hospital care and questionable financial sustainability. The strengths were the
relative equitability of the system, with everyone having access to essential health
care regardless of their financial means, and that the establishment of the Hospital
Authority had brought steady improvement to aspects of quality and efficiency.
The Harvard teams proposals for addressing the weaknesses were to reorganise
the Hospital Authority into competitive regional integrated health care systems
to create an internal market in the style of the UKs National Health Service,
and to introduce a social insurance scheme in the form of a Health Security Plan
with compulsory contributions from the working population. The reform
proposals generated much in-depth discussion in the community. The government
organised over 50 seminars and meetings to collect public views, and received
over 2,200 written submissions. Although the consensus was that reform was
necessary, there was little support for the Harvard proposals and the big bang
approach.
The Health Security Plan was not popular with the public because it was
incongruent with the traditional social values of emphasis on individual and family
responsibility rather than income redistribution.1 The public generally regarded
contributions to the Health Security Plan as a new form of taxation. Moreover,
pay as you go schemes involve inter-generational subsidisation, which would have
put undue funding pressure on future generations given the rapidly ageing
population. Concerns were also raised about possible moral hazards connected
with health insurance. Nevertheless, the Harvard teams suggestion of introducing
a mandatory personal savings account for individuals to purchase long-term care
insurance upon retirement met with more public support.
In fact, the weaknesses of Hong Kongs health system are not unique. Many
countries are facing similar issues and have adopted different methods to address
the problems. The government has studied the situation overseas and has found
that an internal market, or competition for that matter, is not a panacea for health
system problems. If not managed well, it can make things worse and erode the
existing strengths of the current system.
Lessons from Internal Markets

The UK, New Zealand and Sweden all implemented similar market-oriented
health care reforms in the 1990s. A literature review of their experiences shows
that it is extremely difficult to implement a health care internal market in a riskfree manner. By most accounts, managed competition did not succeed in reducing
inefficiency and improving quality in the UKs National Health Service (Light,
1999). For example, instead of money following patients, patients followed
money and had to use providers that their health authority had contracted.
Reviews show that the internal markets in these countries have had very few
positive effects, but have raised costs and created new inefficiencies and inequities
(Light, 1998).
The lessons of New Zealands internal market experience have been described
as painful (Hornblow, 1997). Even Alain Enthoven, who proposed the idea of
an internal market within the National Health Service, has come to observe that
there is a crisis of confidence in the quality of care (Enthoven, 2000). Enthoven
writes that:
Creating a quasi-market that improves economic performance in a
social service that is prone to market failure is a very complex matter .
. . The big bang approach to health services reform, be it internal
market or primary care groups (PCGs), is a mistake. Too much is being
wagered on too little knowledge of how it would work. An evolutionary
approach would leave time for learning from experience and for
essential capabilities to develop.
Implemented Health Care Reform Measures

In view of the problems of the Harvard proposals, the government has had to
devise alternative measures to address the weaknesses and enhance the
sustainability of the health system. There are no easy solutions, and the path of
health care reform must be tread with caution to avoid jeopardising the systems
existing strengths. To ensure sustainability, which means that sufficient resources
are available over the long term to provide timely access to quality services that
address the communitys evolving health needs (Romanow, 2002), a coherent
strategy is needed for long-term systematic reengineering based on evidence.
Hence, in 2000 the government set out to implement a series of reforms to
strengthen the three pillars of the health system. The first set of reforms were to
the health service delivery system, to place emphasis on preventive care and public
health, and shift the health paradigm from hospital dominance to communityfocused service delivery. Next were improvements to the system of quality
assurance to institutionalise mechanisms to raise the standard of clinical care. The
third set of reforms included measures to improve the financial sustainability of
the system through reducing costs and enhancing productivity, revamping the
structure of public health care fees and identifying other feasible financing
options.
Reforms to the Health Care Delivery System

The Department of Healths role in providing direct health care services is being
gradually phased out, leaving it to concentrate on discharging preventive health
and public health functions. As an initial step, the responsibility for its 68 general
out-patient clinics was transferred to Hospital Authority by July 2004. This transfer
has brought about a better integration of primary care and hospital care services
in the public sector. The SARS epidemic in 2003 provided extra impetus to this
part of the reform. The Department of Healths Centre for Health Protection
was established in June 2004 to enhance the prevention and control of diseases
in Hong Kong in collaboration with major local and international stakeholders.
To refocus on primary care and facilitate community-based service delivery,
the government has invested in increasing the number of family doctors through
a six-year structured training programme in family medicine. Over 500 doctors
have enrolled in the programme since 1998. Resources have similarly been
earmarked for nurses and allied health professionals to be trained as practitioners
in primary care.
Since 2001, funding for the Hospital Authority has been provided according
to a population-based formula rather than the number of hospital beds. This
enables the Authority to deploy the health resources from inpatient to ambulatory
and community care. Two categories of client groups have particularly benefited
from this policy initiative: the elderly who are served by community-based geriatric
teams and patients with mental health problems who are served by community
psychiatric teams. The Hospital Authority has also reorganised its service delivery
to be based on geographical clusters, which makes it more responsive to the needs
of local communities.
Improvements to the System of Quality Assurance

To ensure that a consistently high standard of clinical care is provided to patients,
the government is devising a framework of quality assurance in the health system
through a combination of education and training, system support and regulatory
measures. In particular, the government is working with health care professionals
on the requirement for doctors, dentists, nurses and allied health care providers
to undertake continuing professional education to ensure that their knowledge,
practice and skills are up to date.
Voluntary programmes of continuing medical education were introduced for

doctors in 2001, and similar programmes were introduced for dentists in 2002.
For medical specialists, continuing medical education is now mandatory. Failure
to fulfil this obligation will result in the doctors name being deleted from the
specialist register of the Hong Kong Medical Council.
Measures to Improve the Financial Sustainability of the Health System

There are three strategic directions in the reforms to improve the financial
sustainability of the health system:
1. to contain costs and enhance productivity;
2. to revamp the public fee structure and better target public subsidies to those
in need; and
3. to identify other feasible health financing options, such as assessing the
feasibility of establishing a mandatory medical savings scheme of Health
Protection Accounts. (Under this scheme, individuals will put a certain
percentage of their earnings in a personal account during their working years
to assist them in paying for medical services in old age.)
Containing Cost and Enhancing Productivity
Since 1998, the Department of Health and the Hospital Authority have been
required to contain costs and increase productivity while taking care not to
compromise their core services and service quality. Measures that have been
implemented include the streamlining of organisational and administrative
structures, introducing voluntary and early retirement schemes for redundant
staff, and introducing new remuneration packages for new recruits. Both
organisations have also rationalised their services to increase efficiency and reduce
waste.
Revamping Fees and Charges
Given finite resources, there is a need to review the subsidy level for public health
care so that public funds can be channelled to assist lower income groups and to
services that carry major financial risks for patients. Hence, a consultant team
from the University of California at Berkeley was commissioned in 2001 to conduct
a comprehensive review of the fees and charges for public health care services.
Recommendations made by the consultant team aimed to minimise waste and
the unnecessary use of medical services, and ensure that vulnerable groups are
assured continuing access to affordable services while those who can afford to
pay are not unduly subsidised by public funds. The study led to the introduction
of fees for Accident and Emergency services in 2003. The fees for other public
health care services were also upwardly adjusted. To ensure that the needy and
the less well-off were not disadvantaged, the medical fee waiver system was
strengthened.
Identifying Feasible Health Care Financing Options
To study the various health financing options and examine the feasibility of the
Health Protection Accounts, a study group comprising medical doctors,
epidemiologists, actuaries, economists, statisticians and social scientists from local
universities and government agencies was formed, with external advisors from the
University of California at Berkeley. The study group carried out a series of studies,
the findings of which were released in June 2004 (Health, Welfare and Food
Bureau, 2004). Their work included a comparative analysis of the different sources
of health financing, a statistical analysis of savings behaviour in Hong Kong, the
determinants and a projection of health care utilisation, gathering the publics
views on a medical savings scheme, an actuarial illustration of the Health
Protection Accounts scheme, and analysis of the potential economic significance
of such a scheme. A research team from the London School of Economics was
also commissioned to conduct a contextual analysis of the proposed reforms to
the health financing system.
The findings show that no single combination of funding sources could meet
the needs of every economy. However, the channels for health care purchases
through taxation and social or private insurance are based on the notion of crosssectional risk pooling and subsidies, which are sensitive to the demographics and
size of the pool involved. These funding channels, in principle, do not deal with
the purchasing of future health care. To deal with the dynamic aspect of health
financing, pre-funding through savings or medical savings is a key instrument.
To this end, the proposed Health Protection Accounts can be considered as a
bridge between current resources and future spending, and could complement
financing sources that are sensitive to future demographics and risk pool size.
The research findings also demonstrate that it is feasible to introduce a medical
savings scheme in Hong Kong and that the introduction of Health Protection
Accounts to fund higher co-payments to public health care services would not
undermine the current strengths of the existing health system. Nevertheless, there
is still a need to carefully examine the role of a medical savings scheme and how
it will complement other measures, as well as the detailed features of such a
scheme.
Conclusion
Over the years, Hong Kongs health system has provided accessible, quality,
equitable and affordable health care services. In the face of population ageing
and rising community expectations, the government has implemented numerous

measures to reform the system to ensure its sustainability and address identified
weaknesses. Recognising that there are no simple solutions to complex problems,
the government has proceeded with health care reforms through an evidencebased and evolutionary approach, and in the process has exercised practical
judgment and taken into consideration the communitys social values and
aspirations. The government will continue to assess the health needs of Hong
Kong citizens and review the health system and its financing model, drawing on
the experience of other developed economies. However, it will have to take into
account its own situation, such as its tax regime, economic development,
demographic trends and social values, in devising the appropriate reforms.
The Challenges of Reforming Hong Kongs Health System 469
CHAPTER
22
The Challenges of Reforming Hong Kongs Health

System
Alan Maynard
Alan Maynard, the doyen of health economics in the UK and founding

director of the influential health policy group at York University,
concludes this volume with his assessment of the various new proposals
that are currently on the table. He first summarises the nature of
international health care markets as being dichotomised by essentially
libertarian versus liberal collectivist ideals. He then discusses the
ubiquitous inefficiency in health care provision in major advanced
economies lessons that are apt for Hong Kong. He closes with two
key messages. The first is that reformers who focus solely on one aspect
of the health system, such as financing, without implementing
concomitant changes in other areas, such as service provision, are
doomed to failure. The second is that medical savings accounts are far
from being the panacea that they have been marketed as in Hong Kong,
and must be much more closely scrutinised. His parting mantra is, If
it isnt broken, dont fix it! If it is broken, fix it properly!
Introduction
There has been continuous debate about the failure of health systems for
decades. This debate tends to polarise the liberals, who favour a more laissez-faire
and individualistic approach and the adoption of what is now called consumer
directed health reform, and collectivists, who favour reform that is directed at
the better regulation of providers. The former advocate individually orientated
policies such as medical saving accounts and the extensive use of co-payments
and deductibles (user charges). The latter focus on the failures of health care
providers worldwide and the need to offer robust systems of consumer protection
and observable, rather than non-evidence-based assertions of high quality patient
care (McLachlan and Maynard, 1982; Maynard, 2005).
After a review of the common failures of health systems throughout the world,
a critical review of current reform proposals in Hong Kong leads to the conclusion
that reformers who focus solely on one side of the health care market (e.g.
funding) are doomed to failure, as they may well leave patients badly served and
politically disappointed.
The Nature of the International Health Care Markets

The Funding Debate
Capitation
payments

Social
insurance
Fee per item

of service
Private
insurance
HEALTHCARE
BUDGET
H
O
U
S
E
H
O
L
D
S
General
taxation
There is continuous debate about the source of health care funding throughout
the world. In more affluent countries and territories, such as Hong Kong, Britain,
Germany, France, Switzerland, Singapore, Mexico, Chile, Brazil and the United
States, the often hidden agenda is the shifting of the cost burden between
different socio-economic groups.
As depicted in Figure 1, households fund all health care. It is householders
who own assets and receive all of the resources in the form of income from labour
market activity and the rent, interest and profits on what they own.
Salaries
User charges/
copayments
P
R
O
V
I
D
E
R
S
Adapted from Reinhardt (1984)
Figure 1 The expenditure-income identity
The policy choices for the funding of health care in Hong Kong relate firstly
to the level of expenditure and secondly to its source. Whatever the level of health
expenditure in a country, its funding is usually derived from a mix of sources.
The principal funding sources are general taxation, social insurance (as in Japan,
Germany, the Netherlands and France), private insurance and user charges.
General taxation is usually the most redistributive source of financing because of
the progressive rates of income tax. Social insurance is less redistributive, as it is
usually funded by proportionate tax rates. Private insurance and user charges
impose higher costs on those who use health care systems the most, which means
that they favour the rich, the young and the healthy.
The debate about health care funding is usually the product of the power of
opposing ideological forces. Libertarians are forever seeking to shift the balance
of finance from the affluent who pay taxes to the often less affluent who use the
health care system most. The collectivists continually resist this pressure and
advocate the use of tax revenue to fund increased expenditure, which thereby
shifts the burden to the more affluent.
Libertarians typically advocate consumer-directed health care policies covertly
to effect redistribution, and explicitly because they believe that user charges and
medical savings accounts have significant efficiency benefits. They argue that
because consumers are more individually responsible in financial terms for their
consumption of health care in such systems, they will be more frugal and more
critical of the quality and price of the services that are offered by medical
practitioners.
The collectivists typically reject this approach for three reasons. Firstly, they
argue that Bismarck, Beveridge and other reformers collectivised health care
possession for equity reasons, because the previous systems failed to care
adequately for the poor, the sick and the elderly. Attempts to shift the financial
burden in libertarian consumer-directed health care systems disadvantage such
groups by relieving the rich, the healthy and the young of the burden of caring
for the disadvantaged.
In addition to this equity argument, the collectivists note that if tax finance
is undermined by increased emphasis on user charges and medical savings
accounts there is a loss of expenditure control, with potentially deleterious effects
for the economy. An advantage of tax finance is that it can be cash limited and
the government, if it is so motivated, can regulate to constrain the financial selfinterest of doctors, hospitals and the pharmaceutical industry. Private funding
sources fragment and dissipate such controls. Internationally, for instance, private
insurers have been feeble purchasers, and health care systems in which private
insurers dominate, such as the United States, have had continuous cost
containment problems.
Collectivists contest the libertarian argument that consumer-directed health
care creates greater efficiency. Libertarians hypothesise that because their
proposals impose direct costs on consumers, such as user charges, they will pursue
value for money vigorously and discipline inefficient providers by taking their
custom elsewhere. Collectivists argue that such exercise of market power in health
care is difficult for two reasons. Firstly, consumers are ill informed about providers,
and typically, because of the asymmetry of information between patient and
doctor, practitioners act as agents for their customers and effectively determine
what health care is delivered to whom and when. Secondly, patients typically face
monopoly suppliers. The medical profession is cartelised by a variety of
organisations that were created to discipline practitioners, but often act as
protective trade unions that inhibit competition by opposing transparency in
medical practice and accountability to patients and purchaser agencies, be they
private insurers or government agencies.
The debate between the libertarian and collectivist perspectives is summarised
in Table 1. It is epitomised by a recent American debate in the Journal of the
American Medical Association (Herzlinger and Parsa-Parsi, 2004; Reinhardt, 2004),
in which the protagonists argued that the superior performance of the Swiss
health system (which is the second most expensive in the world) relative to that
of the United States (which is the most expensive in the world) was a product of
consumer driven health care and the extensive use of co-payments in Switzerland.
Reinhardt interpreted the same data in a different way. He argued that advocates
of consumer-directed health care expect:
insurance policies with high deductibles and co-insurance to convert
hitherto excessively insured, passive recipients of health care into
vigilant shoppers of health care, motivated to control both its cost and
its quality and capable of doing so.
(Reinhardt, 2004)
This libertarian optimism is not sustained by evidence. Firstly, there is no

correlation between per capita spending and cost sharing, with countries such as
Germany and the Netherlands having lower cost sharing and lower expenditure
relative to the very expensive Swiss system. Secondly, as in all health care systems,
consumers are ill informed and are largely ignorant of the real costs of care or
its quality. Hence, it must be questioned whether consumers can exercise their
choice to discipline the inadequate and reward the efficient practitioners and
hospitals in such systems. Finally, Reinhardt points out that the lower cost and
perhaps better quality of the Swiss health system relative to that of the United
States is a product of much more regulation by a government that tightly controls
both insurance premiums and the price of the services that are delivered to
patients. Che Guevara argued that Switzerland was the heart of capitalism, but
like many capitalist organisations, that which superficially appears to be governed
by the principles of laissez-faire is often the product of regulations that are
designed to limit the excesses of monopolies and cartels preying on consumers
(e.g. Japan). All too often, capitalists are the enemies of capitalism.
In all health systems, that which is spent by households to fund health care
(Figure 1) equals the income of providers. Advocacy for improved services by
providers is an attempt to capture more household expenditure and translate it
into provider income. The true identity of this income expenditure is often lost,
but it is of central importance in the policy choices of societies.
Private charitable action is not rejected, but is seen as potentially

dangerous on a moral basis because it is often demeaning to the
recipient and corrupting to the donor, and is usually inequitable. It
seems preferable to establish social mechanisms that create and
sustain self-sufficiency, and that are accessible according to precise
rules on entitlement that are applied equitably and are explicitly
sanctioned by society at large.
Freedom is seen as the presence of real opportunities of choice, and

although economic constraints are less openly coercive than political
constraints, they are nonetheless real and often place effective limits
on choice. Freedom is not indivisible, but may be sacrificed in one
respect to obtain greater freedom in another. Government is not an
external threat to the individuals in society, but is the means by which
individuals achieve greater scope for action (that is, greater real
As the only moral justification for using personal achievement as the
basis for distributing rewards is that everyone has equal opportunities
for such achievement, then the main emphasis is on equality of
opportunity. When this cannot be assured, the moral worth of
achievement is undermined. Equality is seen as an extension to the
many of the freedom that is actually enjoyed by a few.
Social Darwinism dictates a seemingly cruel indifference to the

fate of those who cannot make the grade. A less extreme
position is that charity, when expressed and effected under
private auspices, is the proper vehicle, but it needs to be
exercised under carefully prescribed conditions, for example,
such that the potential recipient must first mobilise all of their
own resources and, when helped, must not be in as favourable
a position as those who are self-supporting (the principle of
lesser eligibility).
Freedom is to be sought as a supreme good in itself. Compulsion

attenuates both personal responsibility and the individualistic and
voluntary expression of social concern. Centralised health planning

and a large governmental role in health financing are seen as
an unwarranted abridgement of the freedom of clients and health
professionals, and private medicine is viewed as a bulwark against
totalitarianism.
Equality before the law is the key concept, with clear precedence
being given to freedom over equality wherever the two conflict.
Social Concern
Freedom
Equality
Egalitarian
Personal incentives to achieve are desirable, but economic failure is

not equated with moral depravity or social worthlessness.
Libertarian
Personal responsibility for achievement is very important,

and this is weakened if people are offered unearned rewards.
Moreover, such unearned rewards weaken the motivating force
that assures economic well-being, and in so doing also
undermine moral well-being because of the intimate connection
between moral well-being and the personal effort to achieve.
Personal
Responsibility
Table 1
Attitudes Typically Associated with the Libertarian and Egalitarian Viewpoints
Although providers may reasonably be expected to seek to increase their

income, if the services that are provided are demonstrably cost-effective, then the
ideological conflicts that their advocacy of particular funding policies disguise
should not be lost to public examination. If society wants expenditure inflation,
inefficiency and increased inequity in the funding of health care, then the
adoption of consumer-directed policies such as user charges and medical savings
accounts are rational.
The alternative collectivist model offers the potential of expenditure control
(limited cash, tax-financed care) and less inequality in the funding of health care.
However, it typically offers inefficiency which is similar to that evident in private
health care systems. This is unsurprising, as in many health care systems (such as
the National Health Service) the same potentially inefficient doctors are working
both in the public and private sectors and dominate management in the public
and private hospitals. In addition, the same pharmaceutical industry markets new
products that often exhibit marginal clinical benefits at high prices (Maynard et
al., 2004).
Ubiquitous Inefficiency in Health Care Provision

There are some international certainties in the provision of health care that are
indicative of inefficiency in both the public and private sectors. These are
variations in medical practice, an inability to deliver appropriate and proven
health care interventions to chronic disease groups, ubiquitous and unmanaged
medical errors and the absence of measures of outcome success.
Variations in Medical Practice

The work of Wennberg and his colleagues at the Dartmouth Medical School in
the United States has demonstrated the existence and durability of variation in
medical practice, and has stimulated similar work that has revealed a similar
variation in medical practice across the world. The initial Wennberg studies
compared the nature of the care that was received by Medicare patients in Boston
and New Haven in the 1980s. These university cities (the home of Harvard and
Yale, respectively) had a similar demography, but had levels of funding and activity
that varied significantly (Wennberg et al., 1987; Wennberg et al., 1989). The
adjusted rate of hospital discharge varied by 49%, that of readmission varied by
29%, that of length of stay varied by 15% and that of reimbursement varied by
79%. Expenditure in Boston for elderly federally funded Medicare patients was
nearly double that spent in New Haven, but the mortality rates were similar. Boston
churned more patients, did more to them and spent more, but its mortality
success rate was no better, despite all this endeavour. Wennberg subsequently
created an atlas of practice variation in the United States, but this research has
had little influence on service variation in the US health care market.
Wennbergs Dartmouth colleagues more recently (Fisher, 2003; Fisher et al.,
2003) showed that the variations which were evident 20 years ago persist, and
that there is an east-west divide in the United States in the intensity and cost of
Medicare provision. They showed that per capita Medicare spending in 2000 was
US$10,550 per enrolee in Manhattan and US$4,823 in Portland, Oregon. They
concluded that such variations were a product of volume effects and not of
differences in level of illness, socio-economic status or the price of services. Fisher
(Fisher, 2003) stated that:
Residents in high spending regions received 60 percent more care but
did not have lower mortality rates, better functional status or higher
satisfaction.
He argued that potential savings of 30% could be made on the US
Medicare budget if high spenders reduced their expenditure and
provided the same safe practice as the conservative, low-spending
regions.
Evidence of variation in medical practice is ubiquitous internationally. For

instance, the variation in the activity rates of English surgeons is considerable and
largely unexplained (Bloor and Maynard, 2002). Studies that have replicated
Wennbergs methods in Europe have again shown variation (McPherson et al.,
1982). One explanation of the variations that Wennberg found in medical practice
was:
The amount and cost of hospital treatment in a community have more
to do with the number of physicians there, their medical specialties and
the procedures they prefer rather than the health of residents.
Wennberg and Gittelsohn (1973)
Thus, the elimination of variation requires improved management of the numbers

and practice of physicians by the profession itself and by government (Maynard
and Bloor, 2003a). An interesting issue is why, given this evidence, such variations
have been neither managed nor effectively mitigated. To vary is normal in humans,
but one must ask how much variation is efficient, and how under-activity (on
the job leisure) and over-activity can be determined and better managed to
ensure that patients are treated neither by the inactive and potentially underskilled nor by stressed workaholics.
Delivering Appropriate Care

Doctors and health care systems often fail to provide cost-effective, evidence-based
care to chronic care groups, and inappropriately provide care to patient groups
that may benefit little or may be damaged by such interventions.
There is good evidence to support intervention for hypertension, cholesterol,

diabetes, asthma, heart failure and other conditions. This evidence shows that
the creation of patient databases, regular monitoring and the use of usually cheap,
cost-effective interventions, such as generic pharmaceuticals to control blood
pressure and cholesterol, can significantly reduce morbidity and mortality amongst
patients who often have co-morbidities and chronic diseases. However, health
systems are failing to deliver such care to patients, leaving them with avoidable
morbidity and premature mortality. A recent study by the Rand Corporation
showed that US patients receive only 55% of the care that they need for their
medical conditions (Kerr et al., 2004). The UK government, in introducing a
general practitioner quality framework with generous fees for services, recognised
similar failings in the National Health Service (Maynard and Bloor, 2003b). This
failure to deliver appropriate care appears to be ubiquitous and poorly managed
(Maynard at al., 2004).
Another common failure of medical practice and practitioners is the delivery
of inappropriate care to patients. This literature seeks to use evidence and expert
groups to define appropriate care, and then to retrospectively or prospectively
examine medical practice to determine adherence or non-adherence to best
practice. A British study of this type used a US and a UK panel to determine the
appropriateness of the use of coronary artery by-pass surgery (CABG) and
angiographs in the Sheffield Trust. They concluded that often the patients
received treatment that was of little therapeutic benefit to them.
Inappropriate care even in the face of waiting lists, is a significant
problem in Trent. In particular, by the standards of the UK panel, one
half of the coronary angiographs (CAs) were performed for equivocal
or inappropriate reasons, and two fifths of the coronary artery bypass
grafts (CABGs) were performed for similar reasons. Even by the more
liberal US criteria, the ratings were 29% equivocal or inappropriate for
CAs and 33% equivocal or inappropriate for CABGs.
(Bernstein et al., 1993).
As with medical practice variations, evidence for appropriate care not being
delivered and inappropriate care being given with no benefit to patients is
impressive, but appears to have all too little effect on public policy and clinical
practice.
Medical Errors
In the UK, a serial killer in general practice killed over 200 of his patients by lethal
morphine injections over 20 years, despite being the most popular general
practitioner in his town with patients waiting to join his list. Two gynaecologists,
Neale and Ledward damaged hundreds of women. A paediatric cardiac surgeon
in Bristol killed 29 children because he adhered to a technique that was

demonstrably flawed. In all of these tragedies, the National Health Service, the
profession and the private sector in the UK failed to monitor performance and
manage practice.
In the United States, medical errors affect 3.5% to 5% of admissions (Kohn
et al., 1999). In Australia, using methods that are identical to a study that was
carried out in Utah and Colorado, it has been found that 10% of admissions are
associated with errors and 0.3% of admissions are associated with errors that lead
to death. Similar rates may exist in the UK, although the evidence is limited. Such
errors occur in the medication of patients, with the wrong drug and the wrong
dose being given (in the United States, medication errors kill over twice as many
Americans each year as died in the September 11 incident); in surgery (such as
the Welsh surgeon who recently appeared in court after he removed the healthy
rather than the diseased kidney of a patient); and as a result of infection because
of poor hygiene (including MRSA) worldwide, which could be significantly
reduced by improved hygiene (especially washing hands) on the part of nurses
and doctors (Pittet and Boyce, 2001). Some common problems with medical
errors are the poor measurement of their incidence and prevalence, and the
failure to adopt simple cost-effective interventions, such as the systematic and
continuous management of hand hygiene.
The Absence of Measures of Success in Medicine

Public policy makers tend to measure success in the performance of their health
system by using measures of input, such as expenditure, hospital bed population
ratios and doctor population ratios, and process, such as waiting times for general
practitioners, and out-patient and in-patient care. Some systems now also use
measures of failure in medicine, including hospital readmission and mortality
rates. No health system in the world systematically measures the success of
practitioners in terms of their improvement of, or at least stabilisation of, the
physical, social and psychological functioning of their patients. This is curious.
There are hundreds of disease-specific quality of life measures and several
generic measures. All have been used in hundreds of clinical trials, and have been
shown to yield valid information about patients health status over time. However,
the routine use of these measures in clinical practice is limited. One example of
such measurement is the work of the UK insurer, the British United Provident
Association (BUPA). In response to the failings of the gynaecologist Ledward, they
introduced the use of Short Form 36 (www.sf36.org), which comprises 36 questions
about social, psychological and physical functioning. This is given to patients
before (largely elective) procedures, with a follow-up three months later.
This gives BUPA data about improvement (or non-improvement) or about
patient functioning before and after a procedure. It also enables them to manage
the performance of individual consultants, typically using the safety engineering

approach (Six Sigma) and appraising performance that is three standard
deviations above and below the mean. The purpose is to ensure consumer
protection and value for money (Vallance-Owen and Cubbin, 2002). This type of
measurement of success is long overdue given that such measures have been
available for decades (Kind and Williams, 2004; Appleby and Devlin, 2004).
Groups of National Health Service practitioners such as orthopaedic surgeons
are now adopting this type of evaluation, and the UK government has funded an
evaluation of its use in the new National Health Service and independent centres
for orthopaedics and ophthalmology.
As with the literature on variations in medical practice, the literature on the
measurement of success is substantial, but has been ignored for decades. For
instance, Florence Nightingale advocated the measurement of the performance
of hospitals in terms of whether patients were dead, relieved or unrelieved
(Nightingale, 1863). She went on to argue that:
I am fain to sum up with an urgent appeal for adopting this or some
uniform system of publishing the statistical records of hospitals. There
is a growing conviction that in all hospitals, even in those which are
best conducted, there is a great and unnecessary waste of life . . . In
attempting to arrive at the truth, I have applied everywhere for
information, but in scarcely an instance have I been able to obtain
hospital records fit for any purpose of comparison. If they could be
obtained, they would enable us to decide many other questions besides
the ones alluded to. They would show subscribers how their money was
being spent, what amount of good was really being done with it, or
whether the money was doing mischief rather than good.
Florence Nightingale (1863)
It is strange that medical practitioners and hospitals remain reluctant to measure

their success in terms of improving the quality of life of their patients, when such
evidence is an essential part of good clinical practice and consumer protection.
Overview
The four issues that have been reviewed variations in medical practice, the
appropriateness of care, medical errors and the absence of measurements of
success are quite well demonstrated, are long established as performance
problems and are generally ignored by management, both clinical and nonclinical. Will the proposed reforms in Hong Kong mitigate these failings by
improving consumer protection and value for money for taxpayers and patients?
Tables 2 and 3 compare and contrast idealised and actual health system
characteristics generally. They can be instructive to Hong Kong policymakers as
they develop a new set of reform proposals in 2006.
1. When ill, individuals are frequently imperfect judges of their

own welfare.
2. Priorities are determined by social judgements about need.
3. The erratic and potentially catastrophic nature of demand is
made irrelevant by the provision of free services.
4. As the distribution of income and wealth are unlikely to be
equitable in relation to the need for health care, the system must
be insulated from the influence of this unequal distribution.
1. Professional ethics and dedication to public service are the
appropriate motivation, and focus on success in curing or caring.
2. Priorities are determined by where the greatest improvements
in caring or curing can be effected at the margin.
3. A predetermined limit on available resources generates a strong
incentive for suppliers to adopt the least costly methods of
provision.
1. A central review of activities generates the efficient audit of service
provision, and management pressures keep the system costeffective.
2. Well informed clinicians are able to prescribe the most costeffective form of treatment for each patient.
3. If there is a resulting pressure on some facilities or specialties,
then resources will be directed towards extending them.
4. Facilities or specialties that experience slack pressure will be
slimmed down to release resources for
other uses.
1. The electorate judges the system by the extent to which it
improves the health status of the population at large in relation to
the resources that are allocated to it.
2. Producers judge the system by its ability to enable them to provide
the treatments that they believe to be cost-effective.
1. Individuals are the best judges of their own welfare.

2. Priorities are determined by own willingness and the
ability to pay.
3. The erratic and potentially catastrophic nature of
demand is mediated by private insurance.
4. Matters of equity are to be dealt with elsewhere
(e.g. in the tax and social security systems).
1. Profit is the proper and effective way to motivate suppliers

to respond to the needs of demanders.
2. Priorities are determined by peoples willingness and ability
to pay, and by the costs of meeting their wishes at the margin.
3. Suppliers have a strong incentive to adopt the least costly
methods of provision.
1. Many competing suppliers ensure that offer prices are kept

low and reflect costs.
2. Well informed consumers are able to seek out the most
cost-effective form of treatment for themselves.
3. If, at the price that clears the market, medical
practice is profitable, then more people will go into
medicine, and hence supply will be demand responsive.
4. If, conversely, medical practice is not remunerative,
then people will leave it or stop entering it until the system
returns to equilibrium
1. Consumers will judge the system by their ability to
get someone to do what they demand, at the time
and place and in the way that they want it.
2. Producers will judge the system by the living that they can
make out of it.
Demand
Supply
Adjustment
mechanism
Success criteria
Public
Private
Table 2
Idealised Health Care Systems
1. Personal professional dedication and public spirited motivation

are likely to be corroded and degenerate into cynicism if others
who do not share those feelings are seen to be doing very well for
themselves through blatantly self-seeking behaviour.
2. Priorities are determined by what gives the greatest professional
satisfaction.
3. As cost-effectiveness is not accepted as a proper medical
responsibility, such pressures merely generate tension between the
professionals and the managers.
1. That which is most profitable to suppliers may not be that

which is most in the interests of consumers, and as neither
consumers nor suppliers may be very clear about what is in
the consumers interest, suppliers have a large range
of discretion.
2. Priorities are determined by the extent to which consumers
can be induced to part with their money, and by the costs
of satisfying the pattern of demand.
3. The profit motive generates a strong incentive towards market
segmentation and price discrimination and tie-in agreements
with other professionals.
Supply
Public
1. Doctors act as agents, and identify need on behalf of their

patients.
2. Priorities are determined by the doctors own professional
situation, by the doctors assessment of the patients condition and
the expected trouble making proclivities of the patient.
3. Freedom from direct financial contributions at the point of
service and absence of risk-rating enables patients to seek
treatment for trivial or inappropriate conditions.
4. Attempts to correct inequities in the social and economic
system by differential compensatory access to health services leads
to recourse to health care in circumstances where it is unlikely to
be a cost-effective solution to the problem.
Private
1. Doctors act as agents, and mediate demand on behalf of

consumers.
2. Priorities are determined by the reimbursement rules
of insurance funds.
3. Because private insurance coverage is a profit-seeking
activity, some risk-rating is inevitable, and hence coverage is
incomplete and uneven, which distorts personal willingness
and ability to pay.
4. Attempts to change the distribution of income and wealth
independently are resisted as they are perceived to destroy
incentives, one of which is the ability of the rich to buy better
or more medical care.
Demand
Table 3
Actual Health Systems
Public
1. Because it does not need elaborate cost data for billing purposes,
it does not routinely generate much useful information on costs.
2. Clinicians know little about costs and have no direct incentive or
sometimes quite perverse incentives to act on the information
that they have (i.e. cutting costs may make life more difficult or
less rewarding for them).
3. Very little is known about the relative cost-effectiveness of
different treatment and even where there is knowledge in this
area, doctors are wary of acting on such information until a
general professional consensus emerges.
4. The phasing out of facilities that have become redundant is
difficult because it often threatens the livelihood of concentrated
specialised groups and has identifiable people who are dependent
on it, whereas the beneficiaries are dispersed and can only be
identified as statistics.
Private
1. Professional, ethical rules are used to make overt competition

difficult.
2. Consumers are denied information about quality and
competence and, as they are insured, may collude with
doctors against the insurance carriers in inflating costs.
3. Entry into the profession is made difficult and numbers
are restricted to maintain profitability.
4. If demand for services falls, then doctors extend their
range of activities and push out neighbouring disciplines.
1. Consumers will judge the system by their ability to get

1. As the easiest aspect of health status to measure is life
someone to do what they need done without making them
expectancy, the discussion is dominated by mortality data and
medically indigent or changing their risk-rating too adversely.
mortality risks to the detriment of treatments that are concerned
2. Producers will judge the system by the living that they can
with non-life-threatening situations.
make from it.
2. In the absence of accurate data on cost-effectiveness, producers
judge the system by the extent to which it enables them to
carry out the treatments that they find to be the most
exciting and satisfying.
Adjustment
mechanism
Success criteria
Table 3 (continued)
Reforming the Hong Kong Health System

The Hong Kong health system has a public sector that provides hospital and other
types of care, which reflects the beliefs and reforms of the British collectivist
model, combined with a laissez-faire private sector in which practitioners generate
high incomes by exploiting their market power. The common characteristic of
both these sectors is the variation in activity, outcome, the quality of services that
are delivered to patients and expenditure inflation.
In recent years, the problems that are associated with the Hong Kong health
system have been systematically examined by an outside consultancy group and
by local government groups. The Harvard consultancy group gave a thorough
diagnosis of the problems with the system, listed the probable social objectives
of Hong Kong and articulated the options for change, including medical savings
accounts. More recently, another report reviewed financing feasibility and the use
of medical savings accounts (Health Welfare and Food Bureau, 2004).
The advocacy of medical savings accounts is like an international virus, and
is challenging decision makers in Singapore, Canada, China, the US and Hong
Kong. The usual model discussed is that of the pioneering system in Singapore.
It is important to realise that the idea of the Singaporean system being wholly
funded by medical savings accounts is a myth. Less than 10% of Singapores health
expenditure is funded in that way, and the system seems to inflate rather than
save costs (Hsiao, 1995; Maynard and Dixon, 2002; Deber et al., 2004). In
mainland China, where income differentials are large, the use of medical savings
accounts in urban areas has had a mixed effect (Yi et al., 2004).
The recent Hong Kong report (Health Welfare and Food Bureau, 2004)
provides a good analysis of savings and related issues, but underplays the broader
effects of efficiency, equity and macroeconomic expenditure.
On international evidence, the blunt and simple lessons are as follows:
1. If medical savings accounts are used primarily to shift costs from taxpayers
to individual households, then they may easily become discredited.
2. The discrediting of medical savings accounts is particularly likely to occur if
there is inadequate control or a lack of appropriate incentives, transparency
and policing of activity and outcomes, and rigorous performance
management and clinical governance.
3. Medical savings accounts may also lead to cost inflation, and may benefit the
more affluent unless they are carefully designed and managed.
The long-term strategy for all health systems is not merely to tinker with funding
sources (which may or may not pander to fluctuating ideological priorities of a
distributional nature), but to devise a long-term strategy that focuses on the
identification and rewarding of the performance of providers. With inefficiency
in the provision of health care seemingly ubiquitous, it is essential to devise a
system for measuring activity and outcome (and in particular success in
improving the health status of patients) and to create complementary incentive

systems that ensure that providers are accountable for transparently supplying high
quality, cost-effective and appropriate care to patients in a more equitable manner.
To the extent that funding systems can be used to complement this primary
objective, they may be useful if they are consistent with social goals, particularly
equity. However, the policy focus should be on the supply (provision) side, rather
than the demand (financing) side of the market.
It is unfortunate that Hong Kong policy makers appear to be more concerned
with increasing funding from new sources, such as medical savings accounts, than
with ensuring that existing resources are used efficiently. A probable explanation
for this is the political cost of tackling powerful and influential provider groups.
This is particularly the case in the creation of transparent systems of managing
the performance of doctors. Such systems are absent throughout the world and
ensure that purchaser trust both in the public and private agencies is eroded.
As Confucius argued, without trust, we cannot stand. To care for patients
efficiently and humanely, doctors need real-time information systems that
illuminate their activity and outcomes in relation to those of their peers. Only
then, with accompanying transparency and accountability, can they ensure that
they are doing their best for their patients both professionally and socially
(Maynard and Bloor, 2003a).
Conclusion
The Hong Kong government is seeking sustainability in health care funding.
This can only be achieved through the careful definition and ranking of its social
goals. It must decide whether it wants expenditure control, efficiency and equity,
in what order they should be prioritised and the trade-offs that it is prepared to
make. Furthermore, the government should recognise that households fund all
expenditure, and that its funding proposals may be inflationary, inefficient and
inequitable to an extent that depends on the type of medical savings account that
is selected. Policy makers often find it difficult to articulate their objectives
explicitly, and are often tempted to fragment their decision making. The current
focus on MSAs is unlikely to reduce cost inflation, inefficiency and inequity, and
indeed may worsen performance in all three areas. The challenge for local
politicians and policy makers is to take a longer term view, with the primary focus
on the current endemic inefficiencies in the provision of health care. Without
the long-term view, the introduction of MSAs will make some providers more
affluent, but is unlikely to improve expenditure control and equity. Some parts
of the Hong Kong system appear to work quite well, such as the hospitals, but
need supporting reforms. Other parts, such as the private sector, are expensive.
Reformers should recognise that the provider is the key in both the public and
the private sectors, and use financing reform as a minor complementary activity
with an explicit distributional design for local citizens to debate.
Epilogue 485
Epilogue
In the preceding pages, our contributors have attempted to highlight key

questions, rather than provide complete answers. These chapters are not meant
to be prescriptive in offering exact blueprints for reform. Rather, they are
presented as material to be reflected upon, perspectives to be debated and visions
that challenge orthodox thinking while foreshadowing prospects for the future.
Gould (Chapter 1) laments the slow progress on key decisions about
financing and macro-organisation since the 1980s, when the government first
began to think about such issues. Twenty years on, it looks as though Hong Kong
may finally be on the verge of a radical shift away from this inertia, with a whole
new cast of players joining the health policy and political scene in 2004. After
all, the forces for change in terms of socio-demographic patterns (Chapter 4),
epidemiological shifts and economic realities, such as convergence with mainland
China (Chapter 16) coupled with the shaky financial sustainability of the Hospital
Authority current accounts (Part IV), will ultimately dictate the pace of reform.
Hedley (Chapter 7) argues that a systematic public health approach is the formula
for successful change to meet the three principles that guide health system reform,
and that the system should use scarce resources efficiently to deliver care which
is appropriate for and acceptable to users and which consistently reduces
inequalities in health care across the community. Whatever we decide to do, we
must not lose sight of our equity target. The Secretary for Health, Welfare and
Food, York Chow, was particularly emphatic about this last point when he declared
during the announcement of his ministerial appointment that his top priorities
were to fight for the underprivileged and to address the effective support and
services to be given to the elderly, disabled, chronically ill and those families
disadvantaged by poverty. In contrast, the president of the Hong Kong Medical
Association, Choi Kin, retorted that the social medicine system has been tested
and shown not to work, which perhaps implies a laissez faire vision of an
unfettered health care market with the attendant moral hazard of the inequitable
486 Epilogue
distribution of services. This is exactly the divide that Maynard observes (Chapter
22) when he categorises health reformers into libertarian and collectivist camps.
Even within the collectivist camp, like-minded people often differ on how best
to reform the system, as is proven by the widely divergent visions that have been
espoused by the Harvard team and the health ministry under Yeoh Eng-Kiong.
Roberts (Chapter 2) cautions that it is easy to lose sight of the important moral,
philosophical and ethical aspects of decisions about health reform amidst the
noise and obfuscation of political grandstanding and emotive public debate.
However, we must not allow such fundamental notions of fairness and social justice
to be obscured by scare mongering or shortsighted politics. The way in which a
community organises and finances health speaks volumes about what it collectively
represents.
From the micro-environment of how care is and should be delivered in a
hospital ward or community-based clinic (Parts II and III) to the macro issues of
funding healthcare and paying providers through various financial intermediaries
(Part IV), our contributors have offered a wide range of viewpoints for readers
to digest, discuss and debate. This book will have served its purpose if it can
motivate and encourage an ongoing dialogue on the vision of health for all in
Hong Kong.
Too often in policy and politics, what we cherish most we inadvertently fail
by believing that the protection of something means the preservation of the status
quo, when its improvement actually requires unorthodox thinking and visionary
change. If we are to sustain Hong Kongs health system and allow it to thrive, we
will have to change it, and the sooner that we institute evidence-based reform,
the smoother the evolution will be. This is not about improving a system; it is
about the patients who entrust us with their care every day. Theirs is a trust that
we must honour.
Notes 487
Notes
CHAPTER
1.
This and the following sections draw on Gauld and Gould (2002).
CHAPTER
1.
The TFR is obtained by adding up the specific fertility rates excluding births in Hong
Kong to two-way permit holders and illegal entrants.
CHAPTER
1.
The author wishes to thank the Governance in Asia Research Centre at the City University
of Hong Kong, for supporting the research which has resulted in the production of this
chapter.
CHAPTER
1.
The research presented in this chapter was supported by a small-scale research grant from
the City University of Hong Kong (Project No. 9030937).
CHAPTER
13
1. The three committee members were Anthony F. Neoh, Dr Chiu Hin-Kwong and Ng ShuiLai. The first meeting was convened on 16 January 1992.
2. According to a report in the Apple Daily on 14 April 2001, committee members of the
Medical Council congratulated the defendant on the internet, and mocked the patient
several times.
3. Expert reports commissioned by the Hospital Authority are legally privileged documents.
4. Other complaints channels that are suggested in the Hospital Authority complaints system
brochure include the Chief Executives Office, the Legislative/District Council Secretariat,
the Health, Welfare and Food Bureau, the Medical Council of Hong Kong, the Office of
the Ombudsman and the Consumer Council.
488 Notes
5. The mission of the Equal Opportunities Commission is to promote equality of opportunity
between men and women, between people with and without disabilities, irrespective of
family status; to eliminate discrimination on the grounds of gender, marital status,
pregnancy, disability and family status through legislative provisions, administrative
measures and public education; and to eliminate sexual harassment and the harassment
and vilification of people with disabilities. (Equal Opportunities Commission 1999; www.
eoc.org.hk/CE/annual/index.htm accessed October 2005.)
6. In 1998, Legislative councillor Emily Lau Wai-Hing sued Jiang Enzhu, the then Director
of the Xinhua News Agency, for breaching the Personal Data (Privacy) Ordinance. Lau
claimed that she had made a written request to Xinhua News Agency to access her
personal data, but that the Agency did not provide the relevant data within the stipulated
period. Lau filed a complaint with the Office of the Privacy Commissioner for Personal
Data, which ruled that the complaint was valid. However, the Legal Department did not
commence a prosecution, so Lau had to apply for a summons. The defendant appealed
to the High Court to revoke the summons, and the High Court ruled against Lau because
of legal technical problems, and awarded costs and interest of $1.6 million against her.
7. The famous Bristol cases occurred between 1988 and 1997, and two paediatric cardiac
surgeons and a chief executive of a hospital were later found guilty. One of the surgeons
had performed cardiac surgery on 15 children, 9 of whom died. The mortality rate for
this type of surgery in an average hospital in the UK was lower than 15%, whereas that
of the surgeon concerned was 60%. The other surgeon performed surgery on 38 children,
20 of whom died. The average mortality rate for this type of surgery was less than 10%,
whereas that of the doctor concerned was 53%. (General Medical Council Annual Report,
1999).
8. This case involved a general practitioner in Hyde, Manchester who was convicted of
murdering 15 patients and sentenced to life imprisonment. Refer to (2000)
300. Hong Kong Economic Journal.
9. Although health care policy in Hong Kong is deeply troubled by the current reduction
of resources, standards of service should be maintained by the medical profession.
Australia has set criteria for the assessment of health care institutes, and Hong Kong
should develop principles to maintain service quality. The National Health Service in the
UK has already established its own set of service standards (Department of Health, UK,
1998; The Australian Council on Healthcare Standards, 1974).
CHAPTER
1.
A total of 22,898 (77%) nurses with practising certificates responded to the 2000 Health
Manpower Survey that was conducted by the Department of Health. Among them, 93%
were in active practice. One possible interpretation of the results is that those who did
not respond to the survey had either emigrated overseas or were not engaged in local
practice. The non-respondents, together with inactive practitioners, accounted for 28%
of nurses with practising certificates.
CHAPTER
1.
14
16
These included catastrophic failings in the breast and cervical cancer screening services,
the Bristol Royal Infirmary inquiry into abnormally high rates of death or brain damage
Notes 489
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
among babies who received cardiac surgery in the late 1980s and early 1990s, and the
case of Dr Shipman, a general practitioner who murdered a large number of patients
over many years.
The Bristol Royal Infirmary Inquiry concluded that it is an account of a time when there
was no agreed means of assessing the quality of care. There were no standards for
evaluating performance. There was confusion throughout the National Health Service
as to who was responsible for monitoring the quality of care. Source: Report of the Public
Inquiry into Childrens Heart Surgery at the Bristol Royal Infirmary 19841995: Learning from
Bristol. The Bristol Royal Infirmary Inquiry.
Clinical governance is the core theme of A First Class Service, the policy document of
the UK health care services that was published in 1998.
Department of Health. Clinical Governance: Quality in the New NHS. 1999. This document
announces a fundamental shift in clinical quality management and emphasises the need
for a culture of learning and open participation in which education, research and the
sharing of good practice thrive; the need for a commitment to quality across the
organisation that is supported by clearly identified local resources; the importance of
multidisciplinary teamwork; the need for clear accountability to and by the National
Health Service Trust Board; and the need to work with users, carers and the public.
The Agency for Health Care Policy and Research (AHCPR) reported that medical errors
were responsible for injury in as many as 1 in every 25 patients, and that among those
injured, 1 in 7 or about 180,000 people each year dies. Errors in health care have
been estimated to cost $100 billion per year in the United States (Agency for Health Care
Policy and Research, 1998).
The Institute of Medicine reported that 44,000 to 98,000 people die in hospitals each
year as a result of medical errors, which costs up to $29 billion annually (Kohn et al.,
1999).
These incidents involved the Hospital Authority (e.g. potassium supplement as a bolus
injection and mismatched transfusions), the Department of Health (e.g. wrong
prescription due to the mixing up of formulary in a general out-patient pharmacy) and
private hospitals (e.g. the wrong gas administered to a patient under anaesthesia and
contamination of a haemodialysis machine by formalin).
The Trent Accreditation Scheme was introduced by Sir Harry Fang in 1999. The first
inspection was conducted in 2000, and re-inspection has taken place about once every
two years.
The Hospital Authority Mechanism for the Safe Introduction of New Procedures/
Technology (HAMSINP).
NHS Management Executive Risk Management in the NHS. 1993. This document
provides a structured approach to risk management in health care, from clinical services
to the management of waste.
The Advanced Incident Reporting System is a Hospital Authority-wide Internet-based
system that supports risk management by aiding the reporting, classification, analysis and
management of incidents.
The Medical Council, Dental Council, Nursing Council, Supplementary Medical
Professions Council and Chinese Medicine Council of Hong Kong.
490 Notes
PART IV COMMENTARY
1.
2.
Progressivity is defined as the degree of proportionality in the relationship between health

care payments and the ability to pay. Mathematically, it can be measured by the most
popular summary index, that of Kakwani. This is defined as twice the area between the
concentration curve of a payment and the Lorenz curve (the concentration curve of living
standards or other measures of economic status). It is calculated as K = C G, where C is
the concentration index of the health payment and G is the Gini coefficient of the ability
to pay variable. The value of K ranges from 2 to 1. A negative number indicates
regressivity, and the concentration curve of the payment lies inside the Lorenz curve.
Payments fall as a proportion of the ability to pay as the latter increases. A positive number
indicates progressivity, and the concentration curve of the payment lies outside the Lorenz
curve. The share of total payments that is made by the poor is less than their share of
the total ability to pay. In the case of proportionality, the concentration coincides with
the Lorenz curve and the index is zero (van Doorslaer et al., 1993).
Note that regressivity in a benefit-incidence analysis denotes a desirable social good,
whereby the less well-off consume disproportionately more of the publicly funded health
care.
CHAPTER
17
1. The four largest schemes, covering 57% of the population, included Labour Insurance
(covering 40% of the population), Government Employees Insurance (8.1% of the
population), Farmers Insurance (8.2% of the population) and Low-income Household
Insurance (0.6% of the population).
2. It was still only 4.55% of gross wages in 2003. This figure is very low when considering
the double-digit equivalents levied in OECD nations (particularly the EU nations with
social health insurance such as Belgium 7.4%, France 13.6%, Germany 14.3% average
and the Netherlands 8.1%) and the total premium of 8% of wages in the China Urban
Employees Basic Medical Insurance scheme.
3. Son argues that the 1995 reforms are partly due to the criticisms of the Democratic
Progressive Party opposition that social policy was underdeveloped in Taiwan. See AHK
Son. Social policy and health insurance in South Korea and Taiwan: a comparative historical
approach. Uppsala, Uppsala Studies in Economic History No. 62, 2002.
4. J Wong. Health care and the democratisation of policy-making in Taiwan. Paper presented
at the American Political Science Association Meeting, Washington DC, September 2000,
36 pages.
5. National health care expenditure in 1995 rose by 16% over the previous year, compared
with a 10.4% increase in the previous year. GDP growth in 1995 slowed to 8.6% from 9.
2% the previous year, and thus the health/GDP ratio was 5.3% in 1995 and did not budge
much in the four-year period of 19951998. With GDP growth slowing from 1998, the
health/GDP ratio was still only 5.4% in 2000.
6. Before 1995 national coverage was about 57%, but by 2003 it had risen to 99%.
7. The administrative costs of the National Health Insurance scheme are just under 2% of
total expenditure and 100% of claims are electronic. Furthermore, in the 28 months from
April 2001, the scheme introduced 22 million smartcards that allowed electronic storage
and retrieval. See W Seidemann. GD TECO implementing the Global Platform for Health
Notes 491
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
Care the Taiwan experience. Paper presented at Global Platform Seminar, February
2004, 33 pages.
J-F R Lu and WC Hsaio. Does health insurance make health care unaffordable? Lessons
for Taiwan. Health Affairs MayJune 2003; and a range of publications accessible through
the Taiwan government website (www.nhi.gov.tw/00english/e_03res_1.html).
74% in 2003.
Physicians for a National Health Programme. Taiwans single payer system: a phenomenal
success, quoting the conclusions in Lu and Hsaio, ibid. Accessed at www.pnhp.org/news/
2003/may/taiwans_single_payer.php. Both the original analysis and the PNHP
commentary make assertions that are barely supported by trend data, by the 34% increase
in total health care expenditure between 1995 and 1998 (20% per capita), or by the
obvious flaws in supply and demand-side economic incentives in the Taiwanese National
Health Insurance scheme. The enthusiastic endorsement of the Taiwanese model did not
persuade Hong Kongs government to take the social insurance route, and it rejected
many findings of the 1999 Harvard Report.
Using the World Health Organisation Fairness of Financial Contribution Index, the equity
of financing improved from 0.881 in 1994 to 0.991 in 1998, according to the Bureau of
National Health Insurance, Ministry of Health, Taiwan.
C Chi, H-C Lang, J-L Lee and L-F Chou. Supply factors that influence the inflation of
medical care expenditure under Taiwans NHI.
In 2003, 97% of doctors were in private practice and 85% of hospitals were in the private
sector.
The average hospital occupancy rate was 63% in 2003, and there was no waiting list, which
suggests that that there may be excess capacity in Taiwanese hospitals.
Means testing to offset this effect was not considered because of its associated
administrative requirements.
The same study showed that when case payments were used, the magnitude of the cost
differences between public and non-profit hospitals was lower under heavy competition
than under less competition, but for cost-based payments this finding was not observed.
In a similar study using three different diagnostic groups (uncomplicated caesarean
section, femoral/inguinal hernia repair and thyroidectomy), for-profit hospitals had 3%
to 6% lower costs per discharge but 11% to 22% higher costs per discharge under costbased reimbursement, leading the authors to conclude that the differences observed in
costs per discharge under the two payment methods were due to (1) greater productive
efficiency in private hospitals under case payment, (2) cost shifting from case payment
diagnoses to cost-reimbursed diagnoses, and (3) patient dumping. (Lin et al., 2004)
During 1999, nearly 55% of all National Health Insurance expenses for care in the last
year of life were incurred in the last three months of life (Liu and Yang, 2002). This
finding suggests that Taiwan is facing the same challenges in end-of-life care as other
nations (Kessler and McClellan, 2004; Seshamani and Gray, 2004).
The deficit in the pension fund grew from RMB10 billion in 1998 to nearly RMB40 billion
in 1999, and this shortfall worsened in 2001 with increasing numbers of laid-off workers
taking retirement earlier than expected. In 2001, nearly RMB220 billion was paid out in
pensions, compared with RMB188 billion in 2000. These payouts did not include the debt
owed under the old pension scheme for workers who were hired before 1997, which is
an estimated RMB1.8 trillion. About 130 million people in China, or 10% of the
population, are older than 60 years.
492 Notes
19. Restrictions preventing investments by pension funds in stock investments could be lifted.
The trust open-ended fund was announced in April 2001.
20. In Liaoning province, in which a social security reform experiment began early in 2001,
employer contributions to the social security fund dropped three percentage points to
20% in the first quarter.
21. The coverage grew from 51 million in 1998 to 63 million in 2000, and then to 109 million
in 2003.
22. PRC Statistical Digest. Downloaded 25 December 2004 from: http://61.49.18.68/
statistics/digest04/s55.htm.
23. A survey in 2000 by the China Consumers Protection Society involved residents in six
major cities. The respondents indicated that the insurance policies bought included
commercial medical at 36.7%, pension policies at 33.9% and life insurance policies at
29.3%. Of the respondents, 57.3% were willing to buy commercial medical insurance in
the future.
24. This insurance can be sponsored by either an enterprise for its own employees or by
enterprises in an industrial sector for their employees. Premiums are paid by enterprises.
25. These funds aim to help those in the low-income bracket and those living in poverty,
and are financed by local governments and social donations.
26. The system is financed by premiums paid by civil servants, their unions and their
employing units.
27. Some hospital administrators believe that use rates have declined (Institute of
Development Studies, 2003), and the numbers of admissions to, bed-days in, and outpatients attending central township hospitals and township hospitals in rural areas
declined from 1995 to 2000 (Wang et al., 2002). National data from the Ministry of Health
shows that from 1990 to 2000 the number of admissions to all hospitals rose at 0.3% per
year from 51.4 to 53.0 million, the number of out-patient visits fell 1.9% per year from 2.
56 billion to 2.12 billion, the average stay at hospitals at the county and above level fell
from 15.9 to 12.1 days and the occupancy rate fell from 81 to 67%: see (Gross, 2000).
Data for 2003 shows that hospital admissions rose to 60.9 million, out-patient visits fell
further to 2.10 billion, the average stay fell to 10.9 days and the occupancy rate rose to
71%.
28. Some of these effects have already been anticipated in the micro-modelling of the schemes
that operate in Zhenjiang and in Jiangsu province. The medical expenses for all age
groups are projected to increase from 2002 to 2006, with total payments per retiree
reaching RMB11,316 in 2006. The average growth rate in clinic expenditure will be an
estimated 8.24% in 2006, with hospital expenditure growing at 9.17%. The analysis also
shows that the rate of drawing on individual medical savings accounts will fall by 2.8%
from 2002 to 2006. The unified fund will be paying about 60% of all retiree medical
expenses by 2006, compared with 35.25% in 2002 (Xiong et al., 2003).
29. Following the introduction of its experimental health insurance scheme in 1997, Nantong,
a city with a relatively high per capita income and high insurance coverage, was forced
to decrease its contribution rates in 1999, and it also reduced the benefits for out-patient
care (Institute of Development Studies, 2003).
30. One indicator of this problem can be found in national data from 1990 to 2000. The
rate of admissions to hospitals and health centres per 100 out-patient and emergency
room visits rose from 2.01 to 2.44, which may have signalled that the attendance of sicker
Notes 493
31.
32.
33.
34.
35.
36.
37.
38.
39.
40.
41.
people at these hospital-affiliated clinics leads to higher admission rates to hospitals, or

that the primary care services are not identifying chronic diseases early. Efficiency of the
Chinese hospital system: policies to reduce inappropriate use and expenditures. Institute
of Health Economics and Technology Assessment, China Health Economics Monograph No
2, December 2000, edited September 2001.
The top six causes of death in China are non-communicable diseases, with infectious
diseases ranked seventh.
This section is based on two earlier studies completed in 2002: PF Gross (2002).
International trends in health care financing and health insurance: changing the incentives on
both the supply and demand sides in Asian nations. Hong Kong, May 2002; and PF Gross
(2002). The health system of Hong Kong in 2002: trends, imbalances and policy options. Hong
Kong, May 2002.
This estimate follows acceptable practice in which first the cumulative annual growth rates
in nominal health care expenditure for population growth are adjusted, and then for
wage and price inflation using available price indices. The residual (the annual growth
rate in nominal expenditure, less these two annual growth rates) is then assumed to be
the rate of growth due to technological intensity. To obtain the percentage contribution
of the three drivers, each of the three annual growth rates is divided by the growth rate
for nominal expenditure, and multiplied by 100. However, this is a very crude method
for estimating the last growth rate, and it may not be capturing the effects of technology
alone in the residual. The technique also does not allow for interactions between the
three components, so it may be overstating the effects of technology. Moreover, it cannot
separate the effects on the nominal expenditure growth of the two sub-components of
technological intensity. To partly redress this last problem, the annual growth rates of
per capita visit rates and the number of tests ordered per visit to two technologically
intensive diagnostic services can be estimated.
Although rising household income could explain the increased use of all health care,
the charges at Hospital Authority hospitals were minimal until recently, which led to a
form of consumer moral hazard.
OECD Health Data 2001 indicates that during 1999 the ratio was 3.9 in Australia and 2.8
in Sweden.
In Australia, over 50% of the use of acute hospitals is by same-day patients.
Australias rate in acute hospitals was about 22% in 2000.
The rate was 2.3% in 2002 and 3% in 2003 (Hong Kong 2003-2004 Budget, March 2004).
In March 2004, the 2004-2005 Budget predicted growth of 4.5% over the medium term,
but the cyclical recovery will not reduce the structural budget deficits until government
spending is cut. See, TDC. Hong Kong Budget; no surprise. 11 March 2004. Accessed
December 2004 at www.tdctrade.com/econforum/dh/dh040301.htm.
Hong Kong Economic and Trade Office. Highlights of the Hong Kong 2003-2004 Budget.
New York, HKETO, 5 March 2003. This budget also indicated the intent to cut
government expenditure from 22.3% of GDP to below 20% in 2006/07 as part of a threepronged strategy to boost the economy, cut expenditure and raise revenue.
The Hong Kong Academy of Medicine claims that 8-9 years are required, but this duration
could be accommodated by three 3-year terms or two 4-year terms.
In Hong Kong, there is a perception that the private health sector is small, unpredictable,
expensive and not very innovative. This may be valid, but it should not justify the dismissal
494 Notes
42.
43.
44.
45.
46.
47.
48.
49.
50.
51.
52.
53.
54.
of all policy options that involve an expanded private hospital sector. It is more reasonable
to expect that the private hospitals will have a supplementary role as in the UK (where
they are about 12% of the hospital market). It is also reasonable to expect that in time
specialists who are now in Hospital Authority hospitals will privatise some specialist
hospitals with government support, and that some private hospitals might create new
accident and emergency departments if new health insurance arrangements and charges
for accident and emergency services by the Hospital Authority were to be instigated.
This was foreshadowed by early moves in obstetrics and elective surgery in 2002 (Parry,
2002).
The consultants were advised that the incomes of non-specialists had dropped.
The US developers of the resource-based relative value scale have recognised that the
fees paid to different medical specialties should reflect the average resources that are
consumed in an efficiently organised hospital clinic, private office or emergency
department, and that the fees should vary within each of these sites of care.
These measures are being trialled in private sector contracts between some health funds
and hospitals in Australia and New Zealand in 2005.
This data excludes mentally infirm, mentally handicapped, infirmary and rehabilitation
patients.
The Social Welfare Department budget grew 600% between 1993/94 and 2003/04.
The Hospital Authority has signalled the need for partnerships of government and private
hospitals in obstetrics and elective surgery. (Parry, 2002).
It is called anticipatory case management because the process is attuned to recognise
signals that the individual is likely to need institutional care unless the case manager
initiates preventive action or encourages health promotion.
At the November 2004 meeting of the Hospital Authority Board, the new Secretary of
Health, Welfare and Food, Dr York Chow, indicated that one of the six priority issues to
be addressed was the development of an integrated community-based service structure
with appropriate alignment of service boundaries with the Department of Health and
Social Welfare Department at district level. When asked by the Chairman when the
proposed regional structure could be completed, Dr Chow replied that an
interdepartmental committee would be assembled in the near future.
The Elderly Commission appointed by the Chief Executive has a consultative role in the
development of guidelines for the Hospital Authority, the Social Welfare Department and
the Department of Health. For a useful discussion of other issues in ageing in Hong Kong,
see Chan and Phillips, 2004.
If Hong Kong decides to free up infirmaries, then more nurses will be available for elderly
care. There is evidence that nurses who are recruited from Guangdong province are not
always well trained.
This policy option deserves careful review, given new data from US surveys which show
that informal care provided to older adults can reduce home health care and out-patient
surgery and delay entry into institutional care. The study also provides tentative estimates
of the effects of tax credits on adult child care by elderly parents. (van Houtven and
Norton, 2004).
Todays commercial medical insurance is basically a short-term product, but the public
may be prepared to pay for long-term insurance if the government sets the appropriate
tax framework and policy goals. Group medical insurance in Hong Kong has produced
the lowest profit rates in recent years (less than a 5% margin).
Notes 495
55. This observation does not diminish the action of government health authorities and
universities to offer short courses on health financing to government officials. However,
such courses can offer only a superficial overview of developments in health financing
in other nations.
56. Some of the progress perceived by Hospital Authority officials is summarised in the
Hospital Authoritys Minutes of the Hospital Authority Board Meeting held on Thursday
23 September 2004.
57. Other Hospital Authority concepts of paying for care are outlined in its 2001/02 annual
plan (Hospital Authority, 2001).
58. The government also commissioned an academic study by the London School of
Economics between June and December 2003. The study was a review of the literature
on health financing options and was not intended to propose costed models of care.
59. The report indicates that for those with catastrophic costs, the MSA would not be able
to meet all costs and that an insurance scheme would be required. This is the Singapore
Medishield equivalent but cutting in at an older age (Health, Welfare and Food Bureau,
2004).
60. Table 3.1 of the report (p. 15) shows that Hong Kongs personal income tax rates (highest
rate 16%) is 11 percentage points less than that of Singapore, 28% less than that of
mainland China and 23% less than that of Taiwan (all of which use medical savings
accounts). Hong Kongs health share of GDP (5.5%) is also less than those of these three
nations, in addition to Japan and South Korea. Table 3.2 (p. 16) shows that general
taxation funds 54% of Hong Kongs health care, which is 2-7 times more than these other
five nations (Health, Welfare and Food Bureau, 2004).
61. The resulting effects on bed-days of hospital care are predictable; the bed-day rate per
1,000 population for the age groups of 75-79, 80-84 and 85+ years were 3.5, 4.5 and 6
times greater than for the age group 60-64 years. (Health, Welfare and Food Bureau,
2004).
62. This might be best initiated in a White Paper that discusses intergenerational needs for
the next 50 years. The Australian debate on the subject began with a Treasury Paper on
this theme released with the federal budget on 14 May 2002. The two subsequent budgets
continued the theme.
CHAPTER
1.
2.
3.
18
Hong Kongs health accounts were officially known as domestic health accounts
(DHAs), instead of being given the moniker national health accounts, out of
deference to the Special Administrative Regions specific status. The Chinese mainland
has been producing national health account estimates since the early 1990s.
The methods and data sources that were used to produce these estimates are such that
it should be feasible to easily produce comparable estimates for one or two years in each
of the preceding decades. This might be of interest to future analysts of the historical
evolution of Hong Kongs health system.
The headline total of total domestic health expenditure in the Domestic Health Account
estimates includes spending on education and training, an item that was later excluded
from that which the OECD (2000) defined as total expenditure on health. Spending on
this item accounted for 6 to 7% of total spending, and thus total health expenditure
according to the new OECD (2000) definition would have been 3.7 to 4.3% of GDP
between 1990/91 and 1996/97.
496 Notes
4.
5.
6.
7.
This assumption of increasing private spending was in fact disputed by many in the private
sector, who complained of declining revenues and patients.
The Domestic Health Account estimates led the Census and Statistics Department to revise
its methodology for the estimation of private medical expenditure in the income accounts.
The critical difference of this approach is that the Domestic Health Account estimates
of the level of total household spending are assumed to be more reliable than estimates
that are based solely on household survey data. In fact, there is approximately a 40% to
60% difference in the levels of out of pocket spending reported in the household
expenditure surveys of the Census and Statistics Department and that which was estimated
in the Domestic Health Accounts.
The Domestic Health Account results were published in 1998 as Special Papers that
accompanied the main Harvard Consultancy Report, and were made available to the
public both in print and through the Bureaus website. The website, moreover, made
publicly available all of the spreadsheets that comprised the Domestic Health Accounts
database, in an exercise of commendable transparency.
CHAPTER
1.
The projected health expenditure is based on the data of 1991-1996, a period in which
the public health care sector grew strongly as a result of extensive investment in new
facilities and hospital beds to satisfy the long suppressed potential demand of the 1980s.
The establishment of Hospital Authority in the early 1990s may represent a one-time
structural shift in expenditure.
CHAPTER
1.
19
21
Hong Kong is a low tax economy: the top marginal personal tax rate is 16%, and the
corporate tax rate is 20%; less than one-fifth of the population pays tax on earnings and
there is no sales or value-added tax.
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Index
Access to health care 9, 22, 41, 82, 84, 196,

333, 452
availability 44, 97, 148, 154, 227, 312, 330,
390, 397, 406, 458, 462
equity issues 33, 36, 42, 45, 47, 179, 370,
402, 441, 450, 459, 463, 473, 480
organization of health care 188, 190192,
194, 298299, 307, 324, 374, 388
payment systems 189, 340, 346, 348, 352,
355, 414, 466
quality of health care 33, 174, 197, 311
312, 313, 412, 464
Accident and Emergency 24, 25, 142, 158,
191, 202, 228, 230, 233, 236, 238, 243, 293,
408, 409, 466, 494
Accreditation 180, 205, 243, 262, 328, 329,
333335, 416, 489
Admission 22, 25, 69, 73, 75, 130, 131, 153,
154, 162, 170, 171, 178, 196, 200, 206, 213,
233, 235238, 240, 245, 246, 261, 294, 300,
347, 353, 391, 401, 403, 406, 407, 408, 413,
414, 462, 474, 477, 492, 493
Adverse selection 37, 38, 158, 343, 345, 365,
380, 394, 443, 455
Advertising 168, 264
Ageing or ageing population 9, 13, 28, 61, 62,
69, 71, 72, 73, 74, 76, 77, 78, 92, 95, 96,
98, 106, 145, 181, 184, 224, 226, 228, 243,
245, 247, 249, 250, 251, 290, 291, 294, 365,
379, 396, 397, 404, 410, 413, 417, 436, 443,
444, 448, 450, 453, 455, 461, 463, 467, 494
Allocative efficiency 30, 377, 441

Autonomy
patient/individual autonomy 43, 44, 45,
48, 55, 56, 57, 58, 59
professional autonomy 29, 30, 40, 156,
210, 219, 220, 255, 274, 285, 286, 292,
295, 327
Avian influenza 25
Bird flu, see avian influenza
Births 7, 62, 63, 64, 68, 69, 71, 72, 73, 76, 78,
79, 80, 487
British colonisation of and influences in
Hong Kong 18, 120, 203, 233, 340, 482
Budget 10, 18, 24, 77, 83, 90, 113, 114, 119,
131, 146, 155, 161, 167, 179, 182, 183, 185,
202, 203, 205, 208, 211, 217, 219, 224, 240,
246, 305, 316, 324, 325, 331, 336, 344, 351,
353, 354, 355, 356, 360, 364, 374, 377, 379,
386, 395, 400, 401, 403, 410, 411, 412, 414,
416, 417, 420, 423, 428, 429, 432, 436, 444,
450, 451, 452, 453, 457, 458, 459, 470, 475,
493, 494, 495
Burden of disease 111, 145, 383
Capitation 154, 210, 212, 216, 352, 356, 377,
378, 385, 400, 402, 470
Carer 91, 225, 230, 239, 307, 316, 489
Case mix 159, 220, 334, 352, 394
Catastrophic illness 201, 221, 348, 376
Chadwick, Edwin 118, 119
536 Index
Chadwick, Osbert 120, 121
Centre for Food Safety 141
Centre for Health Protection 25, 139, 181,
364, 465
Chinese Medicine Council 489
Chinese medicine 18, 20, 23, 82, 95, 104, 105,
141, 143, 144, 146, 150, 351, 373, 376, 425,
438
Ching, Henry 169
Choice, see patient choice
Chow, York Yat-Ngok 26, 92, 141, 201, 386,
459, 485, 494
Chronic illness or conditions
compression of morbidity 376
elderly people 224, 225, 226, 227, 231,
235, 245, 249
expenditure 28, 38, 164, 221, 363, 365,
397,
financing arrangements 23, 347, 373, 380,
407, 417, 453
health care needs 10, 46, 47, 50, 145, 202,
408, 448, 456, 485
health care provision/utilisation 30, 174,
221, 230, 294, 391, 403, 474, 475, 476,
493
patient support groups 82, 88, 89
prevalence increasing 37, 144, 181, 183,
291, 406
Chung, Sze-Yuen 169
Civil servants health care 19, 83, 102, 345,
395, 406, 415, 416, 423, 425, 438, 440, 492
Clinical governance 138, 173, 205, 206, 215,
324, 327, 328, 329, 330, 332, 333, 335, 336,
481, 489
Clinical practice guidelines 330, 331, 332, 336
Clinics 20, 96, 105, 128, 141, 456
charges (public sector) 162164
Chinese/traditional medicine 104, 107
general outpatient (public sector) 21, 106,
142, 146, 192, 219, 226, 293, 294, 353,
408, 457, 462, 465
genetic counselling 141
in Chinese villages 103
in urban centres (China) 406, 407, 493
management of 188, 189, 196
private 100, 161, 174, 216, 240, 256, 360,
400, 408, 415, 425, 426, 428, 431, 436
smoking cessation 299

specialist outpatient (public sector) 142,
146, 161, 165, 236, 293, 408, 438
Taiwan 401
Co-insurance 398, 405, 472
Commercial insurance plans, see private
insurance
Commission for Healthcare Improvement
and Audit 451
Communicable diseases, see infectious
diseases
Compartmentalised system 23, 154, 155, 201,
352, 448, 449, 450, 459
Competition 27, 30, 40, 98, 154, 177, 178,
203, 209, 211, 214, 216, 219, 221, 240, 373,
381, 399, 402, 436, 441, 442, 451, 455, 459,
463, 464, 472, 481, 491
Comprehensive Social Security Assistance
119, 345, 380, 390, 414, 440
Confucianism 52, 54, 59
Consultation documents
Building a Healthy Tomorrow 155, 204, 386
Harvard Report 13, 17, 25, 42, 86, 138, 146,
153, 196, 201, 208, 223, 271, 273, 274,
275, 284, 303, 344, 357, 373, 374, 375,
376, 379, 380, 381, 389, 407, 412, 416,
431, 432, 435, 444, 447459, 461, 491
Health for all the way ahead, see Working
Party on Primary Health Care
Lifelong Investment in Health 24, 376, 377,
380, 435, 447, 462
Scott Report 21, 145, 169, 200
Towards Better Health 22, 23, 25, 380
Consumers of health care 10, 30, 31, 34, 35,
38, 81, 173, 177, 211, 217, 219, 315,
321, 324, 330, 342, 344, 345, 348, 360,
367, 373, 381, 382, 395, 412, 471, 472,
479481, 492
Consumption of health care see also ecology
of health care 31, 38, 42, 48, 55, 98, 106,
153, 324, 346, 347, 348, 349, 350, 351, 352,
363, 365, 376, 385, 401, 403, 408, 416, 420,
445, 471
Continuing medical education (CME) or
continuous professional development
(CPD) 117, 332, 466
Index 537
Continuous quality improvement or CQI
170, 178, 333
Contract medicine, see managed care
Co-payments 97, 98, 210, 221, 344, 347, 373,
382, 394, 398, 401, 403, 467, 469, 470, 472
Cost of health care
administrative 37, 39, 161, 190, 192, 220,
296, 349, 381, 490
average 384, 406
avoidable 126, 138, 296
cost control 40, 58, 98, 102, 153, 157, 159,
169, 211, 214, 240, 294, 298, 299, 300,
301, 344, 348, 354, 355, 365, 376, 377,
401, 427, 435, 441, 442, 452, 462, 466,
471, 472, 479, 481
cost data 407, 414, 420, 421, 425, 429
cost-effectiveness 32, 35, 44, 46, 48, 50, 59,
111, 127, 147, 153, 178, 182, 201, 209,
211, 212, 220, 221, 237, 244, 245, 250,
252, 295, 297, 298, 316, 331, 348, 373,
384, 394, 396, 442, 445, 474, 475, 476,
477, 479, 481, 483
cost of reform 157, 396, 483
cost of services 20, 22, 30, 33, 37, 38, 39,
46, 77, 82, 114, 156, 162164, 167, 182,
190, 204, 205, 219, 247, 261, 309, 346,
348, 385, 402, 404, 405, 406, 407, 408,
440, 455, 462, 472, 475, 479, 491
cost sharing 31, 54, 157, 243, 343, 348,
400, 453, 454, 470, 471, 472, 482
fixed 159, 167, 218, 383, 384, 411
litigation 90, 257, 259, 260, 285, 289, 290
marginal 98, 344, 382, 383, 384, 385
opportunity 5, 193, 351
payment systems 34, 43, 97, 100, 103, 245,
348, 366, 367, 373, 410, 412, 416, 456,
475, 491
production 30, 102, 161, 166, 205, 215,
244, 378, 386
reform efforts 148, 177, 200, 401, 402, 464,
465, 495
rising costs 6, 9, 10, 28, 29, 36, 38, 39, 95,
96, 98, 102, 145, 182, 210, 224, 335,
336, 344, 371, 385, 386, 410, 417, 429,
482, 483
time 161, 174, 178, 193, 195, 259
Customer satisfaction, see patient satisfaction
Data
access to/ownership of patient records 10,
85, 488
collection and analysis of routine health
and health care statistics 35, 131, 174,
175177, 180, 181, 287, 310, 315, 322,
323, 324, 332, 333, 334, 352, 355, 357,
371, 375, 379, 402, 403, 415, 420, 476,
477
Deductibles 344, 348, 373, 382, 405, 454, 469,
472
Defensive medicine 260, 261
Demographics, see also ageing
ageing and demographic trends in Hong
Kong 6180
demographic transition 10, 11, 144145,
181, 223224, 365, 379, 383, 385, 386,
396, 448, 467, 468, 485
Dentists 150, 424, 465, 466
Department of Health 18, 21, 22, 25, 69, 83,
92, 93, 106, 111, 112, 119, 130, 139, 141,
142, 146, 149, 180, 183, 196, 202, 206, 219,
221, 227, 240, 284, 288, 301, 318, 335, 340,
378, 379, 388, 391, 402, 408, 409, 414, 423,
430, 431, 432, 437, 457, 462, 465, 466, 488,
494
UK counterpart 306, 307, 332, 489
Dependency ratio
child 61, 62, 63, 73, 74
elderly 9, 61, 62, 73, 224
total/overall 62, 73, 78, 80
Diabetes mellitus 28, 88, 156, 174, 178, 225,
227, 294, 307, 313, 363, 373, 448, 453, 476
Diagnosing health-sector problems
control knobs and 27
health system performance 146, 447, 448,
452
reform efforts and 482
Diagnostic services 228, 230, 233, 261
as source of revenue 168, 351, 400
expenditure on 424, 433
high-technology 182, 204, 409, 456, 493
overuse 102, 261
Diagnosis-related groups (DRG), see also
patient-related groups (PRG) 353, 354,
373, 403, 491
538 Index
Disabled people/families
access to health services 42, 485
health or social care costs and their
financing 53, 247
Disease outbreak, see epidemic
Disease prevention, see also preventive care
92, 110, 179, 227, 310, 363, 364, 394, 437
Distributional aspects of health policy, see
equity
Doctor advertising, see advertising
Doctor consultations, see clinics
Doctor shopping 82, 142, 153, 155, 156, 161,
187198, 212
Doctors-patient relationship 214, 268, 286
Domestic Health Accounts or DHA 139, 341,
355, 357, 363, 364, 419433, 495, 496
Harvard Report 357, 421
local institutionalisation 357, 431, 432
OECD standards 357, 422, 423
Drugs
adverse events 156157, 174, 194, 231,
296, 477
approval and monitoring 1112, 105, 142,
174
benefit coverage 84, 90
cost-effectiveness assessment 182
cost escalation 10
inappropriate or excessive use 168, 257,
261, 264
labelling 85, 90, 269, 279
new and expensive 32
polypharmacy 239
prescription cum dispensing 142, 156157
pricing 398, 400, 403, 456
revenues generated from 22, 24, 25, 139,
163164, 407
substitution effects 377
Ecology of health care 363, 391
Economics of health care reform
changing expectations 10, 28, 69, 81, 170,
172, 194, 195, 260, 269, 280, 291, 294
296, 307, 316, 331, 386, 406, 427, 444,
448, 462, 468
contracting 24, 36, 97, 102, 139, 157, 161,
203, 209, 210, 213, 216218, 244, 352,
378, 383, 398, 401, 413414, 451, 456,

464, 494
control knobs associated with 27
cost of health care see Cost of health care
economic stakeholders 24, 168, 176, 208,
297, 301, 305, 307, 310, 316, 320322,
324325, 327, 329, 335, 431, 433, 465
effects of insurance see Insurance
elasticity of demand 114
financial risk protection see Risk protection
market approaches 12, 17, 24, 27, 3031,
3436, 3738, 40, 42, 43, 45, 58, 83, 96,
98, 106, 126, 151, 154, 158, 160, 165
169, 177, 182, 203, 210211, 214221,
306, 365, 378, 380382, 384, 388, 402,
404, 407, 411, 415416, 436437, 441
443, 461, 463464, 470471, 475, 479
480, 483, 485
monopolies 18, 158, 206, 472
moral hazard see Moral hazard
redistribution 31, 34, 38, 39, 348, 370,
379380, 385, 441, 463, 471
resource allocation 46, 55, 144, 308, 317,
357, 441
Economies of scale 166, 218, 343
Efficiency in health care
allocative efficiency 30, 43, 58, 98, 178,
204, 206, 210, 215, 349, 377, 384, 388,
396, 416, 483, 485
consumer-driven health care 177, 474
contracting out 244
imperfect markets 96, 403, 411, 451
managerial or policy interventions and 6,
60, 141, 201, 322, 458459, 463464,
466
market competition and 30, 40, 211, 436,
455, 456, 471472
as performance measure 12, 160, 248249,
298, 324, 328, 348, 355, 365, 378, 385,
389, 391, 393, 395, 435, 441445, 452,
469, 482, 493, 494
special considerations 6, 474475
technical efficiency 97, 155, 161, 174, 183,
187193, 196, 292, 329, 341, 343, 374,
399, 491
Egalitarian liberalism, see liberalism
Index 539
Elderly people, see ageing
Empiricism and health care reform 6, 28, 46,
296, 299300, 340, 342, 352, 375, 383, 391,
395
Employer-provided medical benefits 139,
394395, 439
Entitlement to health care see Health care/
services entitlement
Environmental hygiene 2021, 114, 121, 141
Epidemic (communicable and noncommunicable) 82, 125, 126, 127, 130,
131, 137, 230, 271, 363
avian influenza 25, 180
historical/colonial Hong Kong 19, 120,
121
pandemic influenza 180
SARS 25, 81, 86, 91, 92, 142, 143, 171, 179,
180, 181, 395, 449, 465
EQUITAP 12, 365
Equity
efficiency and 160, 395, 483
financing health care 27, 28, 33, 37, 179,
367, 370, 429, 441, 449, 474, 491
general taxation 368
health sector reform 31, 32, 40, 366, 391,
393, 471
horizontal equity 189, 193, 367, 369, 370
medical savings accounts 348, 385, 482
out-of-pocket payment 444
performance goals 6, 12, 298, 324, 355,
365, 369, 394, 435, 436, 444, 452, 479,
483, 485
private insurance 346
provision/access 27, 28, 32, 42, 116, 122,
179, 190, 191, 193, 194, 196, 330, 370,
402
relative vs absolute equity 31, 32
risk protection 36, 374
social insurance 39, 401, 406, 453
vertical equity 31, 347
Estate Doctors Association 374
Ethics
professional 262, 277, 279, 287
of health care reform 3, 2740, 4160, 309,
381, 479
Executive Council 114, 169, 255, 390
Export of health care services 165, 167
Fang, Harry 489

Fees and charges 4, 22, 24, 25, 33, 34, 35, 85,
86, 87, 90, 92, 139, 157, 160, 161, 168,
189, 193, 224, 228, 325, 341, 347, 350,
373, 375, 376, 378, 383, 398, 430, 431,
439, 440, 443, 444, 450, 457, 458, 461,
465, 466, 476
private sector 195, 204, 213, 217, 264, 354,
449
public sector schedule 162164
Fee-for-service 97, 139, 153, 160, 192, 210,
212, 213, 216, 217, 219, 245, 350352, 353,
354, 377, 378, 400, 401, 403, 407, 436, 438,
449
Financial burden or risk, see also access to
health care; equity 78, 97, 192, 201, 202,
213, 316, 339, 350, 353, 367, 376, 379, 404,
439, 440, 441, 450, 456, 458, 459, 462, 466,
471
Food safety 141, 313
Freedom of choice, see patient choice
General outpatient department (GOPD), see
clinics
Global budget 211, 354355, 386, 400, 403
Government general revenue or GGR 13,
189, 340342, 343, 344, 347, 349, 367, 373,
389, 444
distribution of burden 375
health sector reform 376, 379, 382, 383,
386
Governments role in health care reform 17
26, 43, 44, 46, 47, 48, 52, 53, 78, 146,
314315, 318, 319, 322, 324, 325326,
329, 371, 374, 375, 376380, 385, 386,
404405, 436, 452, 461468, 483
accountability 334
as facilitator in the export of health care
services 161, 166
organization of health care 57, 58, 100,
106, 155, 157, 160, 203, 218, 226, 244,
354, 364, 382, 383, 475
regulation 5, 30, 39, 96, 98, 100, 105, 127,
142, 158, 173, 211, 287, 288, 290, 332,
345, 346, 381, 388, 402, 472, 476, 478
114, 161, 247, 340342, 346, 369, 397,
540 Index
398, 402403, 407, 411412, 435, 436,
438, 473
Gross domestic product or GDP 3, 100, 139,
202, 219, 247, 296, 358, 359, 365, 366, 371,
386, 387, 388, 401, 403, 410, 412, 415, 420,
426, 427, 428, 429, 442, 444, 450, 452, 457,
462, 490, 492, 495
Harvard Report 13, 17, 138, 196, 223, 376, 432,
447460
key findings 146, 201, 208, 273275, 284,
412, 435, 444, 491
financing options 25, 344, 379, 389, 407,
416
Health Security Plan 375, 381, 453454
Medisage 376, 389, 453, 455, 458
recommendations 86, 153, 271, 303, 374,
375, 380, 461
public response 373, 374, 431
Health Integrated Systems 155
Hay, Joel 380382, 384
Health and Medical Development Advisory
Committee or HMDAC 155, 157, 198, 201,
204, 207, 208, 321, 386, 388
Health and Welfare Bureau or Health,
Welfare and Food Bureau (HWFB) 6, 86,
111, 112, 114, 138, 139, 141, 142, 146, 179,
183, 196, 347, 357, 370, 378, 391, 416, 421,
422, 423, 432, 433, 461, 496
Health expenditure 10, 7778, 96, 97, 101,
106, 146, 176, 179, 182, 208, 211, 244, 248,
342, 345, 347, 349, 385386, 391, 394, 397,
401403, 406411, 417, 445, 449, 459, 470,
472, 474, 475, 477, 482, 483, 491, 492, 493
Domestic Health Accounts 341, 346, 355
370, 419445, 495496
Hospital Authority 149, 169, 360, 372
relative to GDP 139, 247, 358, 360, 366,
401, 450, 462, 490
relative to recurrent public expenditure
319, 395396, 444, 450, 452
projection 371, 386389, 392393
Health care needs 43, 103, 224, 294, 410, 436
Health care utilisation 35, 69, 77, 154, 161,
174, 176, 187, 189, 191, 193, 196, 211, 213,
214, 216, 233, 325, 340, 345, 350, 352, 354,
358, 368371, 381, 386, 391, 394, 398, 401,

417, 467
Health care workforce 219, 251
nursing 292, 295, 297, 298, 299, 301
Health care/services
access see Access to health care
case mix of services 220, 334, 352, 394
competition see Competition
demand for services 10, 20, 28, 30, 32, 35,
69, 73, 77, 81, 98, 153, 160, 179, 188,
191, 192, 223, 224, 243, 248, 294, 344,
350, 355, 371, 377, 378, 386, 394, 396,
400, 408, 410, 416, 417, 444, 451, 459,
479481, 496
entitlement 4, 22, 31, 32, 44, 84, 224, 247
248, 381, 382, 394, 406, 438, 473
financing 1214, 2124, 2729, 3334, 37,
39, 4142, 44, 47, 5960, 69, 78, 86, 92,
9798, 101103, 137, 139, 145147,
151, 154, 157, 177, 179, 195, 203, 208,
209211, 218, 220221, 223, 225, 240,
243245, 247248, 252, 291, 316318,
337 onwards (Part IV)
inefficiency 6, 96, 98, 161, 189193, 196,
215, 385, 441442, 464, 469, 471, 474,
482483
organisation and management 15, 18, 26,
40, 42, 44, 47, 59, 137 onwards (Parts
II and III), 346, 353, 373, 377, 384, 397,
398, 421, 449, 452453, 456, 461, 466,
485
out-of-pocket payment 4, 34, 39, 97, 99,
103, 106, 139, 157, 341, 346347, 348
349, 355, 367368, 373, 381383, 390,
402, 410, 424, 428, 436438, 440, 444,
450, 461, 462, 496
pricing policy 22, 31, 35, 38, 9899, 161,
205, 209210, 213214, 216217, 219,
248, 345, 348, 350, 373, 380, 397398,
400, 403, 407, 409, 412, 414, 426, 471
472, 475, 479480, 493
quality see also continuous quality
improvement and/or quality indicators
7, 10, 23, 28, 3236, 40, 8485, 93, 103,
146, 156, 161, 167168, 169178, 203,
209212, 214216, 219220, 233, 242
Index 541
247, 255 onwards (Part III), 350352,
354, 360, 365, 373374, 377, 380, 382
383, 385, 386, 388391, 395, 397, 399,
403, 411, 414, 416, 441, 445, 450, 452,
458459, 463467, 469, 471472, 476
rational use 30, 37, 43, 45, 114, 151, 316,
320, 445, 466, 482483, 488489
reluctance to seek 394, 457
357, 441
service delivery system 6, 13, 139, 145, 149,
155, 160, 173, 195, 204, 316, 373, 386,
464, 465
unit costs, see also Diagnostic-related
groups and/or Patient-related groups
28, 215, 244, 386
Health Data (OECD) 421, 442, 493
Health education 83, 148, 201, 236, 364, 395
Health care facilities see clinics; hospitals
Health for all the way ahead, see Working
Party on Primary Health Care
Health informatics
computerisation 174175, 197, 208, 209,
298
Hospital Authority 333
private-public interface 157, 221
Health maintenance organisation or HMO
155, 157, 174, 209210, 213, 218219, 345
Health professionals, see also health care
workforce
autonomy 40, 156, 210, 220, 255, 274,
285286, 292
competition see health care/services
competition
income 158159, 214, 220, 350352, 412,
472, 474, 482, 494
productivity 169, 192, 197, 201202, 211,
353, 386, 400, 406, 465, 466
relative power 97, 354, 374, 377, 483
Health promotion 110, 123, 148, 227, 245,
247, 304, 310, 363
Health Protection Accounts or HPA, see also
Medical Savings Accounts; Lifelong
Investment in Health
Health sector, see health care/services
Health status
equity issues and 365, 381
ethical considerations 32, 36
improvements in 69, 76, 401
measuring 155, 159, 184, 227, 251, 304,
308, 313, 325, 477
performance goal 12, 311312, 318, 322,
483
utilisation of health care 190, 195, 443
Health care seeking behaviour see also ecology
of health care 393394
Health targets 181, 303326
Ho, Lok-Sang 382
Home care 225, 231, 239, 243, 244, 246, 364,
424, 455
Hong Kong Academy of Medicine 23, 147,
149151, 174, 184, 199, 221, 261262, 286,
332, 379, 493
Hong Kong College of Community Medicine
15, 184
Hong Kong College of Family Physicians 149
Hong Kong Medical Association 84, 88, 160
161, 199, 261, 275, 280, 354, 374, 485
Hong Kong Medical Council 150, 171, 262
code of practice 204
specialist register 15, 466
Horizontal equity see Equity horizontal
equity
Hospital Authority or HA
accounting 354, 385
budget/expenditure 11, 17, 22, 24, 25, 77,
119, 139, 146, 147, 149, 159, 169, 200
201, 202, 224, 354, 360, 371, 374, 377,
386, 410, 423, 437, 444, 451, 453, 457,
458, 465, 485, 495
clinical governance 8485, 90, 172, 173,
182, 256, 261, 266, 268, 280, 281, 283,
284, 286, 288, 290, 292, 327 (whole
chapter), 415, 487, 489, 494
competition 36, 355, 380381
dual role of purchaser and provider 180,
365, 384, 388, 447, 451
efficiency 174, 463, 466
fees and charges 4, 85, 246, 382, 413, 440,
450, 493
542 Index
historical roots/establishment 18, 21, 83,
84, 145, 200, 272, 292, 360, 373, 426,
428429, 462, 496
managerialism 6, 15, 19, 9092, 142, 151,
167, 197, 218219, 235, 272
monopoly 22, 363
organisation/reorganisation 24, 36, 106,
142, 146, 177, 189, 196, 201, 374, 456,
457, 463, 465, 494
outsourcing 157, 395, 414, 416
postgraduate specialist training 146, 167,
203, 207
priority setting 25
private-public balance/interface 160161,
168, 199, 203204, 207, 243, 383, 412
414, 494
public health considerations 111, 117, 131,
151, 176, 180, 221
quality of care 11, 22, 169, 205, 266, 315,
319, 360, 450, 463, 489
services provided/utilisation 26, 42, 69, 71,
73, 75, 77, 142, 226, 228, 234, 238240,
340, 382, 408409, 437
staffing/staff benefits 202, 293294, 345,
395, 411, 438
Hospital Services Department 83
Hospitals
accreditation see Accreditation and/or Joint
Commission on Accreditation of
Health-care Organizations
drug pricing policies 403
fees and charges 85, 86, 92, 139, 160, 162
164, 204, 354, 376, 444, 466
fee schedule 97, 98, 157, 351, 373, 375,
378, 381, 384, 402, 412, 449
funding see Health care/services
financing
expenditure see Hospital Authority
budget/expenditure
high-technology interventions 200, 404,
412, 449, 456
incentives see Management of health
care incentives and/or Incentive
strategies
length of stay 211212, 235, 353354, 406,
413, 440, 474
management and administration 205, 230

monitoring and regulatory control see
Accreditation and/or Joint Commission
on Accreditation of Health-care
Organizations
occupancy rates 142, 235, 450, 491, 492
out-patient care 228, 236, 239, 293, 369
performance indicators 324
private 18, 19, 20, 24, 25, 93, 100, 142143,
166, 168, 199, 201, 202, 205207, 221,
228, 240, 256, 284, 296, 327, 329, 333,
335, 346, 350, 354, 360, 383, 391, 394,
409, 411, 412, 425, 450, 456, 474, 489,
491, 494
productivity see Productivity
public see Hospital Authority
quality of care see Health care/services
quality
reimbursement mechanism 101103, 139,
157, 210, 375, 384, 401, 407, 412, 474,
480, 491
staff numbers see Hospital Authority
staffing/staff benefits
surplus revenues 372, 401
user charges, see Hospitals fees and
charges
Household surveys
General Household Surveys 67, 176, 241,
408, 426, 429, 496
Thematic Household Surveys 143, 144,
345, 363, 391, 408, 417, 426, 429, 439,
440, 496
Hsiao, William 13, 23, 97, 138, 146, 154, 158,
159, 160, 274, 319, 344, 345, 347, 348, 350,
351, 352, 354, 363, 370, 373, 389, 394, 429,
435, 437, 444, 447, 452, 461, 482
Human resource management 293, 317, 333,
353, 378
Hypertension 28, 178, 225, 227, 476
Immunisation 82, 144, 155, 312, 313
Incentive strategies
corporatisation 399, 411
decentralisation 155, 158, 177, 182, 306
financial incentives 154, 156, 165, 209,
211, 212215, 246, 252, 339, 344, 388
390, 445, 453, 459, 479481, 491
Index 543
lack of 192, 219, 240, 342, 382, 438, 482
market approaches 158, 203, 378, 384
organisation 179, 187, 323, 441, 483
payment systems 347348, 350, 353354,
356, 398404, 456
regulation 196, 199, 212
to computerise 174
workforce and human resources
management 185, 203, 220
Income
household 4, 393, 493
inequalities 193
low 14, 33, 34, 38, 202, 242, 348, 386, 402,
405, 406, 438, 454, 490, 492
Inequalities see also equity 54, 115, 122, 323,
346, 474, 485
in access to services see also Access to
health care 193, 307, 348
Infant and maternal mortality rates 14, 21, 69,
70, 80, 121, 122, 383, 442, 462
Infectious diseases 3, 10, 115, 120, 180, 181,
183, 291, 313, 364, 407, 493
Information asymmetry 436
Informed consent 334
Innovation in health care reform 13, 158,
178, 250, 258, 323
In-patients, see hospitals
Insurance
adverse/risk selection 3738, 158, 343,
345346, 365, 380381, 394, 443, 455
catastrophic illness 221, 348
co-insurance 398, 405, 472
compulsory coverage 13, 22, 39, 247, 343,
375, 382, 385, 388, 399, 445, 453, 463
coverage 33, 37, 39, 58, 84, 97, 103, 111,
139, 189, 193, 195, 216217, 331, 344
345, 348, 353, 380, 382, 389, 392, 394,
399, 401, 402, 405, 407, 412, 419, 438,
440441, 443, 453, 480, 490, 492
employees and employers contributions
15, 23, 39, 95, 99, 101102, 343, 389,
438, 463, 492
government contribution 102, 405
payroll deductions 97
premiums 33, 34, 37, 39, 45, 9798, 103,
200, 210, 213, 217, 248, 341, 343347,
349, 352, 366, 374, 376, 380383, 389,

399, 401403, 405, 407, 410, 415, 443,
453455, 472, 490, 492
private see Private insurance
regulation 98, 346, 381, 472
risk pooling 3739, 339340, 346347,
365, 374, 379, 381, 388389, 435, 443
444, 453, 455, 459, 461, 467
social insurance see Social insurance
work-related, see employer-provided
medical benefits
uninsured persons 84, 219, 260, 343344,
365
Joint Commission on Accreditation of Healthcare Organizations (JCAHO) 180, 333
Joint-venture clinics or hospitals, see also
export of health care services 165, 218
Kant, Immanuel 31, 49, 395
Leadership in health care reform 117, 292,
321, 324325, 331, 374, 390
Leading causes of death 145, 328
Legislative Council 12, 84, 86, 89, 90, 92, 114,
119, 121, 180, 272, 274, 275, 281, 282, 330,
340, 385, 488
Leong, Che-Hung 92, 390
Liberalism, see egalitarian liberalism
Libertarianism 4344, 45, 118, 123125, 365,
395, 469, 471473, 486
Licensure
doctors 166, 167, 172, 261, 278
drugs/pharmaceuticals 12
homes for the aged 242
hospitals 206, 256, 335
insurers 217
Life expectancy 7, 14, 61, 62, 69, 70, 73, 77,
80, 148, 224, 383, 404, 424, 463
Lifelong Investment in Health see consultation
documents
Malpractice 172, 257, 259260, 284285
Managed care 6, 84, 139, 152, 153, 154, 209
221, 306, 373, 456
contract medicine 139, 209, 216, 217, 352
544 Index
health maintenance organisations or
HMOs 155, 157, 174, 209, 210, 211,
213, 218, 219, 345
insurance 345, 443
panels of doctors 154, 210, 213
provider payment 154, 348, 352, 377
Management of health care see Health care/
services organisation and management
Managerialism 173, 198, 266, 328, 332333
Market economy 5, 211, 345
Medicaid 245, 331, 351
Medical and Health Department
organisation of 21
discontent with 82, 203
reorganisation of 83
Medical care see Health care/services
Medical Development Advisory Committee,
see Health and Medical Development
Advisory Committee
Medical insurance, see Insurance
Medical savings accounts or MSA 23, 3739,
347349, 373, 375376, 379, 385, 388390,
394, 398, 404405, 407, 416, 443, 447, 453,
455, 457, 458, 461, 463, 469, 471, 474,
482483, 492, 495
Medical schools 15, 82, 90, 145, 149, 151, 167,
186, 268, 274, 378, 403, 451 474
Medical tourism, see Export of health care
services
Medicare 35, 42, 52, 245, 324, 348, 351, 353,
371, 382, 398, 474475
Monopolies 15, 18, 206, 380, 384, 472
Moral hazard 95, 98, 100, 102, 158, 161, 344,
347, 348, 350, 353, 365, 373, 382, 394, 400,
436, 442, 463, 485, 493
Morale problems
Hospital Authority 203
National Health Accounts, see Domestic
Health Accounts
National Institute for Health and Clinical
Excellence or NICE 182, 215, 221, 303,
331, 336, 451
Non-communicable diseases, see chronic
illness or conditions
Non-governmental organisations (NGOs) 88,

111, 112, 117, 127, 240, 314
Non-profit entities 97, 168, 381, 424, 428, 437,
491
Nuclear family 77
Nurses
qualification of personnel in private clinics
156
role differentiation and evolution 1516,
212, 243, 291301, 414, 455, 494
workforce 150, 290, 411, 415, 465, 488
Obesity 132, 312, 363
Occupancy rates see Hospitals occupancy
rates
Ombudsman, Medical 85, 92, 271, 284, 288
Operations research 189
Opportunity cost 5, 193, 351
Oregon Health Plan 22, 330, 475
Organisation for Economic Cooperation and
Development or OECD 148, 167, 296, 355,
357, 365, 377, 382, 401, 408, 419, 421423,
427428, 432, 433, 442, 462, 490, 493, 495
Outcomes of health care reform, see
performance of health sector
Out-of-pocket payments 4, 34, 39, 97, 99, 103,
106, 139, 157, 341, 346347, 348349, 355,
367. 368, 373, 381383, 390, 402, 410, 424,
428, 436438, 440, 444, 450, 461, 462, 496
Out-patients, see clinics
Over-prescription see drugs
Panels of doctors, see managed care
Patient satisfaction 10, 103, 153, 155, 159,
188, 192, 195, 196, 211, 245, 256, 259, 261,
269, 295, 308, 318, 322, 328, 353, 399, 475
Patients Charter 11, 84, 93, 286, 330
Patient choice 6, 10, 28, 33, 34, 35, 36, 37, 39,
40, 41, 44, 45, 46, 55, 84, 97, 99, 117, 154,
165, 179, 190, 201, 205, 209, 216, 218, 219,
247, 307, 319, 334, 345, 346, 360, 380, 381,
382, 384, 400, 450, 451, 453, 458, 462, 472,
473
Patient-related groups (PRG), see also
diagnosis-related groups (DRG) 354,
385
Index 545
Performance indicators
health targets see Health targets
Pharmaceutical industry 28, 182, 307, 308,
471, 474
Pharmacies and pharmacists 127, 151, 156
157, 207, 425
Politics of health care reform 27, 39, 114, 120,
322, 486
Population, see ageing; demographics
Population-based funding formula 159, 417
Practice guidelines, see clinical practice
guidelines
Prescription drugs 84, 87, 156157, 164, 239,
246, 261, 264, 351, 452, 489
Preventive care 31, 35, 42, 84, 117, 139, 153,
155, 178, 181, 188, 201, 202, 210, 211, 215,
221, 233, 245, 350, 364, 454, 456, 464, 465,
494
Pricing of health care, see economics of health
care reform
Primary care
Chinese medicine as see Chinese medicine
contract medicine 217
Estate Doctors Association see Estate
Doctors Association
financing 99, 351, 352, 353, 400, 454
gatekeeping 93, 142, 152, 153, 207, 212,
215, 336, 352, 398, 448
Hospital Authority clinics, see Clinics
in the UK 182, 203, 332, 352, 437, 449,
451, 464
nurses role 148, 151, 156, 158, 232, 238,
295, 465
private vs public sector see also Clinics
general outpatient (public sector) 100,
160, 207, 216, 226, 438
role in health system 13, 18, 21, 106, 142,
143, 144160, 177, 178, 189, 201, 210,
213, 246, 363, 376, 385, 407, 462, 465,
493
specialists in see Hong Kong College of
Family Physicians
Private health care providers
doctors see Clinics
hospitals see Hospitals private
quality see Health care/services quality
Private insurance 13, 33, 34, 37, 39, 41, 42,

43, 139, 195, 247, 341, 344346, 347, 349,
366, 367, 373, 380, 381, 382, 383, 385, 388,
394, 400, 412, 415, 424, 437, 445, 458, 459,
462, 467, 471
Productivity 44, 76, 138, 166, 169, 185, 192,
197, 201, 202, 211, 353, 365, 386, 400, 406,
444, 465466, 491
Provider payment
bonus 353, 400, 403, 407
capitation 154, 210, 212, 216, 352, 356,
377378, 385, 400, 402, 470
diagnosis-related groups see Diagnosisrelated groups
fee-for-service see Fee-for-service
hybrid formula 159, 250
patient-related groups see Patient-related
groups
per diem 139, 200, 353, 440
resource-based relative-value system see
Resource-based relative-value system
salary 99, 101, 203, 241, 353, 385, 400, 403,
407, 410
Public good 158
Public health 109133
academic 23, 170, 185, 357, 463
approach 4, 5, 109111, 137, 180, 183
184, 221, 342, 485
functions 111115, 142, 179183, 364, 425,
464, 465
organisation 5, 10, 21, 92, 115, 141, 175,
177, 183, 185186, 308, 462
workforce 141, 149, 181, 184185, 313
Public opinion 47, 57, 130, 180, 191
Public-private interface
outpatient services/clinics 204, 205, 207
Quality assurance, see also continuous quality
improvement 24, 26, 30, 138, 142, 165,
188189, 191197, 201, 205207, 251, 407,
409, 412, 451, 455456, 481
Quality indicators, see also performance
indicators 13, 159
Queue, see waiting time
546 Index
Rationing and prioritisation 22, 24, 27, 46, 47,
50, 182, 192, 195, 203, 215, 292, 304, 306,
315, 316, 320321, 323, 325, 330331,
333335, 377, 417, 438, 458, 479480,
482483
Rawls, John 31, 45
Referrals, see also ecology of health care;
clinics; hospitals 88, 99, 104, 105, 107, 153,
154, 160, 168, 188189, 191192, 193,
195197, 205, 230, 260261, 285, 388, 400,
449, 457
Reimbursement, see provider payment
Resource-based relative-value system or
RBRVS 159, 351, 352, 412, 494
Resources
allocation of 46, 50, 55, 102, 144, 218, 305,
308, 317, 357, 363, 376, 377, 396, 420,
441, 452, 454, 457
input 33, 34, 155, 304, 318, 351, 477
impact of resource constraint 11, 77, 147,
182, 211, 244, 246, 316, 324, 331, 336,
400
Risk pooling
financing health care 339, 365, 404, 435,
443444, 461
government general revenue 340
insurance
private 37, 39, 346, 375, 388
social 374, 453
inter-generational 379, 467
inter-temporal 381, 389, 391
medical savings accounts 38, 347, 455, 459
Risk protection 27, 28, 3639, 459
Salary, see provider payment
Scott Report see Consultation documents
Sen, Amartya 115
Severe acute respiratory syndrome or SARS
3, 4, 10, 17, 25, 81, 86, 88, 91, 92, 109, 118,
131, 139, 141, 142, 171, 179, 180, 181, 183,
207, 234, 291, 318, 363, 364, 395, 407, 449,
465
Singapore 15, 33, 38, 39, 95, 98, 104, 106, 126,
157, 167, 220, 221, 295, 348, 366, 379, 380,
388, 399, 437, 438, 470, 482, 495
ElderShield 347, 375, 389
MediFund 389
MediSave 13, 99, 100, 220, 221, 347, 349,
365, 375, 389, 398
MediShield 13, 99, 100, 221, 347, 375, 389,
398, 495
Smoking, see tobacco control
Social contract 43, 52, 171, 343
Social insurance 13, 14, 15, 27, 37, 39, 40, 95,
96, 97, 98, 100, 101, 102, 103, 106, 157,
195, 247, 308, 343344, 347, 352, 365, 366,
367, 368, 373, 375, 380, 381, 382, 389, 401,
437, 438, 443, 444, 447, 453, 454, 461, 462,
463, 470, 471, 491
Social welfare, see Comprehensive Social
Security Assistance
Stewardship, see clinical governance
Subvented
hospitals 21, 83, 117, 145, 169, 200, 220
homes for the aged 224, 225, 226, 236,
237, 242, 243, 244, 413, 414
Supplier-induced demand 35, 153, 154, 158,
195, 350, 353, 354, 373, 374, 378, 442
Switzerland, health system of 157, 381, 382,
385, 388, 470, 472
Targeting of public subsidies 25, 386, 430, 453
Taxation, see government general revenue
Technical efficiency 204, 374, 441
Technology diffusion 386
Tobacco control 5, 112, 114, 116, 121, 123,
124, 130, 132, 141, 299, 312, 313, 342, 394
Total Quality Management (TQM), see
continuous quality improvement
Towards Better Health see Consultation
documents
Traditional Chinese medicine, see Chinese
medicine
Tung, Chee-Hwa 201
Unemployment benefits, see Comprehensive
Social Security Assistance
Universal coverage, see also access to health
care 39, 97, 189, 203, 370, 389, 399, 438,
443
Universities, see medical schools
User charges, see fees and charges
Index 547
Utilitarianism, 32, 43, 44, 45, 59, 182
Utilisation of health services, see access to
health care; health care/services
Vulnerable households/groups, see access to
health care; Comprehensive Social
Security Assistance
Waiting time 25, 161, 165, 188, 189, 191198,
204, 226, 238, 243, 304, 377, 401, 416, 438,
443, 450, 458, 477
Working Party on Primary Health Care 18, 21

World Health Organisation (WHO) 4, 84,
100, 114, 137, 138, 145, 148, 171, 304, 308,
326, 328, 419, 432, 491
Yeoh, Eng-Kiong 6, 24, 92, 141, 155, 160, 208,
273, 280, 281, 289, 374, 458, 486

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(GLWHGE\

Hong Kong University Press

14/F Hing Wai Centre

Hong Kong University Press 2006

All rights reserved. No portion of this publication may be reproduced or

British Library Cataloguing-in-Publication Data

A Historical Review: The Colonial Legacy

Philosophy, Ethics and Societal Values in Health System Reform

Confucian Care-Based Philosophical Foundation of Health Care

Implications of the Demographic Transition

Changing Patient Expectations

Comparative Health System Models in East Asia

The Role of Public Health in Social Justice: The Next Steps in

PART II The Organisation and

Parts II & III Commentary

Operations Management in the Public Sector

The Private-Public Interface

10. The Emergence of Managed Care

11. Long-Term Care and Hospital Care for the Elderly

PART III Quality of Care

12. Quality of Care and Patient Redress: A Professional Perspective

13. Quality of Care and Patient Redress: A Patient Perspective

14. Nurses as Agents of Quality Improvement

15. Quality Indicators and Health Targets

16. Clinical Governance and Quality Management

PART IV The Financing of Health Care

17. Health Financing Trends in Greater China

18. The Origins of Hong Kongs Domestic Health Accounts

19. Health Financing in Hong Kong: The Current Status

20. A Systematic Approach to Reforming Hong Kongs Health Financing: 447

22. The Challenges of Reforming Hong Kongs Health System

GML and JB-S

Iris Chi is the Chinese-American Golden Age Association/Frances Wu Chair for

List of Contributors xvii

xviii List of Contributors

and population projection. He has provided consultancy services for the

Ravindra P. Rannan-Eliya is Director of the Institute for Health Policy in Sri

History, Ethics and Forces of Change

Hong Kongs Health System: Reflections, Perspectives and Visions

Commentary: History, Ethics and Forces of Change

Modern public health is sadly bereft of such tough critical thinking. It

Such hard-hitting criticism finds resonance in Chapter 7, in which Anthony

Hong Kongs Health System: Reflections, Perspectives and Visions

maximisation strategies more generally. Opponents of the scarcity or limit setting

Commentary: History, Ethics and Forces of Change

Hong Kongs Health System: Reflections, Perspectives and Visions

Figure 1 Age-sex breakdown for one way permit holders

Figure 2 Number of never married aged 2049 by sex

Commentary: History, Ethics and Forces of Change

Figure 3 Elderly dependency ratios* under different retirement scenarios

Hong Kongs Health System: Reflections, Perspectives and Visions

Commentary: History, Ethics and Forces of Change

Hong Kongs Health System: Reflections, Perspectives and Visions

Commentary: History, Ethics and Forces of Change

Hong Kongs Health System: Reflections, Perspectives and Visions

Hong Kong SAR $$$$

$$$ Upper-middle income group

Social insurance financed

$ Low income group

Life expectancy at birth (years)

$$ Lower-middle income group

Infant mortality rate per 1000 live births

Figure 4 Financing modes and development indicators in EQUITAP territories

Commentary: History, Ethics and Forces of Change

Hong Kong's Health System

Hong Kong's Health System