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Project
Public Private Partnership for Improved Health System Performance- A Case Study of Hospital Services Outsourcing Programme (HSOP) in Malaysia
The quality of care in Malaysian public health facilities has been affected by multiple longstanding issues. These include insufficient human resources and infrastructure, which have led to long patient wait times, overcrowding in outpatient clinics and wards, bed shortages, and poor service delivery. Despite being repeatedly highlighted by both providers and users over the years, little improvement has been observed to date (CNA, 2023, Economic Planning Unit, 2015, Keertan Ayamany and Rex Tan, 2023, Khairie Hisyam Aliman, 2019, Ministry of Health Malaysia, 2018, Sharayu Pillai, 2022).
Malaysian healthcare system is characterized as two-tier mixed system consisting of public and private. Public healthcare is funded by the government and financed through general tax revenue. Meanwhile, the private sector is funded by household out-of-pocket payment, largely by fee-for-service typically by those who are affluent. There is no overlap in service delivery between the two sectors. Despite the greater number of private healthcare facilities, the high costs associated with private care led many people to rely on public facilities, especially the poor. In 2020, there were 202 hospitals with 17 155 beds in private sector compared to146 public hospitals with 44 117 beds. As for primary health care facilities, there were only 3158 public primary health care clinics compared to 8222 clinics in private sector (Ministry of Health Malaysia, 2021). In 2019, 74.5% of the population were admitted in public hospital as compared to only 22.5% in private sector. Similar trend was observed for outpatient visit, where 64.6% of the population was attending public facility as compared to 36.3% in private sector (Institute for Health Systems Research (IHSR), 2020). Similarly in 2023, 74.7% of the population admitted at public hospital in comparison to only 25.3% to private hospital (Institute for Public Health, 2024). This uneven distribution of resources between the two sectors increases the disparity and eventually put the public sector under enormous burden especially with increasing number of non-communicable diseases (NCD) and aging society. As a result, long waiting times and overcrowding remain as persistent challenges.
Given these persistent challenges, the government recognized the need for systemic reforms. This led to the introduction of the Health White Paper (HWP) in June 2023, outlining a 15-year transformation plan to improve healthcare delivery, financing, and governance. In the first five years, health financing transformation will focus on increasing government spending and strengthening Public-Private Partnerships (PPP) to reduce waiting times, congestion, improve healthcare access and quality of services. (Ministry of Health for the Government of Malaysia, 2023).
PPPs through outsourcing and privatization had been considered as one of the solutions to address growing concern of health disparity of the population and resources disparity of the provider despite its mixed reviews. Scholars had been debating the role of private health care in improving the health status of the poor. It had been argued that private, which nature is for-profit, driven by market, conflicts with the goal of providing comprehensive and equitable service for all. It is argued that any non-profitable services will be neglected (Hanson et al., 2008). Using the same economic concept of market, pro-private counter argue that competition, profit and market motivates the private providers to compete with each other to provide more innovative, advanced and high quality of care (Hanson et al., 2008). Can the public and private sectors coexist or even collaborate to provide equitable, accessible and quality health care for the public?
In Malaysia, outsourcing began since the 1990s. Influenced by global trend, under the New Public Management emphasizing cost reduction and efficiency improvement, the then Prime Minister Tun Dr Mahathir Muhammad introduced privatization, corporatizing and outsourcing in many fields including health sector. In 1993, Government Medical Stores (GMS) was privatized and in 1995 several non-clinical hospital services such as cleaning services, linen and laundry, clinical waste management, biomedical engineering maintenance, and facilities engineering maintenance were outsourced to three local consortia without competitive tendering. Later, it was reported that the hospital support service expenditure rose from $54 million in 1996 to $174 million in 1997 to $188 million in 1999 while noticing no changes in service expansion nor improvements in quality (Khoon, 2003, Noorul Ainur Mohd Nur, 2003). Meanwhile, The prices of drugs was increased by 3.3 times without any proper justification following the outsourcing (Babar and Izham, 2009). A study looking into the causes of increased operational costs identified factors such transaction costs, agency problem and longer duration of the concession led to increased spending (Fara Diva Mustapa, 2004). Although, these reports show little evidence on cost effectiveness or cost reduction of the outsourced services, outsourcing is still widely practiced to date with expansion including catering, security services and clinical services.
From 2019 to present, several PPP projects had been introduced by the government. In 2019, PekaB40 program was launched to address the increasing prevalence of NCDs among the B40 group (bottom 40% of income earners). The program aim to improve the wellbeing of B40 population through early detection and accessible healthcare services (Razif et al., 2021). Following that, Ministry of Health (MOH) of Malaysia introduced another PPP project to alleviate overcrowding and reduce waiting times at public hospital emergency departments by providing acute primary care services to the B40 population. Under the Madani Medical Scheme (MMS), B40 individuals and households automatically receive free outpatient treatment at nearby contracted private general practitioners (GP). However, to date, both programs have demonstrated only mediocre performance, falling short of their intended objectives. The PekaB40 continues to struggle with low participation rates. As of February 2025, only 22.5% of the beneficiaries had undergone their screening (ProtectHealth Corporation, 2025). Meanwhile, MMS originally launched to alleviate congestion and reduce long waiting times at public healthcare facilities, has gradually shifted its focus toward expanding access to care. Despite an initial nationwide expansion, the MMS has since been scaled down and is now operational in only 10 districts (ProtectHealth, 2024b).
Even though, the PPP in recent days shows little promising effect, the government continue to invest in strengthening PPP. In July 2024, the Hospital Services Outsourcing Programme (HSOP) was implemented in collaboration with private hospitals to reduce waiting times, alleviate congestion, and enhance service quality. However, as the program operates on a grant-based model, its long-term sustainability remains uncertain. Furthermore, a recent interview with the president of the Association of Private Hospitals Malaysia revealed that participating private hospitals have incurred financial losses under the program. He also cautioned that hastily implementing the initiative without careful planning and evaluation may prevent it from achieving its intended outcomes (Boo Su-Lyn, 2025).
These shortcomings indicate a misalignment between policy intentions and actual outcomes, underscoring the need for evidence-based evaluations to optimize resource allocation and improve program effectiveness. This study is structured into two papers. The first paper will evaluate the program’s impact on reducing waiting times for patients undergoing Coronary Artery Bypass Grafting (CABG) surgery one year after its implementation. The second paper will examine the policy formulation and contractual design of the HSOP, assessing whether it was developed based on evidence-driven decision-making and aligned with the intended health system goals. By integrating policy analysis with outcome assessment, this study aims to provide a comprehensive evaluation of the HSOP, offering insights into its design, implementation, and effectiveness. Ultimately, the findings will contribute to the broader discourse on objective-oriented health reform, emphasizing the need for data-driven policymaking to ensure that outsourcing initiatives fulfill their intended purpose and drive meaningful improvements in healthcare delivery.
Malaysian healthcare system is characterized as two-tier mixed system consisting of public and private. Public healthcare is funded by the government and financed through general tax revenue. Meanwhile, the private sector is funded by household out-of-pocket payment, largely by fee-for-service typically by those who are affluent. There is no overlap in service delivery between the two sectors. Despite the greater number of private healthcare facilities, the high costs associated with private care led many people to rely on public facilities, especially the poor. In 2020, there were 202 hospitals with 17 155 beds in private sector compared to146 public hospitals with 44 117 beds. As for primary health care facilities, there were only 3158 public primary health care clinics compared to 8222 clinics in private sector (Ministry of Health Malaysia, 2021). In 2019, 74.5% of the population were admitted in public hospital as compared to only 22.5% in private sector. Similar trend was observed for outpatient visit, where 64.6% of the population was attending public facility as compared to 36.3% in private sector (Institute for Health Systems Research (IHSR), 2020). Similarly in 2023, 74.7% of the population admitted at public hospital in comparison to only 25.3% to private hospital (Institute for Public Health, 2024). This uneven distribution of resources between the two sectors increases the disparity and eventually put the public sector under enormous burden especially with increasing number of non-communicable diseases (NCD) and aging society. As a result, long waiting times and overcrowding remain as persistent challenges.
Given these persistent challenges, the government recognized the need for systemic reforms. This led to the introduction of the Health White Paper (HWP) in June 2023, outlining a 15-year transformation plan to improve healthcare delivery, financing, and governance. In the first five years, health financing transformation will focus on increasing government spending and strengthening Public-Private Partnerships (PPP) to reduce waiting times, congestion, improve healthcare access and quality of services. (Ministry of Health for the Government of Malaysia, 2023).
PPPs through outsourcing and privatization had been considered as one of the solutions to address growing concern of health disparity of the population and resources disparity of the provider despite its mixed reviews. Scholars had been debating the role of private health care in improving the health status of the poor. It had been argued that private, which nature is for-profit, driven by market, conflicts with the goal of providing comprehensive and equitable service for all. It is argued that any non-profitable services will be neglected (Hanson et al., 2008). Using the same economic concept of market, pro-private counter argue that competition, profit and market motivates the private providers to compete with each other to provide more innovative, advanced and high quality of care (Hanson et al., 2008). Can the public and private sectors coexist or even collaborate to provide equitable, accessible and quality health care for the public?
In Malaysia, outsourcing began since the 1990s. Influenced by global trend, under the New Public Management emphasizing cost reduction and efficiency improvement, the then Prime Minister Tun Dr Mahathir Muhammad introduced privatization, corporatizing and outsourcing in many fields including health sector. In 1993, Government Medical Stores (GMS) was privatized and in 1995 several non-clinical hospital services such as cleaning services, linen and laundry, clinical waste management, biomedical engineering maintenance, and facilities engineering maintenance were outsourced to three local consortia without competitive tendering. Later, it was reported that the hospital support service expenditure rose from $54 million in 1996 to $174 million in 1997 to $188 million in 1999 while noticing no changes in service expansion nor improvements in quality (Khoon, 2003, Noorul Ainur Mohd Nur, 2003). Meanwhile, The prices of drugs was increased by 3.3 times without any proper justification following the outsourcing (Babar and Izham, 2009). A study looking into the causes of increased operational costs identified factors such transaction costs, agency problem and longer duration of the concession led to increased spending (Fara Diva Mustapa, 2004). Although, these reports show little evidence on cost effectiveness or cost reduction of the outsourced services, outsourcing is still widely practiced to date with expansion including catering, security services and clinical services.
From 2019 to present, several PPP projects had been introduced by the government. In 2019, PekaB40 program was launched to address the increasing prevalence of NCDs among the B40 group (bottom 40% of income earners). The program aim to improve the wellbeing of B40 population through early detection and accessible healthcare services (Razif et al., 2021). Following that, Ministry of Health (MOH) of Malaysia introduced another PPP project to alleviate overcrowding and reduce waiting times at public hospital emergency departments by providing acute primary care services to the B40 population. Under the Madani Medical Scheme (MMS), B40 individuals and households automatically receive free outpatient treatment at nearby contracted private general practitioners (GP). However, to date, both programs have demonstrated only mediocre performance, falling short of their intended objectives. The PekaB40 continues to struggle with low participation rates. As of February 2025, only 22.5% of the beneficiaries had undergone their screening (ProtectHealth Corporation, 2025). Meanwhile, MMS originally launched to alleviate congestion and reduce long waiting times at public healthcare facilities, has gradually shifted its focus toward expanding access to care. Despite an initial nationwide expansion, the MMS has since been scaled down and is now operational in only 10 districts (ProtectHealth, 2024b).
Even though, the PPP in recent days shows little promising effect, the government continue to invest in strengthening PPP. In July 2024, the Hospital Services Outsourcing Programme (HSOP) was implemented in collaboration with private hospitals to reduce waiting times, alleviate congestion, and enhance service quality. However, as the program operates on a grant-based model, its long-term sustainability remains uncertain. Furthermore, a recent interview with the president of the Association of Private Hospitals Malaysia revealed that participating private hospitals have incurred financial losses under the program. He also cautioned that hastily implementing the initiative without careful planning and evaluation may prevent it from achieving its intended outcomes (Boo Su-Lyn, 2025).
These shortcomings indicate a misalignment between policy intentions and actual outcomes, underscoring the need for evidence-based evaluations to optimize resource allocation and improve program effectiveness. This study is structured into two papers. The first paper will evaluate the program’s impact on reducing waiting times for patients undergoing Coronary Artery Bypass Grafting (CABG) surgery one year after its implementation. The second paper will examine the policy formulation and contractual design of the HSOP, assessing whether it was developed based on evidence-driven decision-making and aligned with the intended health system goals. By integrating policy analysis with outcome assessment, this study aims to provide a comprehensive evaluation of the HSOP, offering insights into its design, implementation, and effectiveness. Ultimately, the findings will contribute to the broader discourse on objective-oriented health reform, emphasizing the need for data-driven policymaking to ensure that outsourcing initiatives fulfill their intended purpose and drive meaningful improvements in healthcare delivery.
Datum:15 okt 2025 → Heden
Disciplines:Sociaal-medische wetenschappen niet elders geclassificeerd
Project type:PhD project