IJN should be spared the "the second wave of privatisation"

IJN Holding and Tan Sri Nor Mohamad Yakcop has denied it. Tun Dr Mahathir Mohamad has in so many words repeated the call that IJN should not be privatised.

However, Najib's budget speech last Friday mentioned "the second wave of privatisation". The exerpt from his budget speech taken from his blog here is below:

Implementation of Privatisation Initiatives

28. The Government will gradually reduce its involvement in economic activities, particularly in areas where it competes with the private sector. For this, the Government will privatise companies under Ministry of Finance (MOF Inc.) and other viable Government agencies. The second wave of privatisation aims to enable the companies and agencies to operate more efficiently and expand their activities. This will reduce their financial dependence on the Government.

The big picture for the healthcare industry will have to consider the various trade agreements the country has commit itself to. The liberalisation process will involve the service sector and healthcare is included.

Despite all the assurance given, these considerations could make all of those involved in IJN very nervous. IJN is owned by MOF Inc..

If IJN is privatised

If IJN is to be privatised, it will come at the cost of rising medical cost to patients. There is no two way about it. Doctors fee and salary will rise. Medicine will be charged more expensive. Hospital support will cost more.

For IJN which is dependent on Government GL, that portion of the service will remain for the time being as long as Government has no other alternative hospital for heartcare.

However, there is the likelihood that if IJN is privatised, the Government throughput will be revoked later as further liberalisation policy will put pressure on Government to open up its patients to other private hospitals.

By then, IJN will have to compete in the same manner like other private hospital. This will defeat the purposes IJN was established.

IJN was established for the purpose of developing the nation's competency in healthcare, in particular heart care. Since it cost money to train and keep such specialists within the public healthcare system, a semi-private hospital was established using throughput of Government patients.

Another reason is to provide quality heartcare for the public. This objective should never be compromised.

The major shareholder of IJN was MOF Inc. since Government investment was usually placed under MOF then.

If IJN was to be privatised, one way would be to sell to a corporate entity in the manner the attempted bid by Sime Darby. BUt that have been rejected.

Another possibility is via Management By Out (MBO). For the current Management to buy even a portion for significant representation, it will cost them a bomb. Try value the land, property, equipment and other intangible after netting off the loans. That rules out an MBO.

If this blogger is a corporate player with a billion at his disposal and only see hospital business as lucrative, one way to get into IJN is to do a privatisation with critical members of IJN. In a normal hospital, the critical part of the operation are the nursing staff but they are not quite critical in a takeover exercise. Nurses are usually paid staff, not unionised, and thsu do not have bargaining power. For Specilist Hospitals in Malaysia, the Specialist are critical for the time being till their numbers become abundant that they lose bargaining power.

A shrewd corporate player would entice the doctors into a joint takeover seen as an MBO. Then create a situation to dilute their shareholding or buy them out for control like what happenned before elsewhere. Finally, turn the hospital into a purely profit making commercial entity. It is all kaching.

Saving IJN for public

The purpose this corporate game is exposed is to illustrate that privatisation of an institution like IJN will not serve to benefit the nation but will only be a short term financial excercise that benefit the greedy few.

Thank god there are no such doctors in IJN since they have signed a joint statement to reject Sime Darby takeover. They have stated that of utmost importance to them is their hippocratic commitment to patients healthcare.

But the risk of takeover is forever there.

In order for patients interest to be safeguarded, IJN should remain within the public healthcare system and structured as to ward off any attempt for takeover.

IJN was established as a corporate entity and was intended to be sustainably self sufficient and financially independent. The organisation and operation was developed for such a need. It means a simple single operation structure will not be sufficient.

As it is, IJN had taken up a sizeable borrowing with a Sukuk loan. So it requires a subsidiary need to be established for the loan to pass through and 'contain' the risk. (It is quite elaborate to explain.)

It is no more suitable to maintain the pharmacy, support services, and manpower development into departmental units within the hospital operation. By establishing subsidiaries, it could operate efficiently as cost centres able to reduce cost or profit centres that generate revenues through joint ventures or other modes.

The idea here is to improve revenue flow using the existing operation.

The manner these subsidiaries are arranged will depend on the purpose of the excercise. For IJN, the purpose is to maintain sustainability of the operation. The challenge to sustain operation increase as public demand increase and to reduce dependence on subsidy.

Of utmost importance, it has to emulate IMalaysia to be 1IJN: Pesakit diutamakan, Pemulihan didahulukan.

Another reason for institutions like IJN need to achieve sustainability is basically economics. The Government coffer is not bottomless and there are also other priorities.

Where to IJN?

There are many issues confronting the healthcare industry today. For one, what is the extent in the role of the private healthcare? The public's concern is that it is seen as merely cost plus profit money making venture. It is not contributing towards increasing accessibility to quality healthcare at affordable prices for the public.

The public healhcare remains burdened to take up that slack. IJN is only one of the pieces in the public healthcare system albeit a successful experiment.

The need is now to emulate working models like IJN or enhance the reach of such model to enable the lower income public without insurance and company coverage access to such quality healthcare service. As it is, IJN gives priority to Government patients and it is partly subsidised.

For such services to be made available all over the country, more such centres need to be built or existing institution need to be expanded geographically. THese need thorough thinking, planning and implementation.

How will the role of institutions such as IJN be? Will it be as a feeder to develop more doctors and medical administrator to other centres? Will it be dedicated to increase competency and research and development activities?

Will it be just one of the many specialist hospital dedicated to heartcare?

Should IJN remain as an investment in MOF Inc. to generate income? Or will it take some leading role by being part of the Ministry of Health?

All this can be explored with IJN being part of the public healthcare system.

In the spirit of IMalaysia: Rakyat didahulukan, Pencapaian diutamakan, the Government need to develop a sustainable public healthcare system that would serve the bigger healthcare need of the nation.

* Edited 8:30 PM