Dzulkefly said the Diagnosis Related Group (DRG) system – where hospitals are paid a fixed rate per treatment case instead of itemised fees – was designed to control medical inflation and promote fairer billing practices.
He was responding to Tan Kok Wai (PH-Cheras), who asked why the DRG system, initially slated for implementation this year, had been postponed. Tan also asked if the delay was influenced by lobbying from private hospital operators who feared it would impact their profit margins.
Dzulkefly said the current fee-for-service model used at private hospitals had resulted in inconsistent and often inflated charges, while the DRG system would bring “uniformity, fairness, and value-based healthcare”.
“Let me make it clear – this postponement is not due to lobbying or external pressure. It’s not like that at all,” he told the Dewan Rakyat.
“Such an important initiative must be implemented carefully, with full preparation and measures in place to mitigate any unintended effects.”
The minister said several challenges must be resolved before full implementation, including time constraints, incomplete treatment data, and a shortage of skilled personnel.
“We want the DRG system to be implemented as soon and as effectively as possible, but the short time frame is a challenge,” he said.
He added that the health ministry was still gathering treatment data from private healthcare operators to develop fair payment standards and ensure that the new system functions smoothly.
Dzulkefly said the ministry planned to introduce a national DRG framework tailored to Malaysia’s needs but did not specify a start date.
His deputy, Lukanisman Awang Sauni, said yesterday that the full rollout of the DRG system would take place in 2027, delayed from the original target of mid-2025. He said the additional time would be used to develop the system, finalise cost models, integrate hospital data, and conduct pilot tests.
The DRG system, widely used in countries such as the US, Australia, Germany, and South Korea, standardises hospital payments by charging patients a fixed fee based on diagnosis and treatment type. It aims to improve efficiency, reduce unnecessary tests, and control healthcare costs.
Private healthcare costs surged last year, leading to insurance premium hikes of up to 70%. Bank Negara Malaysia later capped premium increases at 10% for three years while working on a long-term solution to curb medical inflation.
The health ministry received 817 complaints about private hospitals between 2021 and 2024, 188 (23%) of which were related to billing and charges.