For discussion
on 12 March 1999


Subhead 514 Hospital Authority

    Members are invited to approve supplementary provision of $59 million under Subhead 514 Hospital Authority.


We need to meet the shortfall in the Hospital Authority (HA)'s income in 1998-99 mainly as a result of the Government's decision to freeze most government fees and charges for 12 months from February 1998.


2. The Secretary for Health and Welfare proposes supplementary provision of $59 million in 1998-99 to HA to meet its income shortfall.


3. Under the current funding arrangements with HA, the Government provides an annual recurrent grant to HA under Head 177 Subventions : Non-Departmental Public Bodies Subhead 514 Hospital Authority which represents the Authority's net operational cost, that is, total operational cost less projected income, the bulk of which comes from patients fees and charges. Such income is accounted for on an actual basis, that is, any excess over the projected amount will reduce the subvention required whereas any shortfall will be met by Government through supplementary provision. In the 1998-99 Estimates, we provide a net recurrent subvention of $25,082.2 million to HA, based on the assessed total operating cost of $26,022.2 million and a projected income of $940 million for the year.

4. The income of HA consists of medical fees and charges and other income not related to medical services, mainly interest income from bank deposits. Fees and charges for health care services provided by HA are determined by the Government and subject to regular revisions. Hitherto, these fees and charges are revised in line with the rate of cost increases in order to maintain the service at around the same level of subsidy. The last regular revision of medical fees and charges took place in 1996. The estimated income of HA in the 1998-99 Estimates was based on the assumption that there would be a scheduled fee revision exercise in 1998 to reflect the change in service cost since 1996. In the event, this has not taken place given the moratorium on most Government fees and charges for one year as announced by the Financial Secretary in his 1998 Budget Speech. The measure benefits users of HA's services across the board.

5. Up to the end of December 1998, HA collected a total income of $676 million. For the year 1998-99 as a whole, HA estimates that total income would amount to $881 million. This represents a shortfall of $59 million which we would have to meet through additional subvention in accordance with the established arrangements. A comparison of the original estimate with the revised estimate of HA's income is as follows -

Income Original Estimate
($ million)
Revised Estimate
($ million)
(a) Medical fees and charges 780 665
(b) Other income
(such as interest income and rental income)
160 216
Total 940 881

6. The shortfall in income from medical fees and charges is attributed to the following factors -

  1. the moratorium on fees in 1998-99 as explained in paragraph 4 above accounting for an estimated reduction in income of $87 million; and

  2. a higher than expected amount of fees waived in respect of patients who lack the financial means. In the first nine months of 1998-99, 24% of in-patients discharged had their fees waived, up from 23% in 1997-98 and 21% of out-patient fees are expected to be waived, up from 17% last year. These lead to total income foregone of $230 million and $69 million respectively in 1998-99. Since we have already factored in fee waivers in estimating HA's income based on past trends, the shortfall in income which requires supplementary provision is mainly due to a higher than estimated amount of fees waived.

The shortfall in income from medical fees and charges is partly offset by a higher than anticipated interest income of $56 million derived from HA's balance in its operational funds.


7. Subject to Members' approval of the proposal, we shall offset the supplementary provision of $59 million required by deleting an equivalent amount under Head 106 Miscellaneous Services Subhead 251 Additional commitments.


8. The last revision of hospital and clinic fees and charges took effect from 15 November 1996 to reflect the rate of cost increases from 1994-95 to 1995-96. The present charges for public ward in-patient services and specialist out-patient services are $68 per bed day and $44 per attendance respectively for entitled persons. These represent a Government subsidy of 96% and 90% respectively at 1995-96 price level.

9. HA operates a fee waiver system to ensure that no one would be denied of adequate medical treatment through lack of means. All medical fees of recipients of Comprehensive Social Security Assistance (CSSA) will be waived upon presentation of a certificate affirming their status. Non-CSSA patients who lack the financial means are means-tested by medical social workers in the hospitals according to a set of established criteria. Their medical fees may be partially or wholly waived.


Health and Welfare Bureau
March 1999