Sovereign fund sells high-priced facility at huge loss
Prince Court Medical Centre in Kuala Lumpur commenced commercial operations in 2007 with the aim of creating a high-end, luxury facility to take advantage of Malaysia’s growing reputation as a medical tourism sector.
But in the ensuing 13 years, which started with a troubled and expensive construction debacle, the 277-bed facility has turned into a nightmare for the current owner, the sovereign wealth fund Khazanah Nasional, that appears about to culminate in a RM600 million (US$144.9 million) loss and is raising concerns over the resurrection of crony capitalism by siphoning off assets to private interests and tarnishing the country’s reputation for top-class medical care.
Khazanah took over the hospital from Petronas, the government-owned energy company, in 2018, adding to a long list of money-losing enterprises that have been unloaded onto the investment fund over the years. Petronas provided a captive clientele, routing its employees to the hospital, which along with diminished services finally resulted in a RM51 million net profit in the fiscal year ending December 2018.
Police investigations launched into alleged insurance fraud that has been reported in a series of stories by Asia Sentinel are just part of the problems. The CEO Chong Su-Lin left following complaints of misconduct filed with the Malaysian Medical Council (MMC) in 2016. Reported management shortcomings during the five-star hospital’s first decade hampered operations, resulting in accumulated losses of almost RM1.5 billion to the end of 2016.
Khazanah paid a reported RM 1.6 billion for the facility, with the land it occupied in central Kuala Lumpur reportedly worth over RM 1.0 billion. However, just 13 months later, Khazanah began the sale to a private medical provider, IHH Healthcare Bhd for a reported RM 1.02 billion, essentially the value of its land and suffering the RM 600 million loss. Khazanah owns 26.04 percent of IHH.
The Khazanah board of directors hasn’t explained to the stock exchange, Bursa Malaysia nor the general public, why Malaysia’s taxpayers should bear the loss of nearly RM 600 million over the sale of what is now a profitable going concern to IHH, which has substantial foreign shareholders.
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The sale shows that lessons from the 1Malaysia Development Bhd scandal, in which US$4.8 billion was lost to mismanagement and theft, have escaped the ruling Pakatan Harapan coalition. This will alarm investors and the general public alike and erode trust in the current government’s attitude to ethical, moral and responsible investment, especially among its Muslim stakeholders.
IHH has additional problems, raising questions over the thoroughness of Khazanah’s due diligence process. It is under investigation by India’s Serious Fraud Investigation Office for its U$1.3 billion takeover offer for India’s Fortis Hospitals for what were described as “alleged financial irregularities.” The probe was ordered after a review by India’s Supreme Court in November 2019.
The failure of transparency adds to mounting concerns about Khazanah’s attitude to non-disclosure of material concerns when disposing of assets.
Recently, Khazanah issued a legal notice to a Malaysian online news site asking it not to publish articles based on corporate documents that apparently were embarrassing to the investment fund.
Another report alleges Khazanah was willing to enter into a business partnership with a person making a regulatory settlement of RM .36 million, for insider trading of Malaysian Airlines (MAS) shares, showing a deep lapse in due diligence of potential partners.
Ethical standards pay the price
The case of Nur Muhammad Tajrid Bin Zahalan, reported extensively by Asia Sentinel, exposed misconduct and patient mistreatment that has dragged Prince Court into the courts, disciplinary hearings at the MMC and investigations by insurance companies, the police and the corruption authorities. Among many other claims of unethical practice, evidence seen by Asia Sentinel shows an open admission by the facility that an allegedly unqualified administrator altered the recommendations of physicians to facilitate Tajrid’s admission, resulting in insurance payments to the hospital of almost RM120,000.
Expected world-class practice standards such as those practiced in the United Kingdom or Australia, would involve seeking a satisfactory remedy to a patient’s problems. This would mean either solving the medical complications and/or correcting any billing discrepancies and/or errors. But in Tajrid’s case, PCMC issued a summons in the court to recover what they claimed were excess fees. Subsequently, they withdrew the claims at the start of the court hearing, having paid the costs of eight lawyers to represent various parties in the case. They were denied leave by the court to make any further claims against Tajrid and their requests for legal costs were also denied.
In the meantime, 12 doctors from PCMC were investigated by the MMC and four were charged with “infamous conduct in a professional respect,” also termed “gross professional misconduct.” Senior managers at PCMC including the medical director Kuljit Singh and former CEO Chong Su-Lin were included among those who faced hearings by the disciplinary committee. Kuljit Singh subsequently became a member of the MMC governing council.
Insurance fraud rife
Soon after Pakatan Harapan’s victory in the general election in 2018 a local insurance insider, wrote the editor of Kuala Lumpur-based tabloid The Star, alleging that medical insurance fraud is rife in Malaysian private hospitals. Tajrid’s case provides ample justification for the letter-writer’s concern. Asia Sentinel has reported in detail on false claims submitted to insurers, Prudential Assurance Malaysia Bhd, on two occasions for surgery in Tajrid’s case.
Although a complaint was filed to Prudential Assurance in November 2019 confirming the submission of the false claims, Prudential managers, including Dr Siva, Director of the Claims Department and Dr Ashish, Head of Medical Business Management responsible for managing the PCMC account initially brushed off the complaints, made on Tajrid’s behalf.
Ashish stated in a January 2020 meeting – three months after the complaint had been filed – that Prudential would only help police with their criminal investigation if they were asked directly and would not volunteer help. In the same meeting, Ashish also admitted that Prudential had already informed the police that they were not interested in taking action.
Prudential later stated that they relied on the MMC and they would not suspend new claims or payments to the accused doctors pending any criminal investigation and they would not seek to recover the payments already admitted to have been made improperly.
Prudential Assurance Malaysia was finally forced to review the matter following a referral to their global anti-fraud office in London and direct complaints to Malaysian CEO, Gan Leong Hin and two members of the Malaysian board of directors, former British diplomat Tony Collingridge and member of the International Arbitration Centre, Richard Duxbury. Their inquiry is still ongoing.
The police were asked to probe the criminal allegations because the MMC investigating committee, chaired by Megat Burrainuddin, itself has been reported to the MMC council for malpractice and is under investigation by the Malaysian Anti-Corruption Commission (MACC).
Earlier six members of another MMC committee investigating the same case had resigned due to allegations of corruption and admissions of conflict of interest particularly associated with Medical Defence Malaysia, an insurance company that funds the legal fees of doctors accused of malpractice and pays the fines and compensation costs for those found guilty.
In a lengthy defence of ethical practices at the MMC and Medical Defence Malaysia, veteran physician Dr Milton Lum was quoted extensively by the Galen Centre, a healthcare consultancy based in Kuala Lumpur. However, in breach of accepted ethical standards, neither Lum nor the Galen Centre disclosed that he is not only a member of the MMC governing council which determines the guilt or innocence of doctors accused of breaches of medical ethics but also a director of Medical Defence Malaysia that pays their legal fees and the expenses of those found guilty. Lum himself has also been involved in allegations of unprofessional behavior.
There is an urgent need to clean up the medical industry of fraudulent insurance claims. This is not a victimless crime, it is Malaysians who are at risk from doctors and hospitals that put fees ahead of patient welfare and it is Malaysians who are paying excessive health insurance premiums because of the greed of a few. So far, the only response from medical industry, professional bodies and the Ministry of Health is to erect a wall of silence.
Complaints to multiple agencies including the Ministry of Health, Private Medical Practice Control Branch (CKAP) and Dzulkifli Ahmad, the Minister of Health have fallen on deaf ears. Neither the hospital nor the Malaysian Medical Commission has replied to Asia Sentinel’s requests for interviews.
ASIA SENTINEL
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