Doctor is now an outsourced contractor

2 April 2015



THE Goods and Services Tax comes into effect today. Most people, including me, are prepared to comply with this new taxation system on our purchases of goods and services. But please allow me to share my musings from the viewpoint of a long-serving medical professional, who has believed over the years that he is a core provider of healthcare.

There has been much debate and confusion regarding the implementation of GST in private healthcare, but not much of this has occurred in other sectors. Clearly, healthcare is a special service not easily equated to other services or goods.

Healthcare touches the basic necessity of a person’s existence — his life. How did I, like others, begin to get confused by the decisions and statements regarding the implementation of GST in private hospitals, including the one I am serving at? The initial pronouncement by the authorities was that healthcare was GST-free.

Then came the technical jargon created by writers of GST. Terms such as “healthcare providers”, “outsourced contractors”, “standard-rated” and “zero-rated” came into play. As I am not employed by the hospital, I am now classified as an “outsourced contractor” because I am not registered as a healthcare provider under the Private Healthcare Facilities and Services Act. Only my hospital is.

As an outsourced contractor, I am standard-rated, and all my services are taxable with GST. The hospital’s services are GST free and patients do not have to pay GST on most services provided by the hospital. Much of the controversy has arisen because, initially, it was thought that as outsourced contractors, doctors would be providing service to hospitals that had contracted them and if so, these hospitals had to pay GST on the payments they made to doctors.

Earlier statements from the authorities appeared to imply that. In some situations, doctors came to believe that they had to bear at least part of the GST to be paid, if this was the GST arrangement. Now, it is decided that doctors are not healthcare providers (in the eyes of GST law), instead, they are outsourced contractors (a humbling and emasculating pronouncement, I must say). These doctors are to collect GST from patients and not from their hospitals.

I am now resigned to this. The only thing is that a situation has been created where an entity called a hospital has been divorced (conceptually, at least) from individuals, who provide the main healthcare service. We used to think that we were an entity together as the hospital needed us to be with them to get licensed, that is, we were their flesh and bones. In reality, almost all private hospitals do not employ their specialists and their specialists are almost all outsourced contractors by current definition. So, what healthcare services do private hospitals provide? They provide beds and rooms, facilities for care, such as operation theatres and intensive care units, pharmacy, nursing, physiotherapy, linen and kitchen services.

By GST, these constitute healthcare provision and are mainly non-taxable. Of course, if the hospitals employ their specialists, which is rare, the services of these specialists would also be GST-free. Although my patients and I know that I am the core provider of healthcare, it is fait accompli that I am a mere outsourced contractor as of today.

I am prepared to include the six per cent in my bill to patients, with the help of my hospital. The facts appear to be clearer and the experts have ready-made answers. The technical aspects of GST are non-debatable any more. The experts are doing it right. But as a human blessed with ideas of right and wrong, my mind cannot stop asking questions. Please examine the following scenarios.

SCENARIO 1: A businessman wants to celebrate his success. He buys a RM30,000 watch. He happily pays for the watch plus the six per cent tax.

SCENARIO 2: A man riding a motorbike gets knocked down by a lorry, and suffers head injury and multiple fractures and a lung collapse. He is taken by ambulance to the nearest hospital, which is a private one. He requires multiple surgeries, intensive care and expensive medication. He survives his ordeal and is discharged after a month’s stay at the hospital. His doctors’ fees come to RM30,000 out of a total fee of RM100,000. He is supported by his employers for a maximum of RM25,000, which is divided proportionately between the hospital and doctors. He has to pay six per cent on the remaining doctors’ fees and unapproved medication. Of course, he does not have to pay GST on his room, food, nursing and other services provided by the hospital.

SCENARIO 3: A 2-year-old boy from a poor family requires a lifesaving heart surgery provided only by an expert surgeon in a private hospital. Your newspaper helps to raise money for this. This child is taxed six per cent on the expert’s fees, which thankfully, has been reduced by this charitable specialist. The family is grateful to the specialist for saving the child’s life. In all three scenarios, all consumers have to pay GST on their goods or services. But some pertinent philosophical and ethical questions to ask are: is seeking pleasure equivalent to seeking treatment for life and limb? Are they equally taxable? If some aspects of healthcare are taxable, why choose the very soul of it, that is, the doctors’ life-saving work and not the peripherals, such as rooms and food? Are we doing the right thing? Not everyone who seeks private healthcare has the means. A health issue is a personal, family and societal calamity. Beyond the ringgit and sen, and the technicalities of the implementation of GST, there are interesting but serious ethical and philosophical issues to be debated. Where then are our ethicists and thinkers? I need their assurance that I am part of an ethically flawless and highly necessary endeavour for our country’s wellbeing. I am all for my country’s wellbeing, of course. I am also all for my patients’ wellbeing. All said and done, from today, I will have to get used to existing in two contradicting worlds governed by two laws. I am a registered doctor (healthcare provider) under the Medical Act but an outsourced contractor (not a healthcare provider) under GST. I will continue to provide the best care to my dear patients. And by writing to you, I hope I will be relieved of a mental burden not easily understood by those not passionately involved in healthcare.

Professor Datuk Dr Azizi Omar,

Petaling Jaya, Selangor


Originally published in


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