Implementation of e-Invoice in Malaysia for Healthcare Industry

The Malaysian government has introduced e-invoicing for businesses starting August 1, 2024, with an initial phase targeting businesses exceeding a turnover of RM 100 million. The e-invoicing implementation extends to the healthcare industry as well. 

To help healthcare providers in this transition, the Inland Revenue Board of Malaysia (IRBM) has released FAQs for the healthcare industry addressing various billing scenarios in hospitals. These FAQs cover invoicing processes for medical expenses, 3^rd party claims, consultants, rental arrangements, admission deposits and along with requirements for submitting detailed bills for validation to the IRBM.

In this blog, we will discuss everything related to the implementation of e-invoicing in the healthcare industry in Malaysia.

Scope of e-Invoice in Malaysia for Healthcare Industry

Malaysia has a two-tier system of healthcare, which is public and private. Malaysia is developing its medical tourism sector too. The Malaysian healthcare industry aims to provide modern healthcare facilities at a competitive fee. Medical facilities, pharmaceutical services, diagnostic services, nursing, medications, healthcare insurance, medical equipment, online and telehealth services, and medical tourism are some of the elements of the healthcare industry. In fact, it is one of the leading countries in Asia in medical tourism. Further, Malaysia provides one of the strongest markets for medical device manufacturers in Southeast Asia. e-Invoice in Malaysia for the healthcare industry aims to bring a digital transformation. 

During the pandemic, many shortcomings and illegal practices were identified in the healthcare industry. Hence, e-invoicing in Malaysia for the healthcare Industry will help to allow for better control of the traceability of the financial operations carried out.

E-Invoicing in Healthcare: Challenges and LDHN Guidelines

E-invoicing in the healthcare industry comes with its own set of complexities and considerations compared to e-invoicing in typical businesses. Here are some of the major complications and LHDN’s clarifications.

Dual Billing (Partly insurance Companies and Party patients)

Hospitals issue separate invoices for medical expenses, with one portion billed to insurance companies or third-party administrators (TPAs) and the remaining balance billed to patients.

• Current Scenario: Hospitals issue one bill for the portion covered by insurance/TPA and another bill for the remaining balance, which is to be paid by the patient directly. These bills are usually paper-based invoices sent via mail or handed directly to the patient.
• E-Invoicing Implementation: One e-invoice will be issued for the portion covered by insurance/TPA, and another e-invoice will be generated for the patient's remaining balance. 

Performa Bill and FGL Request

Hospitals issue a proforma bill as a preliminary invoice to insurance companies is delivered, typically used to request a Final Guarantee Letter (FGL) from an insurance company or TPA

• Current Scenario: Currently, hospitals issue proforma bills to insurance companies to request FGLs for covering medical expenses. Once the FGL is obtained, the hospital finalizes the billing process based on the agreed terms with the insurer.
• E-Invoicing Implementation: Once the billing arrangement is finalized, hospitals will be required to convert these proforma bills into e-invoices.

Consultants Bill

Consultants, doctors, and medical staff bill hospitals for their professional services rendered, typically invoicing for the total fees accumulated within a given period.

• Current Scenario: Hospitals receive invoices from consultants detailing the total professional fees accrued over a month. These fees are then integrated into the invoices issued by the hospital to patients.
• E-Invoicing Implementation: No change in the current invoicing process.

Contract for Service

A contract for service involves an agreement between a hospital and either individual doctors or a company representing doctors for the provision of medical services.

• Current Scenario: Currently doctors bill the hospital for their professional fees, typically monthly. The hospital then issues invoices to patients, which include the consultant fees.
• E-Invoicing Implementation: Individual doctors in service contracts with hospitals are responsible for issuing e-invoices directly to the hospital. If a company represents a doctor in a service contract with a hospital, that company is responsible for issuing the e-invoice to the hospital. 

Referred Patients Invoicing

Referred patients are those individuals who are initially admitted to one healthcare facility but later transferred or referred to another facility, such as a sister company or a private hospital, for further treatment or care.

• Current Scenario: Hospitals issue bills or invoices to the patient or their insurer based on the services provided during the initial admission and subsequent transfers. 
• E-Invoicing Implementation Changes: No specific alteration to this process.

Consolidated Invoices

Consolidated invoices refer to the grouping of multiple transactions into a single invoice, typically issued for simplifying billing processes or when individual invoices are not necessary.

• Current Scenario: Hospitals opt to consolidate multiple transactions into a single invoice for efficiency in certain cases like self-paying patients or transactions with minor variations.
• E-Invoicing Implementation: Hospitals can generate consolidated e-invoices for the same.

Deposits on Admission

Deposits upon admission are the upfront payments collected by hospitals from patients upon admission to cover anticipated medical expenses.

• Current Scenario:  The issuance of invoices for these deposits varies; refundable deposits often do not require invoicing, while non-refundable deposits are documented through invoices.
• E-invoicing Implementation: Hospitals will be required to issue e-invoices for non-refundable admission deposits. Refundable deposits, however, may continue to be collected without the need for e-Invoices.

Other E-Invoicing in Healthcare Clarifications

Staff Medical Expenses

The current practice of hospitals issuing invoices for staff medical expenses, paid by the hospital, remains the same, except that hospitals now have to issue e-invoices.

Space Rental

An e-invoice must be issued for space rental within the hospital compound, including convenience stores and cafes. 

Buyer's Details for Minors' Medical Expenses

In cases where parents, guardians, or other relevant parties are responsible for paying medical expenses for minors under 18 years of age, their details should be included as the Buyer's details on the e-invoice. 

Consultants' Obligation and Bill Submission

Consultants' requirement for e-invoice implementation is determined by their individual thresholds, irrespective of the hospital's turnover. Compliance is mandated based on the issuance of invoices. Both consultants and hospitals must adhere to their respective thresholds for e-Invoice implementation.

Bill Validation

For e-invoice submission to the Inland Revenue Board (IRB) for validation, hospitals must provide detailed bills rather than summary bills. This ensures thorough documentation of charges incurred by patients. 

Conclusion

In the healthcare industry, billing processes are complex, and ensuring regulation is essential to prevent tax evasion. The implementation of e-invoicing brings numerous benefits, including streamlined processes, enhanced transparency, and higher accuracy. The FAQs and guidelines released by the Inland Revenue Board (LDHN) help clarify the complex e-invoicing procedures in healthcare.  IRBM is supposed to release more clarification as time progresses.