web_vol47 4.pdf - International Hospital Federation

Policy: China
Figure 2: The development of for-profit hospitals as a
percentage of total hospitals
percentage of for-profit share
45
40
35
30
25
20
15
10
5
0
Number of hospitals
2003 2004 2005 2006 2007 2008 2009
Source: China Year Book of Health Statistic (2003-2010)
General
hospital
TCM hospital
Specilized
hospital
and for-profit health care organizations. With these favorable
policies and market conditions, the private hospital market has
grown rapidly. From 2003 to 2009, the percentage of for-profit
specialty hospitals grew from 27% to 41% of the total hospitals,
while the percentage of for-profit general hospitals grew from 9%
to nearly 20% (Figure 2). Although private hospitals still constituted
a relatively small percentage of the market they grew quickly and
became more important players in the hospital market. The limited
empirical evidence shows no evidence that private for-profit
hospitals have driven up average medical expenditures while
serving their profit-maximization objectives. Rather, they help
increase the market supply of health care, which in turn better
serves the increasing demand (Liu et al. 2009).
Era III: Exploring options to address access and cost issues
in the public hospital system (2009–present)
The start of this era is marked by the issuance of “Guidelines on
Deepening the Reform of Health Care System” in 2009. In early
2010, the government issued “Guidance for the Public Hospital
Reform Pilots” to provide direction for further improving quality and
access. It designated 16 cities as the site for pilot where public
hospitals could experiment with ways to better serve the public,
improve operational efficiency, improve fairness and accessibility,
optimize the organizational structure, and promote innovation. It
specifies four “separations”: the separation of regulation and
operation, the separation of policy-making and management, the
separation of medical and pharmaceutical services, and the
separation of for-profit and not-for-profit hospitals.
These guidelines have come under increasing public criticism for
making medical care too expensive and too difficult to find. But no
specific remedies have been proposed. As a result, the
government has authorized the 16 designated pilot cities to design
their own public hospital reform agenda to “establish a reasonable,
effective and optimized medical service system” (Xinhua News
2010). The reform initiatives are categorized below:
Public hospital governance reform. The main objective is to
align the accountability and responsibility of different public
bureaus on public hospital management. For example, some pilot
cities have established a public hospital management committee
as the highest decision-making authority. A mayor or deputy
mayor usually serves as the head of the committee, and its main
function is to coordinate strategic decision making and
implementation of public hospital reform by the various bureaus.
Hospital conglomeration. The main objective is to increase
economies of scale and improve operational efficiency. Although
public hospitals are affiliated with governments at various levels
(the military, higher education, business enterprises, and so forth),
hospital group development is mostly led by the government.
Spurred by market competition, medical institutions have been
active in developing hospital groups–more than 120 in recent
years (Li et al. 2006). Different models have been developed in the
market, including cooperative hospital groups, hospital chains,
merged hospital groups, and hospital groups with reorganized
assets.
Provider-payment system reform. The main objective is to
contain public and private out-of-pocket expenditures. The new
payment methods use case-based payments adjusted for
disease profiles, such as diagnosis-related groups (DRGs) or
global budget caps, or a combination of the two approaches to
replace the fee-for-service (FFS) methods. The limited empirical
evidence shows that prepayment is associated with a slower rate
of growth of overall expenditures, program spending, and patient
copayment per inpatient admission compared with FFS (Yip and
Eggleston 2001).
Despite these initiatives, progress in public hospital reform has
been much slower than in health insurance reform. The slow
progress of the reform highlights the underlying structural and
institutional weaknesses that lie at the heart of the conflict
between public hospitals and public interests. The weak
institutional setting provides powerful incentives for physicians
and hospitals to exploit patients and third-party payers for
financial gain.
Lessons learned from the evolution of the Chinese hospital
system
The evolution of the Chinese hospital system offers several
lessons. First, it is impossible to institute reforms beginning with a
blank slate; change is always embedded in an existing socioinstitutional
context. Rather than imposing blueprint solutions,
political and historical realities must be considered. A strategy for
reform must be guided by careful analysis of the current situation,
and consider available options, vested interests, potential costs
and benefits, and potential allies and opposition.
Second, two critical issues are usually ignored in the rush to
design and implement health reforms: governance and
sequencing. Without both of these being properly addressed, the
health care reform may encounter unintended consequences or
even an undesirable regression (Rose et al. 2003). When China
decentralized revenue generation and profit retention to the public
hospitals in the 1980s, there was no appropriate governance
mechanism to guarantee the public interest and provide external
accountability. Introducing a governance reform later in the
process is more difficult than doing it at the outset.
Third, the entrance and development of private hospitals may
increase market competition and improve the efficiency of the
health care delivery system, but their development and functions
8 World Hospitals and Health Services Vol. 47 No. 4