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Private Hospitals to Get More Pricing Power

04-23 09:25 Caijing
The government’s monopoly of medical resources, which it has achieved through favorable policies to public hospitals, is the fundamental problem facing medical reform.

By staff reporters Wang Kai, Li Hanwen, and intern Yan Lijiao

The National Development and Reform Commission and other departments issued a circular April 9 announcing that the pricing of medical services for non-public medical institutions would be regulated by the market.

According to the circular,“ all private hospitals’ medical services would be determined by the hospitals themselves and not in any way be subject to improper interference.” This means that the government will give some of its pricing power for healthcare services back to private medical institutions.

Caijing learned that subsequent medical reform policies will put a high priority on promoting social investment in non-public medical institutions. Decision makers hope the policy will promote the expansion of investment of social capital in the healthcare industry, increase the supply of medical services, and put external pressure on public medical institutions, thus promoting further reforms.

“Medical price reform is the hardest part of healthcare reform. The current problem in the healthcare price system is that medical services and other items with high technical content occupy a low proportion, whereas items such as sales of medicine and medical supplies occupy a high proportion. If this situation does not change, neither public nor private hospitals will be able to change the survival mode of ‘covering hospital expenses with medicine revenue,” said Zhang Yang, president of Beijing Sanbo Brain Hospital.

Cai Jiangnan, director of the CEIBS Centre for Healthcare Management and Policy, thinks that the long-term suppression medical services prices, coupled with the rigid, unchanging administrative pricing system, are directly responsible for the current predicament of hospitals’ dependence on medicine revenue for survival and the shortage of medical personnel. In the long run, the NDRC’s circular will have important significance for breaking the rigid system and finding out price signals for medical services, said Cai.

In fact, several years ago the State Council stated in a reform document that non-public medical institutions and public medical institutions should enjoy the same treatment. However, gaps have always existed between reality and policy.

The government’s monopoly of medical resources, which it has achieved through

favorable policies to public hospitals in terms of market access, planning, preparation, ratings, research, pricing, and health insurance, is the fundamental problem facing medical reform.

This situation has directly impacted the formation of China’s entire healthcare system - in terms of quantity, public hospitals and private hospitals can be described as each having half the market; but outpatient and medical service amounts at public hospitals outnumber private hospitals by 9:1, and 90 percent of beds are in public hospitals. In addition, only 10 percent of Chinese public hospitals’ income comes from government funding. Like non-profit hospitals, their main source of revenue comes from patients and medical insurance.

Some experts think that hospitals which are purely public should mainly rely on government funding, and patients that visit hospitals that the market has no interest or ability to run, such as psychiatric hospitals, infectious disease hospitals, and hospitals in poor and remote areas, etc., should be able to receive low-cost or even free medical care.

A source familiar with the matter said that in addition to price deregulation, relevant state departments are also considering more than a dozen other equal treatment policies for non-public medical institutions and public medical institutions in the aspects of market access, social insurance designations, the establishment of key specialties, professional title evaluation, academic status, grade assessments, technology access, etc. “The end goal is to create a fair, competitive market environment," said the source.

Full article in Chinese: http://magazine.caijing.com.cn/2014-04-20/114115040.html

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