Wednesday, 23 July 2014

Why China's well-meaning rural health reforms are destroying township hospitals

by Michael Woodhead
In the hierarchy of Chinese healthcare, rural township hospitals occupy the second to bottom rung, below country hospitals, but above village clinics.  They are an essential component of the Chinese health system, especially for rural people on low incomes, but they are collapsing because of ill-planned rural healthcare reforms started in 2008.
The big change that is destroying township hospitals is the attempt by the health ministry to make drugs affordable and stop doctors from profiting from commissions on the sale of medications. To do this, the ministry brought in a new system that restricted township hospitals to using medications on an essential drugs list, all of which are sold at zero commission. This made drugs more affordable to rural people, but it also meant that township hospital doctors lost their main source of income. To compensate, doctors were put on fixed salaries equivalent to those of secondary school teachers. The Chinese government also created an affordable rural health insurance scheme that would provide reimbursement for inpatient care - and less so for outpatient care.
In theory, this sounds like a recipe for affordable and equitable healthcare for rural residents. So what went wrong? The first problem was that the health ministry forgot to consult with rural doctors on the likely impact of the scheme. The unintended consequences of the reforms have meant that they have done the exact opposite of what they were intended to do - they have weakened the township hospital system to the point where it is being abandoned by doctors and patients alike, all of whom are fleeing to the larger and better equipped country hospitals. Why is this?

In a new paper in the journal Social Science and Medicine, China health experts including Dr Theresa Hesketh from the University of London report on a series of interviews with rural health workers and patients, who describe the impact of the health reforms.

1. Essential Drugs List
The main complaint of rural health workers is that the essential drugs list is too narrow, and it prevents them from doing their job properly. Many doctors have found that the drugs they need are simply not available, and as a result patients have to go to a country hospital, where the essential drugs lists (and capped prices) are not enforced. Thus patients end up having to travel long distances for treatment and also have to pay more for their drugs. Another problem with the essential drugs list is that drugs are often not in stock because the low prices mean that drug companies have little incentive to produce them to a good quality standard.

2. Doctor Incomes
A second problem with rural health reforms relates to the switch to fixed salaries of doctors - a return to the 'iron rice bowl' of the Mao years. This means that doctors no longer have an incentive to see more patients or work more flexible hours, such as night shifts or in mornings and evenings when rural residents may be free from farmwork. Doctors now get paid regardless of how hard they work, which is a disincentive. The low level of the fixed salaries is also demoralising because doctors see themselves (rightly or wrongly) as more highly qualified and skilled than secondary school teachers, whose salaries are used as a benchmark.

3. Inadequate health insurance
One of the main anomalies of the New Rural Cooperative Medical Scheme is that patients get more reimbursement for inpatient treatment fees (70%) than outpatient treatment fees (30%). This creates a perverse incentive for patients to get admitted to hospitals, even for minor illness. However, the low ceiling of the health insurance cover (about 200 yuan a year) means that it fails to protect patients who have catastrophic health costs due to serious or chronic illness.

The net result of the reforms has been the demoralisation and de-skilling of rural doctors because they have seen their income drop and their ability to treat patients curtailed. Not surprisingly, many doctors have joined a brain drain from township to county hospitals, where they can earn higher incomes (from drug sales) and have more clinical freedom to prescribe what they want.

Dr Hesketh says the reforms have done some good in the poorest rural areas of China, such as those in Yunnan. There they have made drugs more affordable and guaranteed doctors some income. But in more mainstream parts of China such as Zhejiang the reforms have had a negative impact. The problems might have been averted or minimised if doctors had been consulted about the reform before they were implemented. She suggests that the way forward will have to involve raising doctor's incomes and also expanding the scope of the essential drugs list. Giving rural doctors a 'gatekeeper role' - like primary care physicians may also help, but will prove unpopular with Chinese patients who are used to going direct to the hospital. Dr Hesketh says there is also a need to improve insurance cover and the 'supply side' problems such as overservicing and price gouging.

In the meantime, China is left with a broken health system in need of repair to fix the damage caused by early reforms. Let's hope Health Minister Li Bin is paying attention.

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