Sunday, 28 June 2015

Healthcare reform in China - The Five Reforms and why they will fail


As part of its latest round of healthcare reforms the Chinese government has released  a handy guide to the five top things it is doing to overhaul the creaky hospital system. The snappily titled "Guiding Opinions on Pilot Comprehensive Reform of Urban Public Hospitals" is really just a wish list for what the government would like to  see happening in the public hospital system.

Bear in mind that in China a "Public Hospital" is not  a public hospital as we would understand it in Britain or Europe. It's not a government-funded hospital that provides universal care. No, it's a state owned enterprise that runs a user-pays health institution. No money, no treatment. It's true that most people have some kind of government-subsidised health insurance that may cover some of their medical bills, but here again the public hospitals have a monopoly on that income - until this year private hospitals were not eligible for medical insurance rebates.

Anyway, all that is changing with the new Five Reforms:

1. Management Reform

The government says hospitals must adopt a more independent and accountable management system - recruiting outside experts and taking on board evaluation and performance review systems. They must start to subject themselves to outside scrutiny from consumer and industry groups and  - here's the killer - be transparent with their data. In other words, reveal their costings (insurance companies will love this) and their activities. A big ask. Expect massive resistance.

2. Revenue Reform

Hospital must stop relying on profits from sales of drugs and medical devices for their revenue. At the moment hospitals get 40-60% of their revenue from markups on drugs, medical equipment etc, and only a small proportion from medical fees and government subsidies. The central government wants to reverse that, and is going to ban drug commissions. To make up the lost revenue the hospitals must increase medical fees. Patients won't like that. There have already been riots in pilot trial sites in Sichuan by kidney dialysis patients who saw their cost of treatment go up 200%. The local government backed down.

3. Performance Reform

Hospitals must ditch the current system that forces doctors to overservice in order to achieve their bonuses. They must ditch the contracts that link doctor's remuneration to prescribing and procedure numbers, and replace it with a performance system based on clinical outcomes, service and efficiency.

4. Gatekeeper Reform

The government wants a primary care gatekeeper system and says tertiary hospital must stop being the One Stop Shop/First Port of Call for all and sundry.  Medical insurance policies are to be changed to force patients to attend local community clinics for minor illness and then be referred to local hospitals before going to a major tertiary hospital. The  major city hospitals will be reserved for more advanced and complex care patients. They must stop offering outpatient care for minor illnesses. This will take some getting used to because at the moment all Chinese make a beeline for 'the best hospital' as soon as they have a cough or cold.

5. Private Interest Reform

State-owned hospitals must be opened up to outside private business interests - the so-called 'social capital'. Private companies must be allowed to take on major roles within hospitals, along with insurance companies, and other medical foundations. Most importantly, they must have access to health information data.

The long and short of this guidance is that the closed and tightly-controlled monopoly situation for state owned hospitals must be bust open. At the moment, state-owned hospitals are the empires for local government bureaucrat-business chiefs. They jealously guard their business and their revenue stream - which is patients and the drugs and treatment they receive.

In an interesting opinion article in Caixin this week, Tsinghua University health economist Li Jiangge says that previous efforts to reform the hospital have failed because they simply have too much power and have too much to lose. He cites the example of government programs to provide  affordable treatment for cataracts. Although the central government provided generous funding to set up cataract treatment programs, most local governments blocked these projects in their areas because they would lose the lucrative income from doing the operations in their own hospitals. In other words - hospitals will block anything they see as competition or which undermines their own services. Likewise with kidney dialysis: China has 3 million people with renal failure needing dialysis, but only 400,000 get dialysis. The remainder go untreated and have early death because public hospitals will not allow private operators to enter this area and compete with them.

As Li Jiangge says, private investors and public hospital managers are "strange bedfellows" with conflicting and competing interests, who cannot be expected to co-operate. The few attempts at encouraging private industry to go into partnership wit public hospitals have not been a great success, he says.

Li Jiangge says private hospitals will only flourish when they are independent of the public system and have access to the same advantages such as medical insurance rebates and access to health data. Furthermore, he says private hospital development has been held back by lots of regulations that make them subject to local government control - including many "not-for-profit" rules. He says private companies should be allowed to do what they do best - make profits and take them away. The role of government should be to focus on "public health" matters such as disease control, vaccination and basic health services, he argues.

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