Apr 18, 2017 04:57 PM

Editorial: China’s Health Care Reformers Seek to Get Overhaul Right

China’s health care reform, which has taken place by fits and starts, took a step forward this month, with 20 provincial-level governments revealing plans to put an end to drug-price markups at public hospitals. This will reduce the incentive to doctors to overprescribe or push more-expensive drugs on patients.

The municipal government of Beijing took a bold step on April 8 by scrapping a 15% drug price markup on medicines sold at public hospitals while allowing hospital administrators to raise their consultation fees and prices of certain medical services such as operations and nursing care to cover any deficiencies that may subsequently appear in their budgets.

The capital’s move is in line with a plan announced by the National Health and Family Planning Commission in January to halt by the end of September the controversial practice of hospitals nationwide of relying on drug sales to shore up their respective bottom lines. The much-anticipated move comes as authorities struggle to deal with intense public dissatisfaction with health services that has led to widespread physical attacks on medical staff and a growing gap between rich and poor when it comes to accessing health care facilities.

Chinese authorities announced policies to shake up the country’s health system way back in 2009. But results from piecemeal changes so far have fallen short of public expectations.

Revamping public health systems is a difficult task for policymakers anywhere in the world as it requires reconciling the conflicting interests of many groups. As local authorities step up reform efforts, they must adopt more market-oriented approaches and offer financial support to hospitals to ensure they are not struggling to make ends meet.

It is also essential to co-ordinate changes in medical services, the drug market and the medical insurance system because isolated moves have proved to be ineffective. Top policymakers have long emphasized the need for coordinated efforts, but in practice, the focus has been on reducing hospitals’ reliance on drug sales because it helps address snowballing public complaints about exorbitant drug prices.

In the past, over half of public hospitals’ revenue came from drug sales, and this encouraged doctors — whose bonuses were tied to hospital profits — to prescribe expensive drugs or prescribe more medicines than what patients needed. Such practices also stretched the state-backed medical insurance system.

But focusing on reducing the prices of drugs alone won’t solve the underlying problems plaguing China’s health sector. The lack of adequate coordination among different departments is the main factor impeding further reforms. There are still disagreements on how the medical insurance program should be changed and how it fits with reform targets for public hospitals and other related medical institutions and drug suppliers. While market-oriented pricing systems and fair competition is encouraged among pharmaceutical companies and medical insurance service providers, public hospitals and other medical institutions are largely under state control, which limits the room for deeper, more-meaningful reforms. Pushing for coordinated reforms across the board is the next big hurdle for policymakers.

Although there is a clear road map for China’s health care reform, details on how to implement it need to be fleshed out. Public hospitals will be the main battlefield for health care reform. The biggest challenge facing policymakers is transforming China’s clunky public hospital system that is kept on a tight leash by the government into an independent market player. It is the key to a complete overhaul of the country’s health care system because public hospitals are the major clients for pharmaceutical companies, and the lion’s share of medical insurance claims comes from patients at state hospitals.

The State Council, China’s cabinet, has issued a new health care reform plan for the period between 2016 and 2020. It proposes allowing hospitals to raise fees for medical services, increasing government subsidies to hospitals and helping them reduce operating costs.

Allowing public hospitals to operate according to market rules is a prerequisite for the smooth execution of the plan. If China wants to set up an efficient, modern hospital management system with sound governance and proper supervision by 2020, the government must stop meddling in the running of public hospitals and let them operate independently under market conditions.

Policymakers should also focus on motivating medical staff with proper pay and a safe working environment. This could help create a healthy relationship between physicians and patients that has been frayed by tensions — even violent attacks — in recent years and also reduce resistance to change.

It will take time for the current reform push to yield results. But its goal is to make sure that the country’s health care system keeps pace with its social and economic development. China’s growing middle class is demanding more diverse and flexible medical services. Like many other sectors in the economy, the market should play a decisive role in allocating medical resources. Overhauling the country’s health care system is a tough task that should be carried out in an orderly and well-coordinated manner, and its focus should remain clear and persistent.

Hu Shuli is the editor-in-chief of Caixin Media.

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