Opinion: How Wholly Foreign-Owned Hospitals Can Help China’s Health Care Sector Level Up

China’s health care sector is gradually becoming more accessible to foreign investment, highlighted by the introduction of the Pilot Program for Expanding the Opening of the Solely Foreign-Funded Hospital Sector. A collaborative effort by the National Health Commission, Ministry of Commerce, and other departments, the program aims to allow the establishment of wholly foreign-owned hospitals. The goal is to bring in high-level medical resources, enhance domestic medical services, and diversify medical offerings in China, benefiting both foreigners and local citizens. Comprehensive efforts must be undertaken to create favorable conditions and address barriers so that foreign-owned institutions can maximize their unique contributions [para. 1].

Historically, China's policy on foreign-funded medical institutions has evolved significantly since the beginning of the reform era. Initially, foreign participation was limited to nonprofit activities or joint ventures. However, changes in 2010 and 2014 opened up the sector more, allowing wholly foreign-owned hospitals in selected regions, including Beijing and Shanghai. In 2015, foreign investment in medical institutions was shifted back to being "restricted," requiring joint ventures. Today, over 60 Sino-foreign joint venture medical facilities exist on the mainland, predominantly in major cities like Beijing, Tianjin, and Shanghai, with investments mainly coming from Hong Kong, Macao, and Taiwan [para. 2].

The 20th Central Committee emphasized a gradual opening across various sectors, including health care. In September 2024, plans were announced for allowing wholly foreign-owned hospitals in nine regions. These regulations not only set investment, establishment, and operational criteria for such hospitals but also allow them to apply for public health insurance programs. This represents significant progress in China's ongoing health care reform efforts [para. 3].

Despite advancements, China's health care system still faces challenges, particularly in meeting demand with adequate supply, including the provision of high-quality medical services. Allowing foreign-owned hospitals in regions open to foreign interactions can introduce top-tier international medical resources, increasing service availability and catering to both local and international populations. Such hospitals can complement existing medical facilities and potentially drive reforms in public hospitals through advanced management practices and service models [para. 4].

However, the introduction of foreign capital presents challenges, including "teething problems" as foreign entities adapt to the local environment. The pilot program's provision for foreign and mainland medical professionals may raise concerns among domestic doctors about leaving established systems. Cultural and management style differences further underscore these challenges [para. 5].

Regarding payment, the pilot scheme allows hospitals compliant with regulations to become designated medical insurance providers. This requires adherence to medical service pricing and pharmaceutical policies, influencing the upscale market traditionally targeted by foreign hospitals. Thus, these hospitals must find niche opportunities and engage in differentiated competition [para. 6].

The success of foreign-owned hospitals will largely depend on expectations. Government efforts at all levels must aim to promote a first-class business environment with the rule of law, market orientation, and international standards, while ensuring policy stability and coordination [para. 7].

One of the program's key goals is creating replicable and scalable results. While public hospitals will continue to dominate China’s health care landscape, the role and experiences of foreign-owned hospitals are critical. Future reforms must prioritize patient needs, ensuring effective implementation of pilot programs, and addressing common access and affordability challenges in health care [para. 8].