China to Start Public Hospital Reform Trial, Guangdong Proposes to Pioneer

The MoH spokesperson Mao Qunan has revealed in this week's MoH press conference that public hospital reform is one of the main focuses of the national healthcare reform. Once the overall healthcare reform plan is finalised, the public hospital reform trial plan will be put forward at the same time. Currently the MoH is considering the trial policies for public hospital reform as well as the trial regions' selection.

In line with the MoH plan, China's Guangdong province is in action to pioneer the public hospital trial reform as early as next year, reports Interfax. The provincial government is planning to start the trials by getting rid of the existing 15% drug price mark-up in trial public hospitals.

Focus of National Healthcare Reform Plan

Today China's new healthcare reform plan has completed the one-month public consultation stage since its release on 14 October (see China: 15 October 2008: China Proposes Universal Medical Insurance in Healthcare Reform Plan). During the one-month public debate, the reform draft has received public opinions from all levels including the conflicting interest groups in the industry. As one of the main focuses of the short-term priority fields, public hospital reform is primarily targeting the reduction of hospitals' dependence on drug sales as a main income source.

In the healthcare reform plan, the government proposed to enhance its financial investment into public hospitals and reasonable adjustment on medical service charges to reduce the hospitals' dependence on selling drugs to turn a profit. The government will revise the healthcare reform plan based on the collected opinions but the finalisation date of implementation details release has not been confirmed yet.

Guangdong to Cut Drug Price Mark-Ups

Guangdong, the first province in China to opt for economic liberalisation and pro-market reform in the 1970s, is aiming at coming up with its public hospital reform trial plan by the end of this year. Under the new plan, the trials will start with 11 public hospitals in Shenzhen, Shaoguan and Zhanjiang cities. The 15% mark-up on drug cost, currently widely adopted by public hospitals in China to make up for insufficient funds, will be cut for the trial hospitals. It is estimated by the government that this cut will cause an annual income loss of some 10 million yuan (US$1.46 million) for a large-scale grade three hospital.

The loss is expected to be made up by the subsidies from the governments at the provincial, municipal and county levels and the permit to increase medical service charges including fees for operations. So far Shenzhen municipal government has confirmed that it will subsidise the trial hospitals' loss under this change.

Outlook and Implications

Public hospitals surviving on drug sales' income have long been accused as the main source of high drug prices in China. The doctors tend to prescribe expensive drugs and high volumes of drugs in order to increase their revenue. By tackling this long-existing issue, China's healthcare reform will help to reduce the high drug prices hence relieve the burdens of the patients in healthcare and medicine expenditures. Drug companies will see sales drop in public hospitals with this reform since the doctors won't have the incentives to prescribe large amounts of expensive drugs any more.