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Health policy

Transformation of the Chinese medical and health development: from the perspective of the public hospital reform

ZHOU, Yi; LI, Lan-juan

Editor(s): SUN, Jing

Author Information
doi: 10.3760/cma.j.issn.0366-6999.2012.16.025
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The mistakes of “Old healthcare reform” lead to bad consequences: the contradiction between the reducing government investment and the rising costs of medical treatment, the contradiction between the nature of the public welfare and the marketization of hospitals, and the contradiction between the unlimited demand growth for medical services and the scarcity of qualified medical resources. The causes of the failure of “old healthcare reform” are the loss of market-oriented reform and the decadence of medical tenet. The lagging causes of public hospitals are the poor integrating effects among departments, the insufficient financial investment, the unclear subsidy mode, the trouble of “pharmaceutical care fee”, the imbalance between macro-control and market mechanism, and the contradiction interests between public welfare and profit-seeking of the public hospital. This paper innovatively put forward countermeasures for the improvement of “new healthcare reform” transformation. First, transform from the treatment of the major diseases to the prevention of the diseases, enhancing health productivity and reducing healthcare costs. Second, transform from partial pilot to the comprehensive reform. Third, transform from monopoly to balanced operation system by constructing an equitable, efficient, and balanced mechanism of medical supply and demand.

With the progress of civilization, people are paying increasing attention to health. Healthcare reform is the frontier of the research of public health management and health economics, and the all-around reform of public hospitals is the key of “new healthcare reform”.1 China's healthcare reform had gone through over 30 years, starting from the circular On Strengthening the Economic Management of the Pilot Hospitals [(1979) Weijizhi No. 579] jointly issued by the Ministry of Health, the Ministry of Finance, and the State Bureau of Labor in 1979. China first started its “Old healthcare reform” in 1992 to abolish a system under which the government covered more than 90% of expenses. The Opinions of the CPC Central Committee on Deepening Healthcare System Reform in 2009 [Zhongfa (2009) No.6] confirms the promotion of “New Healthcare Reform”. The “New Healthcare Reform” has put forward the principles to further reform Chinese medical and health care services. By reviewing the development of the Chinese healthcare reform with historic and comparative methods from the perspective of the public hospital reform, this paper aims to analyze the causes and lessons of the old healthcare reform and put forward the countermeasures for the transformation of “new healthcare reform”.


China's healthcare reform in a way had gone through 30 years since the circular On Strengthening the Economic Management of the Pilot Hospitals [(1979) Weijizhi No. 579] jointly issued by the Ministry of Health, the Ministry of Finance, and the State Bureau of Labor in 1979. China first started its “Old healthcare reform” in 1992 to abolish a system under which the government covered more than 90% of expenses. The “Old healthcare reform” experiencing long period has made progress, but it also led to many adverse consequences and the public hospitals is the embodiment of the problems.2 The three contradictions mentioned below lead to bad consequences, patients dare not access to high-priced healthcare services for their illness, which not only aggravates the doctor-patient tension, but also ruins the tenet of healthcare services. And it is a disaster for every member of society, since each of us will inevitably be a patient one day.3


According to a latest survey by the National Bureau of Statistics (NBS) on “unsafe” factors upsetting the public, rising medical costs have become the top concern among Chinese people. More than 90% people are not satisfied with the old healthcare reform especially with the soaring medical fees. They think that with the rising costs of medical services and increasingly luxurious hospitals, they have problems to access to hospitals. Surveys showed that more than 90% people think that the rising costs of medical services have accounted for an increasing proportion of the total income of their family year after year. During 30 years since China's reform and opening up in 1979, the economic growth rate has reached an average of 9.3%; however, the medical security system has become from bad to worse - the government healthcare budget has dropped from 39% to 13% of the total healthcare spending and the healthcare spending of enterprises and communities has dropped from 46% to 18%, but the healthcare spending of individuals have been increasing continually from 20% to 60%. Social security fund which originally accounted for 40% of total healthcare spending, has dropped to 17%, among which the new cooperative medical fund in rural areas covering 80% of the total population is only 3.1 billion Yuan, less than 2.4% of the total social security fund. This illustrates that “old healthcare reform” is a matter of fact that the government shoves off the burden of medical security to marketization.4 Taking a look at the situation in developed countries, there is no exception that each country set up its medical security system through state welfare system. In 2000, WHO carried out a performance evaluation for the healthcare system in 191 member states and China's comprehensive evaluation in the performance of healthcare system and per capita healthcare expense rank poorly, especially the fairness of social internal fund allocation ranking the 188th place, that is to say, the fourth from the bottom.

As the government is busy with “selling hospitals” or “casting off the burdens”, public hospitals have changed into private hospitals overnight and healthcare services have become high-price and poor-quality, which has three manifestations. First, medicine prices become higher and higher. Second, under the instinct of money-making, doctors brazenly claim kickbacks. Third, doctors rack their brains to overprescribe medicines and carry out excessive checks for the patients. These not only aggravate the burden of healthcare expense, but also do harm to the health of patients. Worse still, there are phenomena of hospitals to financially supporting local government, which do harm rather than good to the health of patients.5


As a part of social welfare, medical security system is naturally against market, which should make overall arrangements through specific system by the government, and it is impractical to attempt to solve it by the market-oriented reform. It is self-evident that market economy may solve the problems of information and incentive mechanism properly, but it is difficult for it to solve such problems as monopoly, externalism, and public product supply. As far as the economic development of developed countries and newly emerged market-oriented countries are concerned, the regulation of government for economy has almost never ceased.

Originally, China's public hospitals were invested by the government, and its characteristic was the commonweal nature. After “old medical reform”, the state-owned hospitals which undertake the main part of medical security have switched from public institutions to commercial enterprises, and the investment of hospitals has switched from state allocation to self-financing. With the lack of government investment, public hospitals have been forced to use drug sales to support healthcare services. And in the process of marketization, public hospitals have lost their way. They have pushed the healthcare services, which should be treated as part of the commonweal, to the market completely. This has shaped a closely linked chain of profits accompanied by the lack of management of medical market, medical staffs seeking for the maximum of economic benefits and the mercenary temptation of pharmaceutical sales representatives.

Before “old healthcare reform”, healthcare coverage of urban and rural areas respectively reached 95% and 50%; after the reform, the urban healthcare coverage has dropped to 32%, because of the disappearance of “barefoot doctor” and the market orientation of township healthcare centers and rural healthcare security has long existed in name only.6 The out-of-step between “old healthcare reform” and the establishment of medical security system, the blur of principal part of medical insurance system, order dislocation, responsibility indifference, system chaos, low coverage, mandatory relaxation, and weak prevention function shaped a “mutual-loss” mechanism, and incurred the dissatisfaction of ten major interest bodies including government, enterprises, hospitals, doctors, patients, medicine dealers, urban people, rural people, the wealthy, and the poor.

Taking the opportunity of the incompletion of “old healthcare reform” and the leaks of medical insurance system, some special go-betweens and some power groups become vested interests, such as pharmaceutical sales representatives, who sell medicine to hospitals by means of bribes and “establishing relationships with important employees of the hospitals” and try to cooperate with the doctors having the right of prescription, to realize a “win-win” situation. Thus, the profits of high price medicines go to the pockets of these collusive persons both inside and outside of hospitals; however, hospitals, medicine manufacturers, and patients become the losers of “old healthcare reform”, which causes the medical insurance function to exist in name only.7


Medical security may be divided into two levels: one is financial security for those who cannot go to hospitals because of low income; the other is medical service guarantee, for those who have high salary and need qualified doctors to provide qualified medical treatment. For example, as an important determinant of patient satisfaction, waiting time, has gained increasing attention in the field of health care services.8 In the public consciousness and during the professional discussions, these two levels may easily mixed up and, China's healthcare reform needs to solve the problem of both financial security and healthcare guarantee.

The imbalance between the demand and supply of China's healthcare services has a long history and it is difficult to solve. The incomplete development mode of supply and demand results in the institutional defects of healthcare system. If we take the situation of 1978-2010 to analyze, our country's Gross Domestic Product (GDP) has increased by about 53 times, which equals to the income growth of urban and rural residents; but the healthcare spending of all walks of life including government, social organizations, and individuals has increased by about 80 times, and among them, the healthcare spending of individuals has increased by about 200 times. From the side of demand, since the beginning of the reform and opening up, the growth of healthcare needs of Chinese common people is many times faster than that of China's GDP and the healthcare spending have been growing continually.

From the side of supply, the government shoulders less than the common people; the income growth of the common people lags behind comparatively, so there is no financial security and the supply of healthcare services is in shortage; this bottleneck problem of healthcare services is hard to solve. From 1978 to 2010, the various kinds of healthcare institutions in China have increased by 80%, among them hospitals have more than doubled, and clinics have almost tripled, whereas public healthcare institutions have increased slowly. Medical staffs have increased by 78%, among them nurses have increased by 2.5 times, and doctors have increased by less than one fold. The short supply, low quality, unreasonable structure of medical human resources, and the low income of medical staffs aggravate the contradiction between the rapid growth of healthcare needs and the scarcity of qualified medical resources, and it is the key problems for “new healthcare reform”.9 A research conducted a questionnaire in 120 healthcare clinics in towns and townships in 12 provinces and cities, and it was found that more than half of the healthcare clinics in towns and townships have no professional doctors with bachelor degree; among these healthcare clinics, 46 clinics cannot carry out obstetric and gynecological operations, and the per capita gross income is 53 Yuan per day, which cannot guarantee the wages of medical staffs.


The problem of “difficult and costly access to healthcare services” has resulted in the tension between the hospitals and the common people, which is called as one of the “three new major social problems”. The Development Research Center of the State Council has concluded that “old healthcare reform is basically a failure”, and “marketization is not the orientation of healthcare reform” has aroused wide resonance in China. Even if market is not the best means of resource allocation, it is not the worst one. Then, why is the marketization of healthcare reform “basically a failure” and why did it result in the consequence of the aggravated tension between hospitals and patients? The main reason is that the particularity of healthcare sector is neglected. The marketization is not everything, the healthcare sector is naturally against the market, and this is the root cause of the failure of marketization ideology.

Market orientation: the loss of healthcare sector reform

The unclear objective of healthcare reform

The coverage of medical insurance mechanism is unclear. It does not have a planning of specific objectives, and more often than not, it has to grope the way cautiously. The government investment has been declining year after year and the rising transaction costs of hospitals and pharmaceutical enterprises have made them reluctant to assume social responsibility, which results in increasing low income patients falling into the self-help circumstances.

The chaos of the main body of the healthcare reform

The main body and objective of medical security are mixed up. In term of the main body of medical security, our country's hospitals have dual nature: most hospitals are not only public hospitals, but also enterprises (they are responsible for their own profit and loss); thus, it is difficult to define their social healthcare responsibility. And for the hospitals to survive, their interests are completely different from that of the broad masses of the patients. In term of the patients, the objective and coverage of medical insurance are not clearly specified. As a part of social welfare, the medical insurance should cover all citizens of the society. However, in fact, the medical insurance of our country covers only a small percentage of people in urban areas.

The conflicts of relevant systems

Ever since “old healthcare reform” in 1979, medicine system, medical system, town medical insurance system, rural medical insurance system, and household registration system are incomplete and inconsistent with each other, and the cooperate mechanism of effective operation is not taken shape, thus causing the conflicts and poor performances of relevant systems.

The order dislocation of healthcare reform

Healthcare reform and the establishment of medical insurance system are not synchronized, and there is the problem of order dislocation. The marketiziation of medical insurance was blindly carried out while the healthcare reform had not been completed, and the failure of healthcare reform was inevitable.

The decadence of medical tenet

If you put medical ethics in a broader socio-historical context to survey, you will easily find that bad medical ethics have complicated socio-historical reasons and it is not merely a problem of the decadence of medical ethics.

A byproduct of the tremendous social and cultural change in transitional period

Although “old healthcare reform” was initiated in 1979, the symbol of marketization reform was officially put forward by The Report on the Several Policy Issues regarding Healthcare Reform, which was transmitted by the State Council to the Ministry of Health and opened the prelude of transformation of healthcare institutions. At that time, the main problems were the insufficient government investment and the scarcity of medical resources; as a result, the government encouraged hospitals to walk the road of market economy for the purposes of hospital development and solving the scarcity of medical resources, such as increasing hospital wards, purchasing facilities and equipment, and recruiting medical staffs by means of self financing (such as loans).

Under the money-driven atmosphere, the healthcare reform started and it was a process of “delegating powers to lower levels”. The hospitals adopted the means of increasing the prices of medical treatment and collecting the drug prescription fee to gain more earnings. The problem of “difficult and costly access to healthcare services” was being highlighted stage by stage; especially in mid 1990s, the money-driven became the only criteria, which resulted in the decadence of medical ethics. Under this background and based on the particularities of the relationship between hospitals and patients, the hospitals regarded the patients as bonanza to realize their huge profits and doctors took advantage of their special social position to gain their rich incomes. As a result, the marketization of healthcare services brought about increasingly heavy burden on the common people, which aggravated the contradiction between hospitals and patients.10 When every doctor who has the authority to prescribe medicines is the terminal to sell high-priced medicines and do harm to the interests of patients. Thus, the lack of medical ethics is the basis of hospitals for realizing the exploitation of the patients and the respect for the doctor will lose completely.

An inevitable product of rational and standardized modern society

The management characteristics of modern society are rationalization and standardization by using the unified standards to integrate various industries into the administrative system. In term of healthcare industry, national administration system attaches importance to the collective capacity of healthcare industry and diminishes the importance of morality of individual medical staff. Medical legislation does not pay enough attention to the particularities of healthcare industry and the relationship between hospitals and patients; instead, it copies the thinking mode of marketization of other industries and neglects the natural attributes of the inequality between hospitals and patients as well as the deadlocked and passive situation. Therefore, the legal rules which seem to protect the interests of both parties are in fact to consolidate the inequality between hospitals and patients, and it is a problem of legislation.

In fact, the construction of medical ethics has never ignored by government administrators; it is just that little effects have been yielded. For example, on 19th December 2007, the Ministry of Health issued The New Guidelines on Establishing Medical Ethics Appraisal Regulations for Medical Staffs, which put forward establishing medical ethics archives for medical staffs in various types of healthcare institutions at all levels, so as to improve medical ethics. But the medical ethics which is prescribed in The New Guidelines on Establishing Medical Ethics Appraisal Regulations for Medical Staffs, does not regard the relationship between hospitals and patients as an undivided whole, but treats the medical staffs as an independent party of practicing medicine. It is difficult to construct good medical ethics simply by relying on the internal restriction of healthcare institutions, even if patients are allowed to participate the medical ethics appraisal mechanism, the anticipated goals can't be realized as well, and it may sharpen the contradiction between hospitals and patients. It is impossible for the rational modern management system to set aside enough space for morality.

In a certain degree, the medical laws and regulations which ignore medical ethics will put hospitals and doctors into a dilemma. The requirement of signing before the operation can well illustrate the situation. For the sake of self-protection, doctors are more likely to choose to obey the medical laws and regulations rather than to save the patients if without the signing before operation, thus, hospitals may be charged with “apathy”; if doctors keep to medical ethics to heal the wounded and rescue the dying, the hospitals may be faced with treatment failure, lawsuits or compensations. This usually aggravates the contradiction between hospitals and patients. The increasingly sharpening situation was illustrated by “XIAO Zhi-jun” incident in 2007. According to Administrative Regulations on Medical Institutions, when hospitals decide to perform operations etc, it is a must to obtain the permission of patient as well as the signature of the relative of the patient. As XIAO Zhi-jun refused to sign for his pregnant girlfriend, the precious saving time was delayed and both the mother and baby died. If we consider the signature refusal of XIAO Zhi-jun, it is legal for the hospital not to perform the operation for his pregnant girlfriend, but it is unreasonable for the hospital to see the patient to die for lack of the signature. This shows the falsehood which seemingly treats hospitals and patients equally: without the signature of patient's relative, the fact that hospital cannot perform the operation to save is nothing but to exculpate responsibility. And there are only two choices facing the patients and their relatives: one is to obey the instructions of the doctors and assume all the possibilities of operation failure and the other is to behave like XIAO Zhi-jun, which may lead to tragedy.

There is natural inequality between the relationship of hospitals and patients. Patients entrust doctors with their health, but they have to accept the diagnoses and suggestions passively. Medical treatment is the exclusive territory of morality, and the market logic cannot be applied to medical treatment. The concept of “medical market” cannot justify itself. The real market mechanism demands information symmetry and capacity symmetry between the buyer and the seller. However, in the so-called “medical market”, you cannot find market characteristics. Although patients pay for doctors and it seems that this is similar to other consumption behaviors, there is a big difference in essence. But on the medical market, almost every consumer consumes just like a “successful person”: he or she wants to buy expensive medicines and medical services only if they can cure the life.

Indeed, the harmonious relationship between hospitals and patients cannot exist without medical ethics. With medical ethics, medical practitioners have gained the trust of patients for thousands of years. But the marketization of old healthcare reform had widened the gap between hospitals and patients, and devalued the moral responsibility of the doctors toward the patients. Old healthcare reform advocates the unbalanced development ideology of fairness and efficiency, which leads to the deviation from traditional values. It treats patients and doctors in medical market with equal status. On the surface, the status of patients is boosted in this pair of social relationship, but in fact, it does harm to the interests of the patients and force the doctors to give up their medical ethics.11

The lagging causes of the reform of public hospitals

In New healthcare reform, the State council has designated 16 key cities along with other pilot units designated by various provinces (autonomous regions and municipalities) to launch the reform in an all-around way to switch from drug sale supporting healthcare services to the national essential medicines system. A number of 1200 national large-scale general hospitals implement outpatient appointment system, off-peak medical treatment, and no holiday outpatient service; more than 3800 general hospitals promote normative and effective nursing service and more than 1300 general hospitals make experiments with clinical pathway management and promote family physician model. More than 50% state-owned grass-root healthcare institutions in pilot counties (towns and districts) set up the new operational mechanism, which realizes resource sharing in various departments such as checkup department, testing department, and pathology center. However, the reform of public hospitals has progressed very slowly, and the analysis is as follows:

The poor effects of cooperation and integration among departments

From the beginning of designing the plan of healthcare reform, the government coordinates 16 ministries and commissions to participate together and form a joint working group, which is jointly headed by National Development and Reform Commission and Ministry of Health of the People's Republic of China. However, when New Healthcare Reform enters the practical operation period, it still rests on the strategy of “feeling its way along step by step” and still lacks an overall implementation plan and corresponding auxiliary projects, which is the bottleneck of deepening the healthcare reform.12

The insufficient financial investment and the unclear subsidy pattern

The incomes of public hospitals come from the incomes of medicine, check-up, and operation, and the income of medicine accounts for more than half of the total income. New healthcare reform has gradually changed the three original channels to compensate public hospitals (service charge, drug prescription fee, and financial subsidy) to two channels (service charge and financial subsidy). And by increasing the prices of medical services, hospitals are compensated for the cancellation of drug prescription fee, including “pharmaceutical care fee”, the adjustment of technique service prices, and the increase of government investment. However, once the healthcare reform of public hospitals is launched in an all-around way and the problem of unclear subsidy pattern of government occurs, the poverty-stricken areas has difficulties to bear in term of financial compensation.13

The imbalance between macro-control and market mechanism

The mistaken ideas are to separate healthcare services and drug sale simplistically, with big promises to let public hospitals return to the commonweal nature, regard the whole healthcare services as public product, advocate realizing maximum social benefit with minimum cost, and guarantee the healthcare of the common people. On the one hand, these mistaken ideas will restrict the enthusiasm of public hospitals; on the other hand, they will engender unrealistic and too high expectations for the common people.14

“Pharmaceutical care fee” needs to be straightened out

While the drug prescription fee was cancelled, the “pharmaceutical care fee” is added, and this is like “robbing Peter to pay Paul”. If government does not constitute a unified standard for the “pharmaceutical care fee”, the different rates in various places will occur, thus causing the charge chaos of hospitals.15


Growing public criticism of soaring medical fees, lack of access, poor doctor-patient relations and, low coverage of the medical system etc compelled China to launch a new round of medical reform.

With the expectation of the people of the nation, it took three years for the Opinions of the CPC Central Committee and the State Council on Deepening the Health Care System Reform (hereafter referred to as “New healthcare reform opinions”) to be promulgated on April 6, 2009. The “New healthcare reform opinions” serves as a programmatic document to establish the healthcare system with Chinese's Characteristics, and it puts forward that “gradually realizing the goal that everyone is entitled to basic health care services” at the very outset. And in the next 3 years, Chinese government will focus on such key reforms as the basic medicine system, the community-level healthcare system, the gradual equalization of basic public healthcare services, and the reform of public hospitals, to solve the problem of “difficult and costly access to healthcare services. In the transformation of Chinese medical and health development, the reform of public hospital is the most complicated and difficult yet important part of the entire health care reform, and better ideology and countermeasures are needed to adopt to promote the development.

Transform to the new notions of healthcare reform and policies

China's medical and health development will “follow a path with Chinese characteristics”16 and it is the first time that the government has put forward this notion. The new healthcare reform's aim is to provide safe, effective, convenient, and low-cost public health and basic medical service to both rural and urban citizens.17 The scheme is featured with basic concepts including adhering to the orientation of serving the people, ensuring the “non-profit” nature of public medical institutions, cutting hospitals' involvement in drug sales, increasing governmental responsibility and input, and establishing a basic medical network for the whole population.

So the new healthcare reform has numerous new concepts and ideas. First, it puts people's health at the first place, in which it is greatly different from the old views considering the cause of medical and health care as an aspect of economic development. It discarded over-marketization of reforms conducted before, and promised to strengthen government's responsibility in the basic medical and health systems, unceasingly increase fund input, and maintain social equality and justice. Second, it first proposed that basic medical and health institutions will be available to all the people as public products. Urban and rural residents are equally covered by basic medical reform, which is a breakthrough from the dual structure of urban and rural areas. Thirdly, it encourages private sectors to take part in medical care market. Fourth, it explicates the government's management to county hospitals. 2012 Government Work Report is adhering to these concepts: “We will move faster to improve the medical insurance system covering the whole population, consolidate and expand the coverage of basic medical insurance, and enhance our capability to provide and manage basic medical services.” Different from the ideology of market-oriented reform since 1992, the new reform aims to subsidize patients by means of establishing the social security system and to encourage the positive competition of hospitals through the free choice of hospitals by patients, thus relieving the problem of “difficult and costly access to healthcare services”.18

Transform from the treatment of the major diseases to the prevention of the diseases

With the wave of chronic diseases and the increasing patients in hospitals, the soaring prices of healthcare services have become a global problem. The key of health productivity should focus on the prevention of diseases and build up health concepts that everybody should undertake the responsibility for his or her own health. The new healthcare reform aims to enhance the public health service and to prevent and control the major infectious diseases, chronic diseases, and occupational diseases and other diseases that may severely threaten the health of masses. Though the 2012 Government Work Report promises put more input such as that China would raise subsidies for medical insurance for non-working urban residents and the new type of rural cooperative medical care system to 240 Yuan per person per year and extend the medical insurance to cover more diseases such as uremia and lung cancer to provide aid for their treatment, better system needs to be developed to keep people fit and prevent the slight illness from developing to serious disease by early diagnosis and treatment.

The experts of the World Bank have carried out a research for the causes of rapid development of global economy for the past 60 years since World War Two, and the result showed that 8%-10% global economy growth is due to the improved health of the people. The East Asia Economic Research Institute of Harvard University has reached the same conclusion, 30%-40% rapid economic development in Asian areas is contributed to the improved health of Asians.

In 2011, our country's GDP per capita is more than 25 000 Yuan, but the hospitalization cost per/person and per/time is more than 5000 Yuan. This is to say one healthy person is equal to increase of 22 000 Yuan production value and decrease of 5000 Yuan cost of hospitalization. Therefore, good health of a working person is a basic premise to measure his or her working ability as productivity essence. It is important to recognize the relationship between health and productivity in a scientific way, explore the harmony between the national health productivity and economic development, probe the reasonable public financial investment and the construction of medical security system, and seek a better system condition and policy orientation, which can enable a faster economic development of our country, a healthier and happier life of our people, and a more harmonious society.

Transform from partial pilot to the comprehensive public hospital reform

The reform of public hospitals involves 20 000 or so medical institutions, and the various interest contradictions of medical services and the advantageous medical resources centralize in public hospitals. Public hospitals account for 96% of the total hospitals in China and also account for the major part and success of the Chinese healthcare reform that cannot be neglected or avoided. As an integral part of China's ongoing new health care reform, China has assigned 47 cities so far to spearhead the reform of government-run hospitals to offer more equitable and efficient medical services. In order to fulfill the aims to provide universal and affordable medical service, the public hospital reform projects include favorable policies for public hospitals in city planning, social insurance, and medical staff training and funding, and it is still needed to promote the comprehensive reform of the administrative mechanism, operating system, regulation system, and compensation mechanism of the public hospital.

First, the reform of public hospitals should be pushed forward so that medical care is separated from pharmacy operations to reform the compensation mechanism of the public hospitals. Second, the administrative mechanism of the public hospital should be reformed with the key to resolve the problem of top-design, by clarifying the major medical body support by the government, scientifically defining the rights and responsibilities of the owner and manager, actively exploring the effective ways to divide the management and operation of the public hospitals, and gradually realizing the integrated management of the public hospitals so as to establish coordinated, unified, and effective administrative mechanism of the public hospitals. Third, the management of the public hospitals should be enhanced to promote the quality of the medical service. The reform of the personnel system should be deepened and the allocation and incentive system should be promoted to fully activate the medical personnel of the public hospitals and to promote the service mechanism of the public hospitals, so that the enthusiasm of the medical staff is fully mobilized and the harmonious relationship between the medical workers and patients is established. Forth, the diversified forces should be accelerated to run hospitals to encourage, support, and guide private capital to develop the medical services and to encourage social forces to run the non-profit hospitals and speed up the creation of a system of hospitals with diversified ownership that is open to foreign participation.

Transform from monopoly to balanced operating mechanism

Constructing an equitable, efficient, and balanced supply and demand mechanism is a necessary choice for new healthcare reform, and it involves transformation from “one size fits all” to “specific matter needs specific treatment”, and “All flowers bloom together”, as well as the exploration and innovation.

Strengthening medical security and controlling the expenses scientifically

“The basic healthcare system” includes three essential contents. The first is the basic medical security system, in which every member of the society has the right to “enjoy the medical services”. The second is the basic medical service system, which solves the problem of “disease prevention” for people in urban and rural areas. The third is the basic health guarantee system. By means of the universal social welfare including both material and spiritual aspects, these “public products” provided by government will let all citizens of the society enjoy the achievements of economic development and social progress.

Focusing the core of healthcare system on “public products”, which shows that the government has realized that “the marketization” is the “adverse effect” of old healthcare reform, is not only the important progress in the positioning and responsibility of government, but also the rectification of the function of government. Only on this cognition premise, can government realize the increase of financial investment to cover the basic healthcare system for the benefits of all citizens of the society year after year, which embodies the purpose of “everyone is entitled to basic healthcare services”.

In spite of that fact that the establishment of medical insurance system covering urban and rural residents is a best and fruitful option, with the restriction of the ingrained and highly-planned administration, the healthcare reform has been evolving slowly.19 The core of healthcare administration is to establish and improve the control mechanism. While coverage of medical insurance and its support capability are strengthened, it is needed to design the clinical pathway for various diseases, construct and improve efficient mechanism of reasonable diagnose and treatment and scientific expense control, and explore the efficient expense control mode on the basis of the variety of diseases. Medical insurance department could carry out the evaluation for doctors on the basis of the quality of medical treatment, for the purposes of reducing medical service expense and increasing medical service quality, which not only assures the satisfaction degree of healthcare services, but also controls the aggregate growth of medical expense, and at the same time, reasonably makes use of medical expense and guarantees the health security of the patients.

Strengthening compensation mechanism and switching evaluation methods

The core of the reform of public hospitals is to implement the separation of healthcare services from drug sale, and the reasonable adjustment of medical service fee. Medicare reimbursement should be equal and without discrimination, and this is an internationally prevailing practice. The medicine and instrument for hospitalization should be solved by the national basic medicine system; the mode of planned purchase and supply by the state including designated production enterprises, unified price and unified distribution should be changed to the mode of open bidding for basic medicines. Thus, the monopoly of healthcare services and administration monopoly are avoided, from which commercial bribery and rent-seeking space of the power arise, so as to ease the unsatisfied status of four parties, including production enterprises, medicine dealers, hospitals, and patients.

It is also needed to construct a mechanism for controlling the prices of healthcare services and boosting the intrinsic dynamics of healthcare services.20 For example, the charges of hospitals invested in Taiwan, China are just half of that of the public hospitals in the mainland of China, where doctors in Taiwan, China have no intention to prescribe costly and collect kickbacks, and medicine purchase is shaped by the various links to restrict with each other. And the accessible degree of physical service increased, which refers to the convenience degree for patients to access to healthcare services, including the reduced time for waiting doctors to carry out healthcare services, the improved healthcare conditions, and so on.21

Therefore, from the angle of medical insurance, there is a problem of how to carry out the reform of creative financing and means of payment while deepening medical insurance system to enable equal rights and responsibilities and to restrict the “morality risk” of excessive healthcare services, which may spring from the medical insurance. At the same time, it is needed to prevent private capital to chase profits. From the experience of developed countries, it is needed to tighten surveillance and regulation, pursue social welfare and strictly prohibit distributing dividends.22

Supporting community-level healthcare system and optimizing the layered services system

The effective approach to relieve the contradiction of supply and demand between hospitals and patients is to expand opening up, and the government should strengthen the supply capability of healthcare services.23 Public finance undertakes basic healthcare services, and lets the market undertake the high-end healthcare services. It is needed to break the monopoly, construct a fair healthcare market environment, allocate human resources from a static pattern to a dynamic pattern, advocate the multiple-site practice of certified practitioners to release 2000 thousands medical staffs from their respective units, bring into play the limited qualified healthcare resources with the form of pluralism, encourage the flow of excellent doctors and boost the enthusiasm of doctors, which will benefit all citizens of the society.

We also need to consult the international experiences, build information-based platform, enable hospitals at various levels to share qualified healthcare resources and diagnosis and treatment information, smooth the bi-directional referral between community medical institutions and hospitals, set up the complete electronic health record data warehouse, exert the responsibility of supervision and administration of healthcare administrative departments, encourage the hospitals to change from profit-seeking-oriented to cost-controllingoriented, so as to form a healthy competition mechanism.

At present patients in China have been in a kind of disorder situation to see doctors, since family doctor system has not been set up in China yet, so it still needs time to realize the aims of the first clinic at community medical institutions, the classification of diagnosis and treatment at different hospitals, and the two-way transfer of illness treatment. So the government should draw up the policies to support the special medical experts and put more investment to the community and rural hospitals. By the restriction of medical insurance system on the scope, quota, and proportion of reimbursement to direct the common people to go to grass-root healthcare institutions for their initial diagnosis, which enable the community-level hospitals and clinics to become the first guard for the health of common people.

It is also needed to introduce free competition mechanism, simplify the procedure of administrative examination and approval, reduce the limitation on the admittance of healthcare industry and the restriction of the flow of talents,24 guide the various types of private capital to set up private hospitals to shape the positive competitive mechanism along with public hospitals, and boost the supply capacity of healthcare services to satisfy the demands of the common people. In addition, hospital directors should discharge their roles and devote their energies to hospital administration for hospital development and a better environment for hospital staffs.25


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healthcare reform; public hospital; transformation; policy

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