Healing Private Healthcare

by+Zi+Mo

Not long ago， Chinese authori- ties unveiled a package of measures， which included relaxing price controls over non-public hospital services， in order to encourage private capital to enter the healthcare sector. The measures were announced in a notice jointly issued by the National Development and Reform Commission（NDRC）， the National Health and Family Planning Commission， and the Ministry of Human Resources and Social Security. Upon issuance of the notice， private healthcare-related stocks jumped by an average of 2.25 percent in Chinas Ashare market， with some even soaring to the daily limit. Does this measure mark the sprouts of spring for private hospitals in China？

Prolonged Process

Prior to the 1980s， the overwhelming majority of Chinese hospitals were publicly-owned， and patients had to endure long waits to consult a doctor in public hospitals， which were often criticized for unsatisfying services. After Chinas reform and opening-up， the government began to introduce private capital into the healthcare sector， in hopes of breaking the monopoly of public hospitals and forcing them to improve their services through market competition.

In the late 1980s， investors from Putian City， Fujian Province， became the first group to test the waters of private healthcare in China. They earned their first windfall establishing private clinics， and then spread their wings nationwide through contracting or acquiring other hospitals. It is estimated that 80 percent of large private hospitals are run by Putian investors. Over the past two decades， private hospitals have mushroomed throughout the nation.

However， the door of Chinas hospital market didnt open to foreign investors until 1997 when the country began to approve Sino-foreign joint venture hospitals. However， foreign investors were limited to holding a 30 percent share in such a hospital. After China entered the World Trade Organization in 2001， foreign investors were allowed to hold as much as 70 percent of a Sino-foreign joint venture hospital. Overseas medical companies began to swarm into China.

“The opening of Chinas healthcare market has been a prolonged process，”remarks Roberta Lipson， chair of United Family Hospitals & Clinics， a witness to the maturation of foreign-funded healthcare institutions in the country. In 1979， at the age of 24， she left the United States for China to distribute medical instruments. Eighteen years later， she founded Chinas first joint venture hospital： Beijing United Family Hospital.

At the end of 2011， the NDRC and the Ministry of Commerce issued the new edition of Catalogue for the Guidance of Industries for Foreign Investment， which lifted the ban on wholly foreign-funded hospitals. “Foreign-invested hospitals bring proven formulas that meet international standards to Chinas medical market， complementing the countrys healthcare sector，” opines Zhao Chun， vice secretarygeneral of Chinese Hospital Association.

Bottlenecks and Future

Although the door to Chinas health- care market has completely opened to private investors and foreign capital， reality remains less than optimistic. Statistics show that by 2013， there were 11，300 private hospitals in China， accounting for 43 percent of the countrys healthcare institutions， but the tally of outpatients at private hospitals accounted for only 2.7 percent while the figure stayed at 2.5 percent in terms of admitted inpatients.

Such a situation has been partially blamed on private hospitals operation. Over decades， in order to pursue the greatest profits possible， some private hospitals lost patients trust via behaviors such as deceptive advertising， excessive treatment， and arbitrary charges. As a result， patients prefer prestigious public hospitals that they consider trustworthy. For a long time， most private hospitals were confined to peripheral medical fields such as orthopedics and ophthalmology.

Additionally， most private hospitals are small and cannot compete with large public hospitals in terms of attracting medical personnel. Private hospitals are often excluded from the national medical insurance system. All of these factors have become bottlenecks to hinder private hospitals from developing.

While many low-end private hospitals face a lack of patients， some high-end private hospitals are gaining increasing popularity. A netizen with the handle “Wandering Lily” posted her experience consulting a doctor at a Taiwan-funded private hospital in Shanghai： “A patients condition can worsen if he or she waits in a long line to see doctor in a noisy， crowded public hospital. But， this Taiwanese hospital is bright and spacious. It is even equipped with a convenience store. All doctors and nurses are polite. Although the prices of its services are more expensive than public hospitals， patients feel comfortable there.”

Authorities want nongovernmental capital to enter the healthcare sector to increase the supply of medical services， so that the government will invest more resources to ensure basic healthcare services are available to as many ordinary people as possible. According to Professor Gu Xin from the School of Government at Peking University， price controls over commercial private hospitals were already lifted a long time ago， and only nonprofit private hospitals had to adopt government-mandated prices. “The recent price-relaxing policy enabled the pricing of medical services in all private hospitals to become marketoriented，” he adds.

However， some experts think that the policy to loosen price controls is unlikely to help private hospitals gain steam. Against a backdrop of private hospitals struggling to compete with their giant public rivals in terms of facilities and personnel， raising prices would seem like digging their own graves.

Although it remains uncertain whether price-relaxation will divert more private capital into the healthcare sector， a statement in the notice has drawn great attention： a requirement that local governments qualify private hospitals for public medical insurance schemes and implement the same reimbursement policy for both public and private hospitals. This means that private and public hospitals are likely be treated equally in terms of access to medical insurance and other peripheral products.

Few doubt that Chinas private healthcare market will see a boom in the future， but how hospitals will grow is largely reliant on the implementation of measures such as incorporating private hospitals into the countrys medical insurance system and allowing medical personnel to work in different hospitals.