Dilemma of Hospital Reform in China, Public or Private? World Health Organization 28 April 2017 Dilemma of Hospital Reform in China, Public or Private? Yingyao Chen, PhD School of Public Health Fudan University Shanghai, China

Outlines Background Theoretical framework Public hospital autonomy, good or not? Private hospital, an alternative? Policy suggestions

Background

Objectives of Hospitals Reform At the Hospital level: improve the operation of the hospital Better clinical outcomes (quality) Better and sustainable financial outcomes (efficiency) Better patient satisfaction and social responsibility At the System level (Society level) Quality of service Equity in access to services (affordable and accessible) Efficiency of using resources Financial sustainability of the system

Services organization and delivery Structure: public private mix, autonomous public hospitals Decentralization in 1980-2007 Public hospital: lack of government support, self-run Market share: public sector dominating supplemented by the private sector Hot competition within public hospitals and between public and private hospitals

Urban and rural health service system Province/city hospital Rural County hospital District hospital Township health center Community health center Village Clinics /doctors

Mapping Public & private hospitals’ in China Number of hospitals 27.6% 11.4% Growth rate(2003-2012): non profit hospital by 6.95% profit hospital by 216.04% Source: China Health Statistical Yearbook(2004-2013)

Number of hospitals 42.2% 17.2% Source: China Health Statistical Yearbook(2004-2013)

Number of hospitals Source: China Health Statistical Yearbook(2004-2013)

Theoretical framework

Analytic framework Hospital autonomy (HA) is defined as “a reduction in direct government control (from health authority or different level government) over public hospitals, and a shift of the decision making from the hierarchy to hospital management team.” (Harding and Preker, 2003) Decision right Market exposure Residual claimant Account- ability Social functions Budgetary units Autonomous Corporatized Privatized Few at the hospital Many at the hospital None Full Public purse Hospital Direct: hierarchy Indirect: regulations Implicit unfunded Explicit funded Autonomy is the right to make decisions over various aspects of production of health services, including inputs, outputs, and process. Market exposure refers to subjecting hospitals to competition in the product and factor markets. In the product market, market exposure means that hospital revenues are linked to performance. On the factor market, market exposure means that hospitals compete for inputs, including physicians and capital. An organization’s residual claimant status reflects the degree of enforced financial responsibility—both the ability to keep savings and responsibility for financial losses (debt). CYY: financial responsibility and dealing with the surplus Accountability refers to holding hospitals responsible and answerable for their behavior and performance. Social functions refers to providing services to patients where the marginal cost of producing a socially valued service is greater than the marginal revenue the hospital receives for rendering the intervention. Cyy: providing services to vulnerable patients, uncompensated care. Source: Analytic dimensions of different autonomization of hospitals from Melitta Jakab, et al(2002)

Hospital Autonomy is Letting managers manage Hospital autonomy can be defined as a reduction in direct government control over public hospitals, and a shift of the routine (day-to-day) decision making from the hierarchy to the hospital management team However, the governance functions reside with the government Providing leadership Steering and coordinating at the system level Providing system-wide integration and regulation Supervision

Public hospital autonomy, good or not?

The evolution of policies related to HA from 1978 to 2008 Resolution of the 3rd Plenary Session of the 11th Central Committee of the Communist Party of China (CPC) Decision of the CPC central committee on reform of the economic system Resolution of the 14th Central Committee of the CPC The opinions of the pilot work on strengthening hospital economic management Regulation on the issue of permitting individuals’ practicing medicine The interim measures on hospital economic management Report on regulations regarding the reforms on health services Opinions about related issues of expanding health services Several opinions about deepening the health care system reform The national policy on health reforms and development “Guidance on the health system reform in cities and towns” and other supporting thirteen measures 1978 1979 1980 1981 1985 1989 1992 1997 2000 Residual claimant Market exposure Decision right; Market exposure; Residual claimant; Account -ability Decision right; Residual claimant; Accountability; Social function

Health financing structure changing in China Sprout of HA (1979-1984) Comprehensive development of HA (1985-1991) Continuous development of HA(1992-1996) Accelerated changes of HA (1997-2008) Budgetary units Autonomous units Corporatized units Privatized units Decision right Market exposure Residual claimant Account- ability Social functions In conclusion, it is difficult for us to define what is the type of structure of hospital autonomy in China. The figures show the changes of different dimensions of hospital autonomy with time in qualitative way, it is obvious that decision rights, market exposure and residual claimant had more autonomization than accountability and social functions. we also think the structure of hospital autonomy as a mixture of autonomous units and corporatized units as general before new health reform in 2009. 16

Public Hospitals MOH MOF Financial power Personnel management Org Dept. MOHRSS (social security) UEBMI URBMI Medical assistance NCMS Financial power (e.g. income, use of funds) MOF NDRC (pricing) MOCA MOH NDRC (planning) Investment decision Personnel management Public Hospitals Public Hospitals Public Hospitals China’s public hospitals have an archaic and complex governance structure, which seems to be strongly governed by multiple government agencies, but it is in essence to be a very loose governance pattern for the public hospital. Although the structure of government is helpful for hospital autonomization, but the structure has not solved the problem of unconformity of central-local relations in hospital autonomization. The most important reasons existed in contradiction between hierarchy measures of top ministries and market behavior of local government. In this structure, public hospitals, are unclear about their functions, social responsibilities, and accountabilities and are faced with conflicting policies and rules from the many ministries that govern them while they have explicitly freedom of operating hospitals. Strategic planning and development Use of profit or surplus Staffing decisions Management and use of assets Source: Yip, et al. Early appraisal of China’s huge and complex health-care reforms 17

Evaluation on performance of HA Changes of service delivery and hospital operation Services capacity improved significantly (1980-2010) Hospital increased by 111% Hospital bed increased by 183% With increase of outpatient visits and hospital admissions dramatically, the revenues and expenditures also rapid growing Average 3% of surplus (2002-2010) 6-7.5% government subsidy (2002-2010) Expenses escalated reflecting some evidence of expensive health care (1990-2010) Average expense of outpatient visit: 10.9 Yuan to 173.8 Yuan Average expense of inpatient admission: 473 Yuan to 6525 Yuan

Evaluation on performance of HA Evaluation on performance with indicators for efficiency, quality and equality Efficiency of health care in controversial (1990-2010) Average length of stay decreased from 14.1 to 9.7 Bed occupancy rate increased from 88.2% to 95.0% Revenue per doctor per year from 47,000 Yuan to 881,000 Yuan Quality of care moderate improved (Number and mix of qualified medical staff; Adverse outcome rates) Equity deteriorated (Public expenditure per patient by socio-economic category or insurance status; Mean out of pocket expenditure per visitor/admission by patient socioeconomic category)

Progress of public hospital reform-urban 16 pilot cities carried out in 2010, and Beijing became the in 2012 Expansion of pilot cities in 2014: extra 17 pilot cities The reform priorities and implementation plans was city-specific, different roadmaps, strategies, and approaches Reform of internal and external governance structure Services improvement: Clinical pathways, DRGs, appointment system, shorten waiting time, etc

Public hospital reform Clearly state the roles and functions of public hospitals Shift strategy to market competition and private ownership of public hospitals (Kunming and Luoyang) Address dispersion of responsibility and power between various city departments Establishment of a commission chaired by the mayor or deputy-mayor Reorganize the responsibilities and power of government departments Limit power of Department of Health to make health policy or regulations and create a new agency to manage public hospitals Responsibility and power retained by Department of Health, but responsibilities separated into two divisions, one for policy, regulation, and monitoring of power and one for management of public hospitals

Progress of public hospital reform -rural county First wave 311 pilot counties, second wave over 1300 pilot counties in 2014 The focus on reimbursement mechanism reform: zero markup for pharmaceuticals Service prices increased/adjusted Prices reimbursed by health insurance schemes Government subsidies increased, Asset and hi-tech equipment, discipline development, human resource training, retired staff, public health, etc Cost control by hospitals Reform of medical insurance payment system: combination of multiple payment systems Establishing hospital management committee Reform of personnel system and income distribution system

The public hospital challenge Public view hospital care as expensive and difficult to access Lack of clearly defined functions, social responsibilities, and accountabilities for public hospitals in China Hospitals are governed by bureaucratic rules and subject to conflicting policies by the many ministries that govern them Current service delivery system is fragmented and acute, episodic, volume- based, based on supplier-induced demand, and poor continuity of care Quality and safety concerns, including unnecessary care Low management capacity Uncontrolled expansion of size of public hospitals End goal for reform describes a completely new model – current incentives are not aligned to achieve this model YBR – wants to remove quality from first point & reshuffle order Jerry – ‘unknown quality’? Or ‘expensive and distrusted’ Vivian – low quality vs difficult to access ? – challenge needs to be consistent with other parts of study BUT continuity of service delivery & lack of rehab and aged care [link to primary care]; not use general term as hospital care expense, needs to be reframed as ‘high financial burden on patients’; should not say ‘low quality’; need to include ‘inefficient management’; argument over who should oversee health insurance scheme – ensure equity of health insurance schemes/ Ma Jin – need to reduce the number of challenges outlined – financing and compensation mechanisms – can they be addressed in the short-term; thinks too big of a list will reduce effectiveness of policy recommendations ? (near me): define by ST, MT and LT to help policy-makers address issues; define function – national govt should develop own action planning based on national documents; identify responsibility of public hospital and tiered system; delink drugs from price You Xuedan – discussion most important group is physicians but we have not really touched on this – low salary, doctor violence  status and salary for physicians is too low Chunmei – guidance and action plans clear about guidelines/timeline

Private hospital, an alternative?

Growth in Hospitals and Primary Health Care Facilities by Ownerships 83% 52% 58% 66% 24% 24% 28% 32% 16% 14% 1% 2% Growth in the total number of hospitals/PHC has come primarily from private hospitals/PHC

Size of Public/Private Hospitals by Beds, 2012 96% 60% Most of private hospitals are small (under 100 beds)

Type of Public/Private Hospitals, 2012 Compared to public hospitals, a greater share of private hospitals are specialist facilities

Growth in Beds by Ownership 86% 94% 8% 6% 5% 1% By 2012, private hospitals accounted for 14% of beds, 8% private for-profit (PFP), 6% private not-for-profit (PNFP)

Growth of Out-patient and In-patient Visits in Public/Private Hospitals 90% 95% 5% 4% 1% 5% 89% By 2012, private hospitals accounted for 14% of beds: 8% private for-profit (PFP), 6% private not-for-profit (PNFP) 10% of all outpatient visits (5% each for PFP and PNFP) 11% of all admissions (5% for PNFP and 6% for PFP) Also by 2012, 59.9% of visits at grassroots providers were to non-government providers in 2012 Currently, non-public medical and health care institutions in China account for 22.3% of outpatient visits 96% Private hospitals accounted for 10% of all outpatient visits (5% each for PFP and PNFP); 11% of all admissions (5% for PNFP and 6% for PFP) 3% 6% 1% 5%

Impact on Health Service Delivery System Service delivery is dominated by public hospitals, which have strong incentives to increase service quantity Private hospitals have increased rapidly, but vary significantly in scale, capacity, quality, and reputation Policies currently lack clarity on structure and functions of public and private providers (e.g. role in hospital services vs. grassroots primary care)

Policy suggestions

Thank You ! yychen@shmu.edu.cn