1. 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

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

3. Background

4. 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

5. Services organization and delivery
Structure: public private mix, autonomous public hospitals
Decentralization in
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

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

7. Mapping Public & private hospitals’ in China
Number of hospitals
27.6%
11.4%
Growth rate( ): non profit hospital by 6.95%
profit hospital by %
Source: China Health Statistical Yearbook( )

8. Number of hospitals
42.2%
17.2%
Source: China Health Statistical Yearbook( )

9. Number of hospitals
Source: China Health Statistical Yearbook( )

10. Theoretical framework

11. 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)

12. 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

13. Public hospital autonomy, good or not?

14. 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
Residual claimant
Market exposure
Decision right;
Market exposure;
Residual claimant; Account
-ability
Decision right;
Residual claimant; Accountability;
Social function

16. Health financing structure changing in China
Sprout of HA
( )
Comprehensive development of HA ( )
Continuous development of HA( )
Accelerated changes of HA ( )
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

17. 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

18. Evaluation on performance of HA
Changes of service delivery and hospital operation
Services capacity improved significantly ( )
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 ( )
6-7.5% government subsidy ( )
Expenses escalated reflecting some evidence of expensive health care ( )
Average expense of outpatient visit: 10.9 Yuan to Yuan
Average expense of inpatient admission: 473 Yuan to 6525 Yuan

19. Evaluation on performance of HA
Evaluation on performance with indicators for efficiency, quality and equality
Efficiency of health care in controversial ( )
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)

20. 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

21. 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

22. 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

23. 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

24. Private hospital, an alternative?

25. 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

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

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

28. 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)

29. 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%

30. 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)

31. Policy suggestions

32. Thank You !