Distribute medical service evenly

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By Gu Xin (China Daily)
Updated: 2009-11-24 08:03

Renji Hospital, affiliated to Shanghai Jiaotong University's (SJTU) School of Medicine, recently took an experimental step toward introducing private capital in a controversial ownership reform.

In a move aimed at pursuing development, the old-brand III-A hospital, the highest grade in China's hospital rating, is said to have sold to private investors 50 percent of the shares in its West Branch, which is located in Shanghai's Huangpu district. At the same time, the State ownership of the hospital's East Branch remains intact.

Under the new ownership, Renji Hospital's West Branch will be run as a high-end hospital governed by a CEO reporting to a board of directors. As a for-profit hospital, the branch will no longer serve as a contracted hospital for public healthcare insurance schemes. Also, patients' medical bills are expected to be three times more than the current standard.

The news that a previously State-run hospital will transform one of its two branches into a healthcare provider serving rich people has indeed created waves in the domestic media. Some opponents argue that the transformation of a State-run hospital into a joint-stock one goes against the "public service" ethos of public medical institutions.

In China, many people mistakenly equate the "public service" character of the healthcare sector to public ownership of healthcare providers, insisting the long-established monopolistic position of public hospitals should be further consolidated. This is in stark contrast to the fact that hardly any attention has been paid to the development of private hospitals in the past decades.

So it is no surprise that the "survival space" of private hospitals has constantly been squeezed, and some local authorities have even taken measures to push them to the brink of closure.

However, public providers fail to deliver the widely-expected "public services". In some rural, mountainous and outlying regions, people have no access to even basic medical services given the small number of public healthcare providers, let alone specialized care from the poorly-equipped hospitals.

The underlying factor for this should be attributed to government efforts to maintain the dominant status of public hospitals in large cities. For a long time, big hospitals, especially in big cities, have enjoyed an absolute advantage over their counterparts in rural and outlying areas in being awarded public inputs. At the same time, medical workers in under-funded hospitals have tried to move to big cities and economically developed regions to get higher pay.

So well-equipped public hospitals in big cities are in a far better position to attract more patients. As a result, these hospitals have become more and more crowded, and have more excuse to seek more public funding. Consequently, a non-benign circle has emerged: Big public hospitals in big cities become more powerful, attractive and crowded while grassroots providers, especially those in underdeveloped rural areas, deteriorate due to the paucity of public funding.

The main reason for the excessive concentration of the country's public health resources in economically-developed cities and regions does not lie in insufficiency of government inputs, but in the authorities' restrictions on the healthcare sector's access to private capital. Undoubtedly, the suspension of such long-erected barriers is expected to attract private capital in economically-developed coastal regions and large- and medium-sized cities, enabling various kinds of medical facilities to be set up in line with market demand. This will help free more government finances for less developed rural, border and other areas that desperately need these precious resources.

The government should invest less public resources in the regions attractive to private capital. Instead, it should channel more of its limited resources to areas plagued by insufficiency of private capital. It is the government's responsibility to complement market insufficiency and correct market malfunctioning. Relaxing long-established restrictions on private capital access to public hospitals will serve the development of private hospitals and other private providers. It will also contribute to a more reasonable allocation of public resources and equitable and fair development of the healthcare sector. The institutional environment that sets obstacles in the way of the development of private hospitals has turned out to be one of the fundamental reasons for the uneven distribution of the country's medical service system and the lack of expected "public services".

Therefore, removing the largest obstacle to the development of private medical institutions and getting rid of assorted rigid regulations and stipulations is where the country's long-awaited medical system reform should move. In this regard, Renji Hospital offers a new approach for its counterparts to follow.

The author is a professor with the School of Government Management under Peking University.

(China Daily 11/24/2009 page8)