Health Policy and Planning, 31, 2016, 390–403
doi: 10.1093/heapol/czv062
Advance Access Publication Date: 16 July 2015
Review
Review
Understanding congestion in China’s medical
market: an incentive structure perspective
Zesheng Sun1,2, Shuhong Wang3,* and Stephen R Barnes4
1
School of Economics and Management, Zhejiang University of Science and Technology, No. 318, Liuhe Road, Xihu District,
Hangzhou 310023, China, 2Center for Energy Studies, Louisiana State University, Energy, Coast and Environment Building,
Nicholson Drive Extension, Baton Rouge 70803, United States, 3Department of Stomatology, Hangzhou First People’s
Hospital, No. 261, Huansha Road, Shangcheng District, Hangzhou 310006, China and 4Department of Economics, Louisiana
State University, E J Ourso College of Business, Nicholson Drive Extension, Baton Rouge, LA 70803, United States
*Corresponding author. Department of Stomatology, Hangzhou First People’s Hospital, No. 261, Huansha Road,
Shangcheng District, Hangzhou 310006, China. E-mail: [email protected]
Accepted on 16 June 2015
Abstract
Congestion has become one of the most important factors leading to patient dissatisfaction and
doctor-patient conflicts in the medical market of China. In this study, we explore the causes and effects of structural congestion in the Chinese medical market from an incentive structure perspective. Our analysis reveals that prior medical system reforms with price regulation in China have
induced hospitals to establish incentives for capital-intensive investments, while ignoring human
capital, and have driven medical staff and patients to higher-level hospitals, reinforcing an incentive structure in which congestion in higher-level hospitals and idle resources in lower-level hospitals coexist. The existing incentive structure has led to cost increases and degradation of human
capital and specific factor effects. Recent reforms to reduce congestion in the Chinese medical market were not effective. Most of them had no impact on and did not involve the existing distorted incentive structure. Future reforms should consider rebalancing expectations for medical quality,
free flow of human capital and price regulation reforms to rebuild a new incentive structure.
Key words: Structural congestion, Chinese medical market, incentive structure, price regulation, reform
Key Messages
•
An incentive structure perspective determining medical resource allocation is used to study congestion in the Chinese
market by the lens of economic theory.
• Structural congestion is primarily caused by the distorted incentive structure imposed by the recent medical care
reforms.
• It is needed for China to rebalance patients’ expectations and choices across hospitals of different levels with a new incentive structure to combat structural congestion.
Introduction
Over the past 10 years, China has experienced a substantial increase
in public medical expenditures, increasing from 9.34% of total government expenditures in 2001 to over 14% in 2012 (Figure 1).
However, the rapid growth of expenditures has been accompanied
by congestion in the medical market that has been represented by
long wait times, and the higher level hospitals are, the longer wait
time their patients have to face (Zheng and Ji 2009; Liang and Bao
C The Author 2015. Published by Oxford University Press. All rights reserved. For permissions, please email: [email protected]
V
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391
Figure 1. Public medical expenditure as a proportion of Chinese government expenditures (%). Source: Economy Prediction System Database Company
2012). Patients facing long wait times can be thought of as paying a
‘time price’1 (Gravelle et al. 2002). This ‘time price’ pushes the total
cost of services higher than the pecuniary price at congested hospitals to bring supply into balance with demand in an environment
of persistent, or structural, congestion. In China, congestion has become the second most important factor (second only to high medical
costs) leading to patient dissatisfaction in China (MOH of China
2010a) and results in more negative sentiments among patients
(Zhang et al. 2010).
One potential explanation for congestion in health care is poor
management, which can mean hospitals are not operated efficiently
and patients must wait for care despite sufficient resource availability. In this case, increased utilization of online or telephone-based
scheduling technology can reduce wait times to a certain extent
(Yang et al. 2015). But surveys have shown that these innovations
largely have the effect of shifting congestion to the Internet or telephone point of access (Duan et al. 2013; Sun et al. 2013). While improvements to hospital management might offer a partial solution,
we show that the problem of congestion is far more widespread than
would be expected if congestion were limited to hospital-specific
management practices.
A survey conducted by the Ministry of Health (MOH of China
2010a) showed that congestion not only has led to a significantly
shorter consultation time per patient and decreased the patient-perceived consultation and treatment quality but also caused a large
number of medical disputes and serious incidents of violence.
According to statistical data from the National Health and Family
Planning Commission of China, there were about 70 000 medical
conflicts and more than 10 000 violent attacks resulting in injuries
to medical staff in China in 2013 (Ning et al. 2014). The 2010
MOH survey showed that more than 25% of medical personnel
experienced abusive language or violence and that more than 50%
of medical staff in provincial and municipal hospitals felt that the
work environment was poor. The survey showed that these negative
responses were highly correlated with congestion and medical
conflicts.
This type of congestion is ultimately the result of an imbalance
between demand and supply. In most countries, it is common practice to deal with short-term imbalances between supply and demand
in the medical market with wait time management (Morton and
Bevan 2008). Holdsworth et al. (1993) also report the presence of
crowded outpatient departments in city hospitals of developing
countries like Lesotho. In terms of management science, because the
supply capacity of the medical market is fixed in the short term
while demand fluctuates, waiting can be used for dynamic demand
buffering or smoothing (Jackson et al. 1964; Bagust et al. 1999;
Gallivan et al. 2002); the clinical need for emergency treatment can
be identified by wait time prioritization (Marioti et al. 2014).
However, understanding the causes of persistent congestion that
does not ameliorate with time requires a different explanation.
Potentially, aggregate demand is outpacing aggregate supply for
health care and resources should be reallocated to increase the provision of health care. This article compares aggregate trends in health
care spending in China to other nations to show that the aggregate
level of health care spending does not appear to be the primary cause
of congestion.
Alternatively, services may be allocated inefficiently within the
sector creating localized shortages and surpluses. An economic perspective on the incentive structure determining the allocation of supply and demand across the health care sector provides a useful lens
through which to study congestion in the Chinese market. This perspective emphasizes that improper incentive for participants in the
market cause insufficient supply of or excessive demand for services
within specific segments of the market (Frankel 1989; Iverson
1993). As we show in this article, a review of the incentive structures
surrounding hospital and consumer decisions supports the conclusion that congestion in the Chinese hospital system can be attributed
to health care regulation and recent policy reforms.
Background
Hospital system reforms
China’s modern hospital system originated from the separation of
departments among industrial sectors and decentralization between
the central and local governments from the period of the planned
economy. Prior to the 1980s, different government departments and
their affiliated large-scale industry sectors, as well as all provinces
and major cities each ran their own hospitals and fully covered the
costs of providing medical care. Although there were no rules on
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Health Policy and Planning, 2016, Vol. 31, No. 3
China and MOH issued the ‘Report on Related Policy Issues of Health
Reform’, encouraging hospitals to invest by utilizing market mechanisms such as obtaining a loan from a bank and allowed 15% drugplus pricing to offset the decrease of public financial subsidy. Still, in
1989s ‘Rule’, the level of medical service price was changed with the
government setting prices to create a positive correlation with the levels of hospital. Also in subsequent practice, medical service price in
third-level hospitals has usually been set about 30% above that of second-level hospitals. In addition, the advantage of higher-level hospitals was gradually extended to include priority investments in
infrastructure, R&D funding, even higher administrative level and
management authority. These advantages were reinforced by the ability of higher-level hospitals to repay loans and retain workers.
As a result, China’s market-oriented medical reform shifted hospitals from medical service providers heavily reliant on financial
subsidies to profit chasers (Wang 2005). From the mid-1980s, income from medical services and drug sales made up 80–90% of total
hospital income. Meanwhile, regulation that held medical service
prices below costs were mostly maintained after China’s medical reform of 1980s. The change was that hospitals were encouraged to
grow revenues by extending their business to services utilizing unregulated technologies and instruments, and to produce or trade
medical supplies.2 This created a strong incentive and opportunity
to raise revenues through capital investments.
hospital classification, hospitals could be separated into different
levels according to their financing source and administrative level
from national level to township level.
The hospital classification system was founded in 1989. On 29
November 1989, the Ministry of Health (MOH) of China issued the
‘Notice on Implementing Hospital Classification Management’ and
‘Rule on Hospital Classification Management’, which began the formal assignment of quality levels to hospitals. According to the
‘Rule’, hospitals are separated into three different types from first
level to third level, where every level includes three grades: A, B and
C (with A indicating the highest expected quality). One exception is
for third-level hospitals, which include an additional higher grade,
AA, but only a few national-level hospitals have been approved to
be Third AA grade. Table 1 reports the basic conditions, coverage
and function of different level hospitals. From 1989 to 1998, all hospitals run by MOH and other departments of the Central
Government and nearly all hospitals run by provinces and major cities were approved to be of third level; community and township hospitals were identified as first level; while district- or county-level
hospitals were generally approved to be second level. According to
the MOH’s ‘rule’, third-level hospitals are designed to provide specialist medical services, treat critical or incurable diseases and undertake higher education and research activities; second-level hospitals
functions as comprehensive medical service providers and first-level
hospitals provide primary medical services.
Since the Chinese government began to decrease financial subsidies
to the hospital system (Figure 2), hospitals were required to balance
their operating expenses and investment expenditures with income
from medical services and drug sales. In 1985, the State Council of
Congestion in China’s hospital system
The term structural congestion is often used in the context of transportation when existing infrastructure is regularly overloaded with
Table 1. Hospital classification system of China
Levels
Bed number (n)
Coverage
Function
First level
20 n < 100
Community/township level
Second level
100 n < 500
Multi-community/county level
Third level
500 n
Multi-district/municipal/provincial/
national level
Provide prevention, treatment, rehabilitation and other primary
medical services
Provide comprehensive medical service and bear certain teaching
and research task
Provide specialist medical services, solve critical/incurable diseases
and bear higher education and research task
Sources: MOH and the authors.
100
80
%
60
40
20
Personal
Firm
Government
Figure 2. Percentage change of medical expenditure among government, firm and personal source in China. Source: MOH.
2012
2010
2008
2006
2004
2002
2000
1998
1996
1994
1992
1990
1988
1986
1984
1982
1980
1978
0
Health Policy and Planning, 2016, Vol. 31, No. 3
excess traffic. When applied to health care, this concept represents
an imbalance between supply and demand for certain services such
that excess demand accumulates resulting in prolonged wait times
for care. In China, structural congestion is manifested in higher-level
hospitals rather than in the entire market. Higher-level hospitals are
severely congested, while lower-level hospitals have idle resources
and very few patients. The higher the hospital level is, the more severe the congestion, and the more dissatisfied patients are with the
wait time (Figure 3).Therefore, congestion in China’s medical market is an unusual case.
Most studies on congestion in China’s medical market focus on insufficient government investment in the public medical and social security systems (e.g. Guan et al. 2006; Dai 2010; Zhang 2011). However,
these studies cannot explain why congestion has become more serious
with the significant growth of public medical expenditures over the
past decade. In addition, it has been demonstrated that public medical
expenditures are not significantly low in China considering its overall
level of development (Gong 2006). Dai (2010) attributed congestion to
differences in medical resource allocation among different regions in
China, along with an insufficient supply of doctors because of the coexistence of marketized financing and price regulation in China’s medical
system reform since the 1990s (Chen et al. 2008). Researchers using
family survey data have found that congestion in higher-level hospitals
and idle resources in lower-level hospitals coexist extensively even in
the same regions in China (Yu et al. 2006; Chen et al. 2007; Wang
et al. 2008). However, these studies only identified a limited number of
factors, such as family income, age and educational background, that
are correlated with the choices of medical treatment and the causes of
congestion have not yet been explored.
Methods
This review of the Chinese market for hospital care uses the lens of
economic theory to provide insights into the causes and consequences
of congestion with a special focus on incentive structures. Congestion
arises when demand outpaces supply and is not uncommon in the
health care setting. However, the degree and persistence of congestion
in the Chinese market for hospital care indicate structural problems in
the mechanisms that should be able to align supply with demand in
the long run without relying on wait times to allocate resources.
393
One hypothesis is simply that aggregate supply is held below aggregate demand. Especially in settings where government expenditures are a significant determinant of supply, it may be the case that
the economy-wide allocation of resources is not dedicating enough
resources to meet consumer demand. This can arise if the aggregate
price level of hospital services is not allowed to adjust sufficiently
relative to goods in other sectors of the economy. To study whether
there is an aggregate undersupply of hospital services, we compare a
series of health care metrics between China, a group of comparison
countries and world averages.
Another possibility is that the aggregate level of investment is appropriate but that structural problems within the market for hospital
services are causing misalignment of supply and demand across establishments or locations. We investigate the Chinese market for
hospital care by reviewing the incentives of consumers as well as
hospitals to see what role they might play in congestion. Because of
efforts to reform the system over time, data illustrating how key
measures changed over time are used to identify the most likely
causes of China’s structural congestion. We also investigate the extent to which this congestion is self-reinforcing through a review of
unintended consequences of recent reforms.
Results
In this section, we explore the causes of the distorted incentive structure based on an investigation of China’s medical system reform.
With price regulation, prior Chinese medical system reforms have
induced hospitals to establish incentives for capital-intensive investments, while ignoring human capital, and market failures have
driven medical staff and patients to higher-level hospitals. Under the
existing incentive structure, an increase in public expenditures and
capacity expansion for higher-level hospitals will further strengthen
the drive of capital investment and hinder medical human capital
formation and spillover, which would not help to solve the structural congestion. On the contrary, because of resource idleness in
lower-level hospitals, increasing public expenditures for all medical
institutions could only further increase the resource idleness rate of
lower-level hospitals.
Figure 3. Degree of dissatisfaction with the wait time in hospitals of different levels in China. Source: MOH of China (2010a).
394
Level of medical resource allocation in China
Congestion arises from an imbalance between medical market supply and demand. Thus, a central question is whether this imbalance
is caused by a relative shortage of supply because of a low level of
medical resource allocation across the economy? If so, the congestion could be treated as a problem secondary to medical resource allocation. In this section, we discuss whether the allocation of
medical resources is too low in China from an international comparative perspective. The analyzed data were collected by the
Economy Prediction System Database Company from the World
Bank, along with official statistics of each country from 1990 to
2012. Considering that China has been an upper-middle-income
country since 2011 and was a lower-middle-income country before
2011, 20 representative high-income and middle-income (including
upper-middle-income and lower-middle-income) countries were selected for comparison. The data include countries from different income groups and average world levels to overcome a possible bias
caused by annual data changes and institutional differences among
different countries.
Two indicators were used for international comparisons: total
medical expenditure as a proportion of GDP and public medical expenditures as a proportion of government expenditures. As
shown in Figure 4, total medical expenditure as a proportion of
GDP in China slowly increased from 3.54% in 1995 to 5.16% in
2011, with a significant decrease from 2003 to 2008. It was similar
to the average of the lower-middle-income countries before 2008
and was close to the average of the middle-income countries
since 2009.
However, an even more noteworthy indicator is public medical
expenditure. Public medical expenditure as a proportion of government expenditures demonstrated a V-shaped pattern from 1995 to
2011, decreasing from 15.22% in 1995 to its lowest level in 2001
and then increasing slowly to over 14% in 2012 (Figure 1). As
shown in Figure 5, public medical expenditures accounted for an
average of 16.97% of government expenditures in high-income
countries in 2011, 7.67% in lower-middle-income countries and
10% or less in upper-middle-income and middle-income countries.
Apparently, the level of public medical expenditure was far higher in
China than in lower-middle-income countries and higher than in
Health Policy and Planning, 2016, Vol. 31, No. 3
upper-middle-income countries. As compared with middle-income
countries with a similar level of development, the public medical expenditure in China cannot be deemed low.
Per capita allocation of medical resources
Another way of comparing the overall level of spending on medical
resources uses per capita figures. Three indicators are introduced
here: the number of hospital beds per 1000 people, the number of
physicians per 1000 people and the number of nurses and midwives
per 1000 people. The first figures analyzed are the number of hospital beds per 1000 people in high-income countries, upper-middleincome countries and China from 1990 to 2011. As shown in Figure
6, the number of hospital beds per 1000 people in China was close
to the average number of hospital beds per 1000 people in uppermiddle-income countries and has even exceeded this average since
2009. China was significantly above middle-income and lower-middle-income countries using this indicator and has narrowed its gap
with high-income countries.
A second useful metric of medical resource allocation is the number of physicians per 1000 people. As shown in Figure 7, the number
of physicians per 1000 people in China (1.46) was between the average of middle-income countries and the average of upper-middle-income countries and was exactly half the average of high-income
countries. China had a lower number of physicians per 1000 people
than that of Brazil (1.76), Mexico (1.96), South Korea (2.02) and
most other selected sample countries, and levels of developed countries were generally much higher than that of China. In China, this
indicator increased to 1.58 in 2012, but China still fell below the
international level, if considering the differences in price levels and
purchasing power between China and high-income countries.
Finally, the number of nurses and midwives per 1000 people is
analyzed. This indicator shows the biggest difference in resource allocation between China and the international level. As shown in
Figure 8, the level in China was higher than that of India but lower
than that of most sample countries; it was significantly lower than
the average of the middle-income countries (1.84) and upper-middle-income countries (2.2) yet much lower than the world average
(2.86) and average of high-income countries (7.34). The number of
Figure 4. Medical expenditure as a proportion of GDP in China and different income group countries. Source: World Bank and Economy Prediction System.
Health Policy and Planning, 2016, Vol. 31, No. 3
395
Figure 5. Public medical expenditures as a proportion of government expenditures in selected countries. Source: the MOH of China and Economy Prediction
System. Note: The data are of 2011 with the exception of the average and Canada being from 2004 and 2010, respectively.
Figure 6. Number of hospital beds per 1000 people. Source: the MOH of China and Economy Prediction System.
nurses per 1000 people increased to 1.85 in 2012, but a large gap
still existed.
In summary, the aggregate amount of spending on medical care
does not appear to be significantly low relative to that of middle-income countries. However, the comparison results for the three indicators measuring the per capita allocation of medical resources are
not as clear. The number of hospital beds per 1000 people is related
to medical infrastructure and capital accumulation, and the level in
China has been higher than the average of upper-middle-income
countries. However, the two indicators describing human capital,
i.e. the number of physicians per 1000 people and the number of
nurses and midwives per 1000 people, were low.3 Additional evidence is showed in Table 2, where it can be found that increase in
the number of doctors lags far behind the increase of hospital beds
from 2005 to 2012. The number of beds increased by 147.47%,
89.52% and 160.83% for third-, second- and first-level hospitals,
while the number of doctors only increased by 39.82%. This suggests that investments in medical resources in China are focused on
infrastructure, equipment and other capital accumulation, while
human capital investments have been relatively ignored. This unbalanced allocation of resources is a starting point for understanding
the structural congestion in China’s medical market.
Incentive structure for congestion in China’s hospital
market
To introduce the incentive structure of the hospital market, we review several key institutional arrangements arising from the changes
in China’s medical system over the last several decades. Medical system reform in China can be divided into four stages since 1978
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Health Policy and Planning, 2016, Vol. 31, No. 3
4
3
2
1
Thailand
India
Lower-middle-income
Middle-income
Malaysia
World
China
Upper-middle-income
Brazil
Mexico
Korea
Canada
Japan
United States
United Kindom
Egypt
High-income
Argenna
France
0
Figure 7. Number of physicians per 1000 people. Source: the MOH of China and Economy Prediction System. Note: The data are from 2010, except the average
data for different income groups and the world average, both of which are from 2009.
Figure 8. Number of nurses and midwives per 1000 people. Source: the MOH of China and Economy Prediction System. Note: The data for China are from 2011;
the data for different income groups are from 2009 and the rest of the data are from 2010.
Table 2. Medical resources of different levels in China: 2005–2012
Year
2005
2008
2009
2010
2011
2012
Beds (thousands)
Doctors (thousands)
Third
Second
First
Total
Third
Second
First
Total
594
857
946
1065
1224
1470
964
1425
1508
1601
1710
1827
120
233
243
257
277
313
2445
2883
3121
3387
3705
4161
NA
NA
NA
406.7
453.7
529.7
NA
NA
NA
609.0
604.9
613.1
NA
NA
NA
92.9
95.3
102.0
1004.0
1131.0
1198.5
1260.9
1307.0
1403.8
Sources: Digest of Health Statistics of China, different years.
(Wen 2007; Wang 2009). The first stage was from 1978 to 1984.
The policy allowed individual doctors to enter the medical market
and proposed managing medical services with economic management tools. The second stage was from 1985 to 2000. This stage
was characterized by expansion of hospital autonomy, and this policy encouraged hospitals to support medical services with tertiary industry and new unregulated business (State Council of China 1992),
while direct government investment and medical insurance coverage
were gradually reduced. The third stage was from 2000 to 2005 and
is characterized by policies that encouraged cooperation. These policies led to the emergence of various medical institutions to build
medical groups and relaxed control over medical service prices for
profit-making medical institutions (State Council of China 2000).
The tendency of public hospital ownership reform began to appear
during this stage. The fourth stage of reform began in 2005 and is
Health Policy and Planning, 2016, Vol. 31, No. 3
ongoing. During this stage, medical expenditures as a proportion of
government expenditures and public medical insurance coverage
have increased significantly. Lower-level hospitals are encouraged to
implement the complete separation of income and expenditure management,4 i.e. to forward all of their income to local governments
and have all of their expenditures borne by the governments through
public fiscal budgets.
Several institutional arrangements are particularly important
during China’s medical system reform. First, the emphasis on public
hospital autonomy with insufficient government investment means
forcing hospitals to seek a balance between their income and expenditures and profit growth (Li et al. 2012). Second, encouraging
hospitals to become profitable by extending their business into the
tertiary industry and new high-value intensive procedures that do
not have price controls. With strict regulation of drug and treatment
prices, this has a dominant effect on redirecting medical resource allocation. Third, there are incentives to focus public medical resources on higher-level hospitals because of their public ownership.5
Finally, as for lower-level hospitals, the separation of income and
expenditure management has severely decreased their willingness to
supply quality care and increased their resource idleness, thus further encouraging demand to shift from lower-level hospitals to
higher-level hospitals.
Because of the absence of an effective referral system, patients
are free to choose different levels of hospitals in China. The core factor motivating patients’ choice of hospital is their cost-benefit analysis across these options. Table 3 presents some regulated medical
fees in major cities in China, which cover the most populated and
economically important areas.6 It can be seen that the registration
or diagnosis fee is very similar across different level hospitals for all
of the cities. Aside from the remaining reported regulated items in
Table 3, prices for other procedures, treatment and medicine are
regulated to be almost the same in one city across hospital levels. So,
the key factor determining patients’ choice of hospital is the expected medical quality provided by different levels of hospitals while
monetary price is of little importance. Patients will have a greater
willingness to go to higher-level hospitals to seek a higher expected
medical quality. Considering the capacity constraint in higher-level
hospitals, longer waiting time, or time price, must function to generate a new equilibrium. Thus, congestion arises in higher-level
hospitals.
The analysis to this point is static and patient based. We now
introduce the choices of hospitals and medical staff to consider how
the incentive structures may impact behaviours over time. During
China’s medical reform in the 1990s, hospitals of different levels
were forced to seek a balance between income and expenditures, as
well as profit growth from the extension of their business to new,
unregulated items and services (Kuang et al. 2009). To make profit
from economies of scale of new technologies and medical devices,
an initial high-patient quantity is needed to share the fixed costs.
Starting with China’s health system reform of the 1990s, public hospitals have a strong incentive for capital-intensive investment. But,
only higher-level hospitals have a first-mover advantage to do that
successfully since their initial patient quantity is large. On the contrary, lower-level hospitals that cannot attract enough patients
would not cover the fixed cost and find these sorts of investments to
be unprofitable. This lack of profitability inhibits the lower-level
hospital’s ability to pay workers, and their human capital is drawn
to higher-level hospitals.7 This becomes a reinforcing mechanism
and the gap in expected medical quality among different levels of
hospitals has been rapidly expanding. That is higher-level hospitals
keep improving from more advanced medical facilities and influx
397
of human capital, while lower-level hospitals continue to regress.
In turn, the reform of the 1990s strengthened expectations about
the difference in medical quality at different levels of hospitals and
has further ignited patients’ willingness to choose higher-level
hospitals.
Since 2000, higher-level hospitals still have the same motivation
for capital-intensive investment and capability to maintain profitability. Although diagnosis fees were regulated and kept low,
Table 3 shows that the price range of sickroom beds is relatively
wide. In Shanghai, the authority lets hospitals of second level or
third level to independently set bed fees for one-bed or two-bed sickrooms; in other cities, the authorities also adjust bed fees and prices
for new medical devices more often upon the request of hospitals
and update of facilities.
However, a new story emerged after 2003. The severe acute respiratory syndrome (SARS) outbreak in China has led to a new focus
on and increased public investment in public medical infrastructure
at lower-level hospitals. Further, the increased public investment
was mainly achieved through a financing mechanism characterized
by the separate management of income and expenditures.8
According to a 2010 MOH survey, the separation of income and expenditures was implemented in more than 50% of community hospitals in 2008. In 2013, the Chinese government continued to
emphasize the implementation of separate income and expenditure
management in areas with suitable conditions, including grassrootslevel medical institutions. These institutions forward all of their income to the local governments, while all recurrent expenditures
required for basic health care and public medical services are fully
paid by the local governments that are within approved budgets
(State Council of China 2013). Therefore, in the absence of patient
visits and higher-level human capital, these investments have turned
into fixed asset investments including buildings and equipment and
maintained the survival of lower-level hospitals. Table 2 shows the
most rapid growth in sickroom beds of first-level hospitals during
2005–12. However, this has seriously weakened the incentive for
lower-level hospitals to provide medical services, motivating them
to reduce services and drive patients to higher-level hospitals (MOH
of China 2010b). The combination of the above two circumstances
leads to the allocation of medical resources to physical capital rather
than to human capital, as well as an incentive structure characterized by the coexistence of congestion in higher-level hospitals and
idle resources in lower-level hospitals.
One might expect higher-level hospitals to simply expand to address this excess demand. However, these hospitals are tightly regulated and cannot expand or open additional locations without
government approval. The intention of the tiered system is to provide care in proportion to need with more widespread availability of
basic services and only a relatively small number of high-level hospitals providing the most costly services to those requiring more intensive treatments. So, the government is reluctant to simply expand
the number of high-level hospitals to enable them to provide more
basic care.
Effects of congestion on China’s medical market
Lowering utilization efficiency of human capital
According to human capital theory, human capital is mainly reflected in the person’s knowledge, ability and health and should be
allocated to cover the investment cost. Within the medical industry,
the allocation of doctors across different levels hospitals is driven by
their different levels of knowledge and ability related to medical
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Health Policy and Planning, 2016, Vol. 31, No. 3
Table 3. Some regulated medical fees in major cities of China
Cities
Beijing
Shanghaib
Tianjin
Chongqing
Guangzhou
Hangzhouc
Ningbod
Qingdaoe
Harbin
Changchunf
Shenyang
Xi’an
Dalian
Chengdu
Wuhan
Nanjingg
Jinan
Xiamen
Shenzhen
Hospital levels
Third
Second
First
Third
Second
First
Third
Second
First
Third
Second
First
Third
Second
First
Third
Second
First
Third
Second
First
Third
Second
First
Third
Second
First
Third
Second
First
Third
Second
First
Third
Second
First
Third
Second
First
Third
Second
First
Third
Second
First
Third
Second
First
Third
Second
First
Third
Second
First
Third
Second
First
Outpatienta (Yuan/visit)
Inpatient (Yuan/bed day)
Registration
Diagnosis
Emergency registration
Emergency diagnosis
Bed
Diagnosis
Nursing
0.5–1.0
0.5–1.0
0.5–1.0
/
/
/
1.0
0.8
0.6
2.0
1.5
1.0
1.0
1.0
1.0
1.0
1.0
1.0
1.0
1.0
1.0
/
/
/
1.0
0.8
0.5
1.0
1.0
1.0
1.0
0.8
0.5
1.0
0.7
0.5
1.0
0.8
0.5
1.0
1.0
1.0
1.5
0.8
0.5
1.0
1.0
1.0
1.0
1.0
1.0
1.0
1.0
1.0
1.0
1.0
1.0
4.0
3.0
2.5
14
10
7.0
3.0
3.0
3.0
3.0
2.0
1.0
3.0
3.0
3.0
2.0
1.5
1.0
2.0
1.5
1.0
4
4
3
1.5
1.0
0.5
2.0
2.0
2.0
2.0
1.5
1.0
3.0
2.3
1.5
2.0
1.5
1.0
2.0
2.0
2.0
3.0
2.0
0.5
3.0
3.0
3.0
2.0
1.0
0.5
5.0
4.0
3.0
3.0
3.0
3.0
1.0
1.0
1.0
/
/
/
3.0
3.0
2.0
5.0
4.0
3.0
1.0
1.0
1.0
2.0
2.0
2.0
2.0
2.0
2.0
/
/
/
1.5
1.5
1.5
1.0
1.0
1.0
2.0
1.6
1.0
2.0
1.5
1.0
2.0
1.6
1.0
/
/
/
1.5
0.8
0.5
1.5
1.5
1.5
1.0
1.0
1.0
1.0
1.0
1.0
1.0
1.0
1.0
4.0
3.0
2.5
14
10
/
3.0
3.0
3.0
3.0
2.0
1.0
6.0
6.0
6.0
3.0
2.5
2.0
2.0
1.5
1.0
6.2
6.2
3
1.5
1.0
0.5
5.0
5.0
5.0
2.0
1.5
1.0
5.0
3.5
2.5
2.0
1.5
1.0
6.0
6.0
6.0
4.0
3.0
1.5
10.0
10.0
10.0
5.0
5.0
5.0
5.0
4.0
3.0
6.0
6.0
6.0
20–26
18–24
16–22
40
32
22
14–16
11–13
8–10
12.0
11.0
9.0
17.6–108
17.6–108
17.6–108
12–60
12–60
12–60
NA
NA
NA
13–40
13–40
13–40
10–12
7–9
4–6
15–25
15–25
15–25
13.0
10.0
7.0
15–60
10–40
6–30
13.0
10.0
7.0
8–50
8–50
8–50
12–42
10–32
7–17
10–48
10–48
10–48
30
20–30
12–20
32–60
32–60
32–60
17.6–108
17.6–108
17.6–108
7.0
6.0
5.0
10.0
9.0
8.0
7.0
5.0
4.0
6.0
4.0
3.0
3.0
3.0
3.0
4.0
3.0
2.0
4.0
3.0
2.0
13/20
13/20
13/20
3.0
2.0
1.0
5.0
5.0
5.0
6.0
4.0
3.0
8.0
5.0
3.0
6.0
4.0
3.0
5.0
5.0
5.0
8.0
6.0
4.0
8.0
8.0
8.0
3.0
2.0
1.0
6.0
5.0
4.0
3.0
3.0
3.0
5–9
4–8
3–7
10–14
10–14
10–14
3–5
3–5
3–5
2–12
2–12
2–12
3–5
3–5
3–5
5–8
5–8
5–8
8
7
5
3–35
3–35
3–35
1–5
1–5
1–5
2–8
2–8
2–8
2–6
2–6
2–6
3–10
2–8
1–6
2–6
2–6
2–6
1–5
1–5
1–5
3–8
3–7
1–5
11–33
11–33
11–33
3–9
3–9
3–9
6–18
6–18
6–18
2.4–12
2.4–12
2.4–12
Sources: The authors.
a
Registration fees or diagnosis fees for associate professors and professors are often higher than the standard fee reported in this table.
b
In Shanghai, hospitals of second level or third level can price bed fee for one-bed or two-bed sickroom themselves.
c
On 27 March 2014, the authority of Hangzhou launched its registration and diagnosis fee reform, where registration fee was merged into diagnosis fee and
the latter was raised to 10 Yuan/visit.
d
In 2013, Ningbo merged registration fee into diagnosis fee for its third-level hospitals, and the new diagnosis fee is 15 Yuan/visit.
e
Some treatment costs are included in the diagnosis and nursing fee.
f
In 2011, the registration fee was merged into diagnosis fee and was raised to 10 Yuan/visit for first-level hospitals of Changchun.
g
New diagnosis and bed fees were introduced in 2014, where diagnosis fee was raised to 10 Yuan/visit, and bed fee is between 30 and 120 Yuan/day.
Effect of specific factors
In the market for factors of production, the reallocation of specific
factors is difficult in the short term and its price cannot adjust adequately to reflect the inter-market rate of return difference.
Medical staff is just such a factor and its outflow from the medical
market is clearly restricted in the short term. Figure 9 illustrated the
medical staff flows under the existing incentive structure of China. It
can be seen that factor inflow to the medical market includes the
choices of high school students’ enrolment into a medical university
or college, medical university or college graduates’ choice to enter
the hospital market, as well as decisions throughout the career to develop a more specialized skill set within the hospital sector.
r-ho
s
pita
l Fl
ow
First-level
ctio
idir
e
Third
-level
nal
Inte
Second-level
Un
Medical University/college Students
services so as to reflect the scarcity of these skills and the related investment cost.
Structural congestion in China causes higher-level hospitals to
undertake functions that can be performed by lower-level hospitals.
Thus patients in need of more specialized medical services have much
longer wait times, and doctors in higher-level hospitals must deal with
illness that could be covered by lower-level hospitals. At the same
time, lower-level hospitals lack of patients and resources are underutilized. The result is that human capital in higher-level and lower-level
hospitals all cannot exercise their function at an efficient level.
One survey completed in Shenzhen city (Chen et al. 2007) found
that, at least 70% of patients in higher-level hospitals should have
chosen lower-level hospitals. Because of lower utilization efficiency
of human capital, bed occupancy rate in third-level hospitals has
reached 104.5% in 2012, while first-level hospitals have a rate of
only 60.4% in the same year. A 2010 MOH survey demonstrated
that doctors in China’s lower-level hospitals have incentives to drive
their patients to higher-level hospitals by claiming the need for
advanced medical facilities or other excuses about medical quality.
A dynamic negative impact on medical human capital can also be
induced from structural congestion. That is doctors’ ability at each
level will degrade with the imbalanced and mismatched utilization.
When facing a rising number of mismatched patients and decreasing
consultation time per patient, doctors do not have enough time to
communicate with patients, diagnose and provide therapeutic regimens so as to maintain their ability. To keep up with high demand,
doctors in higher-level hospitals have to establish standardized procedures by conducting more medical checks or prescribing drugs more intensively, which can lead to degradation of medical services in the
long term. Human capital degradation at higher-level hospitals is
accompanied by higher patient dissatisfaction and higher medical
costs that have resulted in more medical conflicts and even violent incidents (MOH of China 2010a). The 2010 MOH survey also revealed
that, 62.6% of medical staff in third-level hospitals reported burnout
using Maslach Burnout Inventory. Moreover, the higher level the hospital is, the higher the burnout ratio is.
For lower-level hospitals, the lowering of patient quantity and
willingness to provide services creates fewer opportunities for staff
to exercise their ability. Lower-level hospitals choose only to fulfil
public medical responsibilities specified by the local government but
not respond to residents’ medical demand, thus depreciating human
capital rapidly. According to a 2010 MOH survey, only 62.7%
medical staff in lower-level hospitals can pass (score 60 from 100) a
basic medical and health knowledge and skill test. The pass rate for
a prenatal check and hypertension management test is only 21.8%
and 48.5%, respectively. This suggests that human capital in lowerlevel hospitals is also degraded even with the heavy investment from
Chinese government since 2003.
399
High School Students
Health Policy and Planning, 2016, Vol. 31, No. 3
Non-medical Profession/Labor Market
Figure 9. Medical staff flows under the existing incentive structure of China.
For factor specificity, incumbent medical staff usually flow inmarket but do not flow out of market in the short term. So, under
the existing incentive structure, a unidirectional inter-hospital flow
is evidenced, from township/community level to county/district level
and then to municipal level (Yuan 2012; Zheng 2013). Only a small
number with the highest levels of human capital could be qualified
to practice independently with approval of government and other
regulation (Zhou 2013). However, the bigger effect is the long-term
outflow of medical staff under the incentive structure. Because of
the aforementioned degradation of medical human capital, distortion of the incentive structure with drug and treatment price regulation and risk associated with more doctor-patient conflicts, changes
in the cost-benefit pattern for pursuing a medical career have significantly affected the quantity and quality of those planning to enter
the medical market. These influences have negative effects on
human capital formation within the market, as well as on human
capital inflow, in the long term. One model developed by Chen et al.
(2008) also demonstrated the negative effects of medical costs
(mainly from medical infrastructure and equipment) on human capital inflows under the existing incentive structure.
To avoid becoming overly specialized, excellent high school students have a decreased willingness to enrol into medical university
or college (Wang 2013). As evidence of this, some medical universities have been reported failing to recruit enough students (Liu et al.
2010). Even the most famous medical universities of China have
experienced the falling of admission scores and quality among applicants (Tang 2011). One survey sponsored by the Medical Profession
Journal (Hu 2014) collected 1447 questionnaires and found 94.61%
respondents do not want their children to pursue a career in medicine. A similar result is reported in a survey by the Chinese Doctor’s
Association (CDA 2011) where 78% of doctors did not want their
children to pursue a career in medicine.9
As for medical university and college graduates, estimates show
that 50–80% of medical students did not ultimately pursue a career
in medicine (e.g. Hou et al. 2013; Pang and Li 2013). The reasons
include the focus on capital-intensive investments in higher-level
hospitals as well as risks associated with doctor-patient conflicts.
These decisions have restrained employment in higher-level hospitals.10 At the same time, stronger expectations of degrading
human capital make it unattractive to work in lower-level hospitals.
Wang et al. (2011) surveyed Beijing’s medical graduates and found
that, no more than 20% are willing to apply for a job in a lower-level
400
hospital. Even for those students targeting a specific area, 35.25% of
them will choose to break the contract when graduating (Wang et al.
2014). Prior to 2003, medical graduates generally had a low willingness to work in lower-level hospitals when the lack of interest in lowerlevel hospitals was tied to the lack of financing ability of such hospitals.
But after 2003, salaries were fully covered thanks to an increase in government spending on lower-level hospitals. For example, at the township-level, hospital income from the government budget grew from
34.9% of their total salary expenditure to 112% of total salary (Yuan
2012). So the incentive structure causing structural congestion contributes to the weak willingness to apply for job in lower-level hospitals.
Effect on increasing costs
There is a long history of drug and treatment price-regulation policies in China. During the reform of the 1980–90s, purchase price
plus (no more than) 15% pricing was introduced by the authority to
compensate for the decrease of government medical expenditure.
This policy created a positive relationship between drug usage and
profitability of hospitals, thereby sending a strong signal to encourage increased prescription of high-price drugs and resulting in
increasing medical costs. In an attempt to reduce medical costs, (partial) separate management of income and expenditures was introduced in 2000, where drug income of hospitals at the county and
beyond levels must be forwarded to the government and the latter
returns a certain fraction of income to the hospital judging by a series of indicators (one of the most important is medical cost/visit).
The remaining fraction was used by the government to compensate
for losses of other hospitals. Even so, the positive relationship between drug income and profitability was maintained.
However, structural congestion could exert a marginal cost-increasing effect. For higher-level hospitals, as discussed in Lowering utilization efficiency of human capital section, congestion shortens
consultation time available for visits and negatively affects the quality
of diagnosis. To compensate for limited time, doctors may order unnecessary medical examinations or rely more heavily on higher value
drugs when developing a therapeutic regimen. In addition, reduced
quality can generate higher utilization of medical facilities and readmissions. These factors can all tend to increase medical costs. Further, even
if the government tightens regulation on medical cost per visit, doctors
could choose to split prescriptions or services to bypass the regulation
(Xu 2011). As the result, medical cost per visit could be stable while
total medical expenditures continue to increase effectively nullifying
that attempted reform with no ultimate cost savings (Chen et al. 2010).
For lower-level hospitals, incentive inducing structural congestion at higher-level hospitals generates the same cost-increasing result. With the implementation of (complete) separate
management of income and expenditures, financing sources of
lower-level hospitals have evolved from being dependent on drug
and service income to instead depend on the government budget.
Agreements between local governments and lower-level hospitals
to address public health needs will be accompanied by increases
in budgeted expenditures. At the same time, the separation of expense management from income management reduces the need of
these hospitals to respond to local medical needs (MOH of China
2010b; Yuan 2012). Thus, the expenditure means another
increasing cost.
Recent reforms and discussion
During the past 30 years, China witnessed a series of major health
and medical system reforms, with its public medical expenditures
Health Policy and Planning, 2016, Vol. 31, No. 3
and insurance coverage exhibiting a U-shaped pattern. Because of
the lack of an integrated reform roadmap and a focus on responding
to short-term goals during the 1980s and 1990s, these reforms have
accumulated undesirable systematic problems that deviate widely
from the design of each reform. Structural congestion is one of the
most important accumulated results.
Besides China, other countries also face persistent problems with
congestion such as Britain and Canada. The common thread is a system of regulation that does not provide the right incentives on either
the demand or supply side to solve this problem. Although a number
of features of the market contribute to this problem, the central limiting factor is price rigidity that prevents hospitals with excess demand from raising prices or hospitals with excess supply from being
able to reduce prices to reduce congestion. Although wellintentioned reforms may address perceived public health or access
problems, this analysis highlights the unintended consequences that
can arise if those reforms do not maintain sufficient flexibility in the
market.
This article argues that the structural congestion rooted from the
prior medical system reform of China, which cannot be solved by
pure increase in public medical expenditures. The key point to
understand it lies in the existing regulated pricing system, as well as
the incentive structure for patients and hospitals of different levels.
These incentives contribute to a consolidated and self-reinforcing
system that produces structural congestion. It is difficult for China
to combat this structural congestion without a new incentive structure that rebalance patients’ expectations and choices across hospitals of different levels. This would include a comprehensive review
of price regulation, increase to factor mobilization and market entry
and financing mechanism reform in China’s medical market. In recent years, besides continuing to expand the government’s medical
budget, China is also trying to intervene directly to reduce structural
congestion in the medical market. But it is regretful to say that, not
all of the reforms are in the right direction or functioning well.
These reforms are discussed below.
The first important step is price regulation reform. The State
Council of China (2009) announced its reform intention to cancel
the drug plus pricing policy and increase diagnosis and treatment
prices. In 2012, this reform was again emphasized (State Council of
China 2012). Since then, some provinces have tried to implement
these reforms, with the main emphasis on drug price and registration
and diagnosis fee reform and subsidies to increase treatment costs
with public medical expenditures. But there is still little service fee
difference among different levels hospitals (see Table 3 for registration/diagnosis fee). Besides, some provinces have designed a (weak)
decreasing payment ratio of public medical insurance for diagnosis
fees or inpatient fees from lower-level to higher-level hospitals (e.g.
in Beijing and Guangzhou). The most recent advance is to fully deregulate all medical prices for non-public hospitals in 2014
(National Development and Reform Commission of China 2014).
The second step is encouraging market competition and entry or
exit of firms. The State Council of China (2009) also mandated that
doctors should be allowed to practice in multiple sites. Starting in
2010, a pilot reform program was commenced to allow doctors to
practice at multiple sites in Guangdong Province and Kunming city
and was expanded to the whole country in 2011. However, because
of fierce opposition from higher-level hospitals, combined with a
strong dependence of doctors on higher-level hospitals in terms of
benefits, titles, etc., few doctors have chosen to work at multiple
sites (Liu and Feng 2014). In fact, most doctors selecting to practice
at multiple sites are doctors approaching retirement age
(Wang 2014).
Health Policy and Planning, 2016, Vol. 31, No. 3
The third step to reduce congestion is to encourage human capital inflows into the medical market with fiscal subsidies. In 2011,
the MOH of China increased per capita funding for medical students to 27 000 Yuan per student per year, which was more than
three times higher than the funding level in 2008 (7100 Yuan per
student per year). Within the current incentive structure, it is still
difficult for medical graduates to obtain a job at higher-level hospitals because of their capital-intensive investment incentive and
unfavourable working environment. Meanwhile, the risk of human
capital degradation in lower-level hospitals also hinders human capital inflow. Therefore, there is little evidence that this policy would
be helpful to increase human capital supply. Moreover, the Chinese
government introduced a policy in 2010 to provide free targetedarea medical student training for lower-level hospitals and rural students (National Development and Reform Commission of China
2010). Although there are still no graduates until 2015, one survey
of Chongqing has predicted an unsatisfactory future of the effect of
this policy (Wang et al. 2014).
The fourth way to reduce congestion relates to ownership reform, such as merging lower-level hospitals with higher-level ones.
The ideal result for such a reform is to promote technology spillovers from higher-level hospitals to lower-level hospitals and encourage greater utilization of lower-level hospitals. In reality, as
most Chinese hospitals are government owned, the original intention of this reform was to drive hospitals with higher profitability,
which is usually of higher level, to merge or manage those with
weak profitability so as to ease the pressure on government subsidies. This is a politically easy but economically risky reform.11
Evidence on the effect of public hospital integration is still rare and
mixed. Liu et al. (2009) found no evidence on cost saving from it,
while Pan (2010) reported increases of lower-level hospital’s medical
cost after being merged in a case study of Shanghai. However, some
other studies (Zhao 2008; Liu 2009; Ren et al. 2012) gave positive
evidence that hospitals being merged (in their study, refer to secondlevel hospitals) gain more visits in Shanghai and Liaoning Province’s
case, while congestion in higher-level hospitals continued. When extended to first-level hospitals, there is little success being reported.
Only one report showed that first-level hospitals have faced increasing referral rate after being integrated with certain higher-level hospital (Guan and Liu 2014). But other concerns emerged that such
integration could result in diseconomies of scale (Liu 2004), monopoly (Zhao 2008) and an incentive to siphon human capital from
lower-level hospitals to higher-level hospitals (Pu et al. 2014).
What should be done to reduce structural
congestion in China?
China’s structural congestion is a story of market development
under distorted incentives that originated from government control
accompanied by a series of reforms to respond to short term goals.
The Chinese government has announced its strategy to combat
structural congestion using price regulation and market entry reforms (Central Committee of the CPC 2013). Starting with drug
price and diagnosis fee, reforms move the system in the right direction, but the ongoing price adjustment remains insufficient to reflect
the degree of scarcity of services at higher level hospitals and reshape
patients’ expectations and choices. Higher and more differentiated
registration and diagnosis fees are needed to promote the realization
of a hierarchical treatment and referral system among different levels of hospitals.
Relative to the current system, allowing higher prices and allowing prices to vary across hospitals may increase social inequality and
401
restrict the ability of lower income individuals to afford treatment at
high-level hospitals. However, it is true that access is already limited
at these hospitals for all individuals due to structural congestion.
Because of this, other public policies that directly address income
inequality and equity such as income or cost sharing subsidies for
low-income households will be more effective at reducing social
inequality without generating the widespread congestion of the
current system. This is also consistent with the stated goal of
Chinese government to provide efficient primary medical service
and ensure its availability and affordability of medical resources.
Another policy to reduce congestion is the reform of (complete)
separate management of income and expenditures. Currently, hospitals are given sufficient resources to cover their expenditures regardless of the number of patients served. Therefore, lower level
hospitals with excess capacity are able to cover expenses and have
no incentive to attract additional patients. By requiring hospitals to
generate income to cover their expenditure, lower level hospitals
will have a strong incentive to attract additional patients and better
utilize excess capacity.
At the same time, more actions are needed to incentivize human
capital inflow and accumulation in lower-level hospitals. One necessary step here is expanding practice autonomy (including multi-site
practicing). In 2013, cities like Beijing have allowed eligible doctors
employed at high-level hospitals to also practice in community hospitals. Since March of 2015, all doctors of Zhejiang Province have
been permitted to practice at another site within the same region at
least 1 day per week without any requirement to be approved.
Although it is unclear what barriers remain to expand this policy
more widely, this regulation reform is on the way. There exist a
large percentage of medical graduates not pursuing a career in medicine, and public subsidies for them are much higher than for other
majors. We suggest that the Chinese government offer subsidies to
encourage medical colleges and universities and higher-level hospitals to provide regular, effective skill training and internships to
doctors at low-level hospitals, new graduates or medically trained
individuals not working in the field. This will encourage greater
human capital formation, technology spillover and downward transmission throughout the hospital system. Moreover, new public medical funding should be partially used to provide subsidies for multisite practice and for the transfer to full-time practice in lower-level
hospitals to drive higher-level human capital to lower-level hospitals
in many legitimate ways with an incentive.
An important consideration in the context of encouraging the
use of lower level hospitals is quality of care. Current regulations regarding the provision of care are the same across hospital levels with
the only formal difference being the ability of higher-level hospitals
to treat more complex cases. However, if increasingly differentiated
prices are to be successful in reducing congestion, residents must be
confident that care of sufficient quality is available at lower level
hospitals. We recommend that the government strengthen quality
regulations for services offered at lower level hospitals to reassure
residents that they will receive high quality care at lower level hospitals and help lower level hospitals regain consumers’ trust. In particular, regulations related to human capital including minimum
training and experience requirements for staff at different levels
would increase perceptions of quality but also aide in the addressing
the human capital deficit currently found at many lower level
hospitals.
Last but not the least, some caution should be held on the ongoing hospital vertical integration under governmental intervention
and the emergence of much larger hospitals. This reform can in the
short term reduce financial subsidization by local government and
402
Health Policy and Planning, 2016, Vol. 31, No. 3
also seems to be helpful in improving resource utilization of
lower-level hospitals (mainly of second level). This has been met
with a warm welcome from local governments but generates other
potential and unpredictable risks to market competition and
bargaining power among local government, patients and hospitals.
Although the Chinese government has realized this point in its
official document and asked public hospitals not to expand their
scale (State Council of China 2014), it is unclear how far this reform
will go on.
Acknowledgements
The authors thank for the constructive suggestions from anonymous referees.
Funding
8
9
10
11
According to State Council of China (2010), the main purpose
to implement separate management of income and expenditures
in lower-level hospitals is to prevent doctors’ making profit
from excessive prescribing and medical treatment, as well as
new debt from investment.
In China, family’s attitude is confirmed as one of the most important influential factor on professional choice by 67.46% of
47 170 freshmen from a survey (Fan 2009).
Another barrier is Bianzhi. For the sake of budget control, the
authority is usually reluctant to release Bianzhi to hospitals, no
matter how profitable a hospital is.
According to Cao’s (2014) estimation, amount of hospital with
beds more than 800 have reached to 727, and there are more
than 10 hospitals with beds more than 4000 until 2011. Also,
the number of giant hospitals is rapidly increasing with the implementation of integration.
This work was supported by China Scholarship Council from 2014-2015 to Z.S.
Conflict of interest statement. None declared.
Notes
1
2
3
4
5
6
7
Time price means that, if medical prices cannot adjust to reflect
the scarcity of resources in high demand, patients have to wait
longer, which creates an additional cost that must be paid by
the consumer.
Even some medical staff of lower-level hospitals were encouraged to supplement wages by pursuing secondary work with
other hospital departments or running their own clinics while
keeping their Bianzhi in lower-level hospitals. Bianzhi is a kind
of staffing quota with a certain number of positions funded by
the government. In China, all public hospitals are viewed as
public institutions and there exists a two-tier employment system: one is of Bianzhi, where doctors usually enjoy more stable
job and higher salary; the other is fully marketization and not as
stable as employment within Bianzhi.
Considering the methodological difficulties, caution should be
exercised when using this international comparison. Although
only data of 2005–12 are available, Table 2 gives some supports
for the above international comparison result.
This arrangement originated from MOH of China (2000), and
it is firstly against hospital of county- and beyond level, where
all the drug income must be forwarded to the authority and regain money upon a sophisticated model. The key is that,
those hospitals with the highest profitability can gain certain
ratio money they earned with the left being allocated to
those with poor profitability. This can be called partial
separation of income and expenditure management, because
hospitals still could have more money if they earn more but cannot have all the money. This arrangement is said to reduce medical cost.
In some provinces, many lower-level hospitals were restructured
to non-public hospitals with limited government share or fully
private hospitals. Even so, public hospitals with full government
shareholding occupy 86.0%, 90.0% and 89.0% of total hospital beds, annual visits and inpatient patients, respectively, in
2012 for China.
These are also the so-called ministerial-level or vice-ministeriallevel cities, the amounts of which are 4 and 15, respectively.
A regulation regarding practice location, i.e. doctors cannot
practice beyond one hospital, contributed to solidify the
difference and structural congestion.
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