Dilemma of Hospital Reform in China Public or

Dilemma of Hospital Reform in China, Public or Private? Yingyao Chen, Ph. D School of Public Health Fudan University Shanghai, China 1|

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

Background 3|

Objectives of Hospitals Reform l 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 l At the System level (Society level) – – 4| Quality of service Equity in access to services (affordable and accessible) Efficiency of using resources Financial sustainability of the system

Services organization and delivery l Structure: public private mix, autonomous public hospitals – Decentralization in 1980 -2007 – Public hospital: lack of government support, self-run l Market share: public sector dominating supplemented by the private sector l Hot competition within public hospitals and between public and private hospitals 5|

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

Mapping Public & private hospitals’ in China • Number of hospitals (non profit & profit) 18000 16000 15677 15783 15673 15759 15616 15650 15724 15822 16258 16767 14000 12000 10000 27. 6% 8000 6000 11. 4% 4000 2026 2544 2971 3575 4038 4019 4543 5096 5721 6403 2000 0 2003 2004 2005 2006 2007 2008 Non Profit Growth rate(2003 -2012): non profit hospital by 6. 95% profit hospital by 216. 04% Source: China Health Statistical Yearbook(2004 -2013) 7| 2009 2010 2011 2012

• Number of hospitals (public & private by registration) 18000 16000 42. 2% 15483 14309 14051 13850 14000 13539 13384 12000 9786 10000 8440 8000 7068 6240 6000 4000 5403 17. 2% 3220 2000 0 2005 2008 public hospital 2009 2010 private hospital 8| Source: China Health Statistical Yearbook(2004 -2013) 2011 2012

• Number of hospitals by ownership 12000 10000 9880 9777 9651 9629 9579 9637 7504 8000 6604 6048 6046 6000 5892 5397 6474 5926 6029 2011 2012 4594 3887 4000 2219 2000 0 2005 2008 governmental 2009 collective 9| Source: China Health Statistical Yearbook(2004 -2013) 2010 private

Theoretical framework 10 |

Analytic framework l 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) Budgetary units Autonomous units Decision right Few at the hospital Market exposure None Residual claimant Public purse Accountability Direct: hierarchy Social functions Implicit unfunded Corporatized units Privatized units Many at the hospital Full Hospital Indirect: regulations Explicit funded Source: Analytic dimensions of different autonomization of hospitals from Melitta Jakab, et al(2002) 11 |

Hospital Autonomy is l 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 l However, the governance functions reside with the government – – 12 | Providing leadership Steering and coordinating at the system level Providing system-wide integration and regulation Supervision

Public hospital autonomy, good or not? 13 |

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

15 |

Health financing structure changing in China Budgetary units Autonomous units Corporatized units Privatized units Decision right Market exposure Residual claimant Accountability Social functions Sprout of HA 16 | (1979 -1984) Comprehensive development of HA (1985 -1991) Continuous development of HA(19921996) Accelerated changes of HA (1997 -2008)

MOH NDRC (planni ng) NDRC (pricing) MOF NCMS Investment decision MOCA MOHRSS (social security) Strategic planning and development MOHRSS Medical assistance UEBMI URBMI Financial power (e. g. income, use of funds) Public Hospitals Org Dept. Personnel management Public Hospitals Use of profit or surplus Staffing decisions 17 | 17 Source: Yip, et al. Early appraisal of China’s huge and complex health-care reforms Management and use of assets

Evaluation on performance of HA l Changes of service delivery and hospital operation l Services capacity improved significantly (1980 -2010) l Hospital increased by 111% l Hospital bed increased by 183% l With increase of outpatient visits and hospital admissions dramatically, the revenues and expenditures also rapid growing l Average 3% of surplus (2002 -2010) l 6 -7. 5% government subsidy (2002 -2010) l Expenses escalated reflecting some evidence of expensive health care (1990 -2010) l Average expense of outpatient visit: 10. 9 Yuan to 173. 8 Yuan l Average expense of inpatient admission: 473 Yuan to 6525 Yuan 18 |

Evaluation on performance of HA l Evaluation on performance with indicators for efficiency, quality and equality l Efficiency of health care in controversial (1990 -2010) l Average length of stay decreased from 14. 1 to 9. 7 l Bed occupancy rate increased from 88. 2% to 95. 0% l Revenue per doctor per year from 47, 000 Yuan to 881, 000 Yuan l Quality of care moderate improved (Number and mix of qualified medical staff; Adverse outcome rates) l 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) 19 |

Progress of public hospital reform-urban l 16 pilot cities carried out in 2010, and Beijing became the in 2012 l Expansion of pilot cities in 2014: extra 17 pilot cities l The reform priorities and implementation plans was city-specific, different roadmaps, strategies, and approaches l Reform of internal and external governance structure l Services improvement: Clinical pathways, DRGs, appointment system, shorten waiting time, etc 20 |

Public hospital reform l Clearly state the roles and functions of public hospitals l Shift strategy to market competition and private ownership of public hospitals (Kunming and Luoyang) l Address dispersion of responsibility and power between various city departments – Establishment of a commission chaired by the mayor or deputy-mayor l 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 21 |

Progress of public hospital reform -rural county l First wave 311 pilot counties, second wave over 1300 pilot counties in 2014 l 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 l Reform of medical insurance payment system: combination of multiple payment systems l Establishing hospital management committee l Reform of personnel system and income distribution system 22 |

The public hospital challenge l Public view hospital care as expensive and difficult to access l Lack of clearly defined functions, social responsibilities, and accountabilities for public hospitals in China l Hospitals are governed by bureaucratic rules and subject to conflicting policies by the many ministries that govern them l Current service delivery system is fragmented and acute, episodic, volumebased, based on supplier-induced demand, and poor continuity of care l Quality and safety concerns, including unnecessary care l Low management capacity l Uncontrolled expansion of size of public hospitals l End goal for reform describes a completely new model – current incentives are not aligned to achieve this model 23 |

Private hospital, an alternative? 24 |

Growth in Hospitals and Primary Health Care Facilities by Ownerships 83% 58% 28% 16% 1% 52% 66% 32% 14% 2% Growth in the total number of hospitals/PHC has come primarily from private hospitals/PHC 25 | 24%

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

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

Growth in Beds by Ownership 86% 94% 1% 5% 28 | 6% 8% 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% 1% 4% 5% 5% 89% 96% Private hospitals accounted for 10% of all outpatient visits (5% each for PFP and PNFP); 11% of all admissions 3% for PNFP and 6% for PFP) (5% 6% 1% 29 | 5%

Impact on Health Service Delivery System l Service delivery is dominated by public hospitals, which have strong incentives to increase service quantity l Private hospitals have increased rapidly, but vary significantly in scale, capacity, quality, and reputation l Policies currently lack clarity on structure and functions of public and private providers (e. g. role in hospital services vs. grassroots primary care) 30 |

Policy suggestions 31 |

32 | yychen@shmu. edu. cn