Dilemma of Hospital Reform in China, Public or Private ?

1. 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 1980-2007 • Public hospital: lack of government support, self-run • Market share: public sector dominating supplemented by the private sector • Hot competition within public hospitals and between public and private hospitals

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

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

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

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

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) Many at the hospital Few at the hospital None Full Hospital Public purse Indirect: regulations Direct: hierarchy Implicit unfunded Explicit funded Budgetary units Autonomous units Corporatized units Privatized units Decision right Market exposure Residual claimant Account- ability Social functions 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 Residual claimant Market exposure Decision right; Residual claimant Decision right; Market exposure; Residual claimant Decision right; Market exposure; Residual claimant; Account -ability Decision right; Market exposure; Residual claimant Decision right; Residual claimant; Account -ability Decision right; Market exposure; Residual claimant; Accountability; Social function 1978 1979 1980 1981 1985 1989 1992 1997 2000 The opinions of the pilot work on strengthening hospital economic management Opinions about related issues of expanding health services Several opinions about deepening the health care system reform Regulation on the issue of permitting individuals’ practicing medicine The national policy on health reforms and development The interim measures on hospital economic management “Guidance on the health system reform in cities and towns” and other supporting thirteen measures Report on regulations regarding the reforms on health services 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

16. Health financing structure changing in China Budgetary units Autonomous units Corporatized units Privatized units Decision right Market exposure Residual claimant Account- ability Social functions Sprout of HA (1979-1984) Comprehensive development of HA (1985-1991) Continuous development of HA(1992-1996) Accelerated changes of HA (1997-2008)

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

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

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

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

24. Private hospital, an alternative?

25. Growth in Hospitals and Primary Health Care Facilities by Ownerships 83% 52% 58% 66% 24% 24% 32% 28% 14% 16% 2% 1% 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% 5% 1% 89% 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) 6% 3% 5% 1%

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 ! yychen@shmu.edu.cn