Health Care

China Looks to Cure Hospital Corruption


A nurse attends to patients at a hospital in Hefei in eastern China’s Anhui province

Photograph by AFP/Getty Images

A nurse attends to patients at a hospital in Hefei in eastern China’s Anhui province

A retired civil servant with stomach pains was pleasantly surprised by his recent visit to the Beijing Friendship Hospital. “I’m paying less, so of course I’m satisfied,” says the 71-year-old, who would only identify himself as Mr. Tong. “And coming to the hospital, getting a queue number, and seeing the doctor all took less than one hour.” The hospital is part of a pilot program: Patients have to pay more to see a doctor at Beijing Friendship, but drugs sold by the hospital pharmacy are cheaper, lowering the total bill. Waiting times are shorter as well.

The reforms are partly a response to a rash of violence in hospitals. Last spring a doctor in the city of Harbin was murdered by a patient. The government’s official newspaper, China Daily, has reported that in 2010 there were more than 17,000 violent incidents at hospitals and that 50 hospitals in Beijing have beefed up security. With daily episodes of labor unrest, such as the recent brief shutdown of a Foxconn Technology Group factory, the government does not want to add to the frustrations of ordinary Chinese.

Fixing the hospital system will be a priority for the new government of heir apparent Xi Jinping, the current vice president. Many Chinese believe you can’t trust doctors, says Jason Mann, a health-care analyst at Barclays (BCS) in Hong Kong. “They prescribe expensive things you don’t need,” he says.

Most Chinese hospitals charge very little for doctor consultations. They make about 50 percent of their revenue selling medicine to patients, charging markups from 15 percent to 100 percent. Doctors on average earn just $1,000 a month, so many supplement their incomes by overprescribing medicines sold by hospital pharmacies. (The prescribing physician splits the profits with the hospital.) “To increase profits, hospitals overtreat and overexamine,” Rao Keqin, party secretary of the Chinese Medical Association, said in a report published by McKinsey in August. It gets worse: In September, China Daily reported a widespread bribery case in Shenzhen involving at least 20 hospital officials accused of taking kickbacks from drug and medical equipment companies.

Health Minister Chen Zhu says the government won’t tolerate hospital violence but recognizes the anger of patients. “We need to have immediate solutions,” Chen told reporters on Sept. 17, “so we’re preparing to build better channels for patient complaints.”

The reforms, which the government wants to take nationwide by 2015, aim to lower drug prices, make consultations more expensive, and give doctors raises. A patient who wants to see a doctor at Beijing Friendship now pays a minimum of 42 yuan ($6.60), vs. the old fees of 5 to 14 yuan for any doctor. A visit to a specialist now costs 100 yuan. Drug prices have dropped an average 30 percent. “Reforms have stopped doctors from overprescribing medicines,” Chen said.

To help make up the difference, the government will expand subsidies to hospitals. The government is also opening the health-care sector to foreign investment. Critics are impressed, but warn that changes won’t be easy. “The whole idea of trying to make public hospitals really serve the public interest is the right direction to go,” says Liu Su, a professor of public health at the Chinese University of Hong Kong. “The system has been kind of broken for so long, the incentives have been wrong for so many years.”

The bottom line: China is trying to stop corruption at hospitals by raising doctors’ fees, creating less of an incentive to overprescribe.

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Einhorn is Asia regional editor in Bloomberg Businessweek’s Hong Kong bureau. Follow him on Twitter @BruceEinhorn.
Loo is a reporter for Bloomberg News in Beijing.

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