Pricing reform for public hospital

A new regulation will require hospitals to end the practice of using profits from medication sales, to ensure the hospital's sustainability. The measures are raising questions of how to ensure financial viability.

This is the First People's Hospital in Zhengzhou, capital of Henan Province.

Four years ago, it rarely treated more than 500 patients a day. Local residents preferred to go to hospitals further away, making it hard for administrators. High prices were the main reason residents chose to go elsewhere.

To address the issue, the hospital strengthened its supervision on doctors, urging them to use proper medication, rather than those with high prices. Doctors who violate the rule will receive severe punishment.

Yu Hongwei, Deputy chief of Zhengzhou First People's Hospital, said, "Doctors who use improper medication will be reprimanded and receive economic punishment. If they persist, he will be deprived of his capacity to prescribe medicine for a certain period of time."

The new regulations are showing gradual progress. Costs for each patient have decreased.

Yu said, "Patient costs are decreasing, but the hospital's income is increasing because its treating more patients."

The new measures were also tested in a less-developed city in Sichuan Province. Most of the public hospitals in Nanchong used to rely on medication sales.

Li Guangming, chief of Central Hospital of Nanchong, Sichuan Province, said, "If medicine profits are largely eliminated, which is about 20 million yuan in our hospital, we will need the local government's financial support."

Nanchong city's annual revenue is more than 2 billion yuan. One tenth of that will be needed if the policy is carried out.

Yang Chengguo, Chief of Nanchong Health Bureau, said, "Local finances can hardly meet the demand."

Many cities in Sichuan have the same problem as Nanchong. To tackle the issue, many hospitals plan to increase service prices.

Shen Yi, Chief of Health Bureau of Sichuan Province, said, "I have calculated, if we increase the costs for operations and beds, the hospital can earn ten thousand if the patients pay 12 thousand. But if we make profit through medicine sales, the patients will have to pay 80 to 90 thousand, while we earn ten thousand."

Shen says increases in service prices, which are artificially low, will not only motivate doctors, but will also provide benefits for patients.