Background

Since 2010, the State Council has issued a series of policy documents promoting development of the healthcare industry by encouraging the inflow of social capital. As a result, non-public medical institutions have grown rapidly and their level of service has gradually improved. In general, however, the scale of non-public medical institutions is still small and the services they provide are still relatively low. Many difficulties and problems still exist: the potential of non-public medical institutions is limited; the threshold for entry into the industry is high; non-public medical institutions experience brain drain; and the regulatory mechanisms that regulate such institutions needs to be refined. 

In order to solve these issues, the General Office of the State Council issued the Measures on Promoting the Growth of Non-public Medical Institutions (Guo Ban Fa [2015] No. 45)(hereinafter referred to as the “Measures”) on June 15, 2015. The intent of the Measures is to eliminate systematic obstacles and political constraints hindering the development of non-public medical institutions.

Four Major Aspects of the Content

The Measures do not merely repeat the general requirements, development goals, and basic principles of non-public medical institutions. Instead, it puts forth detailed policies which target the practical issues facing the industry through four methods: relaxing the entry barrier; expanding the investment and financing channels; promoting resource flow and sharing; and optimizing the environment for development. It also encourages the localities to explore their own developments in accordance with their needs.

Relaxing the Entry Barriers

The first key step in establishing non-public medical institutions is to obtain government approval. Aiming to solve problems such as the difficulties in entering into the industry, the various restrictions, and the limited space, the Measures propose the following: 1) requiring all localities to publicize the procedures, the authorities and the timeline of the approval of non-public medical institutions, streamlining the approval of establishing medical institutions, and integrating approval procedures; 2) reducing approval restrictions and optimizing the procedures of purchasing and using large medical equipment (the grade and the quantity of inpatient beds are no longer the essential preconditions of equipping medical institutions with large-sized instruments); 3) controlling the size of public medical institutions and regulating the reform of public medical institutions. All localities must reasonably control the quantity and size of public medical institutions and explore options for developing non-public medical institutions.

Expanding the Investment and Financing Channels

To help solve the financing difficulties faced by non-public medical institutions, the Measures propose: 1) strengthening financial support by including non-for-profit non-public medical institutions that provide basic health care services in the scope of government subsidies; 2) enriching financing channels by allowing non-public medical institutions to raise initial expenditure and development capital through methods such as equity financing and project financing; 3) optimizing financing policies by encouraging financial institutions to innovate and create financial products and services based on the special needs of medical institutions and expand their business scale.

Promoting Resource Flow and Sharing

Aiming to solve the non-public medical institutions’ problems regarding poor medical service quality and low academic levels, the Measures stresses: 1) accelerating the process of allowing doctors to practice in multiple medical institutions; 2) exploring effective forms and specific approaches of cooperation between public medical institutions and non-public medical institutions; 3) encouraging non-public medical institutions to introduce new technology, develop new projects, as well as provide featured diagnosis and treatment services.

Optimizing the Environment for Development

The development of medical institutions typically requires long-term operations. China currently lacks large scale, high-level non-public medical institutions. Therefore, it is necessary to accelerate creation of an environment for such institutions to develop. To further promote the development of large scale, high-level non-public medical institutions, the Measures institute a series of supportive policies including: 1) tax incentives, 2) inclusion of non-public medical institutions in the scope of the healthcare insurance coverage that previously only covered designated medical institutions (most of which are public), 3) standardization of charges, 4) further clean up and cancellation of unreasonable and illegitimate fees imposed on non-public medical institutions.

Because the threshold for establishing non-public medical institutions has been lowered, the Measures emphasize strengthening the supervision of non-public medical institutions to ensure the quality of medical services. The major approaches to this goal include: training of executives and relevant managers of non-public medical institutions; building regulatory capacity; striking down illegal medical practices; establishing and improving the credit record mechanism for medical institutions and professionals; and refining policies managing medical institutions based on their categories.

Overall Comment

The Measures address practical issues such as the limited space for the development of non-public medical institutions and the high entry threshold for social capital. The Measures aim to provide fair treatment to social capital and to encourage them to invest in medical institutions by allowing greater participation in terms of access, operation, and supervision. The Measures focus on eliminating existing systematic barriers and policy restraints that prevent non-public medical institutions from thriving. In addition, the Measures emphasize medical safety and a refined regulatory mechanism to strengthen supervision of non-public medical institutions for assurance of quality in the services provided. The ideas reflecting this reform deserve praise.

There is no doubt that publication of the Measures will play an essential role in promoting the development of non-public medical institutions in China. However, medical reform in China faces both an imbalance of resource allocation in the medical service industry as well as the difficulties that non-public medical institutions face when competing against public medical institutions. Thus, it will take time to examine implementation of the Measures to see if they truly promote healthy, high-quality, and large-scale growth of non-public medical institutions.

In addition, because the 2015 Foreign Investment Industrial Guidance Catalogue has moved medical institutions from the permitted to restricted category which only allows for equity and cooperative joint ventures, the scope of foreign capital investment in the medical institutions industry has become more limited. The Measures’ impact on the entry of foreign capital into the healthcare industry in China will require more observation.