Cabinet calls foreign capital healthy for JV hospitals

A handful of overseas investors are entering the Chinese healthcare market as the government announced the easing of curbs on joint-venture hospitals, according to a statement released by the State Council, China's cabinet, on Wednesday.

Amid China's latest healthcare reforms, the new policy is encouraging the establishment of private hospitals to reduce public services from being overburdened.

The plan involves overhauling the management of medical joint ventures that involve overseas partners, including "reducing restrictions on the percentage of foreign ownership in medical JVs and collaborations," it said in the statement.

The move would increase the number of cities in which investors from Hong Kong, Macao and Taiwan can set up wholly owned medical institutions, and allow overseas investors to set up wholly owned hospitals in designated areas, such as China (Shanghai) Pilot Free Trade Zone.

The statement offered no details on a time frame for the easing or for changes in holdings.

Last month, the State Council gave private hospitals the authority to set prices for diagnoses and treatments, which had been controlled by the government

The government also promised in March to let the market play a bigger role in reforming the medical sector.

The scale of public hospitals, which provide 90 percent of China's medical services, will be controlled, and medical resources will be optimized, according to the State Council.

All of these movements signal the government's determination to push forward healthcare reform, launched in 2009 to make it more affordable and accessible for all citizens by 2020.

"This is a move in the right direction," said Bruce Liu, an industry veteran. "It will encourage more capital and expertise from other countries to meet the growing needs for quality healthcare in China."

Still, Liu said easing ownership restriction is only part of the solution, as new entrants still need to navigate a long series of regulatory constraints.

"They will be confronted with problems ranging from site selection and zoning approvals, licensing and registration, staff certification and equipment purchase approvals, product and service pricing, insurance coverage, as well as tax treatment and profit repatriation," said Liu.

When it comes to whether the new guidance will shake up the industry, Liu said he expects to see more details soon for creating a level playing field for private and foreign-owned hospitals, more progressive policies and regulatory frameworks, especially in public-private partnership and payor schemes.

"More transparency and consistency are required if China is serious about winning foreign capital and talent," he added.

Nevertheless, after an executive with British drugmaker GlaxoSmithKline Plc was charged with leading a network to bribe doctors and hospitals to use the company's drugs earlier this month, foreign companies and investors may be more cautious about expanding in China.