Foreign-owned hospitals key to healthcare reform

New institutions to make sector more competitive

The Ministry of Commerce announced last week that China will allow foreign investors to wholly own hospitals in seven municipalities and provinces, the latest move to further open up the country's healthcare sector. The Global Times interviewed three experts to get their views on the issue.

John Cai, director of the Centre for Health Care Management and Policy at China Europe International Business School,

Wholly foreign-owned hospitals will have a powerful demonstrative effect because they usually provide a higher level of technology and customer service. Public hospitals will therefore have to improve their technology and service to compete.

Foreign hospitals, however, won't be able to do much to solve the problem of inadequate healthcare resources because foreign hospitals are geared toward the high-end market, such as foreigners working in China and their families, as well as wealthy Chinese. Regular people prefer public hospitals to unaffordable foreign hospitals.

This policy will attract more foreign capital to hospitals in China. But it won't be much. Healthcare is not an industry that generates colossal profits. It requires a large upfront investment and takes a long time to begin generating profits. Moreover, high-end patients account for a small minority of the market. In addition, foreign hospitals are strictly regulated.

Compared with public hospitals, foreign hospitals also have to bear a much heavier tax burden.

The greatest obstacle that foreign hospitals face in China is that they will remain shut out of the public healthcare system for a long time because they are for-profit hospitals. Regular people will likely choose public hospitals. Private insurance may solve this problem. The spread of private health insurance will greatly promote the further development of foreign hospitals in China.

Foreign hospitals may have good prospects in China, but only if the Chinese government enacts more supportive policies to aid their development.

Ma Jin, professor and executive dean of the School of Public Health at Shanghai Jiao Tong University,

The purpose of this policy is to enhance healthcare reform. The government believes that wholly foreign-owned hospitals can meet some of the healthcare needs of high-end patients. Moreover, the government hopes that public hospitals can take a page from the wholly foreign-owned hospitals and improve their technology and services.

It is true that the price of care at Sino-foreign joint-venture hospitals is much higher than at public hospitals. But if more and more foreign hospitals enter the Chinese market, the competition might help bring down prices. Patients will benefit from this. In addition, some non-profit foreign hospitals may also enter the Chinese market. These hospitals can provide more options for regular patients.

A shortage of physicians is one problem that foreign hospitals will face in China. First, foreign physicians can only register to work in China for one year at a time. Second, the current public hospital system has impeded the mobility of domestic doctors. The government should simplify the registration procedure for foreign physicians and allow domestic doctors to work in different parts of the country.

Foreign hospitals also have to abide by strict restrictions over importing high-end medical devices. They have to get government approval to import some devices, and these approvals are usually difficult to obtain. The government could help by making it easier to get permission to import these devices.

Sheryl Jacobson, senior partner at Deloitte Consulting China Life Sciences Health Care Practice,

The changes the government is making will give the Chinese people more healthcare options and increase the quality of healthcare. A healthier population is a more productive population, which strengthens the economy.

Foreign capital is already coming into China with many foreign-funded hospitals opening in major markets. China will continue to be a challenging market for foreign hospitals, however. Most foreign hospitals will not be part of the social insurance scheme, at least initially, and thus affordability will continue to be a challenge. Foreign hospitals will also continue to struggle to attract local physicians from the public sector. The shortage of nurses and other medical professionals, regulatory hurdles and uncertainties will also be key obstacles to overcome.

More and more public hospitals focus on upgrading quality of care and improving patient satisfaction now. Smart public hospitals are starting to realize the competition going forward and are preparing for it.

It will also help through partnerships. Many of the private hospitals are already partnering with public hospitals and sharing physicians, clinical practices and best practices around patient care.

The new guidelines specified seven pilot provinces or cities and each one will have authority to design the detailed regulation for implementation. Some provinces or cities will be more open and "fair" while some will be more conservative. It is essential for foreign investors to really understand the regulatory framework and dynamics within each pilot site and carefully design their entry strategy.

This policy is a critical component of the government's overall healthcare reform and will specifically help the government achieve their goal of 20 percent of care being private. But it is only a component. To be truly successful, greater private healthcare needs to be matched with greater private insurance. Only then will the affordability challenge be addressed and the critical safety net be in place.