Enlisting Physician Support

Despite the promise of favorable regulatory treatment, private healthcare in China would likely remain hamstrung unless it was able to offer patients high-quality local medical talent. Allowing top-level physicians to retain their positions and standing in government hospitals while practicing part time in private settings is the key to the future of private healthcare in China. Here, the signs are also positive.

Following its typical modus operandi, the MOH has put in place a number of pilot projects allowing physicians to practice at multiple sites. These programs have built momentum over the past year and now include sites in Hainan, Henan, Guangdong, Sichuan, and Yunnan. While a major aim of these pilot programs is to enable staffing of the rural and community clinics that are a key component of the healthcare reforms, they also pave the way for the resuscitation of private healthcare. Going forward, physicians will likely be required to spend a certain portion of their time in grassroots settings, but they may also be allowed to enjoy some of their newfound freedom practicing in private clinics and hospitals. The most recent and significant development in this vein comes from the Beijing Municipal Health Bureau, which since March has allowed licensed physicians to work simultaneously at a maximum of three hospitals.

However, the devil is in the details. For pharmaceutical manufacturers, key issues will be the extent to which private facilities will be allowed to fuel their profits from pharmacy sales—the current situation in public hospitals which the health reforms mean to bring to an end—and whether products sold in private hospital settings will be subject to the same tightening price controls as those in the public sector. A lure to private hospitals for doctors will be the ability to receive (above the table) fair-market compensation for their services. If this is accomplished only via increases in medical service fees (and if private hospitals are not allowed to enjoy significant profits from their pharmacies), then incentives to prescribe innovative medications will be largely driven in ways similar to other markets—the potential for boosting innovation will have been largely squandered. If, however, pharmacy sales are part of the compensation mixture for physicians, and hospitals in private settings, then premium-priced products will likely enjoy increasingly brisk sales at these venues.