Providers of Chinese healthcare have many options

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Private hospitals have been allowed for over 15 years. However, they still only account for 6.5 percent of China’s hospital beds. There are three types of private hospitals in China: one is high-end and service-oriented, and the other two are specialty hospitals, which focus on elective procedures and simple dental procedures. Although the first two categories have a clear market position, they are often limited in scale. The third category of hospitals, which are directly competing with large public institutions and other private sector entities, has struggled to create a distinct and competitive value proposition. Many Chinese patients prefer to stay in public hospitals, even though they are dissatisfied with the service.

Unfavorable policies by the government held back all three types private hospitals. The most notable was the restriction that each doctor could only register and work at one facility. This restriction meant that most doctors chose to work in public hospitals. They had a stable and clear career path. Private hospitals were unable to find qualified medical staff, and could not compete with private hospitals for quality care.

Private hospitals also have been subject to reimbursement restrictions. They were often not allowed to join the hospitals networks that are covered by public insurance in many cities. Their reimbursement rates were lower than those for public hospitals in cities where they were covered.

These constraints are being removed by the most recent reforms. The central government’s reform guidelines as well as the policies in various cities made the most significant change: Doctors can now practice at multiple facilities. This makes it easier for the best doctors to be recruited and more mobile. Private providers may now be able to build or leverage existing hospitals that offer high quality clinical services and meet the growing needs of the affluent-patient population. An increasing number of signs are also being made, such as the recent announcement from Shandong Province that private hospitals are being considered for inclusion into public health insurance for foreigners in China networks under the same terms and conditions as public hospitals.

After all of these reforms have been completed, private hospitals will be more prominent. They could be responsible for between 8 and 10 percent of all hospital beds within the next few decades, up from the current 6.5%. China’s private providers will play a significant role by creating healthy competition between public hospitals and meeting unmet medical needs.

A few international providers have established a presence here, including ParkwayHealth in Singapore, and plan to continue expanding. Many others plan to take advantage of the Chinese opportunities within the next few decades. Rumours abound that the government will allow foreign ownership of 100 percent in private healthcare facilities. However, no official word has been made. Foreign ventures can already hold 70% of such facilities.