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No More Labs in Public Hospitals in China?

March 12, 2017
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A Typical Day in a Chinese Hospital; Source: sixth tone

Prior to the 2009 health system reform, in the face of dwindling governmental health spending, Chinese public hospitals relied primarily on drugs with high mark-up and expensive laboratory tests as their sources of revenue. In fact, according to earlier estimation, lab testing expenditure alone costs the system 751.9 billion RMB in 2015. Unlike in the U.S. where lab tests are conducted in both hospital lab settings (62%) and independent laboratories, lab tests are completed almost exclusively within public hospital laboratories (99.3%) in China.

In the effort to improve healthcare quality and cost-effectiveness, the Chinese central MOH has recently published policy recommendations that call for labs within public hospitals to register as independent legal entity. In addition, the development of independent medical laboratory companies is also encouraged. However, actual implementation of such policy recommendations (not mandate) is at the discretion of individual provincial MOH, whose opinion is largely influenced by large public hospitals. In this case, public hospitals are unlikely to support such policy in fear that they will lose another source of revenue (in light of the recent “zero drug mark-up” policy). General publics have also voiced concerns related to whether all hospital laboratory services will be removed and how that might affect their care-seeking experience.

To maintain healthcare quality and mitigate the risk of national health insurance fund deficit , the central government of China should enforce such policy with no delay. However, in order to generate buy-in and reconcile the conflicts between different stakeholders, the CMOH should:

  1. Change the “policy recommendation” to “policy mandate”, set pilot cities, start from small-scale implementation to national roll-out;
  2. Subsidize public hospitals to help them go through the transition period;
  3. Emphasize to the public that frequently used lab services will be available at public hospitals, only to be financially separated from the public hospitals’ revenue streams;
  4. Set high quality control standard for independent lab services.

Group member: Ai Liu, Zhengchun Jiang, Shanshan Wang