Reforming China's 50,000 township hospitals--effectiveness, challenges and opportunities

The 50,000 publicly-owned Rural Township Hospitals (RTHs) in China play an important role in providing both curative and preventive services to China's 800 million rural population. Since the market oriented rural economic reform initiated in the early 1980s, the RTHs' position has been threatened by low efficiency and financial crisis. More than half of the RTH resources have been wasted and about one-third of the RTHs have run into deficit. Reforms have been undertaken, but the problems are still challenging. Several policy options are now being discussed including revolutionary strengthening of the RTHs to attract patients, leaving the RTHs as they are but guaranteeing the funds for prevention services, and strengthening the RTHs having relatively high efficiency. However the discussions have not been translated into national policies. The statistics for 1995 show that the RTHs are taking a turn for the better after a decade of continuous decline in both the number of visits and bed occupancy rates. These changes can be explained by the widespread government concerns with the development of RTHs, the incremental capacity-strengthening of RTHs, and government's efforts to construct a workable Cooperative Medical System (CMS). The authors recommend that the government should play a major and active role in regulating and financing the RTHs and CMS. Demand deflection through promoting CMS and repricing the RTH medical services at relatively low level is important, and government support to strengthen the RTHs is essential for maintaining the deflected demand. Neither of the two conditions can be ignored. Interventions should be made on both supply and demand side.