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The Chinese experience of hospital price regulation
1Institute of Social Medicine and Health Policy, Shandong Medical University, Jinan, China.
Insights
China's hospital pricing policies, meant to ensure equitable access, have led to significant cost recovery issues. Regulated fees often fall below costs, distorting service provision and efficiency.
Area of Science:
- Health Economics
- Healthcare Policy
- Public Health
Background:
- Chinese government regulates hospital service prices to ensure equitable access.
- Subsidies are provided to public hospitals.
- Current pricing policies may lead to unintended consequences in healthcare provision.
Purpose of the Study:
- To analyze the distortion effects of hospital pricing policies in China.
- To evaluate the cost-recovery rates of regulated hospital services.
- To understand the impact of pricing on hospital behavior and resource allocation.
Main Methods:
- Comparison of regulated service fees with average unit costs.
- Analysis of drug profit margin allowances.
- Empirical investigation of hospital behavior, including price regulation violations.
Main Results:
- Average cost-recovery rate for hospital services is only 50%.
- Fees for 90% of services are below average unit costs.
- High-tech services have fees exceeding costs, and drug profit margins are allowed.
- Observed violations include exceeding regulated fees, over-provision of profitable services, and over-prescription of drugs.
Conclusions:
- Low regulated fees do not necessarily reduce patient economic burden.
- Distorted medical fees lead to skewed service provision and inefficient resource use.
- Strategies to correct price distortions are necessary for improving healthcare efficiency.
Abstract:
This paper analyzes the distortion effects of the hospital pricing policies in China. To help maintain equitable access to hospital services, the Chinese government regulates prices of hospital services, and provides subsidies to public hospitals. Comparing the regulated fees of selected hospital services with their average unit costs indicates that the average cost-recovery rate of the fees is only 50%. The fees for 90% of the services are less than their average unit costs, while the fees for the high-tech services exceed their costs. Moreover, the State Price Commission allowed a drug profit margin of 15-20% over the wholesale price. The distorted fee schedule affects the behaviour of hospitals. Empirical evidence revealed problems of violation of price regulations (charging a fee exceeding the regulated fee), over-provision of profitable high-tech services and over-prescription of drugs. The Chinese experience shows that low regulated fees cannot reduce the economic burden on patients, and that distorted medical fees can result in distorted service provision and low efficiency of medical resources. Strategies to correct for the price distortions are discussed.