Responding to growing public criticism of soaring medical fees, lack of access to medical services, poor doctor-patient relations, Chinese government will launch a pilot program to reform its public hospitals.

"As China aims to provide universal medical service to 1.3 billion people," Chen Zhu said, "state-run hospitals must be overhauled."

"A compensatory mechanism will be set up in public hospitals," Chen said at a national health work meeting on Thursday.

He specified, under the reform plan, the government will be responsible for giving subsidies to build public hospitals' infrastructure. Money will also be spent on purchasing big medical apparatus, key academic research, doctor training and covering health care costs for retirees.

The government will also give special subsidies to hospitals providing public health services such as disease prevention, inoculation and health education.

"The plan will tilt in favor of hospitals specializing in epidemic diseases, vocational diseases, psychiatry, traditional Chinese medicine, maternity and pediatrics," Chen said, suggesting those institutions would be eligible for more funding under the reforms.

How Hospitals Will Make Money?

At heart of the reform will be changes on how hospitals should make money.

"We aim to cut hospitals' involvement with drug sales to cut drug prices, medical supply prices and physical check-up fees," Chen said.

He noted that resulting money shortfalls could be met by government subsidies and a reasonable rise in medical service fees passed on to patients. Some of those fees might be covered by the basic medical insurance refund, according to Chen.

China began reforming its medical system in 1992 as it tried to abolish a system under which governments covered more than 90 percent of medical expenses.

Due to a lack of government funding, public hospitals have, for years, mainly operated using profits from medical services and drug prescriptions. This profit-driven method of management meant "heavy burdens on patients and led to a waste of medical resources," Chen had said earlier.

Government funding accounted for only about 17 percent of the expenditure of the health sector.

According to the Chen, the government will set up hospital monitoring institutions to ensure transparency in management and quality of medical service.

Balance of Medical Resources

To deal with the "imbalanced" allocation of medical resources, which were concentrated in major urban hospitals, the government is considering relocating or integrating some state-run hospitals. It also wants to beef up efforts towards building more county-level hospitals, Chen said.

The central budget supports the construction of about 2,000 county-level hospitals in the next three years. Work will begin in 2009. The goal is to ensure each county has at least on hospital of national standard, according to the ministry. China has more than 1,600 counties.

Cities to Be Selected for Pilot Reforms

According to Chen, the government is going to select several cities to try out the new reforms. The trial period will last for the next three years. Chen did not give the number or names of those selected cities.

"We expect the pilot program to help us form a general idea and major measures for public hospital reform and lay the basis for the nationwide reform," he said.

These plans announced Thursday are part of the country's long-awaited medical reform plan, Among which, the one on reforms of state-run hospitals is one the most important.

The other areas include medical insurance, basic medicine, grassroots medical service and public health service, and the entire official plan will be issued "in the near future", Chen Zhu said.

The new plans were also a result of public debate. In 2006, 16 ministries and commissions began brainstorming ideas for the new plan.

On October 14 last year, the National Development and Reform Commission (NDRC) issued a draft plan on medical reform on its website for public debate. But it was instantly criticized by the public respondents as being "too general" and "full of empty principles".

As a result, the NDRC received more than 35,000 suggestions in one month. And the Ministry of Health has received more than 200,000 suggestions to date, Chen said.

(Xinhua News Agency January 9, 2009)