The scene was one of bedlam, a line of patients .ling into a room where a dis-interested nurse administered injections of penicillin with sound stabs, only stopping to change needles. Enough to make the least squeamish buckle at the knees, this is the fate of most who interface with China's public medical system.
The hospital is the Xie He Yi Yuan in Fuzhou, a rambling public hospital of four floors where blue-collar workers carry sick infants, and farmers holding bruised and crushed limbs lean on neighbors' shoulders in endless queues. You queue to be seen by the doctor. Then you queue into the doctor's surgery. After a gruff consultation it's into another queue to pay for the medicine prescribed. It's not easy to find an upscale op-tion in the city.
Up in Beijing, meanwhile, It's never been a safer time to get sick. For the same ear infection seen to at the Xie He Yi Yuan, Beijing's United Family Hospital in the city's embassy district charges almost seven times as much for a consultation and prescription. But the staff is engaging and ef.cient and there's no queue. That's because only a small percentage of China's population can afford to come here. Of the 12,599 general hospitals in China, only eight percent are, like Beijing United, run for profit. Ministry of Health statistics indicate they handled less than four percent of China's patients in both 2003 and 2004.
And then came SARS
Bottlenecks and bedlam like that at the Xie He Yi Yuan in Fuzhou are caused by the fact that there's no system of General Practitioners (GPs) in China. Physicians are employed in a one-stop shop hospital treating everything from head colds to car crash victims. If China had a healthcare crisis, it was rudely awakened to the fact in 2003 when the SARS epidemic paralyzed the country for over a month. In some cases, sufferers ini-tially refused to go to hospital because they were unable to afford medical care, until the govern-ment guaranteed that costs would be covered.
China's creaking healthcare system needs fixing, and fast. Building enough hospitals to meet the demand appeared to be a task for private sector cash, and the government has been eager to promote the concept of private money flowing into the public healthcare system. According to the municipal govern-ment, Beijing now has more than 20 hospitals funded in part by foreign involvement. The capital's privately-run Beijing Diakonie International Orthopedic Hospital was built recently in a Sino-German joint venture. Private finance may be the easiest answer to the capital's overstretched healthcare sys-tem, says Xiao Feng, a marketing executive at the hospital. "Policies have been carried out so that Beijing residents have access to a variety of levels of medical servicesat both public and private hospitals existing facilities could never satisfy demand. That's where joint venture hospitals come in."
Hospitals also need to be kitted out with better equipment. Training, education, and information systems are also needed. The Zibo Wanjie Tumor Hospital in Shandong province has been getting the best of western knowhow and equipment to battle cancer when it drew down a US$15 million loan from the World Bank-affiliated International Finance Corpo-ration to enter a partnership with Canadian Advanced Medical Services International, a consortium of hospitals in Canada.
Green field developments
Rather than buy into local hospitals, many foreign investors are choosing to build new private hospitals that cater to China's elite. In June, Nasdaq-listed Chindex International Inc, an American-based hospital operator and distributor of healthcare products, opened its United Family Downtown Clinic in Beijing, the second clinic affiliated with the firm's Beijing United Family Hospital. The latter was China's first foreign-controlled hospital oper-ated for profit when it was opened by Chindex subsidiary United Family Hospitals in 1997. The subsidiary's second hospital, Shanghai United Family Hospital, opened early in 2005. Both hospitals originally targeted expatriates but "a growing Chinese patient population is willing and able to pay for the premium services provided by the hospital," says Chindex CEO Roberta Lipson.
Earnings in Chindex's hospital division increased 43 percent in the twelve-month period up to March 2005. Aside from building hospitals, Chindex distributes ultrasound systems for multinationals including Siemens and cardiology equipment maker Guidant. Results for the year up to the end of March show the Company's revenue topping US$100 million for the first time. The firm's strategy for the future is to lay on more services and "aggres-sively" build on its Chinese client base . there are plans for new hospitals in the southern cities of Fuzhou, Guangzhou and Xiamen. Earnings in Chindex's medical equipment division are up too. "Our healthcare services and medical equipment businesses have strong prospects," Lipson predicts.
Restrictions for foreign investors
Despite plenty of talk about interest in private cash of all kinds in healthcare institutions, China's investment regulations for health care services remain restrictive and have stalled the building of new hospitals and clinics. Wholly foreign-owned investments are prohibited and foreign investors are limited to a maximum 70 percent stake in joint-venture healthcare facilities. Those who do get approval face a tedious inspection process to meet local government standards. A minimum US$2.4 million investment is required, and all activities must be domiciled at the same licensed facilities, with branch hospitals prohibited. Duty exemptions for imported equipment for foreign-invested healthcare facilities have been discontinued. Despite the firm's strong earnings, Chindex apportioned some of the blame for an overall net loss of US$24.2 million last year to hold ups caused by regulators. red tape which delayed the opening of the company's new hospital in Shanghai.
China has plenty of its own entrepreneurs keen to provide top-notch healthcare to those with the money to pay. The government should look after basic healthcare coverage in China and encourage market-oriented premium health care services to the section of the population who can afford them, says Li Zhongyuan, China Health Care Group, a private healthcare company with partners in the US and Britain. Better public hospitals will benefit by being permitted to offer private health care in co-operation with foreign inves-tors, says Li. "We want to nurture the creation of a viable private health care service market in China by introducing international expertise, capital and technology. Public hospitals can only maintain their current positions as centers of excellence in various specialties by introducing modern practices and expertise, and you do this by working with high-end patients."
The way forward: reaching the masses
there's plenty of demand from China's middle classes who are willing to pay Western rates for Western standards of care. But what of the masses queuing in Fuzhou's Xie He Yi Yuan? Splitting the burden between an overstretched government purse and the market is the obvious way to better hospitals for everyone, but indecision is holding up badly needed reform, says Professor Liu Yuanli, director of the China Initiative at the US-based Harvard School of Public Health. "Eleven departments are responsible for healthcare in China . there needs to be more transparency and openness," he says.
Perhaps the way ahead is in the approach taken by the non-profit Asia Foundation, which has launched the pilot New Rural Cooperative Healthcare Scheme in collaboration with the Ministry of Health. Farmers participating in the scheme pay an annual RMB10 medical insurance fee, which is matched by the same amount from the government. The scheme provides cash for medical care and is helping to fund better equipment and training at rural clinics.
Private healthcare services, if developed alongside the public non-profit healthcare system, can relieve the cost on government coffers, argues Dr Jonathan Seah, president of Parkway Group Healthcare. Patients who want premium care should pay for it, with money saved going to improving basic health care for the larger population, says Seah, whose healthcare company has investments in China. That kind of logic ought to be welcomed by anyone queuing at the Xie He Yi Yuan in Fuzhou.
