China is not only the country with one of the fastest developing economies, but it also has the largest and permanently growing population. Keeping Chinese residents healthy is therefore a constant challenge and makes the healthcare system to a central issue. Around 1,3 billion people live in China, which is almost 1/5 of the total world population of approximately 6,519 billion individuals. The number alone as well as the experience with the SARS epidemic a few years ago already demonstrates, why the national healthcare system does not only affect China's population, but should be important to other countries as well.

Since 1949, when China's healthcare industry was incepted, several reforms were implemented with the goal to achieve basic healthcare and medical coverage for all Chinese residents. However even though investment into China's health infrastructure has nearly doubled throughout recent years, healthcare has only reached a level of 5.5 percent of the GDP. Furthermore, hospitals have raised their service charges broadly conducted with a strong income growth of medical staff. At the same time the number of patients - especially the number of low income citizens - decreased.
To improve the current situation, opportunities for changes are diverse and were initiated in different areas of standards, technology and services. This was addressed by improving hospital management, enhancing public private partnerships, funding clinics for low income earners, restructuring health insurance as well as encouraging the establishment of privately owned hospitals.

Rural Healthcare Situation

While approximately 30 % of China's whole population live in urban areas and have extensive access to numerous hospitals and clinics, the other 70 % of China's residents live in rural areas and use only about 20 % of China's healthcare resources.
One of the reasons why health care in rural areas is only accessed by a small part of its population is, because many do not have the ability to afford it. Low wages lead to the situation that the cost of one average hospitalization exceeds the average annual income of almost half of the rural population.
In 2002 a State Council resolution was issued by the government, declaring to strengthen health-care work in rural regions. It aimed to receive funds for developing non-governmental medical institutions, attracting urban medical staff to work in rural areas as well as improving the training for rural doctors.

Hospitals and Medical Institutions

China has approximately 330,000 local and foreign founded medical institutions as well as around 4,49 million medical professionals. Currently approximately 2,000 hospitals are at county level and around 50,000 are at township and town levels.

Only a few of China's hospitals are private, as most of them are public hospitals, struggling with typical problems like capacities, bureaucracy as well as little time per patient. Moreover since most of these public hospitals were managed as government agencies instead of medical service organizations, administrative staff used to be more powerful than physicians at a hospital. This situation improved with reforms, which increased competition amongst hospitals, pressuring to focus more on the importance on training and retaining high skilled professionals and advanced medical services.

Even though public hospitals in China are classified into three tiers, differences in basic consultation fees do not exist. These are subject to government regulations. First tier hospitals generally serve communities with basic services and treatment of common diseases. Bilingual staff and a wide range of medical treatment and diverse diseases is offered by second tier hospitals to patients across a municipality. Third tier hospitals are not only providing superior services, but are also usually connected to a medical university and therefore involved into medical research and the education of medical students.

Joint Venture Hospitals

Even though hospitals exclusively funded by foreigners are currently still forbidden in China, a number of healthcare Joint Ventures (JV) have been established throughout the country. The minimal investment in such a project is RMB 20 million, in which the foreign investor is allowed to hold up to 70 % of the shares, while the Chinese partner has to hold a minimum of 30 %. Since most of the healthcare JV are located in economically developed coastal regions as well as in large cities, terms might be less strict if the JV will be settled in central or western China in order to enhance reliable medical support, advanced technology and management models from abroad in underdeveloped areas.
One of China's largest foreign healthcare JV enterprise for example is Xian Gaoxin Hospital in Xian, Shaanxi province, consisting of 45 clinical and medical departments, having 760 beds and offering highly advanced medical amenities.

Most of the jointly invested medical institutions service China's expatriate population as well as higher income earning locals, who expect international accepted standards and a high level of health care. This growing demand and awareness of medical advances can be fulfilled by locally and foreign invested privately owned hospitals, which are constantly upgrading equipment and services to reach a treatment level equivalent to the one in Western countries.

Taking Shanghai as an example, the most innovative and modern hospitals are at the same time the most expensive institutions, providing advanced technology as well as overseas trained and experienced doctors.

Another major joint-venture project will be the Sino-German Friendship Hospital in Shanghai International Medical Zone, starting constructions by the end of this year. The total investment of 1.5 billion RMB will be distributed by the Tongji University in Shanghai as well as two German investors Siemens Project Venture GmbH and Asklepios Kliniken. The area will cover 84,000 sqm and 1,000 beds will be provided once construction work has been completed. The hospital is planning to recruit 30 % of its medical staff from overseas as it will be serving as medical institution for high-end healthcare services especially among foreign communities in the area.

Non-profit and for-profit medical institutions

In China hospitals are separated into profit-orientated and non-profiteering organizations. The main difference is that whilst profit-orientated hospitals distribute their profits, non-profiteering hospitals use their earnings to further invest into infrastructure or the amount will be transferred back to the authorities. In return non-profiteering hospitals enjoy special tax treatment and receive low-cost financing for the capital investment.
Statistics from the Chinese Ministry of Health indicate that as little as 8 % of state owned hospitals are structured as profit-earning institutions.

In order to serve the general population of a certain region, non-profit hospitals are providing comprehensive healthcare, disease prevention, medical education as well as research and developing medical resources by operating according to a regional medical plan. Since profit-orientated hospitals do not share the responsibility with the government for the people's health, they can be set up outside any regional medical plan.

Salaries and Pharmaceuticals

Generally practicing medicine in China is not as a lucrative profession as it might be in other countries all over the world. After graduating from medical school a general practitioner doctor may receive a salary of 1,500 - 2,000 RMB per month, while a specialist earns between 4,000 and 5,000 RMB monthly. Since this salary appears fairly low compared to high costs of living especially in cities like Shanghai or Beijing for example, it is common practice by local hospitals to pay their doctors a commission based on the prescription sales. This means that the commission earned by a doctor is higher, the more expensive a prescribed medication is.

Selling drugs whether they are needed or not is also in issue in non-profit hospitals, since they still need a revenue stream in order to maintain the infrastructure. It is estimated that approximately 70 % of the finances of these hospitals are generated from sales income from medicine.

The fact that selling pharmaceuticals compensate medical facilities and low wages presents not only a potential risk in the industry, but also causes insecurity among patients, who can never be sure when a prescription is really necessary or not.

Traditional Chinese Medicine

Traditional Chinese Medicine (TCM) is part of the Chinese mentality and culture. Its basic theory is the understanding of the internal (zang fu) organs, accupuncture points (meridians), collateral channels, qi, blood and body fluids and pathogenesis.
As China develops a modern medical system, successful efforts have been made to combine TCM techniques with Western style treatments.

Health Insurance

According to the Chinese government currently 75 % of the national population are still not covered by medical health insurance. It is further estimated that approximately 45 % of urban citizens and around 80 % of rural residents are not covered by medical insurance; because they can either not afford it or are uncertain regarding the value of such insurance.

The largest insurer in China is the Government Health Insurance Bureau. Every employee has to join a public insurance system. Since foreigners are prohibited to join the public insurance system, they have to use one of the commercial insurance companies, which are privately owned or part of a Joint Venture.

Foreign health insurers were not permitted to enter the Chinese market until 2005, when the government agreed to open the group health, pension as well as all non-life activities (except statutory insurance) insurance markets.

Employees and retirees in state-owned enterprises as well as employees in government sectors are covered by either an institution called Labor Insurance Program (LIP) or Government Insurance Program (GIP). Everybody else, who can not enjoy either one of those health care institutions, has to pay for medical care individually.

One of the programs which are aiming to provide a more preventative style of medical health care is called 'Family Health Care Plan' and has been introduced by the UA Huashun. The four main benefits of this plan are designed not only to save money, but also to enhance medical-related awareness. For approximately 1,500 - 1,800 RMB per adult the major services include free annual health checks, laboratory and radiology test with for targeting possible unknown illnesses or unhealthy lifestyle habits, annual dental examination, discounts on medical cosmetics and dental treatments, bypassing registration fees as well as free admission to medical or health related seminars and offers a good opportunity to increase health standards.

Welfare Benefits provided by Companies

The government has tried to create an urban health care safety net through a system, where the employer is forced to pay a portion of the health insurance, and medical savings accounts which require people to save money to pay for a portion of their medical expenses. Medical savings accounts cover initial health care expenses and contributions are made from both employee and employer. The employee pays up to 10 per cent of annual wages, while the percentage of the employer's contribution depends on different requirements.

Some employers (both foreign and domestic) have refused to comply, claiming they cannot afford the contributions, as for example in Shanghai it is an additional 61% of the gross salary (counting together with social insurance). The rates of the health insurance vary from city to city and whether the employee is a resident of the city or not. Problems that arises is that many urban dwellers do not work for organised employers. Companies form and disband rapidly to avoid paying benefits to workers. Dependents of workers may not be covered at all.

However, the government has tightened its control stating that welfare (health and social insurance) is paid to the State and not the individual; therefore it is a requirement for each local employee to receive and can be a huge penalty to a company if they avoid to pay the full amount.

Conclusion

By viewing China's development in the medical sector, it appears that the government has finally realized the major weaknesses and problems within the health care system. Even though China is eager to improve the nation's healthcare system, it still has a long way to go since especially medical services in the rural areas require stronger attention.

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