Health re­form in Asian coun­tries

China works on its ver­sion of re­form; more Asian hos­pi­tals seek ac­cred­i­ta­tion

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As China moves for­ward with its own form of health­care re­form, the tra­di­tional meth­ods in which hos­pi­tals are paid to pro­vide care are chang­ing. The Chi­nese gov­ern­ment is ex­pand­ing ba­sic health­care cov­er­age to mil­lions of new pa­tients as part of a pol­icy that also aims to en­cour­age sig­nif­i­cant for­eign and pri­vate in­vest­ment in China’s health­care sys­tem for the first time. At the same time, physi­cians and the mainly govern­men­towned hos­pi­tals are faced with mod­ern­iz­ing the tra­di­tional ways in which Chi­nese pa­tients have paid for their health­care.

China un­der­took its own form of health­care re­form in 2009, a move that aims to pro­vide ba­sic cov­er­age to 90% of the Chi­nese pop­u­la­tion and make the coun­try’s hos­pi­tals more fis­cally re­spon­si­ble. In ad­di­tion, the gov­ern­ment an­nounced a new pol­icy in 2010 that in­tends to in­crease pri­vate and for­eign in­vest­ment in hos­pi­tals in China.

“As China be­comes more wealthy, there will be de­mand for pay­ment mech­a­nisms and hos­pi­tals that pro­vide high lev­els of ser­vice,” says Dr. Ron­ald Ling, Price­wa­ter­house­coop­ers’ health­care leader in Asia.

The ma­jor­ity of Chi­nese res­i­dents re­ceive care at govern­men­towned public hos­pi­tals. The re­cent re­form ini­tia­tive en­sures that the hos­pi­tals will be paid for treat­ing pa­tients who pre­vi­ously paid out of pocket, but they are now re­quired to un­dergo a re­view process to jus­tify the care a pa­tient re­ceived, says Dr. Rabi Su­lay­man, a pe­di­atric car­di­ol­o­gist and di­rec­tor of the in­ter­na­tional pro­gram at Ad­vo­cate Hope Chil­dren’s Hospi­tal in Oak Lawn, Ill. Su­lay­man trav­els to China up to three times a year as part of Hope Chil­dren’s part­ner­ships with Pek­ing Univer­sity Peo­ple’s Hospi­tal, Guangzhou Chil­dren’s Hospi­tal and Nan­jing Chil­dren’s Hospi­tal.

“In many ways, it mir­rors the health­care re­form that is go­ing on in the United States: How do you make those pa­tients have ac­cess to good health­care?” Su­lay­man says. “In essence, the hos­pi­tals are act­ing like pri­vate in­sti­tu­tions and they are man­dated by the gov­ern­ment, and en­cour­aged very se­ri­ously, to make the bot­tom line and not lose any money.”

Even with the $125 bil­lion-equiv­a­lent that the Chi­nese gov­ern­ment al­lot­ted for re­form, the con­flu­ence of tra­di­tional pay­ment prac­tices and the sheer size of the Chi­nese health­care sys­tem pose par­tic­u­lar chal­lenges. Su­lay­man says that hos­pi­tals rou­tinely have 1,000 beds, while some health­care fa­cil­i­ties have up to 4,000 beds.

Un­like the some­what sim­i­lar health­care sys­tems of Ja­pan, South Korea and Tai­wan, China’s sys­tem has tra­di­tion­ally limited the in­volve­ment of the pri­vate sec­tor with the gov­ern­ment retaining con­trol over provider rates and a hospi­tal’s ac­cess to med­i­cal tech­nol­ogy. Ling says that less than 10% of China’s hos­pi­tals are owned by the pri­vate sec­tor.

“That’s an­other in­ter­est­ing is­sue around health­care re­form,” Ling says. “When you look at most of the other Asian coun­tries and even the OECD av­er­age, the per­cent­age of pen­e­tra­tion of pri­vate care is clearly lower than av­er­age in China.”

The Or­gan­i­sa­tion for Eco­nomic Co-op­er­a­tion and De­vel­op­ment tracks eco­nomic, so­cial and en­vi­ron­ment is­sues in 34 coun­tries, in­clud­ing Ja­pan and Korea. The OECD does not track China but is of­ten used as a bench­mark for com­par­ing health­care sys­tems around the world.

Chi­nese hos­pi­tals rely on a pa­tient’s length of stay in the hospi­tal, which de­ter­mines re­im­burse­ment, and drug sales, which of­ten pro­vide hos­pi­tals with a much-needed source of in­come. Tra­di­tion­ally, public hos­pi­tals in China have earned in­come from med­i­cal ser­vice charges, drug markup in­come, and gov­ern­ment sub­si­dies, but as na­tional bud­get al­lo­ca­tions have dropped, hos­pi­tals are re­ly­ing more on in­come from drug markups, ac­cord­ing to a 2011 re­port from the Cen­ter for Strate­gic and In­ter­na­tional Stud­ies, a Washington-based think tank. Mckin­sey re­ported in 2010 that drug markups make up more than 40% of a Chi­nese public hospi­tal’s rev­enue.

“There is clearly con­cern by the gov­ern-

ment and the health­care sys­tem in China that phar­ma­ceu­ti­cals are be­ing pre­scribed in ways which may not be com­pletely med­i­cally nec­es­sary and are be­ing pre­scribed in or­der to gen­er­ate rev­enues for hos­pi­tals,” Ling says.

In ad­di­tion, pa­tients of­ten make “un­der­the-ta­ble” pay­ments to en­sure ac­cess and care by the best doc­tors.

“The is­sue in China is that the price by the pa­tient is some­times not very trans­par­ent for var­i­ous rea­sons,” Ling says. “The ad­di­tional pay­ments which pa­tients make to doc­tors are not recorded in the sys­tem but are part of the cul­tur­ally ac­cepted prac­tices in most Chi­nese hos­pi­tals.”

The prac­tice con­trasts with the health­care sys­tems in Ja­pan, South Korea and Tai­wan, where pa­tients have co-in­sur­ance rates of about 30%, says Ger­ard An­der­son, a pro­fes­sor of in­ter­na­tional health and di­rec­tor of the Cen­ter for Hospi­tal Fi­nance and Man­age­ment at Johns Hop­kins Bloomberg School of Public Health, Bal­ti­more.

Pa­tients in those coun­tries “are aware and feel it is ap­pro­pri­ate” to pay a por­tion of a med­i­cal bill, he says.

The hospi­tal mar­kets in Ja­pan, South Korea and Tai­wan em­ploy a mix of public and pri­vate hos­pi­tals although Tai­wan’s hos­pi­tals are mainly owned by the pri­vate sec­tor. In ad­di­tion, the gov­ern­ments in those coun­tries set provider rates us­ing a fee sched­ule.

Ja­pan and South Korea are two of the low­est spenders on health­care of the coun­tries that OECD sur­veys each year. In 2009, South Korea’s to­tal health ex­pen­di­ture as a share of gross do­mes­tic prod­uct was 6.9%, while Ja­pan spent 8.5% of its GDP on health ex­pen­di­tures. In com­par­i­son, the OECD av­er­age was 9.6% and the U.S. spent 17.4%. In China it was only 4.6% in 2009.

The fee sched­ule keeps provider rates and tech­nol­ogy costs low. Hos­pi­tals charge about one-tenth of what they would in the U.S. but physi­cians are able to make up the costs in vol­ume, An­der­son says.

Paul Chang, man­ag­ing di­rec­tor of the Joint Com­mis­sion In­ter­na­tional’s Asia Pa­cific of­fice, says the num­ber of ac­cred­ited hos­pi­tals and health­care fa­cil­i­ties in Asia has grown by 20 to 25 fa­cil­i­ties each year since 2009.

“We’ve seen a huge pickup and huge growth in the num­bers over the last four to five years,” he says.

The pro­gram has ac­cred­ited about 105 sites in the Asia Pa­cific re­gion since 2001.

“Some of the top-tier hos­pi­tals as well as the am­bu­la­tory-care fa­cil­i­ties are try­ing to dif­fer­en­ti­ate them­selves from other or­ga­ni­za­tions and they also want to have some sort of ex­ter­nal val­i­da­tion of the high qual­ity of care that they are de­liv­er­ing,” Chang says. “Some of the fa­cil­i­ties in Asia are also very fo­cused on the af­flu­ent pa­tient mar­ket or the for­eign pa­tient mar­ket and hav­ing JCI ac­cred­i­ta­tion is a very use­ful means of pro­vid­ing as­sur­ance and gain­ing the trust of these pa­tients.”

Hos­pi­tals in coun­tries such as China and South Korea that are seek­ing to at­tract af­flu­ent for­eign pa­tients or the peo­ple em­ployed by multi­na­tional com­pa­nies that pro­vide pri­vate in­sur­ance of­ten look to ac­cred­i­ta­tion as a tool for dif­fer­en­ti­a­tion.

Mar­kets where med­i­cal tourism is preva­lent, such as Sin­ga­pore, Tai­wan and Thai­land, have the largest num­ber of ac­cred­i­ta­tions. Thai­land has 16 ac­cred­ited hos­pi­tals and Sin­ga­pore has 14. Tai­wan and South Korea each have 11.

In Ja­pan, there are two ac­cred­ited hos­pi­tals. The ad­min­is­tra­tion at Kameda Med­i­cal Cen­ter in Kamo­gawa City has pro­moted the 925-bed hospi­tal as a des­ti­na­tion for med­i­cal tourism for the past five years, but in­ter­est in Kameda’s med­i­cal tourism ser­vices has been limited, says John Wocher, the med­i­cal cen­ter’s ex­ec­u­tive vice pres­i­dent of op­er­a­tions.

Of the 780 non-ja­panese pa­tients who vis­ited Kameda last year, only 5% trav­eled from out­side Ja­pan for care.

“We’re pro­mot­ing more than most med­i­cal cen­ters are, but we’re not get­ting a lot of sup­port from the gov­ern­ment, like what is hap­pen­ing in other coun­tries,” Wocher says. “There’s a lot of op­po­si­tion here in Ja­pan, both among the cit­i­zens and the med­i­cal com­mu­nity, about why we are try­ing to lure for­eign pa­tients into Ja­pan.”

Even though some Ja­panese cit­i­zens and physi­cian groups have op­posed mak­ing Ja­panese hos­pi­tals a med­i­cal tourism des­ti­na­tion, the Kameda Med­i­cal Cen­ter ad­min­is­tra­tion says there is an op­por­tu­nity to cater to for­eign pa­tients, in­clud­ing af­flu­ent Chi­nese.

“The most at­trac­tive mar­ket for us right now, which is very, very dif­fi­cult, is China be­cause of prox­im­ity,” Wocher says.

In 2011, Ja­pan in­tro­duced its first med­i­cal visa, which eases the rules for some for­eign pa­tients seek­ing en­try to the coun­try for med­i­cal pur­poses.

Wocher says the visa al­lows pa­tients in­clud­ing af­flu­ent Chi­nese to travel to Ja­pan for med­i­cal check-up trips, which are also re­ferred to as “ex­ec­u­tive phys­i­cals” and may con­sist of PET and CT scans or a colonoscopy.

Wocher says that while none of the pri­vate hos­pi­tals in Ja­pan have for-profit sta­tus, med­i­cal tourism could lead to im­proved care for Ja­panese pa­tients if the hospi­tal fun­neled med­i­cal tourism prof­its back into the hospi­tal.

But cul­tural be­liefs about what it means to pro­vide care are still of con­cern.

Crit­ics of med­i­cal tourism in Ja­pan be­lieve that “if we start do­ing busi­ness with for­eign pa­tients, we’re mak­ing a profit off of some­one else’s mis­for­tune and ill­ness, and there­fore that’s not a very hon­or­able way to make money,” Wocher says.

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