Chinese Prescription for Healthcare Providers

Chinese Prescription for Healthcare Providers predicts that China is showing itself to be very innovative in health care by implementing market-based offerings. The TEDA International Cardiovascular Hospital, just outside Beijing, offers six levels of service, ranging from $6.70 to $3,200 per night, as reported in “Hospital Caters to China’s Wealthy and Poor” in The Wall Street Journal or the hospital website. The lowest class of service has patients sharing a small room with other patients while “first class” includes a suite with a private gym, a garden, massage chair and other amenities.

China has an aging population of 1.3 billion to whom the government is struggling to provide health care. It regulates the prices of medicine and subsidizes basic services at public hospitals, but most people do not have western-type insurance and end up paying a major portion of their health care. The stakes are high today to solve the health care problem, and they are getting higher as the population ages.

This experiment is enlightening for what may be possible in western countries if they can improve pricing transparency and digitize work processes.

Market-style Experiment: The Wealthy Subsidize Treatment for the Poor

Liu Xiaocheng, the hospital’s president, studied medicine in Australia for several years, and he returned to China specifically to help reform the healthcare system. Dr. Liu’s experiment is seen as a new model for health care that attempts to deliver on Communist ideals while using market-based methods. For example, the TEDA International Cardiovascular Hospital is sleek and ultra-modern, and it outsources cleaning, food, laundry and security and has dispensed with lifetime contracts that are common with state-run hospitals. It also fires people when necessary.

Thus far, Dr. Liu has been able to get support for the model because the core resources are excellent, and they are available to all patients. People travel from all over China for treatment, and Canadian and U.S. Chinese also seek treatment there. The hospital can deliver care much more cheaply than state-run hospitals due to its efficiency and the fact that wealthy patients pay far more.

“It’s just like an airplane,” says Dr. Liu. “In the front of the plane, they have the first class.. and in the end they have economy class. But they’re all going to the same destination. It’s the market!”

Analysis and Conclusions

• The article implies that the quality of the core services provided is high for all classes of service, but the hospital delivers the ancillary services in much different ways. If true, the approach is very interesting—and applicable in the U.S., which is slowly moving toward “consumer-directed healthcare,” which seeks to give patients choice and accountability for making decisions about their health care.
• The hospital’s ability to pursue this model successfully largely depends on relatively transparent costs, which are critical in creating the different classes of service. It is a strong argument for increasing price and process transparency.
• Legacy health care in western countries struggle with price transparency due to the oft-antagonistic nature of providers, payors (whether government or private) and consumers. No party has been directly accountable for the cost of health care, which is one reason why costs have been spiraling out of control and show no signs of stopping.