In Depth: Shanghai’s Struggle to Unclog Its Hospitals

By Xu Wen, Zhao Jinzhao and Guo Xin

Last year, Shanghai set in motion a new reform of its health care services, striving to broaden the use of its community care centers to realize its long-held goal of creating an efficient hierarchical medical system — ever more necessary as the demand for elder care surges with China’s aging population.

The importance of community medical care was shown in stark relief during the Covid pandemic, with Shanghai’s community fever clinics handling more than 60% of the city’s cases, diverting pressure from secondary and tertiary hospitals, Wen Daxiang, the director of the Shanghai Municipal Health Commission, told the Shanghai Observer. But the pandemic also showed the weaknesses that hobble these primary care facilities, including insufficient diagnosis and treatment capabilities, shortages of equipment and medicines, and an overall lack of doctors.

These issues cause both patients and doctors to lack of confidence in community health care centers, with some saying that they are only equipped to handle medicine dispersal and the most basic types of treatment.

To resolve the problems plaguing its health care system, Shanghai in April 2023 released the “Implementation Plan for Further Improving the City’s Community Health Service Capacity.” From hardware upgrades to policy changes, it outlines a development blueprint for Shanghai’s primary medical system. And its key measure — redistributing appointment slots — has become one of the most closely watched initiatives.

But despite the city’s commitment to these reforms, challenges remain: Will large hospitals be willing to direct patients to community clinics? Can primary health care facilities attract and manage more patients effectively?

Redistributing appointments

“I can’t believe I actually got an appointment!” said Chen, a patient at the Xinhua Community Health Service Center in Shanghai’s Changning District.

Caixin encountered Chen while visiting various community health centers in Shanghai in May. The elderly woman had been trying and failing for weeks to book a specialist appointment with Wang Liang, associate chief physician at Fudan University’s Huashan Hospital, one of the city’s top medical facilities.

Wang treated Chen for a stroke a few years ago, and she was trying to see Wang again after recently experiencing numbness in her hands.

This time, Chen’s success was thanks to her family doctor, Zhang Li. After hearing about the new policy of redistributing appointment slots, she decided to ask Zhang for assistance.

“Yes, there is such a policy, but I haven’t tried it yet,” Zhang said as she logged into Shanghai’s medical platform and searched for Wang at Huashan Hospital. “I found one!”

Zhang quickly filled out the necessary information and secured the appointment. Moments later, Chen received a text message confirming her booking.

The surprise and elation of both the patient and doctor illustrates the significant effect this one policy is having on the city’s health care system. As of April this year, 50% of specialist appointments in the city’s top-tier hospitals are reserved for community health service centers five days in advance.

But the goal of this initiative goes beyond easing the city’s appointment booking difficulties. It aims to strengthen the connection between patients and grassroots medical institutions, encouraging more residents to seek primary care at community health centers.

Attracting patients

The redistribution of appointment slots to community health care centers is only the first step in drawing patients to local facilities. Once the initial incentive is set, the real challenge begins — convincing patients to walk through the doors and stay for treatment.

China kicked off a round of health care reform in 2009, aiming to strengthen grassroots medical care by establishing a hierarchical system that encourages patients with common and chronic illnesses to seek treatment at primary care facilities before moving to higher-level hospitals if necessary.

However, after more than a decade, even more patients are seeking treatment at large hospitals rather than community health care facilities.

In 2021, the country’s grassroots health care institutions accounted for 50.2% of patient visits, a decline of 11.7 percentage points since 2009. Additionally, the share of hospitalizations at these facilities fell to 14.5%, down 16.5 percentage points from the same year.

The main problem affecting community level facilities is the lack of diagnostic and treatment resources, driven by shortages of both doctors and medications.

From 2009 to 2021, hospitals absorbed 68.6% of the 5.7 million newly added health care workers nationwide, while only 25.7% were employed to grassroots medical institutions.

Prescribing medication for common and chronic illnesses makes up a substantial part of routine care at community health care centers. However, due to limitations in the National Essential Medicine System (NEMS), which regulates the availability of medications to ensure access to essential drugs, more than 90% of the drugs available at these primary care facilities are basic medications.

This narrow selection creates a significant gap compared to the broader range of treatments offered at larger hospitals, leaving community centers unable to meet patient needs.

Challenges ahead

After the pandemic, Shanghai stepped up efforts to strengthen its community health care system.

The goal is to support China’s hierarchical medical system and address the ongoing challenge of whether community clinics can effectively handle increasing patient volumes.

The city’s reforms have already had a demonstrable impact. According to data from the Municipal Health Commission, as of June 2024, Shanghai’s community-level institutions recorded 38.85 million outpatient visits, an increase of 5.9 million from the previous year — a 17.9% rise. These visits accounted for 38.9% of all outpatient care in Shanghai, marking a 0.8 percentage point increase since the end of 2023.

While these figures indicate that the measures are beginning to show results, the numbers fall short of the target set in the city’s Implementation Plan, which aims for community clinics to handle over 40% of outpatient visits by 2025. The gap is even wider when compared to the national target, which expects community health care institutions to account for 65% of outpatient care.

“We’ve seen some progress, but community health centers still aren’t fulfilling their role in diverting patients from larger hospitals. We need to tackle the bigger challenge of ensuring that people are willing to seek care at the community level,” said an official from the Municipal Health Commission.

Why are residents hesitant to choose community health care?

A doctor at one of the city’s leading hospitals said a lack of trust in community health centers drives patients to seek care at larger institutions.

“New patients, those with urgent conditions, or those who fear their illness is severe, will never choose a community clinic first,” the doctor said. “And community centers aren’t equipped to handle those cases.” The doctor himself admitted he had a lack of confidence in community doctors, citing inconsistent skill levels and underdeveloped departments as major concerns.

On the other hand, major hospitals are reluctant to transfer patients to community clinics. In 2023, Shanghai’s hospitals handled 172 million patient visits, while community health centers saw just 72.7 million, a gap of 2.4 times.

“Under free competition, large hospitals will naturally siphon off patients, leaving community centers with little ability to compete,” said Jin Chunlin, director of the Shanghai Health Development Research Center, which is affiliated with the Municipal Health Commission.

A health care reform expert said that directing patients to local clinics still often results in them seeking care at top-tier hospitals. “The core issue is whether these high-level hospitals should be offering outpatient services at all.”

Researchers from Anhui Medical University’s School of Health Management warn that the ongoing reform of the Diagnosis-Related Groups (DRG) payment system may discourage large hospitals from referring patients to smaller facilities. Their study, published last year, shows how the DRG system categorizes cases by diagnosis and procedure codes, with higher severity leading to larger reimbursements.

This system can impact hospital revenue and influence doctors’ treatment decisions, incentivizing some to inflate diagnostic codes for higher payments. As a result, hospitals may retain patients who should be referred elsewhere, increasing out-of-pocket costs and undermining the referral system’s intended purpose.

The health care reform expert said that current medical resource allocation is centered on large hospitals rather than patients.

The expert cited the example of the “Shenzhen model” in the southern city’s Luohu district, which became the nation’s first pilot for grassroots medical reform in 2015. This model integrates public health care resources into the Luohu Hospital Group, uniting community health centers, secondary hospitals and tertiary hospitals under a shared management system. Doctors in this group can move between facilities, enabling specialists to provide direct care in community centers, while primary-level doctors have opportunities to advance.

Under a capped health insurance fund, doctors are incentivized to manage patient loads effectively and avoid unnecessary treatments as they are allowed to keep any surplus funds, said the expert. “This model benefits the medical insurance system, health care providers, and patients alike.”

“Shanghai has the potential to adopt similar reforms, but it comes down to philosophy,” the expert said. “Is the goal to make it easier for hospitals to profit, or to make care more accessible for patients?”

Zhang Wenhong, director of the infectious diseases department at Fudan University’s Huashan Hospital, emphasized in an interview that strengthening grassroots health care must benefit the state, hospitals and patients alike.

He noted that achieving this requires innovative mechanisms and a complete overhaul of assessment metrics and incentive systems. “We must design systems that allow all parties in health care to benefit. Only then can these reforms succeed,” he said.

Zhang Li and Chen are pseudonyms.

Contact reporter Guo Xin (xinguo@caixin.com) and editor Jonathan Breen (jonathanbreen@caixin.com)

caixinglobal.com is the English-language online news portal of Chinese financial and business news media group Caixin. Global Neighbours is authorized to reprint this article.

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