Opinion: How Wholly Foreign-Owned Hospitals Can Help China’s Health Care Sector Level Up
By Caixin
China’s health care sector is progressively opening up. Recently, a collaborative effort by the National Health Commission, Ministry of Commerce, and other departments introduced the Pilot Program for Expanding the Opening of the Solely Foreign-Funded Hospital Sector. The program explicitly allows for the establishment of wholly foreign-owned hospitals, aiming to introduce high-level medical resources, improve domestic medical services, optimize the business environment and provide diversified medical services to foreigners and the rest of the public in China. To make this happen, efforts should be made to create favorable conditions and remove obstacles to maximize the unique role of these foreign-owned institutions.
Since the start of the reform era, China’s policy on foreign-funded medical institutions has undergone several changes. Initially, foreign involvement in health care was restricted to nonprofit activities or joint ventures and partnerships. In 2010, the State Council issued a notice encouraging and guiding private capital in medical institutions, which adjusted foreign investment projects to allow for foreign-funded medical facilities. In 2014, the Ministry of Commerce and the now defunct National Health and Family Planning Commission issued a notice to test out wholly foreign-owned hospitals in seven provinces and cities: Beijing, Tianjin, Shanghai, Jiangsu, Fujian, Guangdong and Hainan. In 2015, the Catalogue for the Guidance of Foreign Investment Industries reclassified medical institutions from the “permitted” category to the “restricted” category, limiting foreign investment to joint ventures and partnerships. Currently, there are over 60 Sino-foreign joint venture medical institutions on the Chinese mainland, primarily located in Beijing, Tianjin and Shanghai, with significant investment from Hong Kong, Macao and Taiwan.
Decisions from the 20th Central Committee’s third plenary session called for orderly opening up in industries such as telecommunications, internet, education, culture and health care. In September 2024, the Ministry of Commerce, National Health Commission, and National Medical Products Administration announced plans to allow wholly foreign-owned hospitals to be set up in nine provinces and cities including Beijing, Tianjin, Shanghai, Nanjing, Suzhou, Fuzhou, Guangzhou, Shenzhen and Hainan. The program provides specific regulations on the investment criteria, establishment and operating conditions, and the management of foreign-owned hospitals. Notably, it allowed them to apply for inclusion in public health insurance programs, marking a significant opening in this area. This progress represents a hard-won achievement in China’s ongoing reform of the health care industry.
In recent years, China health care industry has made significant advancements. Yet, the issue of supply not meeting demand remains an ongoing challenge. This includes not just overall availability, but also structural imbalances such as the scarcity of high-quality medical services. Certain provinces and cities, noted for their openness to foreign interactions, have a correspondingly high demand for medical services among foreign nationals. Allowing these regions to pilot wholly foreign-owned hospitals could enhance the introduction of top-tier international medical resources and increase the supply of medical services, thereby better serving the multifaceted and diverse health care needs of both the local and foreign populations. Such hospitals could complement public, private and joint venture medical institutions, potentially making up for local shortcomings in health care capabilities, technology and facilities. The advanced management practices and service models of foreign-owned hospitals could also serve as a benchmark for reforming public hospitals.
However, the introduction of foreign capital in China’s health care sector does bring about challenges. There could be significant “teething problems” as foreign entities adapt to the local environment. For instance, the pilot program allows hospitals to employ foreign, Hong Kong, Macao, and Taiwan medical professionals on a short-term basis, provided that mainland personnel make up no less than 50% of the hospital’s management and professional staff. This stipulation may cause concern among domestic doctors, particularly top specialists wary of leaving the established system. This is underscored by differences in management styles and cultural backgrounds between domestic and international practices.
In terms of payment, the pilot scheme specifies that hospitals compliant with health insurance regulations may apply to be designated medical insurance providers. This involves adhering to unified medical service pricing, pharmaceutical policies and coverage under the supervision of health insurance authorities. Recent reforms in payment methods, primarily driven by health insurance, have significantly altered the landscape of China’s medical services market, impacting the traditionally upscale market targeted by foreign hospitals. This means foreign-owned hospitals must find their niche and engage in differentiated competition, as high-end medical services are not the only viable strategy.
The success of foreign-owned hospitals in China’s health care market will profoundly depend on expectations. Thus, governments at all levels should strive to foster a first-class business environment characterized by the rule of law, market orientation and international standards, while maintaining policy stability and coordination.
Creating replicable and scalable results from the pilot program is a crucial goal. Looking ahead, public hospitals will continue to dominate China’s health care system, making the role and pilot experiences of foreign-owned hospitals invaluable. In future reforms, patient needs must remain the priority, ensuring that pilot programs are effectively implemented and that the common problems of access and affordability in health care are further addressed.
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.
Image: shiryu01 – stock.adobe.com