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China Raises Doctor Fees, Lowers Drug Bills to Ease Anger

A retired Chinese civil servant with stomach pains was pleasantly surprised on a recent visit to the Beijing Friendship Hospital by how long it took and how much he paid.

“I’m paying less, so of course I’m satisfied,” says the 71-year-old, who would only identify himself as Mr. Tong. “And coming to the hospital, getting a queue number, and seeing the doctor all took less than one hour.”

Beijing Friendship is part of a pilot program in which patients pay more to see a doctor, while drugs sold by the hospital pharmacy are cheaper, thereby lowering the total bill. Waiting times are shorter as well, Bloomberg Businessweek reports in its Oct. 1 edition.

The reforms are partly a response to a rash of violence in hospitals. Last spring a doctor in the city of Harbin was murdered by a patient. The government’s official newspaper, China Daily, has reported that in 2010 there were more than 17,000 violent incidents at hospitals and that 50 hospitals in Beijing have beefed up security. With daily episodes of labor unrest, such as the recent brief shutdown of a Foxconn Technology Group factory, the government does not want to add to the frustrations of ordinary Chinese.

Fixing the hospital system will be a priority for the new government of heir apparent Xi Jinping, the current vice president. Many Chinese believe you can’t trust doctors, says Jason Mann, a health-care analyst at Barclays in Hong Kong. “They prescribe expensive things you don’t need,” he says.

Doctors’ Salaries

Most Chinese hospitals charge very little for doctor consultations. They make about 50 percent of their revenue selling medicine to patients, charging markups from 15 percent to 100 percent. Doctors on average earn just $1,000 a month, so many supplement their incomes by over prescribing medicines sold by hospital pharmacies. (The prescribing physician splits the profits with the hospital.)

“To increase profits, hospitals overtreat and overexamine,” Rao Keqin, party secretary of the Chinese Medical Association, said in an August report by McKinsey.

It gets worse: In September, China Daily reported a widespread bribery case in Shenzhen involving at least 20 hospital officials accused of taking kickbacks from drug and medical equipment companies.

Patient Anger

Health Minister Chen Zhu says the government won’t tolerate hospital violence, while also recognizing the anger of patients. “We need to have immediate solutions,” Chen told reporters on Sept. 17, “so we’re preparing to build better channels for patient complaints.”

The reforms, which the government wants to take nationwide by 2015, aim to lower drug prices, make consultations more expensive, and give doctors raises. A patient who wants to see a doctor at Beijing Friendship now pays a minimum of 42 yuan ($6.60) compared with the old fees of 5-14 yuan for any doctor. A visit to a specialist now costs 100 yuan. Drug prices have dropped an average 30 percent.

“Reforms have stopped doctors from over prescribing medicines,” Chen said.

To help make up the difference, the government will expand subsidies to hospitals. The government is also opening the health-care sector to foreign investment.

Critics, while impressed, warn that changes won’t be easy. “The whole idea of trying to make public hospitals really serve the public interest is the right direction to go,” says Liu Su, a professor of public health at the Chinese University of Hong Kong. “The system has been kind of broken for so long, the incentives have been wrong for so many years.”

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