Going to the doctor in China is often a very unpleasant experience. Beyond whatever ailment one may be dealing with, a medical visit usually entails painfully long waits in overcrowded, sometimes dangerous hospitals. China’s authorities have been trying to fix its beleaguered medical institutions. The latest move: welcoming more foreign investment.

China will allow wholly foreign-owned hospitals to operate in seven cities and provinces, including Beijing, Tianjin, Shanghai, Jiangsu, Guangdong, Hainan, and Fujian, the Ministry of Commerce announced August 27.  The decision was jointly made with the National Health and Family Planning Commission in late July, but not publicized until yesterday. Previously foreign stakes in hospitals were not allowed to exceed 70 percent, the English language China Daily reported today.

In May, China’s State Council announced a new plan aimed at reforming the health sector. The guidelines called for allowing more private and foreign investment into China’s hospitals. Another key element is reforming the revenue structure so that medical institutions are not excessively reliant on drug sales from their in-house pharmacies, as is now the case, and instead charge more for consultations and treatment. “They are making real efforts to remove or reduce the drug mark-ups,” says Ellon Xu, a principal in Bain & Company’s China healthcare practice. “But it is very painful because they need to find new ways to fund hospitals.”

As of last October, China had 10,877 private hospitals, many of them small in size, up from 5,400 in 2008. China’s large government-owned hospitals however, of which there are 13,440, provide 90 percent of total medical care, according to a report in the official Xinhua News Agency citing official figures. In the decade ending in 2020, China’s healthcare industry is likely to more than triple in size, to reach $900 billion, estimates Bain & Company.

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