China To Support Financing, Cut Red Tape For Private Hospitals

China said it will support private hospitals in efforts to raise funds and streamline the approval process for new facilities, the latest government measure to encourage investment in health-care.

The government will support share listings and bond sales of qualified private hospitals, and encourage financial institutions to provide them with innovative products, the country’s State Council said in a statement Monday. Lengthy approvals and rules that have prevented doctors from joining private hospitals will also be cut back.

China has begun encouraging the private sector to invest in hospitals to help ease the burden on the public health-care system, which is grappling with surging rates of chronic conditions such as diabetes and heart disease. The changes announced today could over time make it easier for investors to navigate government approvals and draw more doctors to private health-care facilities.

Chinese patients are often reluctant to choose private hospitals, where they can rarely get government reimbursements. The State Council announcement today stipulates that public health insurance will extend coverage to qualified private facilities, and cannot reject them for reasons other than their medical service abilities.

“Widening financing channels is important because building hospitals requires a lot of funds,” said Stanley Chan, an analyst with Emperor Securities. The policies “are attractive to investors in terms of fund-raising and tax benefits, which allow them to invest more proactively.”

Phoenix Healthcare Group Co. and Shanghai Fosun Pharmaceutical Group Co. are among the companies that could benefit, he said.

The government also plans to encourage venture capital and financial guarantee institutions to cater to new small health-care businesses. Local governments are also encouraged to subsidize private hospitals through investment funds and to explore cooperation between private and public facilities, according to today’s statement.

The size of public hospitals must be limited to make room for private ones, and non-profit private hospitals will receive subsidies from the government, according to the statement.