China's Healthcare System: Hospitals' Business Organization

Hospitals in China are organized according to a three-tier system that assesses a hospital's ability to provide medical care, medical education, and medical research. This system designates hospitals as primary, secondary, or tertiary institutions. Tertiary hospitals are typically affiliated with universities or large medical centers in provinces or big cities, while secondary hospitals are medium-sized hospitals in districts and counties. The country has witnessed a rapid growth in private hospitals, which now outnumber public hospitals. However, private hospitals face challenges such as high staff turnover, regulation enforcement, and building public trust. The distribution of medical resources is uneven, with high-quality resources concentrated in large and medium-sized cities, particularly in Beijing and other northern regions. China's healthcare system has a long history, blending traditional Chinese medicine with Western medical practices.

Hospitals are organised according to a three-tier system

Hospitals in China are organised according to a three-tier system that recognises a hospital's ability to provide medical care, medical education, and conduct medical research. This system was established during the period of the planned economy. Based on these criteria, hospitals are designated as primary, secondary, or tertiary institutions. There are 3,275 tertiary hospitals, which are usually affiliated with universities or large medical centres in provinces or big cities. Tertiary hospitals are at the top of the hierarchy, followed by secondary and primary hospitals.

Tertiary hospitals are the largest and most advanced medical centres, offering specialised care and housing the most advanced medical equipment and technology. They are often involved in medical research and education, training medical students and residents. These hospitals are usually located in urban areas and serve a wider population, providing comprehensive and complex healthcare services.

Secondary hospitals, numbering 10,848, are medium-sized hospitals typically found in districts and counties. They offer a range of medical services, including emergency care, inpatient and outpatient services, and specialised treatments. These hospitals often serve as a referral centre for patients requiring more advanced care than what primary hospitals can provide.

There are 12,649 primary hospitals, which form the first point of contact for patients in the healthcare system. They are usually smaller in size and located in rural or less populated areas. Primary hospitals provide essential medical services, including preventive care, basic outpatient services, and community health programmes. They may also offer limited inpatient services for stabilisation and referral to higher-level hospitals if needed.

In addition to the three tiers, there are also unclassified hospitals, typically private hospitals, and a network of community health service centres in urban and rural areas. These centres provide basic medical services and act as a crucial link between the community and the healthcare system, ensuring accessibility and addressing the primary healthcare needs of residents.

The three-tier system aims to provide a structured and organised approach to healthcare delivery, ensuring that patients receive appropriate care according to the complexity and specialisation of their medical needs. The system also recognises the role of hospitals in medical education and research, contributing to the advancement of healthcare knowledge and practice in China.

Private hospitals have grown rapidly

China's private hospital market has experienced rapid growth over the last decade, with private hospitals now outnumbering public hospitals. This growth can be traced back to economic reforms in the early 1980s, when the central government reduced investment in public healthcare, shifting the responsibility for financing healthcare services to local governments and individuals. As a result, healthcare facilities became reliant on the sale of services and medicines to generate revenue, leading to the emergence of private healthcare clinics in the 1980s and 1990s.

The large-scale growth of private hospitals began in the early 2000s, spurred by a new phase of healthcare reform that started in 2009. This reform, along with a growing demand for healthcare, led to the number of private hospitals surpassing public hospitals by 2015. The proportion of private hospital beds nationwide increased from 12.4% in 2011 to 21.4% in 2016.

While private hospitals have grown rapidly, outpatient visits and hospitalizations remain higher among public hospitals. Private hospitals face challenges such as limited government financial support, high tax burdens, difficulty in workforce recruitment and retention, poor government regulation, and a loss of public trust.

The expansion of private hospitals has significant implications for healthcare service provision, quality of care, and hospital regulation. Studies comparing private and public hospitals in Guangdong Province found that government hospitals have more assets, expensive medical equipment, employees, and physicians. However, mortality rates do not show a statistical difference between government and non-government hospitals of similar size and accreditation level.

Hospitals are organised by the Chinese national health administration

Hospitals in China are organised according to a three-tier system, which recognises a hospital's ability to provide medical care, medical education, and conduct medical research. Based on these criteria, hospitals are designated as primary, secondary, or tertiary institutions. There are 36,570 hospitals in China, with 3,275 of them being tertiary hospitals, 10,848 secondary, and 12,649 primary hospitals. Tertiary hospitals are usually affiliated with universities or large medical centres in provinces or big cities. Secondary hospitals are medium-sized hospitals in the districts and counties.

The Chinese national health administration directs four out of five of the study hospitals included in one survey. The hospitals are organised according to a model called the System–Culture–Operation–Performance–Employee (SCOPE) model. This model is based on four core attributes: organisational system, organisational culture, operations and performance management, and employee development. The SCOPE model is used by leaders and managers in China's leading hospitals to achieve organisational excellence, positive patient outcomes, and employee well-being.

In terms of organisational culture, hospitals are influenced by traditional Chinese culture, which emphasises "benevolence" and "love", leading all staff to adhere to "patient-centred care and service". Hospitals in China also face challenges such as high staff turnover rates, which create imbalances in skill, experience, and coherence within medical teams, reducing efficiency and quality of care. The absence of mechanisms to enforce regulation and oversight policies within private hospitals has also led to increased rates of provider-induced demand and a lack of standards to guide the hiring of clinical practitioners.

Since 1949, the Ministry of Public Health has been responsible for all healthcare activities and has established and supervised all health policies. The ministry regulates a network of industrial and state enterprise hospitals and other facilities covering the health needs of workers of those enterprises. In 1981, this network provided approximately 25% of the country's total health services. Healthcare is provided in both rural and urban areas through a three-tiered system. In rural areas, the first tier consists of "barefoot doctors" working out of village medical centres. They provide preventive and primary care services, with an average of two doctors per 1,000 people.

Hospitals trade off between charity care and taxes

Hospitals in China face a trade-off between providing charity care and paying taxes, which impacts their organisational structure and business model.

Chinese hospitals are organised as either for-profit or non-for-profit entities, with the majority being public hospitals. These public hospitals are further categorised into three types: government-owned, socially owned, and institutional hospitals. Government-owned hospitals are funded and managed by the government

Hospitals are organised according to their ability to provide medical care, education, and research

Hospitals in China are organised according to their ability to provide medical care, education, and research. They are designated as primary, secondary, or tertiary institutions. Tertiary hospitals are usually affiliated with universities or large medical centres in provinces or big cities. These hospitals are often involved in research and development, and they provide specialised services and advanced technology. They also tend to treat rare diseases and complex patients.

Secondary hospitals are medium-sized hospitals found in districts and counties. They may offer a range of services, including specialised surgery and bone marrow transplants. They also play a role in medical education and training, using residency programs to educate qualified physicians and other health professionals.

Primary hospitals are smaller in scale and may focus on providing essential medical services to the community. They are often the first point of contact for patients, offering preventive and primary care services.

In addition to the three-tier system, there are also community health service centres in urban areas and township health centres in rural regions. These centres typically provide basic medical care for local residents.

The organisation of hospitals in China has evolved since the founding of the People's Republic of China, when all hospitals were nationalised and standardised. Over time, the healthcare system has undergone reforms to improve equal access to insurance coverage, inpatient reimbursement, and basic health services. The distribution of medical resources remains uneven, with high-quality resources concentrated in large and medium-sized cities.

Hospitals in China also vary in their business operations. For-profit hospitals operate under shareholder-elected boards and are not bound to charity care obligations. Public hospitals, on the other hand, are often district-based or affiliated with public universities. They may have different funding sources and relationships with educational institutions, impacting their involvement in education and research.

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