Privatization of Healthcare Services in China Since Dissertation

Excerpt from Dissertation :

Privatization of Healthcare Services in China Since 1980s

Empirical Analysis related to Primary level Changes




Data Presentation, Observations and Analysis

Obstacles faced by Private Clinics

Future Outlook

China opened its door to the outside world and introduced economic reforms in 1980 with a shift from a controlled central economy to an open and market oriented economy. This project takes on the task of investigating the Chinese privatization of healthcare sector with special emphasis on private clinics and the role they play in overall healthcare industry. Driven by need of times this rapid evolution of private sector influenced the whole industry and gave birth to many problems occurring at both rural and urban areas. The thesis also gives a comparison of services and performance of players in the healthcare industry with focus on practices exercised in urban areas with further inquiry in to level of services provided by the privatized clinics, customer preferences and efficiency of overall privatization process with implementation of new healthcare reforms.

Creating a public private mix in the healthcare industry has been a major challenge for leadership of China; its healthcare system once dominated by only public institutions has now seen major changes since 1980 with emergence of a private sector not yet fully developed. Private clinics provide an alternate solution to the problem of increasing population which resulted in overcrowded public hospitals and preference for quality with increased awareness about health issues in general masses. The research investigates the problems faced by all three stakeholders (patient, public and private healthcare institutions) in light of privatization policy of Chinese government. This rapid privatization of healthcare industry gave birth to many problems related to traditional Chinese methodologies for providing medical care and effectiveness of public hospitals in the local setting. In implementing the new reforms Chinese state needs to ensure the continuation of quality health services through existing public healthcare institutions while regulating the private sector effectively.


There have been many health reforms all over the world especially during the past two decades, these reforms were in shape of privatization of healthcare sector. Some advanced economies of the western world changed their approach and privatized there healthcare sector decades ago although the experience in these highly developed countries was according to their economic structure and need of middle and lower classes. The approach adopted by these strong economies influenced the health reforms in developing countries and many such countries privatized their healthcare services in order to promote equity and accessibility (Johnson & Stoskopf, 2010).

China too experienced difficulty in providing equitable healthcare to all, although the need to privatize many industries was apparent in 1960 but the overall change came with the transformation of economic policy when China opened its doors to the rest of the world.

Healthcare industry was also decentralized and a transformation began after 1980 allowing establishment of private hospitals and conversion of previously nationalized hospitals and missionary hospitals to their previous autonomous state. These private hospitals and clinics were operated and financed independently paving the way for competition, lower healthcare costs and enhanced quality. The previously witnessed failure of public institutions in providing equitable healthcare and a wide spread insurance network encouraged private insurance and establishment of private clinics with fee-for-service structure. Bare foot doctors, traditional practitioners and independent medicine manufacturers were either merged within the private sector or deemed illegal by the government. Seeing the positive results the Chinese government compiled and published new healthcare reforms in April 2009; this plan describes the way forward and strategizes the ways for improving healthcare service in local settings and grass root levels. Practical steps are defined for enhancing the role of private sector by effective use of small clinics, healthcare centers in distant villages and underdeveloped towns resulting in equitable healthcare services with overall accessibility and affordability. Development and construction of private clinics is to be encouraged and doctors were allowed to start their own private hospitals besides their employment in public or private hospitals (Freeman & Boynton, 2011).

Privatization of any sector is an intended process by government through which involvement of non-government elements is increased; these non-government entities then finance and provide services on their own being regulated by provisions set by the government. (Starr, 1988)

China started privatization of its health care industry in 1979, the project investigates the process and the obstacles faced during these three decades especially by private clinics and highlights the role of private sector focusing on private clinics in the overall healthcare structure in China with emphasis on the competition, customer preferences and other social elements.

It establishes the understanding of Chinese private healthcare sector by discussing its historic evolution, existing practices in healthcare sector and the future outlook. The thesis then describes the research methodology; explaining important theories related to privatization in relation to Chinese healthcare sector, rapid developments and the resulting impacts. It also highlights the prevailing situation and operations of private clinics and explaining the obstacles. The project would then conclude by discussing the overall impact of healthcare privatization in relation to the key findings.

The quality of services provided by public institutions is better in competition to the scope of services provided by the private hospital or clinic. These private entities operate separately and are owned by one or two individuals, they are considered as more accessible to the general public and exhibit more understanding towards patients (Freeman & Boynton, 2011).

Literature Review:

China is known for its traditional methods and medicines provided to masses in temples by traditional practitioners; this was a private sector but not enlightened with modern techniques and methodologies of healthcare. In the post libration era of 1949 to 1965, the competent professionals were only devoted to royal families, government officials and soldiers, equitable health provisions were absent for common man as they only had access to folk doctors with no formal education using traditional, religious and mythical means for curing selling herbal mixtures as medicine (Ma, Lu and Quan 2008). In 18th century many missionary hospitals were established by Christian missionaries, this paved the way for individuals devoted to medical field to setup their private hospitals. By 1949 most healthcare services were provided by this private sector with public sector established only in capitals providing healthcare services to the elite. In 1950 with nationalization initiative all the healthcare activities were made responsibility of the government and all private institutions of that time were nationalized or eliminated all together. During 1956 most private institutions were under government control and practitioners were inducted into these newly formed public entities resulting in formation of the biggest healthcare network with the most extensive workforce. The government ran these hospitals and was responsible for financing healthcare institutions of both urban and rural areas, aiming for equitable and universal healthcare network for all (Baru, 1989).

China has been facing considerable trouble in dealing with rural healthcare. The struggle has been faced by the Chinese government since its inception. In order to address this issue, Mao levied great stress on having the healthcare needs of rural areas being met. At this point, troops of trained doctors were sent to villages on frequent basis which was responsible for addressing these healthcare needs however the issue was still unresolved. Therefore, in order to deal with this issue, a regime of internal health worker was started. The gist of this reform was to use the agricultural workers who had been to high schools and were reasonably literate, for providing primary healthcare services.

Under this reform, the healthcare workers were made to get training at local and regional hospitals for 3-6 months and then practice in their respective areas. The whole idea was not to provide replacement for properly trained doctors but to make the primary healthcare services available to the general public. The regime turned out to be highly successful and was highly appreciated at national as well as international levels. Even, W.H.O. considered it as one of the successful measures of Chinese government (Bloom,) 2009.

However because of low payment as compared to regular doctors, many health workers opted for regular medicine studies. Reforms in the health-care system in the early 1980s, which were unsuccessful during this period, resulted in the collapse of the cooperative medical system to a payment-based system of medical care in rural areas. The program was cancelled by the Ministry and the idea of rural health was kept at a back burner. Many of these health workers actually began their practice as private practitioners as well. On the basis of this rural health policy, the Government proposed the development of a new cooperative medical system in 2003 (Zhang & Unschuld, 2008).

With the economic reforms of 1979 and increasing burden of healthcare budgets (see figure 1) on the government, many sectors including the healthcare sector was privatized. The redundancy and limitations of public healthcare system were made apparent during earthquakes of 1976 killing more than 200,000 people and injuring more than 700,000; many lives could have been saved if…

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