Recent decades have witnessed significant increases in health spending worldwide; however there is limited evidence of commensurate improvements in quality of care and health outcomes. The same is true in China. In April of 2009, the Chinese government launched a national health care reform program, doubling its health spending, with the goal to provide affordable, equitable and effective health care for all by 2020. By 2012, with substantial government subsidies, health insurance coverage reached 95 percent of the population. However, expansion of insurance coverage and corresponding increases in reimbursement rates have not kept pace with expenditure escalation, resulting in increases in out-of-pocket spending by users with no improvement in the quality of service provision.
A key underlying reason is the misaligned incentives faced by providers. Since the introduction of market reforms in the late 1970s in which the government reduced subsidies for the health care system, providers were permitted to earn revenues (and make profits) by charging for services. Providers are paid by fee-for-service, according to a fee schedule set by the government. For historical reasons, the fee schedule overpays (priced above cost) for drugs and high-technological diagnostic tests while underpays (price below cost) for low-tech and in particular labor-intensive services. These incentives have led providers to over-prescribe drugs and high-tech diagnostics, and under-provide services that are not profit-making, irrespective of clinical efficacy or patient needs. As a result, both over- and under-provision are common in China. Meanwhile, expenditure continues to grow at a rapid rate leading to unaffordable health care and impoverishment.
In the latest Five Year Plan (2012-2016), the Chinese government highlights provider payment reform as a top priority for advancing its goal to achieve affordable, equitable and effective coverage of health care for all. It gives particular focus to public hospitals as they account for over 70 percent of total national health spending. Among public hospitals, county hospitals are identified as top priority since they form the cornerstone of the rural health delivery system serving 800 million people.
The primary objective of this project is to design policy intervention in innovative provider payment methods to incentivise hospitals to deliver services with quality and do so efficiently. It also examines how governance of public hospitals and internal management affect hospital performances. We adopt a quasi-experimental approach to evaluate the impact of these policy interventions and the results will be used to help the government to design their policies.
This project takes place in Ningxia and Guizhou, two low income provinces covering a population of around 40 million. We select these provinces because of our goal to benefit the poorest as a top priority.
Funded by:
The Health Result Innovation Trust Fund (HRITF) of the World Bank
Partners:
- The governments of Guizhou and Ningxia
- Fudan University
- Beijing University
- Stanford University
- Duke University