Download Slide 1

P4P and China’s Health Care Reform:
Current State, Opportunities and
Challenges
Winnie Yip
Reader in Health Policy and Economics
University of Oxford
“Incentives for Health Provider Performance
Network” Conference, May 11, 2011
Context: Chinese Health System Reform
• April 2009: Additional government spending of USD 125 billion in the next
three years:
 Subsidies for insurance premium to enroll in public insurance schemes
 Subsidies for a package of public health services
 Government fully subsidizes the basic salary for township health center
staff, but not hospital staff.
 Major infrastructure building: county hospitals, township health centers
and village clinics
Before 2009
Tertiary and
secondary health
care:
-- Urban: hospitals,
medical centres
-- Rural: county
hospitals
-- Government subsidy
~ 10% of operating
revenues
-- Distorted fee
schedules: high profit
margin for hi-tech
diagnostic tests
-- Mark up of 15% on
drugs
Primary health care:
-- Urban: community
health centres
-- Rural: township
health centres and
village clinics
-- same as above
-- village clinics derive
over 95% revenue from
drug sale
Public health:
-- Government subsidy
-- PHC facilities
~ 30-60% of operating
-- MCH
revenues
-- Disease control and
prevention
Consequences
Since 2009
Govt. subsidy as share of total business income
Financing for Public Health Care
Facilities
70%
60%
50%
40%
30%
20%
10%
0%
1990
1991
1992
1993
1994
Hospital
1995
1996
1997
Control & prev.
1998
MCH
1999
2000
2001
An Incentive Structure That Leads to
Inefficient Treatment Practices
• Hospitals have to earn about 90% of its revenue from fee-forservice payments
• Price schedule that under-pays basic services and over-pays
high-tech procedures and diagnostic tests; allow drug mark up
of 15-20%
• Payment method: Fee-for-service (inflationary)
• Incentives to get revenue from profits on drugs and hightechnology tests, and from kick-backs.
• Physicians are employed by the hospitals, their compensation
depends on profits from drugs and tests + under the table
payments (most for specialists) + kick-backs from drug
companies.
• Village doctors, the back-bone for health prevention and health
care in rural regions, are in private practice, earn their income
from profits when selling drugs and give injections.
Results from Distorted Prices and Incentives:
Revenue in an average urban general public
hospital
Revenue of general hospital, at current price
Urban hospital
Revenue from government
Imaging charges
Revenue from drug chrages
Lab test, supply and service charges
159017
2002
2003
2004
2005
2006
2007
2008
–thousand
–RMB
0
2009
Year
6
–Source: China Health Statistic Year Book 2010
China: Health expenditure has
been rising as share of GDP
China Total Expenditure on Health as % of GDP
6.00
%
5.00
4.00
3.00
Year
2.00
1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002
CTEH as % of GDP
Government’s share of health spending has
been falling in China
Composition of Total Health Spending, by source
Figure 4 Composition of CTEH by Source
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Year
1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002
Government health appropriation
Social health expenditure
Out-of-pocket health expenditure
Prescription pattern for common cold, 3
counties in Shandong Province, 2009
80
70
60
50
40
THC
VC
30
20
10
0
Utilization rate of
antibiotics（%）
Two or more antibiotics Utilization rate of IV（% Utilization rate of steroid
in one prescription (%）
（%）
）
Before 2009
Consequences
Since 2009
Tertiary and
secondary health
care:
-- Urban: hospitals,
medical centres
-- Rural: county
hospitals
-- Government subsidy
~ 10% of operating
revenues
-- Distorted fee
schedules: high profit
margin for hi-tech
diagnostic tests
-- Mark up of 15% on
drugs
Not much
change YET
Primary health care:
-- Urban: community
health centres
-- Rural: township
health centres and
village clinics
-- same as above
-- village clinics derive
over 95% revenue from
drug sale
-- rapid cost
growth
-- unaffordable
health care
-- high financial
risk
-- inappropriate
drug prescription
and tests/exams
-- neglect of
primary health
care
-- neglect of
public health
Government
funds: a capita
budget for a
defined
personal public
health package
Public health:
-- Government subsidy
-- PHC facilities
~ 30-60% of operating
-- MCH
revenues
-- Disease control and
prevention
-- Government
fully funds basic
salaries of
formal staff
-- Zero drug
profit policy
P4P—Who are the Purchasers?
• Ministry of Finance:
– Increase government funding needs to tie
with improved “performances”
– ~30% of public health budget, budget for PHC
facilities’ salaries are with-held for
performance assessment
• Publicly organized insurance schemes:
– Urban: employees, residents
– Rural: New Cooperative Medical Scheme
– Gradual trends moving from FFS to
prospective payment and perhaps with p4p
Design and Implementation
• Decentralized
• What are performances and how are they
measured?
• Public health: Creating health records for residents;
health education; health management for children (0-3
years); imm/vaccination; health exams for elderly;
pre/post natal care; infectious disease reporting; chronic
disease management (TB, hypertension, DB, hepatitis B
and major mental health problems)
• Primary and secondary care, large focus on:
– Cost control; quantity of services; antibiotic prescription/IV
injection not exceeding a target rate (?)
An example
10
P= P1  20 
P2
5000
P6
 15 
 10  P 4  20  P5  25 
 10
2
P3
100
 P> 85; 70-84; 60-69; <60 (fail)

Service efficiency
People’s benefits
Effectiveness
功能体现
Quality
Potential for growth

Inputs (govt, facility, human resource,
equipment)/service vol
Service vol/pop
Inputs/outcomes, where outcomes
include IMR, MMR, stroke, blood
pressure control
Days input on pop based activities
Exp per visit, antibiotic use, IV rate;
use of steroid; completeness in
prescription form; chronic disease
management
rates,
…Patient
satisfaction
Subjective assessment
Effective?
• Results: 83-90 scores
• Performance indicators not targeted
Immunization Rates: age 1-4(%)
Urban
Rural
Antenatal care coverage and rate delivery in
hospital (%) in urban and rural
Antenatal coverage
Hospital delivery
Maternal Mortality
–Source：中国卫生统计年鉴2010， 表7.1
Infant Mortality
–Source：中国卫生统计年鉴2010， 表7.1
Effective?
• Results: 83-90 scores
• Performance indicators not targeted
• Actual implementation:
– Focus on quantity and less on quality/process
– Can generate any result you want depending
on how you calculate your statistics and what
data you use
– Rely on inspection/investigation
– Rely on subjective assessment
– Not external checks and balances
Looking to the future
• Management information system is
essential, with some standardizations to
allow comparisons
• Improved training in management: p4p is a
means to an end
• External checks and balances
• Targets vs relative performance
• Reduce number of indicators, target at
problem areas, revise periodically