P4P and China’s Health Care Reform: Current State, Opportunities and

Challenges

Winnie YipReader 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 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

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:-- PHC facilities-- MCH-- Disease control and prevention

-- Government subsidy ~ 30-60% of operating revenues

Financing for Public Health Care Facilities

0%

10%

20%

30%

40%

50%

60%

70%

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001

Govt

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bsi

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as

share

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Hospital Control & prev. MCH

An Incentive Structure That Leads to Inefficient Treatment Practices

• Hospitals have to earn about 90% of its revenue from fee-for-service 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 high-

technology 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.

159017

02002 2003 2004 2005 2006 2007 2008 2009

Year

Revenue from government

Lab test, supply and service charges

Imaging charges

Revenue from drug chrages

Urban hospital

Revenue of general hospital, at current price

Results from Distorted Prices and Incentives:Revenue in an average urban general public

hospital

6–Source: China Health Statistic Year Book 2010

–thousand –RMB

China: Health expenditure has been rising as share of GDP

China Total Expenditure on Health as % of GDP

2.00

3.00

4.00

5.00

6.00

1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002Year

%

CTEH as % of GDP

Government’s share of health spending has been falling in China

Figure 4 Composition of CTEH by Source

0%

10%

20%

30%

40%

50%

60%

70%

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90%

100%

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

Year

Government health appropriation Social health expenditure Out-of-pocket health expenditure

Composition of Total Health Spending, by source

Prescription pattern for common cold, 3 counties in Shandong Province, 2009

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

-- rapid cost growth-- unaffordable health care-- high financial risk-- inappropriate drug prescription and tests/exams-- neglect of primary health care

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

-- Government fully funds basic salaries of formal staff-- Zero drug profit policy

Public health:-- PHC facilities-- MCH-- Disease control and prevention

-- Government subsidy ~ 30-60% of operating revenues

-- neglect of public health

Government funds: a capita budget for a defined personal public health package

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 exampleP= 10

100

P6525P204P10

P3

500015

2

P220

P1

10

P> 85; 70-84; 60-69; <60 (fail)

Service efficiency Inputs (govt, facility, human resource, equipment)/service vol

People’s benefits Service vol/pop Effectiveness Inputs/outcomes, where outcomes

include IMR, MMR, stroke, blood pressure control

功能体现 Days input on pop based activities Quality Exp per visit, antibiotic use, IV rate;

use of steroid; completeness in prescription form; chronic disease management rates, …Patient satisfaction

Potential for growth 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

–Source ：中国卫生统计年鉴 2010 ， 表 7.1

Maternal Mortality

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