In April 2009, the Chinese government announced the guidelines for healthcare reform, with the core principle of providing universal healthcare services to the country's 1.3 billion population. China will invest 850 billion RMB ($124 billion) on healthcare from 2009 to 2011, further stimulating demand for medical devices, in what is already one of the world's fastest growing markets for medical technology. One year later, a number of new regulations and guidelines are in place, which are beginning to reshape the structure of the Chinese healthcare industry.
Whilst the government has not released details of how the investment will be distributed, InMedica believes that around 50% will be used to expand the coverage of medical insurance, 30% will be used for the construction of rural healthcare systems, and the remaining 20% will be used to fund public hospitals. It is the first time that basic healthcare will be provided as a public service for all people in China, and the Chinese government aims to solve the problems that have caused strong complaints from the public about high medical costs. The overall aim is to provide basic medical services to the population by 2011, with the long-term goal of rolling out universal coverage by 2020. The healthcare reform relies on joint funding by central and local governments. The central government will contribute around 40% of the total 850 billion RMB investment.
Pubic, non-profit hospitals will remain the major provider of healthcare services, but more priority will be given to the development of grassroots-level hospitals and clinics. The central government will fund the construction of 2,000 county-level hospitals, 29,000 township hospitals and the upgrading of 5,000 township hospitals. Furthermore, about 3,700 community health centers and 11,000 community health stations will be established or upgraded by 2011.
Since the reform was announced last April, a series of regulations and guidelines have been released. In June 2009, the guideline on the construction of county hospitals, health centres, community health service centres, and village clinics was released; in October 2009, the guideline on the price of essential drugs was released; and in January 2010, a guideline on training and development of village physicians was released. Most recently, in February 2010, the guideline on the reform of public hospitals in 16 pilot cities was released.
Public hospital reform was one of the key issues of the guideline. Currently, public hospital revenues are derived from drug sales, medical services and government funds. In 2007, the total revenues of public hospitals in China was 375.4 billion RMB, including 200 billion RMB from the sales of drugs. In the same year, funds from the government were 28.5 billion RMB, which was only 7.6% of total revenues. Currently, public hospitals are permitted to make a 15% profit from drug sales. Whilst this market-oriented approach has greatly improved medical services in recent years, it has also resulted in soaring medical costs for the Chinese public.