As part of China’s fee-for-service payment system, inappropriate incentives have lead to accelerated cost increases, inefficiencies, health care many cannot afford, poor quality, and the erosion of medical ethics. Recent attempts to alter this system using several different methods have produced some promising early results in improving primary health care as well as reducing costs, in both urban and rural centers.

In a Review in this week’s China Special Issue of The Lancet, Dr Winnie Chi-Man Yip, Department of Public Health, University of Oxford, UK, and colleagues, say they are cautiously optimistic about these findings.

Changes introduced during the 1980s in China are now recognized as creating an incentive system for physicians and hospitals that is not appropriate. The behaviour of providers as well as their treatment decisions were strongly influenced by these incentives. China’s fee-for-service payment and a price schedule that overpaid for drugs and high-technology diagnostics tests and underpaid for basic primary health care had led providers to overprescribe drugs and diagnostic tests, resulting in a rapid rise in health expenditure and inappropriate treatment. These changes reduced access to health care and imposed a heavy financial burden on the people. In response, the Chinese Government committed to a new reform, promising an additional 850 billion Renminbi (US$123 billion) during the next 3 years to provide universal and affordable basic health care for its 1•3 billion population.

Attempts to improve the system have all focused on reducing overprescription of medications and expensive and unnecessary diagnostic tests, by changing from a fees-for-service to an aggregated payment system, as well as providing incentives for primary-care providers to cover as many people as possible with vaccinations, health education, maternal and child care, home visits, infectious disease control, and the management and prevention of emerging chronic conditions.

In community health centres in Shanghai, Tianjin, Hangzhou, and Chengdu cities, the Ministry of Health in 2005 set up a pilot scheme to disconnect the income of primary health facilities from their service revenue. In Shanghai, community centres are paid by a global budget and pay for performance. In village clinics in rural China, a social experiment, called Rural Mutual Health Care (RMHC), started in three towns in the provinces of Guizhou and Shaanxi. It changed payment for village clinics from fee for service to salary plus a bonus tied to performances. The aim is to improve villagers’ access to cost-effective basic health care and improve their health status. Both sets of experiments suggested quality of and access to care could be improved while reducing costs. For reform in payment for hospitals, the authors point to an innovative experiment at Jining Medical College Hospital, which began in 2004. To set payment levels, a group of medical experts standardized the treatment protocols for diseases by specifying the minimum requirements for length of stay, medication use, service use, and surgical procedures for the disease. With this protocol, a maximum price was set based on estimated treatment costs for each disease. The expenditures for the 128 diseases included in the experiment reduced by 33% between 2004 and 2006, with the largest savings for expensive treatments such as heart surgery.

The authors say: “In China, innovative methods have been used to control the widespread overprescription of drugs and diagnostic tests caused by the present payment system, and to confront the rising disease burden of chronic conditions like hypertension and diabetes mellitus. Although the many provider payment experiments that are in progress in China are encouraging, definitive conclusions cannot be drawn about how well these experiments have improved the quality and efficiency of health care because many are still in the early stages of implementation, and some were not designed to allow rigorous scientific assessment.”

They conclude: “we are cautiously optimistic about these innovations. China needs to have rigorous and objective, evidence-based assessment, with focused attention of the effects on quality and health outcome before conclusions can be drawn about which models are best… Rational financial incentives can profoundly affect a physician’s medical practice. However, to have lasting social benefits, any reform has to include the constellation of factors that affect physician behaviour. In particular, the re-establishment of professional ethics and norms in China, and the disconnection of profit motives for hospitals from incentives given to their employed physicians have to be considered.”

“Realignment of incentives for health-care providers in China”
Winnie Chi-Man Yip, William Hsiao, Qingyue Meng, Wen Chen, Xiaoming Sun
Lancet 2010; 375: 1120-30

Source:
The Lancet

Edited by Christian Nordqvist