An important aspect of the new reform process is to change the management system of public hospitals. Currently public hospitals finance themselves from selling drugs and medical treatment. This has resulted in doctors rampantly over-prescribing medicines and often unnecessary and expensive medical tests, which has been a cause of confrontation between patients and hospital staff. To put an end to this type of practice the new reform package proposes separating the sale of drugs from public hospitals.
Public hospitals have complained that reduced funding from the state has forced them to rely on drug sales and medical tests for revenue. Answering questions at a press conference in January, Mao Qun'an from Ministry of Health said, "Comparing China's government expenditure on health as part of total expenditure on health with the overall international level, we can see that the government's investment in public health care is insufficient and expansion is urgently needed."
Tongren Hospital in Beijing is the best-known ophthalmic hospital and one of the top comprehensive hospitals in China. The 120-year-old hospital's name hit newspaper headlines in December 2005 when a lawsuit was filed by relatives of a penniless migrant worker, who suffered from acute stomach pains for over 20 hours before dying in the hallway of the hospital without getting emergency treatment.
In a recent interview with Beijing Review, Han Demin, Director of Tongren Hospital, said that it is difficult to maintain the hospital's nature as a non-profitable institution. Han insisted that it is the responsibility of the government rather than hospitals to provide basic health care to the population and it is unrealistic for hospitals to price state-of-art operations and tests according to affordability for the masses.
"It is impossible for us to completely rely on financing from government, which now accounts for 2 to 3 percent of our hospital's annual expenditure. In pure economic terms, we are no longer a public hospital," said Han.
Fan Guanrong, Director of Renji Hospital in Shanghai, also believes it is wrong to accuse public hospitals of low efficiency and wasting medical resources. He said the 720 doctors in his hospital received 2.04 million outpatient visits in 2006, which, together with operations, amounted to a workload equivalent for each one of 438 working days, a considerable amount of overtime. He added that without enough government financial support, excessive unpaid work by the medical staff there has become an important means for the hospital to earn the profits necessary to survive, purchase advanced equipment and build new wards.
In 2006, Fan appeared on a local television program to debate with an attorney on who should take the major responsibility for deteriorating relations between hospitals and patients. Representing the side of hospitals Fan earned support and approval from almost half of the television audience.
In January, the National Development and Reform Commission launched a nationwide campaign to reduce the retail price of 354 kinds of drug, the twentieth such campaign since 1996. Fan said this new campaign would cost Renji medical group, which consists of a dozen of member public hospitals, 50 million yuan in net profits.
The loss of this income could severely affect the operation of public hospitals, according to Fan. "Two of our member hospitals have already run on deficits, and I dare not imagine the disastrous scenario that patients couldn't go to a hospital if we went broke," he said.