COVERAGE FOR ALL: A doctor and patient discuss a prescription at Ganghua Hospital, a private hospital in Shanghai. This private hospital was granted government medical insurance coverage in October 2010 (WU JINGDAN)

Currently, sickbeds, doctors and nursing staff in private hospitals only account for 1.4 percent, 9.4 percent and 0.8 percent of China's total, respectively. What's more, the number of outpatients and that of patients hospitalized in private hospitals account for 7.7 percent and 2.9 percent, respectively.

High taxes have been a problem impeding the development of private medical institutes. Although for-profit medical institutes are exempt from a business tax for three years after obtaining medical practice license, the fact is that it takes almost three years for hospitals to finish preparatory work including business registration, which can only be done after getting the practice licensed. In this sense, few private hospitals fully enjoy the tax exemption.

In addition, taxes levied on private hospital accounts for 11 percent of its total turnover after the three-year tax exemption period. Those taxes are value-added, sales and business income related. Business tax exemption will surely benefit private hospitals.

Private hospitals also do not enjoy the same market access as public ones. Hospitalized patients can't get their expenditures reimbursed for services at private hospitals; outpatients can get their expenditures reimbursed, but the proportion is lower than from public ones. As a result, when people are deciding on which hospitals to go to, private ones are naturally their second choice.

The guideline stands to put the various medical institutes, private or public, on an even playing field. It will also further open the field to foreign investments.

The Chinese Government encouraged overseas investment in the medical sector as early as the 1990s, but only joint venture hospitals were allowed, where foreign capital couldn't exceed 70 percent of the total investment.

There are currently around 1,000 medical joint ventures in China with overseas investment mainly from the United States (30.5 percent), Hong Kong (29.3 percent), Japan, Australia, South Korea and Canada.

The guideline states that foreign investment in setting up medical institutions will be changed from the "restricted" category to the "permitted" one. Limits are relaxed on foreign share ownership in the jointly invested medical facilities. Wholly foreign-owned hospitals will go through a trial period before being gradually expanded.

Meanwhile, application procedures and requirements for joint venture or cooperative hospitals will be streamlined. They can get approval from provincial authorities, while wholly foreign-owned hospitals must be approved by the Ministry of Health and the Ministry of Commerce.

This policy is a breakthrough, said Liu, and will benefit the development of foreign-funded hospitals, and bring competition to domestic hospitals, propelling domestic hospitals to improve their services.

Supervision is key

Wang Bei, 24, who rose to fame as a contestant on Super Girl, the Chinese equivalent of American Idol, died on November 15 during facial bone-grinding surgery at Zhong'ao Cosmetic Surgery Hospital, a private hospital in Wuhan, Hubei Province.

Wang's death stirred people's doubts about private hospitals, which have been under public scrutiny for some time. Concerns are already rampant about whether the influx in the private medical sector will trigger more medical accidents.

While private medical institutes are encouraged, supervision on them won't be loosened, said Yin Dakui, President of the Chinese Medical Doctor Association. China issued administration regulations on medical institutions long ago, and the health executive sector is responsible for guiding private hospitals' practice and will not loosen their supervision.

The guideline also stipulated terms on strengthening supervision on private medical institutes, requiring them to obtain licenses before practicing and prohibiting them from releasing false or misleading advertisements, said the guideline.

Private medical institutions should obey all relevant laws to achieve sustainable development, said Yin.

The State Council's measures to direct social capital to medical institutions

1. Social capital for profit and non-profit hospitals will be encouraged and supported;

2. Social capital should enjoy preferential treatment as China adjusts or increases medical resources, and the government, while making or restructuring regional plans for medical resource allocations, will take non-state medical institutions into consideration;

3. Operational scopes of non-state hospitals will be rationally determined in accordance with their service capacities;

4. Social capital will be involved in state-run hospital reform to reduce the proportion of state-run hospitals to private ones;

5. Foreign investment in setting up medical institutions will be changed from "restricted" category to "permitted" one. Limits on caps of shares for foreign investments in joint venture medical institutions will be gradually cancelled. Wholly foreign-owned medical units will go through a trial period before being gradually expanded; and

6. Application procedures for foreign-invested hospitals will be simplified. Provincial governments, instead of central authorities, will be able to approve joint venture or cooperative hospitals. Wholly foreign-owned hospitals will be approved by the Ministry of Health and the Ministry of Commerce.