Overseas-invested hospitals generally provide better service. "They can supply a powerful demonstrative example to the public hospitals because to compete with those high-quality overseas-owned hospitals, the public ones will also have to improve their technology and service," Cai said.

Chen Yude, a professor with Health Science Center at Peking University, expects the competition following the entry of overseas-owned hospitals can help push forward the reform of China's public healthcare institutions.

Chen said overseas-invested hospitals will compete with their local counterparts since they will scramble for not only patients, but also talented medical staff.

According to a Deutsche Bank report published in June, the number of private hospitals in China rose from 3,200 in 2005 to 11,300 last year, accounting for 47 percent of the country's total number of hospitals. However, the number of beds they provide takes up only 11 percent and the ratio is expected to reach 20 percent by 2015.

Public hospitals provide 90 percent of China's medical services. Most Chinese patients prefer to go to large public hospitals in big cities for medical treatment, leading to their overcrowding. Analysts say inviting more private players is an effective way to ease the bottleneck in medical resources.

In May, the Central Government announced the easing of curbs on joint-venture hospitals. It encouraged the establishment of private hospitals to reduce public services from being overburdened.

The plan involved overhauling the management of medical joint ventures that involve overseas partners, including "reducing restrictions on the percentage of foreign ownership in medical joint ventures and collaborations."

In April, the State Council, China's cabinet, gave private hospitals the authority to set prices for diagnoses and treatments, which had been controlled by the government

The government also promised in March to let the market play a bigger role in reforming the medical sector.

The scale of public hospitals will be controlled and medical resources will be optimized, according to the State Council.

All of these movements signal the government's determination to push forward healthcare reform, launched in 2009 to make it more affordable and accessible for all citizens by 2020.

"This is a move in the right direction," said Bruce Liu, an industry veteran. "It will encourage more capital and expertise from other countries to meet the growing needs for quality healthcare in China."

Difficulties

Still, many insiders note challenges that new private hospitals will face, and say that there needs to be development in related fields if private health care is to really take off.

"Ordinary people have to first face the relatively high prices in overseas-funded hospitals. Currently, such costs cannot be covered by their basic medical insurance," Cai said.

Taiwanese-owned Shanghai Landseed International Hospital has capacity to receive 800 to 1,000 patients for clinical services each day, but the real number is only 300 to 400, according to a report by the Economic Information Daily.

"The service is good there, but the costs cannot be covered by our medical insurance. The hospital is for the rich," a Shanghai resident who declined to be named was quoted as saying.

Given the market-oriented pricing of overseas-funded hospitals, China should encourage the development of the commercial health insurance industry to relieve the pressure on individuals who only have basic medical insurance, said Liang Hong, Vice President of the China Health Insurance Research Association.

Staff recruitment also poses a challenge for overseas-funded hospitals. Under Chinese law, overseas doctors practicing clinical and treatment services in China must renew their registrations every year.

Meanwhile, difficulties remain in attracting doctors from the public system, for reasons including problems in transferring academic titles and accrued social benefits.

To address this challenge, the government devised a new regulation in 2009, allowing doctors to practice at more than one site. Since then several cities have implemented the rule.

However, experts say this is impractical because some public hospital heads do not agree with the policy and do not give doctors permission to practice outside their hospitals. "So the human resources flow continues to be challenging," said Roberta Lipson, who founded China's first foreign-funded hospital, Beijing United Family Hospital, in 1997.

Besides, Chang with Landseed said overseas investors have to make adjustment to adapt to local policies. "For example, if we want to open some departments, we are required to have a certain amount of space and a number of personnel working in them, which may not be reasonable," he said.

Liu agreed. He said easing ownership restriction is only part of the solution, as new entrants still need to navigate a long series of regulatory constraints.

"They will be confronted with problems ranging from site selection and zoning approvals, licensing and registration, staff certification and equipment purchase approvals, product and service pricing, insurance coverage, as well as tax treatment and profit repatriation," said Liu.

Liu said he expects to see more details soon for creating a level playing field for private and foreign-owned hospitals, more progressive policies and regulatory frameworks, especially in public-private partnership schemes.

"More transparency and consistency are required if China is serious about winning foreign capital and talent," he added.

Email us at: yinpumin@bjreview.com