Corruption and Violence in the Chinese Healthcare System

Source: WHO

On September 19th 2014 a Chinese court fined British pharmaceutical giant GlaxoSmithKline $489 million for bribing hospitals and doctors, the largest ever corporate fine in China at the time. In this landmark anticorruption case, Chinese authorities accused Glaxo of bribery, overcharging for its drugs, and channeling illicit kickbacks for prescribing their drugs. But for industry insiders, these allegations represent business as usual, exposing the ugly underbelly of China’s healthcare sector. Bribery and corruption permeate every level of healthcare.

In the early years of People’s Republic of China, the vast majority of the population did not have access to modern medicine. Few medical professionals outside of urban hospitals were trained in Western medicine; instead traditional Chinese medicine was often combined and integrated into treatments. In response, the government instituted large scale health sector reforms emphasized on public health and prevention. Between the 1950s and 1970s, the central government established the commune-based Cooperative Medical Scheme that provided public insurance for health services. In the 1980s, the Chinese government enacted reforms that have made the healthcare sector more market-oriented, leaving public hospitals responsible for balancing their books. Decreased government involvement in public health services left hospitals with insufficient funding. As these subsidies decreased, hospitals have developed other revenue-generating mechanisms. Hospitals routinely recommend unnecessary but expensive tests and procedures, add extra fees for ambiguous items, and over prescribe expensive foreign drugs as a means to keep departments financially solvent. According to 2011 Health Ministry data, medical services accounted for 50% of public hospital revenue. Approximately 40% came from prescribing drugs while the rest came from other sources including government subsidies. The current system is laden with inefficiencies and perverse incentives.

Unethical practices have also become necessary to supplement low physician salaries. Doctor’s base salaries are set in line with the pay scale for government workers, a legacy of China’s planned economy. Before bonuses, a newly minted doctor in Beijing earns approximately 3,000 yuan ($480) monthly, roughly the same as a taxi driver. Low salaries have led to the growth of a system of under-the-table payments. They are known as “hongbao”—a reference to the customary cash-filled red envelopes that are given as gifts during Chinese holidays— and are bribes given to physicians to cover a variety of services such as jumping the queue and securing more experienced physicians. The practice has become so common that patients feel compelled to participate. They fear that physicians will provide substandard care without the extra incentive provided by the hongbao.   
 
The commoditization of healthcare has heightened tension between patients and healthcare providers and eroded public trust in the medical profession. A 2013 Chinese Youth Daily survey indicated that 66.8 percent of the general public did not trust doctors’ professional diagnoses or treatments. Patients often question whether their doctors are acting in their best interest. According to a survey conducted by the Chinese Hospital Association, the proportion of Chinese hospitals reporting violent conflicts between patients and providers has increased from 48 percent to 64 percent from 2008 to 2012. Over that same period, the average number of violent attacks directed at healthcare workers in each hospital has increased from 21 to 27 percent.

The post 1980s market reforms have transformed health in China from a social good to a commodity. While other industries have seen unprecedented growth, public healthcare systems remain underfunded and the cost of healthcare continues to rise. From 2007-2011 the cost of inpatient and outpatient services saw an annual growth of 10 percent, higher than China’s GDP growth rate. Given the growing public hostility and violence, the attrition rate among physicians is multiplying. Graduates from top medical schools pursue more lucrative careers abroad or through other lines of work. A growing shortage of future physicians will ensure that demand for healthcare services continues to outpace supply.

In response to public discontent, China’s National Health Commission has implemented new policies to address physician conduct. Since May 2014, both physicians and patients have been required to sign contacts within the first 24 hours of treatment agreeing to not exchange or accept hongbao. Clauses in the contract require that patients “co-operate with treatment activities, truthfully provide medical history...and respect medical personal” and that doctors show “due diligence in treatment.” Despite new regulations, many healthcare workers believe that the status quo will continue. The National Health Commission has not specified how the policy would be implemented and regulated. In the crowded environments of large hospitals, where physicians spend only a few minutes with each patient, it is likely that patients will continue offering payments in the hopes of receiving preferential, quality care.

The Chinese government has recognized the inadequacy of its reforms and has moved to expand investments in its nationalized health insurance system. Although Xinhua News Agency, the state press, can tout that the nation has universal health insurance, the reality is that insurance does not equate to access or coverage. Those with insurance are still burdened with out of pocket costs that can exceed 50% of the total bill. Until hospitals and physician salaries are properly funded, healthcare will remain unaffordable for the average citizen-exacerbating inequalities and fueling resentment from both patients and providers.

David is a Duke graduate and a current NIH Academy Fellow at the National Institutes of Health.