I was just recently in Guiyang, the capital of the Guizhou province in China and had a chance to visit the Huaxi District People’s Hospital (HDPH), one of the largest “secondary” hospitals in the province.  Like the rest of China, it has been gripped by the construction boom, recently opening a new surgery center and revamped medical facilities.  They had a terrific EHR from a local vendor — probably more sophisticated than a majority of U.S. hospitals.  Despite being in one of the poorest regions of China, the hospital has more money than it knows what to do with (so says its leadership) and is planning further expansion. The source of its wealth?  A growing middle class that wants more healthcare services and has the ability to pay for it.

Background on hospitals in China

There are approximately 2853 counties in China across 33 provinces.  Each county has a county hospital, a government owned facility that serves the people of that community.  When the patient is too complicated to be managed there, he or she is transferred usually to a secondary hospital.  Patients who need an even higher level of care are sent to the regional tertiary care hospital.  The gatekeeping system is weak — one need not start at the county hospital — and in fact, a majority of the inpatients at GPH came there directly.

A few years ago, China launched a major health reform with the goal of getting to universal coverage.  They got close and nearly every citizen now has health insurance that covers at least part of the costs of their care.   The insurance has substantial co-pays and doesn’t cover more expensive drugs and tests.  What does this mean for a hospital like HDPH?  About 40% of their revenues came from insurance.  And, despite being a government hospital, only about 5% of revenues came from the government.  The rest?  From the patients themselves.  This revenue mix is supposedly pretty typical of county and secondary hospitals across the nation. Out of pocket spending remains substantial, despite universal health insurance.  In fact, in absolute dollar terms, patients are paying about as much out of pocket now as they were before social insurance kicked in.

Huaxi District People’s Hospital

Outpatient clinics, where a typical appointment might last 2-3 minutes, are by far the biggest source of admissions to the hospital.  But the hospital also has an ER.  Actually, two: a medicine ER and a surgery ER.  The patient gets to choose.  Unsure about which you need? There is an “enquiry” nurse who can help.  I peppered the one on duty with various clinical scenarios and was impressed with the speed and confidence with which she made decisions.  The flow is simple: you choose your ER, you register, pay the fee in cash, and go inside to wait.

In the surgery ER, I encountered a young surgeon who was smart and technically competent.  Based on the symptoms I was faking, he decided I likely had appendicitis and suggested surgery.  Appendectomy costs 3200 RMBYs (approximately $528).  For a typical person with social insurance, the deductible co-pay would cost approximately 780 RMBYs ($130) while the rest would be covered by insurance.  You had to pay before they would prep the operating room for you.

On the medical floors, I saw and discussed two patients with the physicians.  The first was in the hospital with an acute MI.  He had been there for several days, receiving anti-coagulation.  No need for a cardiac catheterization, his cardiologist told me, because he did not have ST segment elevation.  Clinically, taking a more cautious approach is reasonable. But, it was also clear that sending him for cardiac catheterization would mean that the hospital would lose a paying customer.  No need to do that unless it is absolutely necessary.  The clinical plan for him was simple:  three weeks in hospital, mostly for observation and medication titration. In the U.S., the average length of stay (LOS) for a non-ST elevation MI is closer to 3 days.

The second woman I saw had come in with swollen legs and a cough.  She had gone to the community hospital, treated (incorrectly) for pneumonia and discharged.  She hadn’t felt better so she came to HDPH. The patient had been in the hospital for a couple of days and had received an EKG, a metabolic panel and basic blood counts.  The plan was to get liver function tests the next day and if that was normal, urine tests the day after.  Making a diagnosis and treating her was likely to be a several week process.  In the U.S., within the first 24 hours, we would have gotten all of the blood and urine tests, EKG, an echocardiogram, chest x-ray, likely lower extremity ultrasounds, and a trial of treatment with a diuretic.  Average length of stay?  Probably 3 to 4 days.

The difference in pace and tempo of caring for patients in China and the U.S. reflects the underlying payment approach.  In the U.S., we get a single payment for the entire hospitalization, so the goal is simple:  get all the tests, start treatment right away (often before we know the diagnosis) and see how the person responds. And most importantly, get them out quickly.  Given what we know about the safety of care in hospitals, quick diagnosis and early discharge is hardly a bad thing.  In China (and in many other countries with a similar payment structure), it’s hard to get motivated to send people home quickly when each additional day is additional revenue.

But the most interesting part was how they do the billing.  Each day, the woman got a bill for her care and had to pay it.  What happens if she runs out of money half way through her work-up, I asked?  She would be sent home.  It’s simple:  daily bill, daily pay.  No credit.  No collection agencies.

A picture of posted prices in front of the ER at Huaxi District People’s Hospital

What can we learn? 

While I strongly prefer our approach of hospital payments, there are a couple of useful things in the fee-for-service approach that China uses that are at least worth reflecting on.  First, the Chinese doctors seemed far more deliberate in their work-up, getting one test at a time and moving forward after the results are back.  The downside of our approach, getting everything at once, is that it leads to a lot of over-testing.  And over-testing causes more false-positives, which lead to more tests and procedures.  Our payment approach makes being deliberate financially imprudent.

The second observation is that while I found the approach to patient charges — the daily bill and the immediate discharge if the patient cannot pay — jarring (to say the least), there is something strangely honest about it.  When I asked one of the physicians about whether it bothered him to send people home who could no longer afford the treatment they needed, he reminded me that in every part of the economy, you have to pay your bill before you receive services.

In America, we do all the tests and treatments without thinking about the costs or the payment.  We believe we are protecting the patient, but too often we are not. For the uninsured patient who gets the bankruptcy-inducing bill a month after she’s discharged?  Not sure we did her any favors by not paying attention to the costs along the way.

China is undergoing a series of social and economic changes that are breathtaking in scope and speed.  The changes in its healthcare system are no different.  In one generation, these publicly owned hospitals have come to function as for-profit entities (not unlike most of our non-profit hospitals) and there’s a lot here that’s interesting to watch.  Patients have lots of “skin-in the game” when it comes to payment, and it keeps prices in check.  You couldn’t charge $100,000 for an appendectomy the way our hospitals do.  Nobody would pay it.  But their price transparency and lots of out of pocket costs are a challenge because most hospitals are a monopoly and there’s no data on quality of care.  It makes it difficult for patients to be consumers.

The Chinese policymakers are beginning to address this by pushing for more competition among hospitals (primarily by allowing in more private hospitals).  My hope is that they add some quality/outcomes data as well.  Then, we can have a much better sense of the degree to which patients can function as consumers, and whether their approach can lead to both low costs and high quality care.

Ashish Jha is an associate professor of health policy and management, Harvard School of Public Health.  He blogs at An Ounce of Evidence and can be found on Twitter @ashishkjha.