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Private medical care gets boost

By  LIU JIE and WEI TIAN  (China Daily)

08:05, October 08, 2012

The details of a policy that aims to encourage private investment in Beijing's medical care sector are expected to be effective by the end of this month.

Issued by the Beijing municipal government at the end of August, the details reflect a new and long-anticipated development of the country’s medical reform.

In early August, Wenzhou, in Zhejiang province, developed new plans to offer incentive policies for investors which could establish the city as the private medical capital of China.

Like Beijing and Wenzhou, several other local governments are competing to lure private, including foreign, capital into their healthcare regimes.

It’s sure to be a favorable environment for private investors in China. However, a report conducted by McKinsey & Co said it is a complex set of opportunities and challenges for existing private hospitals, as well as for potential investors in this sector.

According to the report, private hospitals in China offer promising opportunities for patients, operators and investors along with benefits to the healthcare system. They give patients the chance to enjoy better care and service and give operators and investors the opportunity to capture a share of an immense and growing market.

They also benefit the overall healthcare system by relieving some of the burden on public facilities. In 2011, there were about 100 million inpatient discharges from both public and private hospitals in addition to 2 billion outpatient visits. The contribution of the private sector is set to double over the next five years, said Alexander Ng, an associate partner in McKinsey’s Hong Kong office.

The Ministry of Health has set a target that, by 2015, private hospitals should be managing 20 percent of China’s bed and inpatient and outpatient volume, which is an increase from 11 percent of beds and around 8 percent of inpatient and outpatient activities now.

However, due to inadequate policies and incentives, private operators and investors have been faced with a series of challenges. For example, reputable physicians have been reluctant to practice in local or foreign-invested private hospitals and, until this year, the government restricted foreign investors to a 70 percent ownership share in such facilities.

Foreign investors aiming to establish successful joint ventures have struggled because of the staffing problems and investment restrictions, as well as burdensome government approval procedures, said Claudia Suessmuth Dyckerhoff, a partner at McKinsey Shanghai.

To get rid of such obstacles, the local governments have formulated a series of incentive policies on land use, taxation and favorable payback conditions for investors. Foreign investors are no longer restricted to operating through 70-30 joint ventures with local partners. Pilot projects under way in specific provinces, including Guangdong, Yunnan, Sichuan, Henan and Hainan, allow doctors to practice in multiple locations, including private hospitals.

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