China ramps up healthcare reform with pilot pricing scheme (updated)

Hygeia Healthcare Holdings Co

31/08/2021 16:48

* Programme involves both price increases and decreases
    * Analysts say programme allows long-term price rises
    * National expansion of pilot programme by 2025

 (Adds analyst comment and market reaction)
    BEIJING, Aug 31 (Reuters) - China stepped up its reform of
public healthcare service pricing mechanisms with the
announcement of a pilot programme aimed at ensuring proper
compensation for service providers and affordable costs for
consumers.
    The plan comes after China had blocked some channels that
allowed public hospitals to earn revenues from medical devices
and drug sales. The measure reduced over-prescription and
illegal rebates but also increased public healthcare operators'
reliance on medical services to support their staff.
    The new scheme is also aimed at rectifying weaknesses in
current pricing mechanisms, where some services are priced too
low and medical professionals do not participate in the
government's price-setting process sufficiently.
    "(Price increase) will be inevitable to make sure doctors'
income remains reasonable," said Zhao Bing, a China Renaissance
Securities analyst, noting reduced revenue streams for public
healthcare operators due to restrictions in sales of drugs and
medical devices.
    Zhao said the rule does not necessarily mean consumer costs
will also increase, as state insurance will help cover the bill.
    The pilot programme guideline will specify how public
hospitals should adjust service prices and involve both
increases and decreases, but will avoid excessive increases in
costs, according to the guideline issued late on Wednesday.
    The government plans to start the pilot programme in five
cities before national launch by 2025, the guideline said.
    Under the scheme, authorities will set guide pricing for
most services at public institutions, and services eligible for
market-driven pricing will be limited. 
    Private hospitals will be allowed to use market-driven
pricing plans, but China will strengthen its regulation and,
when necessary, take action such as pricing investigations,
summoning hospital operators and public disclosure of price
irregularities, according to the guideline.
    Shares in private service provider Aier Eye Hospitals Group
 300015.SZ  fell as much as 4.4% on Wednesday before closing
1.4% higher. Hygeia Healthcare  6078.HK  tumbled 14.8% earlier
but pared losses to close down 2.1%.

 (Reporting by Roxanne Liu and Brenda Goh; Editing by Miyoung
Kim)
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