A Xiamen hospital operated by Taiwan’s Chang Gung was supposed to spark mainland reforms. But the barriers are high.
Xu Heqian, Caijing 18 March 2009
It’s been said that the medical services industry on the Chinese mainland needs a “catfish effect” for system reform – a strong element, or catfish, that pushes schools of small-fry providers to improve, benefiting the general public.
Taiwan-based Chang Gung Hospital, which operates a mainland branch in Xiamen and wants to expand to other cities, was supposed to be the perfect catfish. With 33 years of experience, through good times and bad, it’s been seen as a potential model for private hospitals in China.
But Xiamen Chang Gung, straddling the western shore of the Taiwan Strait in Fujian Province, is sick. The 4-year-old facility has been weakened by major hurdles – from doctor recruitment issues to medical supply quotas -- since its inception. Now it’s running a deficit, and only about 100 of its 500 beds are occupied.
In Taiwan, Chang Gung is registered under a non-profit, incorporated foundation, which means all revenues must be used for medical services or charities – and can never be spent on private projects or investments outside health care. The company follows three basic principles: operate on a large scale, serve only low- to moderate-income patients, and combine academic research with enterprise-style management.
Mainland Hurdles
But running a hospital on the mainland has proven more complicated for Chang Gung founder Wang Yongqing, who decided to invest in the medical sector after his father died tragically while awaiting surgery. The hospital bears his father’s name.
Wang hoped to copy the successful Taiwan model when he established Xiamen Chang Gung jointly with a mainland public institution in 2005. Troubles surfaced soon after its launch.
For starters, he discovered that incorporated foundations don’t exist on the mainland. A hospital’s only options are to register as a non-profit or a for-profit institution. Since a non-profit has to adopt the same financial management system as China’s public hospitals, though, Wang chose to register the Xiamen facility as a for-profit.
But that was just the first hurdle. Wang’s mainland hospital also struggled to find doctors, since mainland doctors are not necessarily able or even willing to work for a Taiwan-based health care provider.
A former Chang Gung consultant, Wu Delang, explained that mainland medical schools generally steer doctors, nurses and other medical specialists into public hospitals that are within their specific spheres of influence. Each graduate may be expected to serve a single institution for life.
Moreover, a Taiwanese hospital can find it difficult to bring well-known doctors on board because mainland facilities offer better research-related compensation from the government, opportunities for career advancement, and honorary titles.
“All these obstacles set high hurdles for market entry. How can we afford housing for doctors as the local public hospitals do?” said a former executive director of Xiamen Chang Gung, Zheng Minghui. “We had to recruit from outside Xiamen or transfer Taiwanese doctors... which increased our costs.”
In addition, the Chinese government – through the central government’s Ministry of Health or provincial health departments -- sets quotas for medical supply imports that affected Wang’s mainland initiative. Due to the quotas, any hospital has to factor in restrictions when ordering equipment and supplies.
Regulatory issues also determine a hospital’s size, as Wang learned. A source who asked to remain anonymous told Caijing about the case of a domestic private health care company that once applied to local authorities for a 500-bed facility. It was approved for only 200 beds, thwarting the company’s goal to build a first-class hospital and offer major surgery services.
Another problem is that medical insurance covers only a small part of medical expenses. “In-patient hospital care payments through medical insurance in Xiamen are only one-third of those in Taiwan,” said Wu. “Out-patient payments are only one-fourth Taiwan’s. But medicine and hospital facility costs are the same as in Taiwan, if not higher.”
“These problems cannot be resolved under the current medical services system,” said Wu. “So we have to make Xiamen Chang Gung Hospital work before expanding to (the cities of) Zhengzhou and Ningbo.”
But Wu emphasized that Xiamen Chang Gung will not get involved in offering special medical services and expensive medical checks – two options that could pull the hospital out of a deficit, but alter its focus.
“If we offer the same” services as Chinese public hospitals, “then why did we come here?” Wu said.
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Is Chang Gung Good Medicine for Reform?
A Xiamen hospital operated by Taiwan’s Chang Gung was supposed to spark mainland reforms. But the barriers are high.
Xu Heqian, Caijing
18 March 2009
It’s been said that the medical services industry on the Chinese mainland needs a “catfish effect” for system reform – a strong element, or catfish, that pushes schools of small-fry providers to improve, benefiting the general public.
Taiwan-based Chang Gung Hospital, which operates a mainland branch in Xiamen and wants to expand to other cities, was supposed to be the perfect catfish. With 33 years of experience, through good times and bad, it’s been seen as a potential model for private hospitals in China.
But Xiamen Chang Gung, straddling the western shore of the Taiwan Strait in Fujian Province, is sick. The 4-year-old facility has been weakened by major hurdles – from doctor recruitment issues to medical supply quotas -- since its inception. Now it’s running a deficit, and only about 100 of its 500 beds are occupied.
In Taiwan, Chang Gung is registered under a non-profit, incorporated foundation, which means all revenues must be used for medical services or charities – and can never be spent on private projects or investments outside health care. The company follows three basic principles: operate on a large scale, serve only low- to moderate-income patients, and combine academic research with enterprise-style management.
Mainland Hurdles
But running a hospital on the mainland has proven more complicated for Chang Gung founder Wang Yongqing, who decided to invest in the medical sector after his father died tragically while awaiting surgery. The hospital bears his father’s name.
Wang hoped to copy the successful Taiwan model when he established Xiamen Chang Gung jointly with a mainland public institution in 2005. Troubles surfaced soon after its launch.
For starters, he discovered that incorporated foundations don’t exist on the mainland. A hospital’s only options are to register as a non-profit or a for-profit institution. Since a non-profit has to adopt the same financial management system as China’s public hospitals, though, Wang chose to register the Xiamen facility as a for-profit.
But that was just the first hurdle. Wang’s mainland hospital also struggled to find doctors, since mainland doctors are not necessarily able or even willing to work for a Taiwan-based health care provider.
A former Chang Gung consultant, Wu Delang, explained that mainland medical schools generally steer doctors, nurses and other medical specialists into public hospitals that are within their specific spheres of influence. Each graduate may be expected to serve a single institution for life.
Moreover, a Taiwanese hospital can find it difficult to bring well-known doctors on board because mainland facilities offer better research-related compensation from the government, opportunities for career advancement, and honorary titles.
“All these obstacles set high hurdles for market entry. How can we afford housing for doctors as the local public hospitals do?” said a former executive director of Xiamen Chang Gung, Zheng Minghui. “We had to recruit from outside Xiamen or transfer Taiwanese doctors... which increased our costs.”
In addition, the Chinese government – through the central government’s Ministry of Health or provincial health departments -- sets quotas for medical supply imports that affected Wang’s mainland initiative. Due to the quotas, any hospital has to factor in restrictions when ordering equipment and supplies.
Regulatory issues also determine a hospital’s size, as Wang learned. A source who asked to remain anonymous told Caijing about the case of a domestic private health care company that once applied to local authorities for a 500-bed facility. It was approved for only 200 beds, thwarting the company’s goal to build a first-class hospital and offer major surgery services.
Another problem is that medical insurance covers only a small part of medical expenses. “In-patient hospital care payments through medical insurance in Xiamen are only one-third of those in Taiwan,” said Wu. “Out-patient payments are only one-fourth Taiwan’s. But medicine and hospital facility costs are the same as in Taiwan, if not higher.”
“These problems cannot be resolved under the current medical services system,” said Wu. “So we have to make Xiamen Chang Gung Hospital work before expanding to (the cities of) Zhengzhou and Ningbo.”
But Wu emphasized that Xiamen Chang Gung will not get involved in offering special medical services and expensive medical checks – two options that could pull the hospital out of a deficit, but alter its focus.
“If we offer the same” services as Chinese public hospitals, “then why did we come here?” Wu said.
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