China's NHSA Implements 'Two-in-One' Licensing for Secondary and Below Medical Institutions, Endorses Third-Party Service Delegation

VCBeat (WeChat ID: vcbeat) has learned that on June 19, 2018, the National Health Commission and the National Administration of Traditional Chinese Medicine jointly issued the “Notice on Further Reforming and Improving the Approval Process for Medical Institutions and Physicians” (hereinafter referred to as the “Notice”).

"The Notice" is guided by industry and public needs, directly addressing the core issues of the "decentralization, management, and service" reform in the medical field, and proposes specific measures in six areas.

Accelerate the establishment of a mechanism for sharing approval information, further streamline approval procedures, shorten approval timeframes, and improve approval efficiency. By the end of June 2018, electronic registration management will be fully implemented across China. Provincial health administrative departments shall organize the printing and distribution of Medical Institution Practice Licenses and their duplicates, in accordance with the format specifications and technical requirements formulated by the National Health Commission, based on the status of electronic registration management.

Under the premise of ensuring medical quality and safety, medical institutions may commission independently established medical laboratories, pathology diagnosis centers, medical imaging diagnosis centers, centralized sterile supply departments, or other qualified medical institutions to provide services such as medical testing, pathological diagnosis, medical imaging, and sterile supply. The health administrative department may use such commissioning agreements as the basis for registering relevant clinical specialties of the medical institution, and annotate “Agreement” after the listed clinical specialties.Lead hospitals of urban medical groups and county-level medical consortia shall meet the basic standards for corresponding medical institutions and possess service capabilities in clinical laboratory testing, pathological diagnosis, medical imaging, and sterile supply.

Health administrative departments shall strengthen communication and coordination with market regulation departments, and provide information on the names of for-profit medical institutions to market regulation departments in a timely manner as required by work needs. Health administrative departments shall, upon application by for-profit medical institutions, issue certification documents verifying their medical institution name information, thereby facilitating the normal practice and operational activities of such institutions.

Local health administrative departments at all levels shall comprehensively organize the review of application materials for the approval of medical institutions. Any requirements lacking a basis in laws and regulations shall be abolished without exception. Where relevant information can be obtained through information sharing with other departments, applicants shall not be required to submit supporting documents. For applications for practice registration of medical institutions, capital verification certificates are no longer required; instead, applicants shall bear responsibility for the authenticity of their registered capital.

Except for tertiary hospitals, tertiary maternal and child health care hospitals, emergency centers, emergency stations, clinical laboratory centers, Sino-foreign joint venture or cooperative medical institutions, and wholly-owned medical institutions from Hong Kong, Macao, and Taiwan, the health administrative departments will no longer issue the "Approval Certificate for Establishing Medical Institutions" for other medical institutions; instead, the "Medical Institution Practicing License" will be issued only at the time of practice registration.

Prior to applying for practice registration, the sponsor shall conduct in-depth research on the feasibility of establishing the medical institution and its impact on the surrounding area, and reasonably design matters such as site selection and layout, functional positioning, service delivery models, diagnostic and therapeutic specialties, staffing, bed capacity, and equipment and facilities.

When applying for practice registration, the applicant shall submit the materials specified in Items 2 through 7 of Paragraph 1, Article 25 of the Detailed Rules for the Implementation of the Regulations on the Administration of Medical Institutions (excluding proof of capital verification). After accepting an application for practice registration of a medical institution, the health administrative department shall publicize the basic information of the medical institution applying for registration and conduct review in accordance with Article 26 of the Detailed Rules for the Implementation of the Regulations on the Administration of Medical Institutions; if the review is passed, a “Medical Institution Practice License” shall be issued; if the review fails, the applicant shall be notified in writing of the review results and the reasons for disapproval.
　

In accordance with the Maternal and Infant Health Care Law, its implementing measures, and other relevant regulations, obstetricians and gynecologists who have completed training in maternal and infant health care technology and passed the corresponding assessment shall have the relevant information regarding maternal and infant health care technical services endorsed on their Physician Practice Certificate; a separate Certificate of Qualification for Maternal and Infant Health Care Technology Assessment will no longer be issued.

The issuance of this “Notice” places particular emphasis on advancing the “decentralization, control, and service” reform, further exploring initiatives in electronic registration, registration of diagnosis and treatment specialties, and naming of for-profit medical institutions, while refining and promoting proven practices and experiences.

At this year’s Two Sessions, Premier Li Keqiang put forward the overall requirement of “Six Ones” for deepening the reform to streamline administration, delegate power, improve regulation, and upgrade services (halve the time required for business registration; halve the time required for project approval; achieve one-stop online government services; strive to ensure that enterprises and the public need to enter only one door to handle affairs; implement the “at most one visit” principle; and cancel all certifications not based on laws or regulations).

On May 15, 2018, the General Office of the Communist Party of China Central Committee and the General Office of the State Council issued the “Guiding Opinions on Deepening the Reform to Make Approval Services More Convenient for the Public,” requiring all localities and departments to intensify efforts in transforming government functions and streamlining administration and delegating power, so as to promote comprehensive and profound changes in the philosophy, institutions, and work style of approval services, and strive to establish an approval service model characterized by “lenient entry, efficient processing, strict supervision, public convenience, and transparency.”

Against the backdrop of reform, we can identify the following key points in the content of the Notice:

The first item of the notice emphasizes further advancing the electronic registration management of medical institutions and physician information;

The second item emphasizes simplifying the application materials for the approval of medical institutions;

The fifth item emphasizes that health administrative departments will no longer issue the "Approval Certificate for Establishing Medical Institutions," but will only issue the "Medical Institution Practice License" during practice registration.

A key term here is “information-sharing mechanism.” Integrating applicant information across various approval processes is the most effective way to streamline procedures and eliminate the need for applicants to make repeated in-person visits at multiple administrative levels. By analogy, this principle can be applied to the establishment of resident health records. If residents’ diagnosis and treatment data are incorporated into their health records and comprehensive interoperability of clinical information among healthcare institutions is achieved, the implementation of tiered diagnosis and treatment may become considerably easier.

Under the second item, “Optimizing the Registration of Diagnosis and Treatment Subjects in Medical Institutions,” the Notice stipulates that medical institutions may outsource services such as laboratory testing, pathology, medical imaging, and sterilization to third-party medical institutions or other qualified medical institutions. Furthermore, “health administrative departments may accept such outsourcing agreements as the basis for registering the relevant diagnosis and treatment subjects of the medical institution.” In other words, these outsourcing agreements are officially recognized for the purpose of registering diagnosis and treatment subjects.

However, it must be emphasized that the lead hospitals in urban medical groups and county-level medical communities must possess all the aforementioned capabilities. This means that services such as laboratory testing, pathology, medical imaging, and sterilization at these institutions cannot be “outsourced.” For medical consortia, this further underscores the importance of the quality of medical services provided by tertiary hospitals.

Based on previous policies, in February 2017, the former National Health and Family Planning Commission issued the "Decision on Amending the Detailed Rules for the Implementation of the Regulations on the Administration of Medical Institutions," adding five categories of medical institutions: medical laboratory testing centers, pathology diagnosis centers, medical imaging diagnosis centers, hemodialysis centers, and hospice care centers.

In August 2017, the National Health and Family Planning Commission issued the “Notice on Deepening the Reform of ‘Delegating Power, Improving Regulation, and Upgrading Services’ to Stimulate Investment Vitality in the Medical Sector,” adding five categories of independently established medical institutions, including: rehabilitation medical centers, nursing centers, sterile supply centers, small and medium-sized ophthalmic hospitals, and health examination centers.

According to the *White Paper on China’s Third-Party Medical Services Industry 2018* previously released by VCBeat, the transformation of third-party medical service providers has been primarily driven by changes in market demand and regulations, with technological advancements playing a relatively minor role. The issuance of the current document further promotes the development of third-party medical institutions.

The Notice facilitates private capital’s entry into the healthcare market in three key areas. To some extent, this is favorable for entrepreneurs and also beneficial for physicians. It is no longer novel for doctors to leave the public system to start their own practices or engage in multi-site practice. Separating services that require large-scale equipment, such as laboratory testing and medical imaging, from core clinical services, along with further simplification of approval processes and the implementation of the “two-in-one license” policy, helps entrepreneurs reduce both capital investment and time costs. As a result, more small yet specialized clinics are likely to emerge in the market.