Chongqing Implements Zero Drug Markup Policy in All Public Hospitals by End of August 2017, Establishing a New Compensation Mechanism Based on Government Subsidies and Medical Service Fees

As Beijing advanced its healthcare reforms, all public hospitals in Chongqing also eliminated drug markups and established a new mechanism for medical service pricing and government subsidies.

On June 13, the General Office of the Chongqing Municipal People’s Government publicly released the “Key Tasks for Deepening Healthcare System Reform in Chongqing Municipality in 2017” (hereinafter referred to as the “Tasks”), led by the Municipal Health and Family Planning Commission and the Municipal State-owned Assets Supervision and Administration Commission, with support from the Municipal Finance Bureau and the Municipal Human Resources and Social Security Bureau.

Focusing closely on the key tasks identified by the Municipal Party Committee and the Municipal People’s Government, we will leverage the pilot program for comprehensive healthcare system reform as a strategic entry point, drive progress through reform and innovation, strengthen the coordinated linkage among medical services, health insurance, and pharmaceuticals (the “Three Medicals”), refine relevant policies, rigorously implement measures, prioritize reform outcomes, strive to achieve substantive breakthroughs in critical links and key areas, and tangibly enhance the public’s sense of gain.

How are medical services priced? What is the new mechanism for government subsidies?

1. Expand the scope of public hospital reform.By the end of August 2017, all public hospitals shall initiate reforms to comprehensively eliminate drug markups (excluding traditional Chinese medicine decoction pieces), establish a new compensation mechanism funded through service fees and government subsidies, and facilitate a smooth transition from the old operational model to the new one.

Implement the government’s responsibility for funding public hospitals by incorporating into the government fiscal budget the expenditures for basic infrastructure construction and procurement of large-scale equipment in accordance with planning, development of key disciplines, talent training, costs for retired personnel as stipulated by national regulations, policy-related losses, and public health tasks. Policy-related debts of public hospitals, for which the government bears funding responsibility, shall be brought under government management and gradually resolved.

Strengthen the development of Zhongxian, Dianjiang County, and Wushan County as demonstration counties for public hospital reform; actively apply for designation as national demonstration counties for comprehensive public hospital reform; encourage breakthroughs in key reform areas such as tiered diagnosis and treatment, personnel and compensation systems, and modern hospital management; and leverage the leading role of these demonstration counties in driving reform.

2. Improve the management system of public hospitals.Research and formulate the modern hospital management system and a list of management responsibilities for public hospitals, and continuously improve management policies and measures.

All districts and counties (including autonomous counties, hereinafter referred to as “districts and counties”) shall establish Public Hospital Management Committees to perform governmental functions in hospital administration, facilitate the transition of government roles from direct management to industry oversight, and build a management and governance framework for public hospitals characterized by coordinated, checks-and-balances, and mutually reinforcing decision-making, execution, and supervision mechanisms.

Actively explore reforms to the corporate governance structure of public hospitals, and implement autonomy in internal personnel management, organizational setup, income distribution, recommendation of deputy leaders, appointment and removal of middle-level cadres, and formulation of annual budgets. Improve internal decision-making and check-and-balance mechanisms in public hospitals, refine the selection and appointment mechanism for hospital directors, and accelerate the implementation of the chief accountant system. Strengthen refined management, promote third-party audits in municipal public hospitals, and improve the financial reporting system. Continue to carry out the Action Plan for Improving Medical Services to build harmonious doctor-patient relationships.

3. Deepen the reform of the personnel and compensation system.Issued an implementation plan for launching pilot reforms of the compensation system in public hospitals, selecting three districts and counties to carry out the pilot program.

In accordance with the requirement to “allow medical and health institutions to exceed the current wage control levels for public institutions, and to primarily use revenue from medical services—after deducting costs and allocating various funds as prescribed—for personnel rewards,” rationally determine the compensation levels and total performance-based pay for public hospitals, and gradually increase the proportion of revenue from medical services, such as consultation fees, nursing fees, and surgical fees, in the hospitals’ total income.

Establish a performance evaluation system oriented toward public welfare and implement the autonomy of public hospitals in distributing performance-based wages. Innovate staff establishment management in public hospitals and launch pilot programs for innovative establishment management in selected Grade 3A hospitals.

Strengthen public (assessment-based) recruitment for urgently needed, scarce, and high-level talents, and promote the autonomous and law-based employment practices of medical institutions.

4. Prudently advance the adjustment of medical service prices.In accordance with the principle of “simulation first, pilot testing second, and full implementation last,” pricing for medical service items will be rolled out in batches within the year.

Accelerate the rationalization of price ratios for medical services, reduce the prices of examinations and tests using large-scale medical equipment, and reasonably increase the prices of medical service items that reflect the labor and technical value of healthcare professionals, such as nursing care and surgical fees.

Pilot programs for special-needs medical services are being explored and advanced in select hospitals, with a list of non-basic medical services—characterized by robust market competition and strong demand for personalized care—being published and subject to market-adjusted pricing.

Strengthen the coordinated integration of policies on medical service pricing, health insurance payment, cost containment, and tiered diagnosis and treatment; incorporate price adjustments for medical services into health insurance reimbursement in accordance with regulations, so as to ensure the sustainable development of healthcare institutions, the affordability of health insurance funds, and no overall increase in the financial burden on the public.

5. Strictly control the unreasonable growth of medical expenses.Clarify the citywide annual targets for controlling medical expenses, and promptly issue cost-control indicators to medical institutions at all levels and of all types. Strictly enforce cost-containment regulations, effectively implement cost-control measures, and continuously strengthen hospitals’ intrinsic motivation to control costs.

Establish a system for certified medical insurance physicians and maintain individual records of physicians’ diagnostic and treatment behaviors, implementing a penalty point system for violations. Conduct prescription reviews to strictly investigate practices such as “excessive prescribing and excessive testing,” and impose focused monitoring on the irrational use of high-priced adjuvant and nutritional drugs. Deepen the implementation of clinical pathway management and expand its coverage.

Strengthen supervision and inspection, and regularly publish rankings of municipal- and district/county-level hospitals based on their performance in controlling medical expenses. The growth rate of medical expenses in public hospitals across the city shall be kept below 10%, the proportion of pharmaceutical costs (excluding traditional Chinese medicine decoction pieces) shall be reduced to 30% overall, and the proportion of revenue from sanitary materials in total medical revenue (excluding pharmaceutical revenue) shall be reduced to below 20%. Enhance performance appraisal of public hospitals by incorporating indicators such as cost containment, control over the scale of public hospital construction, and the proportion of out-of-pocket expenses for items outside the medical insurance catalog into the assessment criteria. Appraisal results shall be linked to government subsidies, the total amount of performance-based wages in public hospitals, and hospital accreditation ratings. Selected districts and counties shall serve as pilot sites for citywide public hospital performance appraisals.

1. Actively promote the family doctor contract service,Focusing on chronic diseases and key populations, fully mobilize the enthusiasm of contracting entities and the initiative of contracted individuals, guide residents or families to voluntarily sign contracts, and vigorouslyPromote the “1+1+1” combined contracting model.

Optimize the substance of contracted services by centering on basic medical care, public health, and health management. Develop contracted service packages tailored to health needs across the entire life cycle, clearly delineating free services, fee-based services, and personalized premium services to provide the public with greater choice. Strengthen performance evaluation of contracted services and improve the mechanism for distributing revenues generated from these services.

Family doctor contract services cover more than 20% of the permanent urban population and more than 45% of the permanent rural population, with a coverage rate of over 60% among key populations. The contract service coverage rate reaches 100% for registered impoverished households, families with special family planning circumstances, and patients under management for hypertension and tuberculosis.

2. Improve the operational mechanisms of medical consortia.All tertiary hospitals shall fully participate in the construction of medical consortia (hereinafter referred to as “medical consortia”) and play a leading role. Further clarify the functional positioning and the relationships of responsibilities, rights, and interests among medical institutions within the medical consortia, improve the operational mechanisms of medical consortia through various models such as integration, trusteeship, and medical collaboration, substantiate urban medical consortia, county-level medical communities, specialty alliances, and remote diagnosis and treatment, and strengthen shared responsibility and benefit-sharing.

Implement systems such as assigning core hospital management personnel to grassroots positions, deploying professional technical teams to provide support at the grassroots level, and sending grassroots staff to core hospitals for advanced training, thereby promoting the rational flow of high-quality resources, including talent, within the medical consortium. Execute bilateral referral agreements within the medical consortium, establish and improve referral indications, standards, and procedures for common and frequently occurring diseases, and facilitate appropriate patient referrals within the consortium. Enhance the information interoperability system centered on electronic medical records and electronic prescriptions, develop telemedicine services, and remove barriers to data resource sharing within the medical consortium.

Improve and develop telemedicine, promote the telemedicine collaboration network, promote full coverage of telemedicine in county-level public hospitals in poverty-stricken counties. Launch pilot programs for a continuous service model integrating diagnosis and treatment, rehabilitation, and long-term care.Select certain districts/counties and municipal-level hospitals to serve as demonstration districts (units) for district/county medical communities and urban medical consortia, respectively.

By signing up with family doctors and advancing the development of medical consortia, improve supporting policies for the tiered diagnosis and treatment system. Expand the scope of conditions for initial consultations at primary care institutions according to local conditions,Develop and refine referral criteria for 50 medical conditions, along with flowcharts for bidirectional patient referrals.。

Improve the primary care system at the grassroots level by implementing a first-contact responsibility system. Contracted residents seeking medical care outside their designated provider group must be referred by their family doctor; those who do so without such a referral will not be eligible for preferential policies related to tiered diagnosis and treatment, thereby guiding residents to change their healthcare-seeking habits.

Establish fee standards for family doctor contracted services and improve the payment and charging mechanisms for these services. Further leverage the guiding and regulatory role of medical insurance policies by refining differentiated reimbursement policies across medical institutions of varying tiers. Provide preferential reimbursement treatment for patients referred in accordance with regulations, and link the performance assessment and disbursement of medical insurance funds to medical institutions’ fulfillment of diagnostic and treatment responsibilities as well as their referral practices. Allow primary care institutions to stock a certain number of non-essential medicines, strengthen medication coordination between secondary-and-above hospitals and primary care institutions, and actively promote extended prescriptions and long-term prescriptions.

Strengthen the comprehensive capacity and discipline development of public hospitals in districts and counties, and enhance the construction of clinical departments specializing in common and frequently occurring diseases as well as scarce specialty clinical disciplines within county-level jurisdictions. The proportion of patients seeking medical care within their respective counties shall reach 88%.