Eight Key Terms Interpreting the Experience of Deepening China's Medical Reform: Policy Prospectus

“Three-Medical” Coordination: Integrated Reform of Healthcare Services, Medical Insurance, and Pharmaceutical DistributionThe “Three-Medical” coordination refers to the integrated reform of the healthcare service system, the medical insurance system, and the pharmaceutical distribution system. It is regarded as the key to deepening the comprehensive healthcare reform. Its significance lies in adopting a holistic approach to healthcare services, medical insurance, and pharmaceuticals, thereby addressing challenges related to healthcare access, medication availability, and health protection. Furthermore, the “Three-Medical” coordination spans multiple dimensions of healthcare reform. Its underlying logic is to reduce the disproportionately high share of pharmaceuticals in the healthcare value chain, thereby creating room for adjusting the prices of healthcare services. This allows the professional value of medical personnel to be properly recognized through their service fees rather than relying on kickbacks from pharmaceutical manufacturers, ultimately normalizing the entire healthcare and pharmaceutical value chain.

The so-called “Two-Invoice System” refers to a mechanism whereby, when public medical institutions procure pharmaceuticals, the manufacturer issues one invoice to the distributor, and the distributor issues another invoice to the medical institution. This aims to reduce distribution links and curb artificially inflated drug prices. Currently, provinces such as Zhejiang, Fujian, and Guangdong are exploring reforms under the Two-Invoice System. The Two-Invoice System is merely one component of a comprehensive package of healthcare reforms; only through the synergistic effect of these combined measures can the relationship between medical services and pharmaceuticals be transformed, ultimately addressing public concerns over high drug costs and limited access to medications. Accordingly, the “Opinions” specify that public hospitals should implement categorized drug procurement, proposing that reasonable procurement prices be established through tendering, negotiations, direct online listing, and designated production, depending on the specific characteristics of different drugs. Adhering to the principle of centralized volume-based procurement, essential medicines and non-patented drugs with high clinical usage, significant procurement expenditures, and multiple manufacturers shall be centrally tendered and procured by provincial-level drug procurement agencies. Meanwhile, pilot cities for comprehensive public hospital reform may conduct independent procurement at the municipal level via provincial drug centralized procurement platforms.

The recently released "Opinions" propose accelerating the development of a tiered diagnosis and treatment system, with family doctor contract services and medical consortia serving as key levers. The most significant challenge in China's healthcare sector is the irrational allocation of resources, and implementing a tiered diagnosis and treatment model is crucial to addressing this issue. Family doctor contract services represent a major initiative within this tiered system. Family doctors establish health records for residents and provide health education and lifestyle interventions tailored to individual health conditions to achieve disease prevention. They are also responsible for treating minor ailments such as colds and fevers, referring patients with serious conditions to specialized care, and conducting long-term monitoring and management of chronic diseases. This requires qualified family doctors to undergo professional training as general practitioners (GPs) to effectively serve as the first line of defense in resident health. However, there is currently a shortage of GPs, largely due to the lack of emphasis on general practice and the relatively low income levels in primary healthcare institutions. To successfully promote the tiered diagnosis and treatment system and the family doctor model, it is essential to strengthen GP training and implement measures such as income subsidies.

Over the eight years since the launch of China’s new healthcare reform, medical insurance has achieved extensive coverage. However, with hard targets such as an enrollment rate exceeding 95% and an inpatient reimbursement ratio of approximately 75% (within the scope of policies for urban and rural resident basic medical insurance), the pooled medical insurance fund faces mounting pressure due to population aging and a shrinking labor force. Therefore, in addition to implementing tiered diagnosis and treatment and the family doctor system to “curb expenditures,” it is also essential to “expand revenue sources.”

“The Opinion” proposes to entrust qualified commercial insurance institutions and other social forces to participate in the administration of basic medical insurance services through government procurement of services. Meanwhile, it encourages the development of commercial health insurance.

The “Opinions” emphasize the need to implement operational and managerial autonomy for public hospitals. Government functions should be transformed, with administrative authorities at all levels shifting from direct management of public hospitals to industry-wide oversight, while strengthening their responsibilities in formulating policies, regulations, industry plans, and standards, as well as providing supervision and guidance. A separation between hospital ownership and operational rights shall be implemented, ultimately establishing a public hospital management system characterized by clear division of labor, mutual checks and balances, and synergistic promotion among decision-making, execution, and supervision.

Establishing an incentive and constraint mechanism is a crucial step in advancing the professionalization of public hospital presidents. Meanwhile, the professionalization of public hospital presidents remains a long-term objective of public hospital reform. The "Opinions" also propose the regular organization of performance evaluations for public hospitals, as well as annual and term-based target responsibility assessments for hospital presidents. The assessment results will be linked to hospital fiscal subsidies, health insurance payments, the total amount of performance-based wages, and the compensation, appointment, removal, rewards, and penalties of hospital presidents, thereby establishing an incentive and constraint mechanism.

Respecting the law of value and ensuring that the labor value of medical personnel is properly recognized is key to rebuilding the public-welfare nature of public hospitals. Medical practice should return to its professional essence, rather than relying on product promotion to sustain hospital operations. Regarding the compensation and benefits of medical staff, the "Opinions" propose that local authorities may reasonably determine the salary levels of public hospitals in accordance with relevant regulations and actual conditions, and gradually increase the proportion of personnel expenditures within operational expenses. Meanwhile, the "Opinions" stipulate that the determination of total salary quotas and the distribution of individual performance-based pay shall not be linked to business revenues generated from pharmaceuticals, consumables, large-scale medical examinations, or other services. Compensation distribution should reflect factors such as the technical complexity, risk, and contribution associated with each position, and it is strictly prohibited to set revenue-generation targets for medical personnel.

“Internet + Healthcare” is a healthcare development model that encompasses various forms of health management services, including health education, medical information queries, electronic health records, disease risk assessment, online disease consultation, e-prescriptions, remote consultations, and remote treatment and rehabilitation, all delivered via internet-based platforms and technologies. These services help address the contradiction between the uneven distribution of medical resources in China and the growing public demand for healthcare. However, the current internet healthcare industry lacks industry standards, mechanisms to ensure the authenticity and reliability of information, and frameworks for determining liability. As a result, the internet has not yet fully leveraged its advantages of convenience, speed, and cost-efficiency in the healthcare sector, and its application remains primarily focused on advancing healthcare informatization.

The "Opinions" propose strengthening the infrastructure for health information. This involves building a four-tiered national, provincial, municipal, and county-level population health information platform that enables interoperability, data sharing, and business coordination; improving core foundational databases centered on residents' electronic health records, electronic medical records, and electronic prescriptions; opening up channels for data resource sharing among various medical and healthcare institutions; and enhancing tiered diagnosis and treatment information systems based on internet and big data technologies, thereby providing technical support for achieving continuous, coordinated, and integrated medical and healthcare services.

In recent years, as Chinese society has transitioned from a subsistence-level to a moderately prosperous standard of living, and with the aging population problem intensifying, the traditional medical model has failed to meet the increasingly diverse and personalized health needs of modern people. This has spurred the emergence and development of the “socially operated healthcare” model. Encouraging and guiding socially operated healthcare has become an important approach to deepening China’s healthcare system reform, optimizing resource allocation, increasing resource supply, and meeting the public’s diverse needs for medical and health services. The “Opinions” propose developing and regulating socially operated healthcare to meet diversified medical service demands, including improving the development level of socially operated healthcare and strengthening standardized management.