Exclusive Analysis: Market-Based Pricing for Three Categories of Medical Services Unlocks New Opportunities

On November 9, the Beijing Municipal Development and Reform Commission, the Municipal Health and Family Planning Commission, and the Municipal Human Resources and Social Security Bureau issued relevant documents, deregulating the prices of special-needs medical services provided by public medical institutions, newly added medical services, and certain medical service items.Starting from January 1, 2017, Beijing will deregulate the prices of special-needs medical services, newly added medical services, and certain other medical service items, allowing hospitals to set their own prices.

In fact, the "Opinions on Advancing the Reform of Medical Service Prices" were already issued this July regardingPromote the relevant regulations on the classified management of medical service prices.

The guidelines establish different pricing mechanisms for basic medical services and special-needs medical services provided by public medical institutions, with basic medical services still being priced in accordance withgovernment-guided pricing, andSpecial medical services and other medical services with relatively sufficient market competition and strong personalized demands shall be subject to market-regulated pricing.

Under the premise of healthcare reform, public hospitals are advancing the separation of medical services from pharmaceutical sales, with the abolition of drug markups serving as a major policy direction. How to compensate for the resulting revenue gap after eliminating drug markups remains a key challenge in the reform.

Subsidies provided through national fiscal channels have transformed the operational funding model from three sources—service fees, drug markups, and government subsidies—to two sources: service fees and government subsidies. Taking a specific region as an example, the Plan stipulates that hospitals be compensated through three mechanisms—adjustments to medical service prices, fiscal subsidies, and hospital absorption—with cost-sharing ratios of 7:2:1, respectively.

Under the scheme, government subsidies account for only 20%, meaning that the vast majority of the remaining funding must be covered by healthcare institutions and the government through medical services.

However, State Council policies stipulate that the proportion of special-needs medical services provided by healthcare institutions shall not exceed 10% of their total medical services. Consequently, healthcare institutions cannot implement special-needs medical services on a large scale but will only offer them selectively, such as designated-surgeon surgeries, overtime surgeries, comprehensive nursing care, special-needs wards, and expert outpatient clinics. Therefore, there is limited room for healthcare institutions to increase revenue through special-needs medical services.

In terms of the categories of medical services with deregulated prices, in addition to the first category—special-needs medical services provided by public hospitals—the scope also includes newly added medical service items such as endobronchial ultrasound (EBUS), blood and fluid warming therapy, histocompatibility testing (HLA antibody detection), as well as services catering to personalized demands, such as cosmetic surgery and plantar massage.

Taking non-contracted models as an example, plastic and cosmetic surgery in public Grade 3A hospitals typically exists as a clinical department with minimal market promotion. Although these public hospitals often possess superior aesthetic medical equipment compared to private institutions, they fall significantly short in terms of marketing, environmental conditions, and overall patient experience. If competition were based solely on price, the high pricing structures of public hospitals would struggle to compete with those of private hospitals.

In the past two years, the medical aesthetics market and the rehabilitation and elderly care market have continued to heat up. The target audience for services such as cosmetic surgery and rehabilitation medicine is often high-net-worth individuals,By adopting market-adjusted pricing through an open market,Unleashing the Market Competitiveness of Public Hospitals，This enables cosmetic and reconstructive surgery and rehabilitation services in more public hospitals to gradually transition from the margins to become revenue-generating departments.

In the “Notice on Liberalizing Prices for Special-Need Medical Services at Public Medical Institutions in This City,” jointly issued by multiple departments, it is explicitly stipulated that “the scale and volume shall be strictly controlled, and this shall not affect the supply scale and service quality of basic medical services.”volume".Public hospitals should establish designated areas for special-needs medical services, clearly demarcated with prominent signage.

For example, after some public hospitals introduced special-need outpatient appointments, patients who registered for such appointments were allowed to use priority channels and the same diagnostic equipment as ordinary patients. Henceforth, medical services provided within the basic medical service areas will no longer be permitted to charge special-need prices.

This also means that the three categories of medical services with deregulated pricing can only exist as Type II incremental services, and can no longer function as value-added services based on price discrimination; the distinction between the two will become increasingly clear-cut.

The purpose of this is to prevent medical institutions from reducing the quantity and quality of basic medical services under market-driven profit-seeking mechanisms, thereby excessively promoting high-value-added services such as special-needs appointments, leading to “"Drug-Funded Healthcare""into the awkward situation of 'supporting pharmaceuticals with medical services.'"

Under the new policy set to take effect, these market-priced medical services may gradually appear in major hospitals across Beijing starting from January 1, 2017.However, in the broader context of healthcare cost containment under medical insurance schemes, suchMedical service items are basically not included in the national health insurance reimbursement list.

The exclusion from national medical insurance has, in effect, created an opening for commercial health insurance. Market-based pricing has been activated for multi-tiered medical services such as rehabilitation, elderly care, and cosmetic surgery, revealing substantial demand among payers. Beyond critical illness insurance, if commercial insurers can establish deep integration with public medical institutions in these areas, it will facilitate the acquisition of precise customer segments and offer considerable growth potential in the future.