County-Level Hospital Reform: The Core of China's Tiered Diagnosis and Treatment System – A Daunting Yet Crucial Mission

The core of the new healthcare reform is “tiered diagnosis and treatment,” aimed at improving medical efficiency and rationally allocating physician resources. At the heart of “tiered diagnosis and treatment” lies the “comprehensive reform of county-level public hospitals,” which positions county-level hospitals as referral hubs to connect grassroots rural healthcare services with high-quality urban medical resources, thereby achieving “initial consultation at the primary care level, two-way referrals, separate management of acute and chronic conditions, and coordinated care between upper- and lower-tier institutions.”

The success of tiered diagnosis and treatment will mark the success of China's healthcare reform.Of course, the reform of county-level hospitals must be carried out first, but such reform is by no means easy.

Tiered Diagnosis and Treatment in Sight: Supporting Actors Step into the Lead Role

Document No. 33 issued by the State Council points out: “County-level public hospitals (including traditional Chinese medicine hospitals) serve as the leading component of the three-tier rural medical and health service network and as the link between urban and rural medical and health service systems. Advancing comprehensive reform of county-level public hospitals is a key step in deepening the reform of the medical and healthcare system and effectively alleviating the difficulties and high costs associated with accessing medical care.”

Director Liang Wannian of the Department of System Reform under the National Health and Family Planning Commission pointed out: To date, more than 4,000 public hospitals across 1,977 counties in China have embarked on the path of reform. Phase-based achievements are expected by the end of 2017, with comprehensive implementation largely achieved by 2020, ensuring that major illnesses can be treated within the county and that 95% of diseases are managed and treated at county-level hospitals.

Last year, General Secretary Xi Jinping focused on and participated in the study of healthcare reform three times within four months, demonstrating unprecedented attention to healthcare reform by the CPC Central Committee and the State Council.

The intense scrutiny and influx of resources have left county-level hospitals—long accustomed to being sidelined despite multiple rounds of reform—both surprised and honored. As the favorable winds of reform arrive, these institutions, once relegated to supporting roles, are being thrust directly into the spotlight as “protagonists.”For them, it is natural to embrace the favorable winds of reform, seek societal favor, and strive to enhance the quality of their medical services to benefit more patients. Yet the road ahead is long, and the burden is heavy.

Challenge 1: How can one talk about long-term goals when struggling to meet basic needs?

While most Grade A tertiary hospitals in first- and second-tier cities are showcasing their massive patient volumes and revenue statements,A larger proportion of primary healthcare institutions are facing the dilemma of “having no rice to cook.”Most patients lack sufficient trust in the diagnostic and treatment capabilities of primary care hospitals, often seeking care at provincial or municipal tertiary (Grade 3A) hospitals even for common conditions such as colds, fever, or appendicitis.

Unable to meet basic needs, our hospital director has to seek out projects everywhere to raise funds and coordinate relationships with various parties. At the same time, they are troubled by the inability to attract outstanding talent and the insufficient capabilities of medical staff. In Yunnan Province, there is a nationally designated poverty-stricken county that received 100 million yuan in national support to rebuild stunningly beautiful facilities, acquire advanced diagnostic and treatment equipment from abroad, and create a "luxurious" medical environment. However, the competence of the medical personnel falls far short of demand. Many doctors still dare not perform surgeries even three years after graduation, relying on Baidu when encountering problems. Shockingly, the soon-to-be-completed obstetrics and gynecology center does not yet have a single doctor.

Challenge 2: The “Medical Consortium” Struggles to Achieve True Integration

Tiered diagnosis and treatment require collaboration between higher-level and primary healthcare institutions. Higher-level institutions should assist primary hospitals in enhancing their diagnostic and therapeutic capabilities, thereby retaining patients at the primary care level and alleviating the overload burden on tertiary medical centers. Meanwhile, for complex and refractory cases beyond the capacity of primary hospitals, patient disease characteristics must be clearly identified to facilitate efficient referral.

However, the lack of administrative interoperability among most hospitals in China remains a prominent contradiction.Healthcare is a systematic endeavor that requires multi-party collaboration to truly achieve tiered diagnosis and treatment.

Frankly speaking, private hospitals should be leading the way in the development of "Medical Consortia." With investors facilitating connections behind the scenes and free from administrative constraints, they operate with the flexibility and autonomy of enterprises. Although the allocation of national resources between public and private hospitals is highly unequal, this disparity extends far beyond hospital accreditation ratings.

Opportunity 1: Connecting Social Organizations to Transform Traditional Models

As the saying goes,Where There Are Pain Points, There Are Opportunities. Under the healthcare system with Chinese characteristics, there are many pain points. Physicians face challenges such as limited legitimate income, strained doctor-patient relationships, and difficulties in acquiring clinical competencies. The pain points for hospitals extend far beyond the two issues mentioned above.

How could mission-driven social organizations turn a blind eye to such opportunities? They have been continuously exploring and experimenting. Hence, buzzwords like “Physician Groups” and “Remote Consultations,” which have gained significant popularity in recent years, have emerged, with everyone eager to get a share of the pie from county-level hospitals.

In addition, fueled by the rapid development of mobile health, county-level hospitals have become densely populated with various social organizations and healthcare-derived platforms, such as “surgical platforms,” “internet hospitals,” “physician self-media platforms,” “hospital design services,” “doctor-patient connectivity solutions,” “third-party inspection and quarantine services,” “hospital information systems,” “referral systems,” “triage platforms,” and “medical information databases.” From a positive perspective, these entities serve as a core force driving reform in county-level hospitals and are instrumental in promoting medical technological innovation, optimizing the allocation of medical resources, and enhancing healthcare efficiency.

After all, informatization is an undeniable trend and an inevitable product of the Internet technology revolution.

Opportunity 2: The Involvement of Social Capital, Shaping More Possibilities

Capital markets are ruthless; typically, the potential and prospects of a commercialized healthcare institution or organization can be assessed within two to three years.

This implies that their patience extends to a maximum of three years. The underlying principle is straightforward: just as we expect compensation for our work, capital is profit-driven rather than charitable, so the pursuit of returns is naturally understandable.

Currently, the investment plans of domestic healthcare investment groups can be divided into two types. One is the "wealthy and resource-rich" model, which aims to achieve industrialized operation of medical consortiums and build platforms. These investors seek to invest in multiple enterprises across different segments of the healthcare value chain, creating their own healthcare ecosystem. Having entered the market at an early stage, they have also established a strong presence by deeply embedding themselves in numerous county- and city-level hospitals.

Another model is the cost-effective type, characterized by limited capital and resources. These ventures typically start small, focusing on a specific niche vertical. This has become the predominant form of internet-based entrepreneurship today, with many physician groups and mobile health companies adopting this approach. Ultimately, they achieve extensive coverage within their chosen vertical, gaining control over pharmaceutical and medical device distribution channels, accumulating vast amounts of medical data, and monetizing these assets through partnerships with pharmaceutical companies, medical device manufacturers, and commercial insurance providers.

As China’s population ages at an accelerating pace, the national health insurance system is likely to face significant challenges in the near future, creating growth opportunities for commercial medical insurance. It remains unclear which industry giants are strategically positioning themselves in this space, and whether county-level hospitals can withstand the pressures of these sweeping reforms. I believe answers will emerge soon.

Text | Tianfu Luo Personal WeChat ID: 664116645