Gansu's Healthcare Reform Model Gains National Attention with 100% TCM Reimbursement Policy

Source: Cyberspace Blue, 21st Century Business Herald

On April 12, the National Health and Family Planning Commission held a regular press conference. The event specially invited Liu Weizhong, Director of the Gansu Provincial Health and Family Planning Commission, to introduce Gansu’s initiatives in health promotion, the development of Traditional Chinese Medicine (TCM), and international cooperation in TCM.

For years, the state has vigorously promoted the “Sanming Model” as a star of healthcare reform. At this routine press conference, the National Health and Family Planning Commission specially invited the Director of the Gansu Provincial Health and Family Planning Commission. Does this signal that the national government will prioritize the promotion of Gansu’s healthcare reforms?

At the meeting, Liu Weizhong stated that, in addition to earnestly implementing the requirements of the National Health and Family Planning Commission and promoting the experience of Sanming, healthcare reform in Gansu Province has mainly featured the following characteristics:

I. To Address the Difficulty of Accessing Medical Care, the First Step Is to Reduce the Number of Patients

The approach emphasizes reducing the patient burden, expanding healthcare reform to encompass health promotion models, and shifting the focus from hospital-centric reforms to health-centric reforms.

"If the number of patients is not reduced, merely reforming hospitals will hardly solve the problem of difficult access to medical care. With an ever-increasing patient population, how many doctors can possibly meet the demand?"

Only when farmers seek less medical care can doctors earn a stable income. In the past, to increase their revenue, doctors had to prescribe more medications and order more tests for farmers. During the healthcare reform in Gansu Province, township health centers and county hospitals implemented a global budget cap system. For instance, if the budget increased by 10 million yuan last year, it might be adjusted to 12 million yuan this year if fewer farmers fell ill; conversely, if more farmers became ill, the budget might be reduced to only 8 million yuan. This mechanism incentivizes the deployment of an increasing number of doctors to rural areas for door-to-door health management, chronic disease management, and preventive care.

First, Gansu has strengthened disease screening efforts.

According to reports, the Gansu Provincial Health and Family Planning Commission has taken two measures in disease screening.

The first initiative was the survey and intervention program for major diseases, launched in 2013. This program operated on an annual cycle, selecting five diseases with high prevalence and substantial financial burden on patients. Experts were organized to investigate the causes of these diseases and develop intervention strategies. In the year following the completion of each survey, public health interventions targeting these five diseases were rolled out across the province.

The five major diseases identified in Gansu Province’s 2013 survey were diabetes, hypertension, hyperlipidemia, kidney disease, and leukemia. The number of patients with these five conditions in Gansu Province exceeded 13 million. “If we address the healthcare needs of these more than 13 million patients, the problem of ‘difficulty in accessing medical care’ will be resolved,” said Liu Weizhong.

The second item is the ranking of the disease spectrum. The ranking of the disease spectrum in Gansu Province involves using proprietary software specific to Gansu to rank diseases across the province on a monthly basis. Furthermore, epidemiological investigations are conducted based on this disease spectrum.

According to Liu Weizhong, Gansu Province became the first in China to identify the “Sanlu milk powder issue” by leveraging disease spectrum ranking. “Our investigators analyzed the disease spectrum and conducted epidemiological surveys, noting that pediatric kidney stones had not been so prevalent in the past, which raised questions about the sudden increase.”

Following the “Sanlu Milk Powder” incident, Gansu Province subsequently identified two additional cases of mercury exceeding safety limits in children’s food and infant formula. Due to rapid detection and timely reporting, the implicated products were promptly removed from shelves, thereby averting a food safety crisis and reducing child mortality.

II. Solve the Most Fundamental Problems with the Simplest Methods

The second characteristic of Gansu’s healthcare reform can be summarized in three phrases: addressing the most fundamental issues with the simplest methods, safeguarding residents’ health at minimal cost, and pursuing a healthcare reform path with distinct characteristics of Traditional Chinese Medicine.

Gansu has adopted the simplest approach to address the issue of kickbacks for physician prescriptions. First, hospitals at the township level and above are required to screen warning education films every month to keep physicians constantly alert; any refusal to provide medical services will result in a record of professional misconduct. Second, “anti-prescription-data-mining” software has been implemented to eliminate kickbacks. This system prevents physicians from compiling prescription statistics—such as which doctor prescribed which medications and in what quantities—to receive rebates from pharmaceutical companies, thereby cutting off this practice at its source and making it impossible for physicians to accept such kickbacks.

Notably, while the national healthcare reform agenda comprises five key tasks, Gansu Province has expanded this to six, with the addition of Traditional Chinese Medicine (TCM), which is integrated into every task. To encourage patients to utilize TCM, herbal medicines are fully reimbursed for both urban and rural residents.

“Traditional Chinese Medicine (TCM) is inexpensive because it does not involve diagnostic testing fees. A single test in Western medicine may cost 2,000 yuan, meaning patients incur expenses even before treatment begins,” said Liu Weizhong. He noted that although the consultation and treatment fees for Western medicine appear higher than those for TCM, they actually include the cost of medical consumables. As a result, while patients pay more, the profits retained by doctors and hospitals are comparatively lower.

Furthermore, in the inpatient care process of Western medicine, patients are often reluctant to be discharged until they feel physically comfortable, leading to low hospital bed turnover rates and decreased operational efficiency. In contrast, Traditional Chinese Medicine (TCM) diagnosis and treatment can circumvent this issue of patient reluctance to discharge, thereby enhancing hospital efficiency and achieving a win-win outcome for both social benefits and hospital performance.

To encourage urban and rural residents in Gansu to utilize traditional Chinese medicine (TCM), the province has implemented 100% reimbursement for TCM services.

“Full reimbursement means including commonly used traditional Chinese medicine (TCM) treatments in the medical insurance reimbursement catalog,” said Liu Weizhong. He noted that 100% reimbursement under medical insurance was first piloted in Liangzhou District, where only a few patients were reimbursed per day. “Later, it was found that there were no issues at all, so the policy was fully implemented. As outpatient services became fully reimbursable, hospitalizations decreased. This helped reduce costs for diagnostic tests and Western medicines, thereby lowering overall medical expenses.”

Moreover, Gansu has extended its reliance on traditional Chinese medicine (TCM) to preventive care through TCM health education.

To enhance health literacy among rural residents, Gansu Province has launched the “Three Village-Level Initiatives.” First, 50 medical culture walls have been established to promote traditional Chinese medicine (TCM) treatments for common and major diseases such as hypertension, hyperlipidemia, and diabetes. In addition, leveraging grassroots village doctors, Gansu has organized farmers to exchange experiences and learn chronic disease management methods. Third, through a bidding process, “health kits” have been distributed to 4 million farmers, with door-to-door training provided on how to use these kits.

III. Strict Supervision of Hospitals

The third characteristic of Gansu’s healthcare reform is the emphasis on regulation in its reform measures.

Sun Zhigang once stated that Gansu Province has implemented the strictest hospital regulations in China. Over the past five to six years, Gansu has recorded the lowest average inpatient and outpatient fees nationwide, second only to Tibet. While drug prices rose across China, they declined in Gansu.

Gansu Province has implemented restrictions on large-volume prescriptions by ranking physicians based on metrics such as antibiotic usage, nutritional drug utilization, and the ratio of outpatient intravenous infusion visits to total outpatient visits. Physicians ranked at the top undergo evaluation; those found engaging in irrational drug prescribing face restrictions on their prescribing privileges and receive adverse performance records. Over the past five years, 5,000 physicians have been penalized, with some having their prescribing privileges restricted and others even having them revoked.

What You Must Know About Healthcare Reform in Gansu

Gansu’s healthcare reforms have long operated under a reverse model, yet the strategy of prioritizing patient volume reduction in this economically disadvantaged province has yielded significant results.

Taking Weiyuan County as an example, the current healthcare utilization rate has declined. Hospitalizations decreased by 16%, and outpatient visits dropped by 3%, while the coverage of conditions under the tiered diagnosis and treatment system rose from 50% to 80%. By adopting the approach that “doctors can earn more only when farmers need less medical care,” this model has not only improved health literacy among rural residents but also addressed physicians’ profit-driven behaviors.

Liu Weizhong, Director of the Gansu Provincial Health and Family Planning Commission, is a Weibo celebrity with nearly 3 million followers. He frequently shares inexpensive yet practical traditional Chinese medicine (TCM) prescriptions on Weibo, such as a TCM formula costing just 0.14 yuan for treating depression, which makes many people marvel at how remarkable this Health Commission director is.

In the actual healthcare reform in Gansu, Liu Weizhong vigorously promoted traditional Chinese medicine (TCM), guided patients to use TCM herbal medicines, and supported and advanced the development of the TCM industry. In 2015, the province’s TCM herb cultivation area reached 3.88 million mu, with an output of 990,000 metric tons, both ranking first in China. Exports of dominant bulk TCM herbs such as Angelica sinensis, Codonopsis pilosula, and Astragalus membranaceus accounted for more than 90% of the national total.

Turning to national healthcare reform, the special invitation extended by the National Health and Family Planning Commission (NHFPC) to the Director of the Gansu Provincial Health and Family Planning Commission to attend the routine press conference was particularly noteworthy.

During the Q&A session, a reporter asked Director Liu whether Gansu’s healthcare reform model could be replicated in other parts of China. Liu Weizhong responded that Gansu is an economically disadvantaged province, and its experience may serve as a reference for other such provinces. However, two aspects—hospital regulation and equal emphasis on traditional Chinese medicine and Western medicine—can be promoted nationwide.

This appears to be a harbinger that the healthcare reforms in Gansu Province will be rolled out nationwide. In particular, the stringent regulation of hospitals, strict restrictions on physicians’ prescriptions, and the vigorous promotion and use of traditional Chinese medicine (TCM)—coupled with the notion that “doctors can only eat their fill if people seek medical care less often”—will comprehensively shrink the capacity of the pharmaceutical market. This comes as a bolt from the blue for numerous pharmaceutical companies.

Not only have drug prices been reduced and clinical usage shrunk, but the remaining market share is also being encroached upon by heavily promoted traditional Chinese medicine. If the Gansu model is replicated across China, pharmaceutical companies will truly need to carefully consider how to respond.