Doctor Groups: A Low-Risk Experiment in Breaking Through China's Healthcare Reform

————————————『Editor’s Note』————————————

Must the government be the primary actor in reform? Must the approach to reform be designed by the government?

Starting with rural reforms, China’s economy has experienced rapid growth for over three decades. Today, it stands at a critical juncture marked by waning momentum and an urgent need for transformation. This is particularly evident in sectors such as healthcare and education, where elite talent remains constrained within the state system, leading to stagnant innovation. How should these reforms be carried out?

Du Runsheng, the venerable elder, passed away recently, prompting people to revisit the landscape of reform in the 1980s. We admire the spirit of reform from that era; three decades ago, reformers declared, “It is possible... it is possible... and it is also permissible.” The social space liberated thirty years ago continues to benefit us today. In advancing today’s reforms, we would do well to draw inspiration from the spirit of thirty years ago.

Text | Zhu Hengpeng, Director of the Center for Public Policy Research, Chinese Academy of Social Sciences

In recent years, issues such as accelerated population aging and environmental deterioration have significantly increased the demand for medical and health services. Meanwhile, with steady rises in income levels, people’s expectations for the quality of medical services continue to grow, while the current healthcare system clearly fails to meet these needs. Over the past six years since the launch of the new healthcare reforms, difficulties in accessing medical care and high costs have remained persistent concerns for the general public, while physicians have voiced substantial grievances. Where lies the next path forward for healthcare reform? In the last one to two years, numerous “physician groups” have gradually emerged. This attempt by physicians within the existing system to seek change and explore new forms of practice is likely to become a breakthrough in breaking the stalemate of healthcare reform.

The exploration by physician groups has touched upon the core of healthcare reform, namely, the transformation of human resource allocation mechanisms in the medical industry, officially referred to as personnel system reform.The Third Plenary Session of the 18th Central Committee of the Communist Party of China made a key statement regarding healthcare reform: to establish “a talent development and personnel compensation system adapted to the characteristics of the industry.” Currently, China’s healthcare service system is dominated by public medical institutions, with over 86% of physicians employed in public hospitals. Constrained by their status as employees of public institutions, these physicians are unable to move freely within the labor market. Unlike the manufacturing sector, which relies on physical capital as its core resource, social service industries such as healthcare and education depend primarily on human resources. In the reform of human resource management systems,Reform of the personnel system, i.e., reform of the human resource allocation mechanism, is the prerequisite, while reform of the compensation system is subordinate., as long as the former is properly streamlined, a series of thorny issues—including medical service pricing and physician compensation systems—can be readily resolved.

Therefore, the true “deep-water zone” of healthcare reform is not the reform of public hospitals, but the reform of the personnel system in the healthcare industry, namely the reform of the human resource allocation mechanism.

Among the various explorations of physician mobility, physician groups may represent a highly promising model. In fact, even within government circles, there is broad consensus on abolishing the public institution staffing (bianzhi) system and enabling physicians to practice independently, a move widely regarded as an inevitable trend. Some local governments are actively piloting reforms; for instance, Beijing has implemented a plan to gradually reclaim staffing quotas from public hospitals, while Shenzhen mandates that newly hired physicians no longer receive bianzhi status.

The question that needs to be considered is,Even if policies fully liberalize independent medical practice, physicians have long been entrenched within the public healthcare system. Whether they can adapt to independent practice, and which model of “independent practice” is more operationally feasible, remains uncertain. With no pre-existing models to replicate, a process of exploration is indispensable.Doctor groups: Regardless of whether physicians remain within the public healthcare system or practice independently, and irrespective of their specific organizational models, it is unnecessary to dwell on these distinctions. What matters is that this represents a commendable exploration.

Some worry that allowing physicians to practice freely will lead to a mass exodus from public hospitals, resulting in the collapse of these institutions and compromising medical safety. To such concerns, we can only say, “You are overthinking it.” First, rest assured that all physicians holding practicing licenses have already met the baseline qualifications for practice, let alone those who have attained the ranks of associate chief or chief physician. Physicians who have worked hard to obtain their credentials are professionals who value their reputations; once they leave the shelter of their employing institutions to practice independently, they will naturally exercise even greater caution. Moreover, the nature of the medical profession requires physicians to rely on their reputation for their livelihood, which fosters professional traits of prudence, adherence to regulations, and risk aversion.

Secondly,Multi-site practice by physicians, which diverts patient volume from public hospitals, is precisely the original intent of the tiered diagnosis and treatment system.Even with the full liberalization of physicians’ independent practice, a significant number of doctors would still choose to remain in public hospitals. Issues that can be addressed by the market should be resolved within the market; those manageable at the primary care level should be handled there; while complex, refractory cases and critical emergencies should be referred to tertiary Grade A hospitals. This approach aligns well“Returning tertiary hospitals to their proper role—namely, undertaking the care of critical and severe cases, managing complex and refractory diseases, and conducting scientific research and teaching, while prioritizing technical excellence and quality over volume—aligns precisely with the objectives of healthcare reform.”

The transformation of physician management systems is also a requirement for China’s transition toward a modern model of state governance. From an economic development perspective, China has reached a middle-income level; however, its subsequent growth momentum is weak, posing a significant risk of falling into the “middle-income trap.” This situation is closely related to the continued administrative allocation of knowledge- and intelligence-based human resources, as well as impediments to the development of modern service industries. The healthcare, education, and technology sectors concentrate a country’s highly educated population, hosting the highest proportion of high-IQ, highly knowledgeable talent. Taking the healthcare industry as an example, physicians in China have long been constrained within the public system, leading to misallocation of human resources and severe suppression of innovation. Physician groups offer a new approach to talent management through self-operated and self-managed structures, enabling autonomous exploration of suitable business models. According to the experience of developed countries, the levels of industry self-regulation and oversight exercised by such professional organizations, along with their professional authority and public credibility, surpass those of administrative departments. This represents an effective model of social governance and can be regarded as a component of the modernization of national governance capacity.

Therefore, for various forms of physician group exploration, if successful, the benefits are substantial; if failed, the consequences are not significant. The vast majority of explorations and innovations worldwide end in failure, but under conditions of free exploration, even the small fraction of innovations that succeed can make the world progressively better. Hence, it is recommended that the government maintain concern and provide risk warnings, while minimizing intervention. It should not introduce restrictive or even prohibitive policies under the guise of standardization. If policy documents must be issued to demonstrate regulatory responsibility, it is hoped that policymakers will emulate the open-mindedness and foresight shown by the drafters of rural reform documents in the 1980s, adopting an approach toward various forms of independent medical practice—including physician groups—that says, “This is permissible… this is also permissible… and so is this…”

This article is dedicated to Mr. Du Runsheng, the “Father of China’s Rural Reform.”

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