The Chinese Pilot Programs in Allowing the Setting up of Wholly
2014-09-30 14:10:19   Source:   Hit:

       The National Health and Family Planning Commission (hereinafter the NHFPC) and the Ministry of Commerce (MoC) issued jointly the Notice on Establishing Wholly Foreign
Owned Hospitals (the Notice) in July 2014, opening China’s doors to foreign investors in allowing them to establish wholly foreign owned hospitals. This Notice is seen to have a ground breaking effect in departing from the long standing restrictive policies toward foreign companies wishing to establish medical institutions in China. Some key issues worthy of note are as follows:
  1. Pilot Venues
Pilot programs have been promulgated in 7 provinces/cities in allowing the establishment of wholly foreign owned hospitals by foreign investors, including Beijing, Tianjin, Shanghai, Jiangsu Province, Fujian Province, Guangdong Province and Hainan Province. That said, the establishment of Traditional Chinese medicine hospitals in the seven regions are only limited to investors from Hong Kong, Macau and Taiwan.
In the likely event that the pilot programs run smoothly as planned, the Chinese government is anticipated to permit the establishment of wholly foreign owned medical institutions all around the country.
  1. Establishment Requirements
Foreign investors seeking to apply for the establishment of wholly foreign owned hospitals are required to have either direct or indirect experience in the investment and management in medical and healthcare sectors. In addition, at least one of the following three specifications has to be met:-
  1. Capability to provide advanced management concepts, models and service models conforming to international standards;
  2. Capability to provide internationally leading medical technology and equipment
  3. Capability to supplement or improve domestic medical services, technology, funds and facilities.
There are of course other national regulations which foreign invested hospitals would need to comply with, including but not limited to the implementation of clinical diagnostic and therapeutic standards and other technical specifications, provision of medical quality assurance and adoption of medical safety practices.
  1. Approval Procedures
Foreign investors are advised to apply to the municipal NHFPC where the establishment of wholly foreign owned hospitals is intended. The municipal NHFPCs will then issue preliminary examination opinions for the approval of provincial NHFPCs – the application then passes to the provincial MoCs which will in turn exercise its discretion based on foreign investment laws. The approval of the provincial MoC will effectively entitle the setting up of wholly foreign owned medical institutions.
  1. Implementation Measures
The NHFPCs and MoCs in the said regions are responsible of structuring their own implementation measures concerning the establishment of wholly foreign owned hospitals in adherence to the principles of “gradually-increased openness” and “adequate risk-control”. They are also in charge of the approval and day-to-day management and monitoring of wholly foreign owned hospital in their respective administrative regions.
The General Office of the State Council had, in as early as 2010, published the Opinions on Further Encouraging and Guiding Private Capital in the Setup of Medical Institutions, which specifically made mention of “allowing foreign capital in establishing medical institutions”; nevertheless, the said opinions were never carried out in practice. Most foreign invested hospitals at present take the form of Sino-foreign joint ventures with minimal foreign capital. There are only over 200 “foreign” hospitals out of the 20,000 in China, in which only 2 are truly “wholly foreign owned” – one owned by the Taiwanese and the other by Hong Kong investors. There has been recent press coverage on the application of a German company seeking to set up a wholly foreign owned hospital in the Shanghai Free Trade Zone, which would then mark, upon approval, the third wholly foreign owned medical institution in China.
The complaints over the excessive costs and complications involved in getting treatment, along with the annoyance over appalling healthcare services are not at all new in China. The green light given by the Chinese government in allowing the setting up of wholly foreign owned hospitals exhibits its intent to improve the domestic medical care system, particularly through the introduction and import of internationally advanced management and service models, medical technology and other sophisticated medical equipment.
It is certainly highly disputable that the aforementioned problems in the Chinese healthcare could be alleviated quickly through the establishment of wholly foreign owned hospitals. It has to be noted that the operation of foreign invested hospitals is predominantly revenue driven – they tend to charge more and are less inclined to provide cost-effective services. Hence, benefit would only be conferred upon those who can afford the luxurious services offered by foreign invested hospitals; the general public at large would hardly be any better off.
Foreign invested hospitals are inevitably at disadvantage when competing with Chinese private and public hospitals, for instance it is difficult for them to be part of the national health insurance system – this would in turn narrow down their potential patients to the rich, expats and employees of foreign companies with premier healthcare insurance. Also, the restrictions on foreign doctors practicing in China would be another factor worth noting. The relevant regulations pose another huge hurdle: foreign medical practitioners are only permitted to provide clinical diagnostic and therapeutic services for a period of one year; foreign doctors would need to make a new application should they wish to extend their practice in China. Moreover, foreign invested hospitals run at comparatively higher costs given their ineligibility to qualify for favourable land use policies offered to Chinese public medical institutions. Foreign invested hospitals also have to pay more for their electric, water, gas and heating bills compared to their domestic competitors.
Therefore, the Chinese government would certainly need to devise appropriate policies to bolster the development of foreign invested hospitals in China, particularly in the finance, property and insurance sectors. A level playing field for foreign and domestic hospitals is highly desirable.