Public Private Partnerships

A press release said health care improvements are considered “an important measure to build a harmonious society,” according to a People’s Daily Online report.

The new network is expected to include public health, a rural cooperative medical care, urban community medical, drug management and public hospital management systems. Participants in the executive meeting of the State Council said proposals were made calling for “deepening reform of medicine management and health care systems, increasing public investment in the public health sector, attaching equal importance to western and traditional Chinese medicines, and inviting individuals and non-governmental organizations to participate in health and medical services.”

But how? This was the topic of the China Health Care Public-Partnership Forum (the forum), which was sponsored by the Chinese Ministry of Health and Ministry of Finance and the International Finance Corporation (IFC), a private sector arm of the World Bank Group.

Participants in the forum said China had accomplished much in bringing medical care to the Chinese population, but most said the system is getting too expensive, both in terms of actual costs and in the value of the quality of services provided to consumers for their money. The system is in a crisis and must be reformed.

Yet, Vice-Minister Chen Xiaohong said, “We are seeking equity in the health care system, and the private component is an important part of healthcare delivery in China for the masses.”

Chen said public-private partnerships (PPPs) are being used in China now and that they will continue to be used, but he said their use must be carefully regulated. “Not all of them are working in the best interest of the public,” he said, referring to abuses within the system.

Still, Chen said, “Public-private partnerships are needed to better serve the public. It will be a system where the government takes command and creates a market system, but the market system alone cannot meet the public’s needs.” He said the government must continue to play a key role in the health care delivery system “as in other countries, but we must define methods and the scope of the market mechanism by carefully considering the overall needs of the public, the public and private sectors, and by using PPPs to best achieve the efficient use of all resources.”

The vice-minister said, “This is much more complicated than simply providing money and training.” Chen said the government could guide the strategic purchases needed by the system, using modern procurement methods to ensure that quality equipment gets to where it is needed at a reasonable cost, while at the same time combating corruption within the current medical procurement system.

Emmanuel Jiminez, sector director of the East Asia and Pacific Region Department of the World Bank, said the use of strategic purchasing would result in “a continuous search for maximizing any health care system’s performanceˇSome global ‘best practices’ exist, but not everything works in every place.”

He said he was aware that the high cost and limited access of the public to the  health care system was “a major concern of the Chinese Government.”

Wang Jun, a vice-minister in the Chinese Ministry of Finance, said, “We are committed to bringing better health care to the general public.” He was referring to statements made on the subject by Premier Wen Jiabao during March’s National People’s Congress meeting. “At the same time, we are also seeking more justice in society.”

Wang said 39 percent of the national budget is spent on health care, if private spending on health insurance is included in the total. Without the insurance component, the total is 18 percent of the budget.

But he said there are factors dogging the existing system: “Rural resources are lagging. There is a gap between spending and demand. Private funding is not adequately utilized.”

Wang said, “We will support the private provision of health care, with an emphasis on treating the poor and making insurance available to them.

“The government now provides most of these services, but more diversity is needed; the private sector must be more involved. We need new PPPs for China. The reform is opening the way to the private sector, more market reforms and better services. But everyone should have equal access to health care.

Sun Zhizhun also of the Ministry of Finance said, “Governmental spending on health in 2006 was greater than that for education, agriculture or social security; yet, there’s still a gap.

“Government participation is a must, but the private sector cannot withdraw from the market. We need the market, but we must find an optimal mix in which the government uses the market to improve efficiency.

“The public health care system especially for women and children must be improved.” Along these lines, Sun said the government is now making it possible for the poor to access the public health system now for as little as 3 yuan–5 yuan. He said the plan to create and improve rural medical clinics will be emphasized in 2006, along with housing, jobs and other issues of special concern to the rural poor.

“Insurance is a major place for private funding; we will turn to the market when possible and when useful to the people.”

Emmett Moriarty, a senior health care specialist with the IFC, said governmental responsibility is a necessity. “Accountability still rests with the government. At the same time, demand exceeds the public sector’s supply [in China], while the public’s expectation for health care is growing.”

But Moriarty said it is important that PPPs that operate in China must understand and fall into line with “the government’s policy objectives.” And, PPPs must find ways to win the public’s trust, something that’s not often encountered even in PPP operations in developed countries such as the United States or United Kingdom.

Phil Lobb, a forum participant from the United Kingdom, said PPPs can work in China, where the state is very much involved in the provision of medical services.

“In the UK, the government still provides services. PPPs are used to build hospitals and to operate the facilities.”

The importance of the latter comment became evident later in the day when a member of the audience questioned whether using private market mechanisms to provide health care in China was ethical or constitutional.

“There needs to be some ethical basis for this; medical care is a human right,” a man said.

Professor Du Lexun of the Health Management College of Harbin Medical University said the use of market mechanisms to improve China’s health care system was both ethical and constitutional.

Strikingly, Du posed the questions: What means public? What means private?

Briefly stated, Du asked what is a State-owned company that has been reformed into a shareholding company with the government acting as the holding party. Is this public or private? And if two share-holding companies whose majority shares are owned by the government and they create a spin off ‘private’ company, is that company still not publicly owned?

Du called for ending the government’s monopoly in health care services wherever it was proper to do so.

Zhou Qiren, a professor at the Beijing University Social Research Center, said, “Reality must be considered. Some people still admire State-owned enterprises and State hospitals, but these institutions have failed and are now under ‘State assets’ protection.

“Whatever we do, any hospital should efficiently use whatever resources it has.”

Zhou said government-provided services should not be “for profit,” but he said, “In some cases services providers can be, and should be, based on local conditions.”

IFC Associate Director for China Karen Finkelston said IFC provides loans to private-sector companies only. In China, it has provided loans to some in the medical industry. She said about US$700 million is available for loans in China in 2007.