restricted access Case-Based Payment System in the Chinese Healthcare Sector and Its Ethical Tensions
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Case-Based Payment System in the Chinese Healthcare Sector and Its Ethical Tensions


Diagnosis Related Groups (DRGs) function as a standardising system, which is increasingly used to help to restrain the rise of hospital expenditures. Patients with the same disease are grouped and coded in the same class. Each patient is coded by one main code, all other diseases fall under secondary codes. DRGs have their roots in the USA. Developed as a patient classification system in 1967, they were introduced as a prospective payment system (PPS) in US American hospitals widely in the 1980s, but only for Medicare patients (Rayburn 1992). DRGs have subsequently been implemented in different versions in many countries.

The implementation of such payment systems aiming at cost-containment and an efficient use of healthcare resources has been controversial. A broad discussion on how to ethically allocate scarce healthcare resources has been ongoing for decades, first mainly in the US, but expanding internationally over the last few years (Callahan 1988; Daniels 2007; Fleck 1992; Lenk, Biller-Andorno, Alt-Epping, Anders, and Wiesemann 2005; Rayburn 1992; Rooks 1990; Wild, Pfister, and Biller-Andorno 2011). There is an evolving consensus that public healthcare resources are limited and their well-considered use is not only justifiable, but morally required. This is in contrast to the previous notions held by physicians that those practising medicine should do what is best for the patient, without regard to the costs. Physicians or nurses working in structures that set incentives for cost-containment may thus perceive a conflict of interests: wanting to provide the best possible care to [End Page 131] their patient on the one hand, and wanting to be loyal to their institution (or healthcare system) and its economic viability on the other.

However, not all of these discussions might be relevant in the same way in the case of China since the context is so fundamentally different than for example in the USA or Germany. Ethical discussions can therefore not be adopted in a generalised way. As a first step towards an ethical discussion of the payment system for cost-containment in China, an understanding of the specific context is necessary.

In this article, we aim at depicting case-based payment (单病种付费 or 按病种付费 in Chinese; English translation adopted from Winne Yip [Yip, Hsiao, Meng, Chen, and Sun 2010]), a payment system similar to but much simpler than DRGs, in the context of China in order to offer a starting point for ethicists to carry out further research. We will start with a brief overview of the healthcare system in China. Then we will trace the evolution of case-based payment in China, clarify different models of case-based payment and compare them with DRGs. Furthermore, we will present a review of empirical studies on the effect of case-based payment in China. In the end, we will conclude why a nuanced understanding of regional adaptations of DRGs is important for an evaluation of the specific ethical challenges.

Characteristics and Challenges of the Healthcare System in China

One of the most important and at the same time conflicting characteristics of the Chinese healthcare system is the tension between a free market orientation with limited public funding on the one hand, and firm governmental control over price regulation and other health relevant public policies, on the other (Hsiao 1995). Ever since the influential transformation of its economic system towards the free market in the 1980s, China has struggled with balancing market force and the government control in the health sector. Many existing problems in the system are results of the two somewhat contradictory features; for example, the prevailing phenomenon of the over-prescription of drugs and medical tests is largely caused by the fact that hospitals need to survive financially in the health market but they are tightly restrained by the price regulation which intentionally keeps the profit very low (Yip and Eggleston 2004).

In the following part of this article, specific challenges in the areas of financing, healthcare delivery, and health services utilisation in China’s health system will be briefly explained.

According to the Statistical Bulletin of the Development...