The VIP Floors
- The VIP Floors
A medical university in China wanted to build a state-of-the-art hospital to further its goals of providing medical care, conducting research, and fostering teaching. A planning committee from the university took the idea to city officials, who also believed the city needed a new hospital and agreed to help with the cost. The planning committee then approached a foundation in Hong Kong, which made a very large donation to help build a new hospital for the new century.
The hospital opened three years ago. A lovely garden surrounds the hospital, and the building itself is an architectural masterpiece—modern, graceful, welcoming, and highly functional. Much of the medical equipment is the latest and best, and effective use is made of information technology. Any city and university would be proud of this facility.
The hospital directors established two VIP floors at the hospital. They called the wards on these floors "special needs" wards to distinguish them from the "basic medical service" wards in the rest of the hospital. The VIP floors are not reserved for people with high social status (as the old "senior cadre" wards were), but are open to all who are willing to pay the extra price. In return, patients receive many amenities: private rooms with private toilets, telephones, color televisions, refrigerators, better food, flowers, newspapers, and other comforts. But they are to receive the same standard of medical care.
The VIP floors have been a financial success. The additional revenue they bring in is added to the general hospital fund that covers, among other expenses, the cost of uncompensated care. The hospital provides a lot of uncompensated care because it strives to treat all emergency cases, regardless of ability to pay.
Should other Chinese cities, universities, and hospitals emulate this arrangement?
- Commentary
After the People's Republic of China was founded in 1949, private clinics and hospitals were phased out. By 1966 virtually all clinics and hospitals were owned by the government or worker collectives. These clinics and hospitals provided health care services within the framework of a planned economic system. But since the 1980s, China has been undergoing a great transformation as hospital administration has become subject to market economics.
Two problems stand out in this time of change. One is making health care available to the 70 percent of Chinese people living in the countryside. To its credit, the government began to implement a new Countryside Cooperation Health System in 2003. A second challenge is to make health care more affordable for city residents. One survey of people who refused hospitalization when doctors recommended it found that over 60 percent of the refusals were due to financial reasons.
Health care reform in the 1980s sought to make patients pay more in order to reduce the government's financial burden. In 1980, personal health expenditure was 21.2 percent of the total expenditure for health care; now it is over 58.3 percent. Hospitals receive only limited financial support from the federal government, usually less than 10 percent of their total income. They also receive revenue from selling medicine and providing health services. Additional reforms were instituted in an effort to control hospitals' revenue from the sale of medicine (most hospitals earned 60 percent of their funds this way). Since 1999, when the government began to distinguish between treatment and the sale of medicine, this latter source of revenue has decreased. On the one hand, hospitals cannot function well on government funds alone, but on the other, the price of current basic health services does not reflect their real value.
Hospitals in China now face more pressure than ever. Under such circumstances, managers at public hospitals have focused more attention on non-basic health care services. Some managers have instituted "special needs" wards, or VIP floors such as the one described above, to increase income and to compensate for money lost in providing the basic medical services that government policies support. In fact, a number of public hospitals have adopted different types of VIP arrangements. Even though some private hospitals emerged in the last decade, public hospitals still play the dominant role in...
