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The government's decision to start public hospital reform with pilot programs will put in place an essential piece, without which it is not possible to reform the country's overall healthcare system.

But unless the government comes up with fiscal input to adequately and timely compensate public hospitals to stop making undue profits from sale of medicines, it will be hard to progress toward a reasonable, effective and optimal healthcare system across the country.

According to the guideline, pilot programs will be carried out in a number of provinces across the country this year to reform public hospitals to focus on serving the public and accord top priority to people's health.

Because of insufficient fiscal expenditure on healthcare most of the country's public hospitals have been relying on profits from sale of medicines to make their ends meet. That practice has evoked vehement public complaints over rising medical costs, prompting policymakers to overhaul the hospital system.

Fortunately, the rapidly swelling national coffer, because of robust economic growth, has put the government in a better position to cover the long-term healthcare budget deficit.

According to the new guideline, public hospitals are expected to reduce their financial dependence on sale of medicines and instead depend more on medical service charges and government subsidy. The pilot programs are meant to help policymakers find out how much government subsidy would be necessary to change the business model of hospitals.

By trying pilot programs in different regions, the government apparently wants to seek out the most cost-effective solution for national public hospital reform.

Yet the lack of a clear-cut promise on minimum fiscal support that the hospitals can expect from the government are more than likely to make it difficult for pilot hospitals to press ahead with the reform.

Uncertainty about their future financial conditions could stop public hospitals from implementing all the necessary reform measures needed to improve their efficiency and reduce patients' expenses.

For public hospital reform to succeed, policymakers may, in the first place, need to commit more public funds to healthcare. And this will be a worthy way, given the very importance of a safety net including affordable healthcare, of unleashing the potential of consumers as a new driving force of the country's sustainable growth.

(China Daily 02/05/2010 page8)