Written by Neil Munro.

China’s public hospitals are notorious for such unethical practices as offering treatment and diagnostic tests which are not medically indicated and taking extra payments (such as the ‘hongbao’ or ‘red envelope’). Such practices present patients and their families with a dilemma: how to ensure that doctors offer, at a reasonable price, the same quality of care as they would for their own family? Citizens have available a variety of strategies to deal with this kind of “agency risk”, varying from passive to active, from the universal to the particular, and, in Hirschman’s terms, between exit, or changing providers, voice, or seeking to change the terms of the relationship with an existing provider, and loyalty, or just doing as the provider says. Data from a nationwide survey carried out in China in the winter of 2012-13 provides us with the opportunity to examine two questions. Firstly, how likely do Chinese citizens perceive unethical practices to be in their local hospitals; and secondly, what strategies do they prefer to deal with the agency dilemma. Citizens’ preferences reveal a great deal about the health care system—to what extent patients are disempowered, how modern the system is in the Weberian sense, how flexible provider behaviour is and to what extent market mechanisms provide an exit from the agency dilemma.

The Chinese health care authorities have been struggling with unethical practices in the health care system for more than thirty years. During the 1980s, they focussed on developing a normative framework for medical ethics, and on different methods of institutionalizing it in hospitals and health care administration more broadly. During the 1990s, medical ethics were made a compulsory part of physicians’ professional education. But the development of ethics training coincided with market reforms in the health care system, which changed the nature of the doctor-patient relationship. The essential problem was not marketization per se but distortions of the market caused by government policies, which set the price of medical labour below cost, whilst encouraging hospitals to make money from drug sales and diagnostic procedures. To make up their meagre salaries, doctors relied on bonus payments linked to the amount of revenue they generated for their department. The aspirational declarations in medical ethics codes were in direct conflict with the real incentive structures which exacerbated price inflation and unethical practices.

The health care authorities have been struggling to find a way to change these incentive structures without taking on too much of the costs of delivering health care. At primary care level, they began paying primary health care providers a fixed per capita fee to deliver a defined package of basic public health services.  Furthermore, they introduced a zero-profit drug policy and tied the allocation of public health budgets to annual performance assessments. However, the Gordian knot is in reforming public hospitals, which provide 90% of inpatient and outpatient services. Based on the results of experiments in a number of cities, the Ministry of Health has started to implement case-based charging with treatment protocols.  They also introduced a National Essential Medicines List with capped prices, extended the zero-profit drug policy to county hospitals, and begun to raise the prices of hospital services. It has also redoubled its efforts to strengthen the ethics of the health care industry. However, in nearly all Chinese cities, hospitals still retain their profits and physicians’ income is linked to profits.

Our survey shows that unethical practices commonly reported in the media are perceived as widespread by the public as well. Sixty-one percent consider it likely that in their local hospital patients will be required to undergo comprehensive check-ups even when the diagnosis is perfectly clear. Fifty-seven percent consider unnecessary prescription of medicines not covered by insurance to be very or somewhat likely. Thirty per cent consider taking bribes or the aforementioned ‘hong bao’ to be likely. Seventy-two percent of respondents see at least one form of unethical behaviour as likely.

Our survey prompted respondents to recommend a course of action to minimize agency risk in three different situations. The first question concerned a surgeon who tells the patient that he cannot guarantee the success of a life-saving operation. Whilst this may be a perfectly ethical and responsible thing to say, we were interested in how many respondents would interpret it as a cue to do something to minimize agency risk. Only one third of respondents said they would recommend just undergoing the operation at one’s own risk. Just over a quarter of respondents recommended changing to another public hospital. One in ten would use connections to find another surgeon. If a doctor prescribes a lot of expensive medicine which is not covered by insurance, even when cheaper alternatives are available, slightly less than a quarter of respondents would just buy the medicine prescribed. The same number would ask the doctor to change it. Just over one in eight recommend changing to another public hospital. If a public hospital requires unnecessary diagnostic tests, slightly less than one third would recommend doing the tests anyway, just under a fifth think that asking the doctor to keep the tests to a minimum would suffice. Slightly less than one in eight would recommend changing to another public hospital. These three strategies—doing what the doctor recommends (“loyalty”), changing to another public hospital (“exit”) and asking the doctor to change their behaviour (“voice”) are the three most popular. Another four types of strategies – using connections, going to a private hospital, complaining to the hospital administration and paying bribes—are clearly marginal, since around 90 per cent of respondents would never recommend them.

Analysis of the socio-demographic correlates of the different strategies suggests that the more educated and the higher the income of the respondents, and the more developed the area in which they live, the more proactive they are in dealing with unethical practices.  Privileged groups are also generally more likely to opt for exit strategies. The oldest Chinese are less inclined to use particularistic strategies (bribery, connections, asking for favours), and, except in the case of surgery, less likely to voice their concerns.

It is probably too early to tell what the effects of recent changes to the incentive structures in Chinese hospitals have been. Our survey, conducted more than three years after the start of the latest round of reforms, showed that in the eyes of the public, unethical medical practices are still prevalent. They are part of a culture of health care seeking and medical treatment in which agency risks are shifted onto patients and their families. Most patients see no alternative but to accept these risks, testifying to the existence of a trap of low expectations with respect to medical ethics.  The market does not seem to offer solutions to the problem of unethical practices. The well-to-do are more likely to deal with agency risks pro-actively, including by changing providers, but this still leaves the bulk of the population vulnerable. Empowerment of patients within the public hospital system seems to offer a more promising way forward. It is striking how few respondents believe that complaining to the hospital administration can help them deal with unethical practices. There is a clear need for regulatory institutions which command public confidence. It would be desirable, for example, to establish a system of patients’ ombudsmen, perhaps chosen from amongst local people’s congress delegates, who stand at arms’ length from the medical profession and have real powers to investigate and punish doctors who transgress codes of conduct. Another possibility is to use the internet to develop whistle-blowing platforms and to gather intelligence about ethical violations. Finally, there is a need to educate the public about their rights when seeking medical treatment, both in order to lower unrealistic expectations and to provide guidance on how to seek effective redress.

Dr Neil Munro is a Senior Lecturer in Chinese Politics at the University of Glasgow.  A more detailed account of the survey reported in this article will appear as a chapter in Public Health Policy in Asia, ed. Pitman Potter. London: Routledge, forthcoming. Image Credit: CC by · · · — — — · · ·/Flickr