Beijing eyes urban 'super hospitals' in healthcare reform battle

China healthcare policymakers are fighting a losing battle to curb the growth of public urban "superhospitals" that now see expansion as more important than ever in the face of a move in May to scrap a 15% markup on drug prescriptions, Reuters reports.

Citing the nearly 7,000 bed-Zhengzhou First Affiliated hospital in central China as a prime example, Reuters reported that the world's biggest hospital scrambles daily to handle patient loads that lead to makeshift beds in the hallways and gurneys holding patients and relatives "in brightly lit stairwells."

In May, China's State Council announced it would scrap a 15% markup on drug sales in major hospitals nationwide in a pilot that aims to transform pharmaceutical cost and quality problems over a two-year horizon as part of a major health system overhaul. It also cuts a key source of revenue for the "superhospitals."

The move was followed in June with guidelines for an expansion of private hospitals by allowing subsidies and finance to flow to new companies as a way to allow patients access to newer services and ease demand on the public system, and stem a tide of patients avoiding rural clinics in favor of city-based mega hospitals.

Reuters, citing Ma Jingdong, associate professor at Huazhong University of Science & Technology in Wuhan, said 60% to 80% of patients in big hospitals could be treated at community medical centers.

Reuters said China has 16 public hospitals with more than 3,000 beds, citing figures from Becker's Hospital Review, compared to 2,478 beds at the largest U.S. hospital, New York-Presbyterian. The size of these operations serve as a testimony to a lack of public confidence in rural clinics that are meant to provide triage in the massive national system.

Also in May, the State Council and the National Health and Family Planning Commission established several other targets to gain control of costs in the nation's healthcare system, forecasted by McKinsey to reach $1 trillion by 2020, while expanding coverage for a population of more than 1 billion people.

But as Reuters reported, last summer Beijing also issued a directive restricting expansion of public hospitals that appears to have been ignored by administrators.

Instead, Reuters reported, some hospitals are so large they have their own police stations and one doctor at First Affiliated Hospital even briefly wore roller skates to get around the wards faster after the hospital was expanded further.

Liu Tingfang, a professor at Tsinghua University, told Reuters, "Hospitals have to expand if they want to survive."

The loss of income from drug markups has also hit drug companies, with traditional sales models changing rapidly as well.

Many drug company executives are watching to see if online pharmacy sales are approved as suggested by policymakers earlier this year. That would join growing over-the-counter products now sold by the likes of Alibaba ($BABA) and, a trend noted by Johnson & Johnson ($JNJ) CEO Alex Gorsky on the second-quarter earnings call as he discussed the outlook for consumer sales.

- here's the story from Reuters