As part of its efforts to "build harmonious society," the government has taken initiatives to establish "fair-price hospitals."

The new programme attempts to appease public grievance against the soaring cost of medical treatment at China's hospitals.

Last year, a number of "fair-price hospitals" were set up by local governments to provide comparatively low-cost medical service to the general public, especially the low-income population.

According to sources with the new programme, these hospitals will exercise a new financial policy: The government will appropriate funds to support them if they lose money, and if they have generated profits, the profits will be handed to the government.

A Ministry of Health spokesman said early last month that once the few pilot "fair-price hospitals" are successful, all public hospitals will be required to follow suit.

If so, this will be a step back to the old policy of the government funding hospitals, a practice that harks back to the years before China launched a campaign to reform its public health service system in the 1990s.

It doesn't seem wise for the government to retrieve the burden it had shed during the reform.

The current need for "fair-price hospitals" derived as a result of the malpractices which appeared during the reform but which have not been chastised. Reform was not wrong but what happened during the reform deserves serious reviewing.

In what was understood as a "process of marketization," public hospitals turned themselves into commercial establishments reaping fat profits. Making money became their main purpose while the sense of professional ethics became faded.

Unethical methods were adopted to overcharge patients. They mainly included asking patients to undergo unnecessary tests using sophisticated equipment, prescribing unnecessarily large amount of high-price medicines and dramatically raising the costs of hospitalized treatment.

In a market economy, it is not evil to seek profit to the maximum degree, and the unethical methods mentioned above are not necessarily illegal.

Consumers, or patients in the case of medical affairs, would choose the best and least expensive products or service. In other words, market forces will repudiate these ill practices. The problem, however, is just that Chinese patients have no alternatives.

Most public hospitals, which make up more than 90 per cent of the nation's total number of hospitals, are designated by the government-sponsored medical insurance system as "contracted hospitals," leaving everyone a share of the market.

The few private hospitals constitute virtually no rivalry to them and rigid government requirements on licensing have deterred investment in the private sector.

In other words, the entire system of public hospitals has acquired a collective monopoly over patients.

The government should not retrogress from the reform but should rely on market forces to rectify the ill trends. The key lies in the management of the market.

In fact, patients have different needs for medical treatment. The government can maintain a certain number of "fair-price hospitals" to provide service for patients of common diseases and minor ailments.

Hospitals with better-skilled physicians and more advanced equipment can accommodate patients with more complicated diseases at higher prices.

Then more favourable measures should be taken to encourage investment in private hospitals, which can provide services at both ends of the market.

Email: liushinan@chinadaily.com.cn

(China Daily 02/08/2006 page4)