Chinese doctors are unhappy about their pay and work conditions.  Moreover, they are in danger of physical attack by angry patients and families.  The Ministry of Health estimated that in 2010, 17,243 attack and agitation incidents occurred in Chinese hospitals, an increase of almost 7,000 over five years. Patients, bereaved families of patients who have died in hospitals, and sometimes paid protestors called yinao or “medical troublemakers,” invade hospitals, berate or attack staff, create loud disruptions, and stage mock funerals.

About 30 percent of the attacks were carried out by patients, 60 percent by family members, and the remainder by others, including yinao. About 75 percent of attacks were aimed at doctors.  According to a 2012 survey of nearly 6,000 Chinese physicians in 3,300 hospitals, 59 percent of doctors had been verbally assaulted and 6 percent had been physically assaulted. News accounts for 2002-2011 yielded 124 incidents of “serious violence” against hospitals, including 29 murders and 52 serious injuries. Often violence accompanies demands for cash compensation for harm to patients, including patient deaths in hospitals.

In response, the Chinese Ministry of Public Security has recently announced a new set of security measures for hospitals. Approximately one thousand top-tier hospitals will now have a police presence in addition to their own security guards; alarm systems linked with local law enforcement; enhanced audio-visual surveillance systems; and security posts at entrances similar to those at airports.

The wave of violent attacks on doctors and other medical workers constitutes a significant problem in its own right.  But it is also a reflection of a broader set of problems faced by today’s generation of Chinese doctors.  They are badly paid, both in relation to doctors in other countries, and in relation to other Chinese professionals. As a result, doctors often supplement their low salaries in ways that strengthen the popular impression that they are corrupt, fostering still greater distrust and anger among their patients and patients’ families. A recent survey showed that 67 percent of the Chinese public does not trust doctors’ professional diagnoses and treatment.

The doctors themselves are also dissatisfied with the current state of affairs. A 2011 Chinese Medical Association survey of its members showed fewer than 20 percent of responding doctors to be satisfied with their medical practice environments, while 48 percent rated them “poor” or “very poor”. Doctors were particularly dissatisfied with their pay. They were also concerned about their work conditions.

When respondents were asked to identify sources of work pressure, the most frequent response, at 77 percent, was “high patient expectations.”  Only 21 percent wanted their own children to become doctors. Interestingly, this survey showed that fewer than 10 percent of respondents blamed patients, doctors, or hospitals for their problems; the majority (83 percent) blamed “the system” for the tension between doctors and patients.

In this post, we review that system and highlight sources of doctors’ discontent and the distrust between doctors and patients.

Reform and Its Effects

The post-Mao reforms beginning in 1978 in China went beyond decollectivization of agriculture and new emphasis on markets in the economy. It also involved radical restructuring of the health care system, with badly designed retrenchment.  For instance, closing down the Cooperative Medical Scheme (CMS) in 1981 took away health care insurance from the 80 percent of the Chinese population then living in rural areas — surely the largest reduction in health insurance in human history.

Restructuring also led to significant cuts in funding for both urban and rural hospitals, which then sought to boost the revenue they collected from patients, a task complicated by ongoing price controls on most care. Consequently, hospitals took steps to increase volume. They raised revenue by selling drugs to patients at a permitted 15 percent markup — a business line which rapidly became hospitals’ principal income source.

At the same time, doctors’ pay began to fall behind the pay of other professionals. The CMA reported average earnings of Chinese doctors to be 1.19 times the average of Chinese workers. By contrast, college teachers’ salaries were reported to be 1.71 times average workers’ incomes. According to a 2012/2013 survey of Chinese doctors, their average annual earnings were ¥67,516 — equivalent to about $19,000 using the World Bank’s Purchasing Power Parity rate, the best exchange rate for understanding personal incomes.  Incomes vary by doctor rank and experience, specialty, hospital level, urban/rural location, and region.

However these numbers represent only part of the total income earned by doctors – most of whom are employees of public hospitals. It is useful to break down the sources of their income into four categories:

  1. Basic salaries as hospital employees;
  2. Productivity-based bonuses paid by the hospital;
  3. Drug rebates, consisting of payments from drug companies related to doctors’ prescribing behavior;
  4. And gifts from patients, known as “red envelopes.”

The latter two sources — sometimes referred to in China as “gray incomes,” are nominally forbidden but seem widely practiced; they have contributed to patient distrust.

But even the legal hospital-paid income that comes in the form of bonuses has fostered distrust among patients. These so-called “awards” are given to doctors on the basis of their contributions to hospital volume and profits, a practice that began to appear in the early 1980s as hospitals sought to raise their patient care volume to increase revenues. With these payments, doctors can raise their incomes by engaging in supplier-induced demand – that is, leading patients to use care and services they otherwise would not. There is a perception in the Chinese public, as reflected in studies and media reports, that this practice takes place with considerable frequency.

Gray Incomes

As their incomes from hospitals have slowed, doctors have taken steps to boost their gray incomes. Drug companies, engaged in fierce competition, bribe doctors to choose their products. Hospitals encourage their doctors to choose the drugs which most boost hospital revenues. The amounts involved are substantial.  Incentive payments paid to doctors for drug sales are typically 25-30 percent of the final drug price paid by patients.  In a 2007 thesis for the London School of Economics and Political Science, Ziyan Wang described the outsized role that these payments play in doctors’ incomes. Relying on interviews with key informants, most of them in government, Wang wrote:

“The monthly salary and allowances of a county hospital doctor are between 1,000 and 1,500 yuan … while the monthly rebates from prescriptions are between approximately 3,000 and 5,000 yuan.”

A major study of the clinical effects of these financial incentives facing doctors and hospitals showed that patients in urban community health centers were prescribed antibiotics at twice the rate recommended by the World Health Organization, and were administered injections of anti-inflammatory drugs at more than three times the rate found in similar countries.

To deal with what they cleverly call “drug-dependent doctors,” health authorities in several provinces are trying new ways to incentivize hospitals to stop selling drugs at a profit.  The experiment began in 2011, when Shanxi Province imposed a zero mark-up policy on 70 percent of hospitals.  Nationwide, more than 700 hospitals are under some variant of the trial policy, which would end hospitals’ largest revenue source.

In some areas, the local government provides subsidies to offset lost drug revenue.  In other areas, hospitals are permitted to offset lost drug revenue by charging more for care. Whether through subsidies, or higher charges for care, or a combination of both, hospitals are allowed to recover no more than 90 percent of the drug revenue they lose as participants in the experiment. It will be interesting to see whether these experiments decrease drug prescribing and, ultimately, increase patient trust.

Another income source for some doctors is the so-called “red envelope” or hongbao. Patients sometimes offer, and many doctors demand, informal payments, especially before surgery, childbirth, or other significant procedures. Health authorities have tried to ban red envelopes in medical care, with limited success.

Doctors justify gray incomes on the basis of the difficult and skilled work they do under heavy pressure. They also cite continued price controls on medical services. The CMA argues that in light of the pressures on doctors, some misconduct is understandable. The best way to prevent such misconduct, they say, is to raise the salaries of doctors.

Patient Care

Discontent among both patients and doctors arises in part from the country’s system of care. Although the majority of problems for which patients seek treatment are those that would be addressed by primary care doctors in most other systems, there is little primary care infrastructure in China.

Instead, most patients seek care from specialists in large urban hospital settings. Those hospitals are crowded and doctors have heavy workloads. Rarely are there formal appointments. Instead patients often have to navigate complex assembly-line care marked by long waits in a series of lines – it can take many hours in line to register then take care of prepaying one’s account, see a nurse then see a doctor, have tests performed then await the results, acquire a prescription then, finally, have the prescription filled. Most of these specialists do not actually have any extra formal training in their specialties. Instead, they acquire a facility in the core of their specialties, simply through experience, seeing the same problems over and over again.

Patient Cost Burden and Expectations

A May 2012 editorial in The Lancet argued that violence is due, in part, to “poor public understanding of medicine, unrealistic patient expectations about treatments, and catastrophic out-of-pocket health-care expenses for families.”

Even though most patients have health insurance, care can be expensive. The structure of insurance in China can leave patients with large out-of-pocket payments. Deductibles, high co-insurance rates (particularly for out-patient care), and annual benefit ceilings are responsible.

When patients face surgery or other major procedures, the price tag can be substantial, in spite of price controls. And doctors may expect a substantial red envelope.  Often families use their savings, borrow from local lenders, or ask other family members for help. The high cost may also enhance patients’ expectations for a successful outcome, and sharpen their disappointment if things don’t turn out as hoped.

Distrust carries over to the malpractice system. Much violence comes after, and in response to, the disappointing outcomes of malpractice complaints. The often-criticized malpractice system has features that may add to distrust and patient anger, and needs to be changed to increase transparency and trust.  But the main changes must come in the health care system itself.

Can the Problems Be Solved?

In 2009, Chinese leaders announced a major “deepening” of reform of the health care system and began implementation with substantial increases in funding. However, the reforms did not stem the rise of anti-hospital, anti-doctor agitation and physician discontent. In fact, as the reforms were implemented and money poured into the system, the crisis of distrust and violence only grew worse. Addressing this crisis will require fundamental reforms and the restoration of significant funding including:

  • Money to hospitals: so that they no longer need to distort care with excessive and inappropriate prescribing of drugs; and so they no longer need to incentivize doctors to increase the volume of care;
  • Money for doctors’ basic salaries: so that they no longer need extra bonuses from added care volume; so that they no longer seek to pad their incomes through rebates from drug companies; and so that they no longer seek or accept “red envelope” payments from patients;
  • And money for more thorough insurance coverage with lower deductibles and co-insurance rates, and above all, with no annual benefit ceilings, which together impose a need for financially crippling out-of-pocket expenditures on patients.

While large amounts of money will indeed be required, the money for hospitals, the money for doctors, and the money for insurance will be the same money. The best way to increase doctors’ salaries is to put money in the hands of the hospitals that hire them; and the best way to do that is to make insurance coverage more comprehensive and liberal.

In the process, it would be more efficient if hospitals were permitted to charge fees which reflected the true economic costs of care, and patients then paid such fees with expanded insurance coverage. Unfortunately, that is not how the current regime operates. Instead fees are held below costs by price controls, and the gap is filled by profits from unnecessary volume and overprescribing drugs.

But it is possible to envision a system where hospitals provide only the care that is necessary and recover their costs from fees that accurately reflect their costs and the market’s demand. The result would be improved quality of care, and perceptibly less corrupt behavior by doctors and hospitals. China has new leaders, and whether they have the will to strive for such changes is not yet clear.