Tuesday, June 18, 2024

Effect of Zero Markup Drug Policy on Hospital Expenditure in Shanghai: A Detailed Analysis

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In a transformative move away from a profit-driven model, China’s Zero Markup Drug Policy (ZMDP) implemented in 2009, aimed at curbing the rising healthcare costs attributed to the previous 15% drug price markup allowed in public hospitals. This policy shift, particularly in Shanghai, offers a unique lens through which the dynamics of hospital revenue and expenditure can be observed, providing insights into the broader implications on healthcare affordability and provider practices. This analysis delves into the shifts in financial management within secondary and tertiary public hospitals post-ZMDP enactment.

Analysis of Hospital Financial Data

Utilizing data from 150 public hospitals in Shanghai, this study meticulously examines how the abolition of the 15% markup on drugs influenced various financial aspects of hospital operations. Results indicated that while the policy led to a decrease in drug expenditure, there was a corresponding increase in spending on medical services, examinations, and tests. This adjustment seemingly aided hospitals in maintaining, if not increasing, their overall revenue streams, with no significant alteration in patient costs for both inpatient and outpatient services.

Comparative Impact on Secondary and Tertiary Hospitals

The study reveals a nuanced impact of the ZMDP between hospital types. Tertiary hospitals, which generally handle more complex cases, were able to increase their revenue more rapidly compared to secondary hospitals. This is likely due to tertiary hospitals’ capability to offer and charge for advanced medical procedures and tests, which are not as prevalent in secondary facilities.

Concrete Inferences from the Study

  • Secondary hospitals face slower revenue growth post-ZMDP, suggesting a need for tailored financial strategies to sustain operations.
  • Tertiary hospitals, benefiting from advanced procedure offerings, may not feel the financial pinch as acutely, highlighting the disparity in service capability across hospital types.
  • The unchanged patient costs post-ZMDP raise questions about the policy’s effectiveness in reducing overall healthcare expenses for patients.

Although the ZMDP succeeded in its immediate goal to reduce drug-related expenditure, its broader impact on medical spending and provider-induced demand (PID) appears to be mixed. The shift in cost structures from pharmaceuticals to procedural interventions suggests that while the policy curbed one form of expense, it may have inadvertently given rise to another. Thereby, it underscores the complexity of healthcare reform and the need for supplemental policies to effectively manage and balance provider and patient financial burdens.

In conclusion, the study underscores the intricate balance between policy intentions and real-world outcomes within healthcare economics. As China continues to refine its healthcare policies, the insights from Shanghai’s experience with ZMDP provide valuable lessons for future reforms aimed at achieving equitable and sustainable healthcare.

Original Article: Front Public Health. 2024 Apr 24;12:1229722. doi: 10.3389/fpubh.2024.1229722. eCollection 2024.

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