Impacts of price changes on public hospital reforms in China: evidence from 25 million patients at tertiary hospitals

Abstract

Abstract China’s public hospital price change reform was progressively piloted at urban-level tertiary hospitals in 2015, aiming to adjust the healthcare expenditure structure, reorient public hospitals towards social objectives and control inflated healthcare expenditure. This study investigates the impacts of price changes on inpatient expenditure, service quantity, quality and efficiency and whether the impacts varied in different specialities, treatments and hospitals. A difference-in-differences analysis was conducted using data from 25 million patients from 124 nationally representative tertiary hospitals between 2013 and 2018. The study analyses changes in total expenditure, drug, medical services and diagnostic test/medical consumables expenditure per admission, the use of antibiotics, performed surgery, readmission within 30 days and length of stay (LOS). These factors are examined before and after adjusting the price changes for demographic, socioeconomic and clinical covariates. The price changes decreased drug expenditure per admission (−13.5%, P < 0.001, USD 96.6) and increased medical services expenditure per admission (30.9%, P < 0.001, USD 153.3). They also reduced the LOS (−1.2%, P = 0.019, 0.1 days) while not significantly affecting total expenditure per admission, diagnostic test/medical consumables per admission and the use of antibiotics, surgery performed and readmission rates. In heterogeneity analysis, price changes reform increased efficiency in major diagnostic categories (MDCs) with high drug share and improved quality in nonoperating room surgical groups and hospitals with high drug share; however, it increased total expenditure in MDCs with low drug share or surgical groups. China’s public hospital price change reform generally adjusted the inpatient expenditure structure and reduced the LOS in tertiary public hospitals. Sufficient compensation from medical services and government subsidies that minimize the income effects may be the key to the success of price change reform.