Chang Gung Hospitals Fail in China

Mark O'Neill has an interesting piece at Asia Sentinel on the failure of Wang Yung-ching's Chang Gung Hospitals to fulfill their goals of making money and providing reasonably-priced care in China....

It is hard for private hospitals, including Chang Gung, to register as non-profits, which would give them these benefits. As commercial entities, they are treated like businesses in terms of tax and land.

From the beginning, the Chang Gung institutions in Taiwan were registered as non-profit entities, which are obliged to plough their profits back into the hospitals or give them to charity. They were unable to obtain this status in China.

The Xiamen facility was approved in 2005. Since Chinese law does not allow 100-per-cent foreign ownership in hospitals, as Wang initially wanted, it is a 70-30 joint venture between his Formosa Plastics group and a city medical firm. Its biggest headache is hiring qualified and experienced staff. The vast majority of Chinese doctors and nurses belong to city hospitals or other government institutions offering housing, pay, welfare benefits and a pension. Mobility is limited.

Medical professionals, especially those with experience, are unwilling to leave their institution and the benefits they have accrued to work for a Taiwan-invested hospital, It is too expensive for Chang Gung to rely entirely on staff brought from Taiwan or elsewhere.

The government sets quotas for the import of medical supplies and equipment, restricting what a private hospital can order.

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China's economic conditions today are similar to those in Taiwan in 1976, when the first Chang Gung hospital was built. The economy was booming and average personal incomes had reached US$2,000. But medical services lagged the economy, with 11 doctors and seven beds per 10,000 people and nearly 80 per cent of the beds controlled by the government. The income of doctors at Chung Gang hospitals consists of an annual salary, fees from teaching and research and income from clinics. They are forbidden to accept ‘red packets' – from patients and their families -- and their pay is not linked to sales of medicines.

In China, such ‘red packets' – given in the hope that the doctor will give the patient his best care -- are commonplace and many hospitals rely on the income from overpriced medicines to remain solvent.

It's a good example of how important the relationship between the State and the medical industry in Taiwan is to the profitability of the latter....

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