Study On Financing Model For Non-profit Hospitals In China

Non-profit hospitals are the main part in the health delivery system. Due to the decreasing of the financial input, the operational income is playing more and more important role in the hospitals' evolution, which is not good for the long term development, and also increased the financial burden of health care for the whole society. Thus, finding ways to collect money for the hospitals is urgent for the policy makers in the health care field.ObjectivesSummarize internal and international financing models in for-profit hospitals, non-profit hospitals, NGO, infrastructure project, etc. Consider the effectives of policies in health care field, the effect of the stakeholders, and the willingness to investors. Appraise the internal-capital running effective of non-profit hospitals. Summarize the existing financing models for non-profit hospitals, and analysis the advantages and disadvantages. Propose the strategies for the non-profit hospital financing and suggestions for supporting the financial system.Data sources and methodsData sources This paper is related to the study on investment and financing mechanism and strategies choice based on game in non-profit hospital in china, which supported by the NSFC. 23 non-profit hospitals in 11 cities of east and middle China were investigated. Financial data from 2005 to 2007 were collected in all the hospitals. And the president in charge of financing, dean of financial department, equipment department, and capital structure department of the selected hospitals were interviewed. Principals of financial and medical affaires department in the health bureaus were also interviewed. Financial data on the national wide non-profit hospitals in 2002 to 2007 were drawn from the China Health Statistics Yearbook.Methods 1. Literature analysis; 2. Macro-policies analysis, PEST analysis, Stakeholder analysis were used to explore the external conditions for the non-profit hospital financing; 3. Capital and debt structure, input and output structure, operational ability, debt-paying ability and development ability of the non-profit hospitals were appraised. And Du pont system was used to evaluate the efficiency of capital use in non-profit hospitals. 4. Comparative analysis was used to summarize the different hospital financing model in different countries, and financing model for different fields.Main Results1. Multi-channel financing model for non-profit hospitals were universal in all countries. The main financing methods include: financial budget, health insurance reimbursement, tax-free bond, business loan, project finance, charity and donation, Asset-backed securitization, etc. Financial budget, tuition fees, bond, fund-raising, etc, was used in colleges and universities. Project finance and asset-backed securitization are commonly used in infrastructure project.2. Reasons for financing system reform: Financial budget is shrinking, operational cost is increasing, competitive pressure is increasing, and residents' demand is improving.3. Macro-environment for non-profit hospitals' financing: The governments are paying more and more attention on people's health, which created a better political surrounding for the non-profit hospitals. New health care reform scheme will largely change the existing health care system. Establishment of primary health care delivery system, basic health security system and primary pharmaceutical system may put stricter restrain on internal capital accumulation for the hospitals, while the government dominant multi-channel input system may bring more external capital for the non-profit hospitals.4. Capital running conditions in non-profit hospitals: Asset-debt ratio of non-profit hospital is in a rational scale with a comparatively strong debt repaying capability, but the lever effect of finances does not effectively used. The decreasing of medicine income and the increasing of health service income makes the return on assets decreased. The third level hospitals are largely expanding recent years, while the second level hospitals increased slowly, and the operational efficiency is relatively low.5. Financing status of the non-profit hospitals: Internal capital accumulation is still the main capital resource for the non-profit hospitals. Financial budget from the government needs to be increased. Business banks prefer to the large hospitals, while the small hospitals which need the loan can hardly get the capital. Deferred payment to the medicine and equipment suppliers is commonly seen in hospitals, but this kind of interest tied is not good for the long term development of the hospitals. In east China, where the private capital markets are well developed, property reformation is attempted. But the mix of state-owned property and the private owned ones may induce some side effect. Charity and donation is not well developed in China. Private lending exists in some western cities. Finance release for the equipment needs to be regulated.6. Willingness of the external investors: The governments are pleased to increase the financial budget, but constraint by the financial ability. Business banks are like to lend to the hospitals, but prefers to the large hospitals. Social capitals are eager to enter the health care field, but the return mode needs to be defined. Conclusions:1. Financing model for different non-profit hospitals: The non profit hospital system should be divided as state-owned, enterprise -owned and civil-owned subgroups. Different subgroups should choose different financing strategies. Government should insure the financial budget to the state-owned hospitals on infrastructures built, the social health security funds should reimburse the operational costs, and debts scale must be strictly controlled. Non profit foundations should be set up to raise the social-founded non profit hospitals, and the social capital should be leaded to corporate-system reform the enterprises owned hospitals. Social charity should be encouraged, and bond or lottery may be used in health capital raising.2. Supporting system building: As to reform the non profit hospital financing system, property rights issues, governance model, compensation systems, regional health planning and moderate scale of hospitals should be considered and resolved. The financial support, supervision from the government, coordination with the health security institutions and taxes reducing policies should be enhanced to support the development of on profit hospitals.Innovations:1. Analysis the external policy surroundings and internal capital utilization efficiency to formulate the strategies model and supporting scheme for non-profit hospital financing system. 2. Subdivide the non-profit hospitals as state-owned, enterprise -owned and civil-owned subgroups, and propose different financing model for different subgroups. 3. Referenced the new health care system reform scheme for the establishment of supporting policy and strategies.