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The Beijing municipal government is moving ahead with plans to let public hospitals sell franchises to the private sector so that patients can get access to a wider range of quality services. Photo: Simon Song

Beijing public hospitals to lead way in selling franchises to private sector

Leading health institutions to cash in on their high-profile reputations to gain access to bigger pool of capital from growing private sector

The Beijing municipal government is moving ahead with plans to let public hospitals sell franchises to the private sector so that patients can get access to a wider range of quality services.

The new system, if adopted, would make Beijing the first place on the mainland to let private investors set up offshoots of public hospitals and capitalise on their reputations. In return, the public institutions would get greater access to investment capital.

The move would add to the various ways some hospitals in Beijing are already trying to attract private-sector money.

For example, doctors from Beijing Cancer Hospital now hold weekly clinics at the high-end, private United Family Hospital; and Phoenix Hospital Group has invested 15 million yuan (HK$19 million) in Mentougou Women and Children's Hospital in return for running the institution and collecting management fees until 2030. And Anzhen Hospital and Beijing Children's Hospital each plan to build two new medical centres by 2018 with private capital.

"Such arrangements are already very popular in the business world, and this will provide a new form of cooperation between public and private hospitals," said Dr Zhong Dongbo, deputy director of the Beijing Health and Family Planning Commission.

Shi Lichen, a senior partner at Allpku management consultancy, said: "It will benefit private capital and public hospitals."

The private franchises would have to be for at least five years because investments in hospitals take longer than those in other sectors to see returns.

According to Shi, franchises would not violate any restrictions on the public system. It was a practical option after public hospitals were banned from charging for prescription drugs - which once accounted for half of their income - and increases in consultation fees did not make up for the drug surcharges.

Still, Shi said, public hospitals needed to be careful. "They should be cautious because they take on a certain risk of having their reputations tarnished or incurring liabilities in medical disputes," Shi said.

Zhong said public hospitals should only offer franchises when they could ensure that their reputations and patient safety were protected, and when the private partner had a proven record in management. Naming rights, where a royalty is paid for just using the name of the hospital, went against the franchise principle.

"Care must be taken to prevent the good name of a public hospital being used to solicit patients while offering poor services," Zhong said. "There have been cases where public hospitals were leased out and patients were fooled into paying high fees for substandard treatment."

The government would closely monitor deals for such risks, Zhong said.

Supporting documents with details on when the system will be implemented will be released by the end of the year. Zhong said the goal of the exercise was clear - to establish an open, fair and standard method of allowing new players to enter the health-care industry.

This article appeared in the South China Morning Post print edition as: Beijing public hospitals set to sell franchises
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