Improving Service Delivery: A Question of Incentives
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financing in China are indeed improving efficiency and equity. This is certainly an issue that merits further attention as efforts to rationalize the delivery system are sustained and deepened.
Finding the Right Balance: Reforming Government Providers or Privatizing? As in other health systems, China faces the challenge of finding an appropriate balance between the discipline, organizational autonomy, and productive efficiency associated with the market on the one hand, and the need to control the tendency toward unnecessary care and cost escalation on the other. This chapter has argued that the right balance currently is not being struck, and has suggested that hospitals and health centers should be given more autonomy over their human resources. At the same time, greater restrictions on their capital investments, service mix, and, at least in the longer term, on their use of operational surpluses are needed to manage the risks of excessive entrepreneurialism. What does this mean for how service delivery should be organized? This question has received a lot of attention in China in recent years. Debates about public services unit reform have tried to determine the appropriate role for public and private provision with reference to the concept of “public benefit”69 (Cheng 2000; Project Team on “Reform” 2004; Project Team of DRC 2005). For the health sector, the government has called for a mixed delivery system, albeit with at least one governmentowned township health center in each area (Central Committee and State Council 1997; Central Committee 2002). A hospital classification scheme, accompanied by policies on government subsidies, taxation, and price setting, has been introduced that categorizes hospitals as either for-profit or nonprofit, with a distinction between government-owned and nongovernmental nonprofits (State Council 2000). Meanwhile experiments with privatization have been widespread. As in international experience, results have been mixed, reflecting the considerable diversity in reform design and the fact that ownership conversions often have made little difference to providers’ autonomy in key dimensions (box 6.6). The problem with couching the debate about service delivery reform in terms of ownership and profit status is that these labels—often ideologically laden—tend to get in the way of thinking about changes in provider autonomy. Privatization and changes in profit status can be a means to achieve organizational change, but, as box 6.6 shows, these changes are by no means automatic. By the same token, substantial changes in autonomy can be achieved without changing either ownership or profit status.