The hospital located in the business centre of Hongkou District is now the largest specialized eye hospital in Shanghai.

One might wonder if this is a hotel or a hospital, because the environment is so comfortable: soft background music in the hallways; landscape paintings on the light green walls; green shrubs and fresh flowers on the tables; smiling nurses.

This is totally different from the general idea of a hospital: corridors usually crowded with noisy patients; the air full of the smell of disinfectant; medical staff reserved and unwilling to say more than one word.

As well as state-of-the-art surgical instruments and the latest laser system, the most outstanding feature of the hospital is that it is a non-State-owned joint stock enterprise.

Healthcare market

Experts predict that China's healthcare market will have an annual growth of 6 to 8 per cent in the next few years, making it one of the potentially most prosperous. In Shanghai, annual medical expenditure is estimated to be 16 billion yuan (US$1.93 billion).

With an increasingly ageing population, the growing consumption power and longer life expectancy of local residents, the medical market has great opportunities.

However, limited medical resources cannot meet people's needs due to financial deficits in State-owned hospitals. As a result, there is room for a range of different medical organizations.

As is the case with many State-owned enterprises, public hospitals in the past half century have learned a lot of bad habits: insufficient management, over-staffing and bureaucratic operating procedures.

Being a member of World Trade Organization (WTO), China has to keep its promise to open the health industry to foreign capital in coming years. By then, public hospitals will be facing fierce competition from Western giants they have never prepared for.

So it's quite urgent for them to learn how to operate as an enterprise and how to survive in the competitive market economy of the future.

As a trial, the healthcare sector was first opened to domestic private investors. Since the first private hospital opened in 1999, private investors from Shenzhen, Sichuan and Zhejiang provinces have been scrambling to enter Shanghai. Statistics show that about 20 private hospitals have been set up in the city, although this number, compared with more than 500 public hospitals, is still quite low.

Weak reputation

Right now, public hospitals still retain the edge in competing with other types of hospitals in regards to scale, patient numbers and medical techniques.

A recent survey in Shanghai shows that State-owned hospitals still hold the vast majority of the medical market. About 96.1 per cent of hospital beds are in public hospitals; which also account for 98.9 per cent of outpatients and an astonishing 99.62 per cent of inpatients.

"We are not competing with public hospitals on an even level since we lack government support," said Liu Chunlong, director assistant of Shanghai Ren'ai Hospital.

The biggest obstacle for private hospitals is that they are mostly excluded from the social medical insurance system.

In Shanghai, nearly 55 per cent of local residents (about 8 million) have joined the government-run medical insurance scheme, started in December 2000. As part of the social welfare security system, it helps those insured pay some of their medical fees when they receive medical service in hospitals.

However, patients have to pay the doctors' bills if they are treated in non-State-owned hospitals.

Today, only a few private hospitals, such as the Humanity Hospital have a permit to receive social medical insurance patients. The numbers are very strictly controlled.

"The local Health Bureau is very conservative in this area which is unfair for us. Private hospitals in other provinces, such as Guangdong and Zhejiang, can also be included in the social medical insurance system, " Liu complained.

Besides the political problem of differing public policies, private hospitals owners also feel depressed about their uncertainty concerning government policies in the future.

The environment is good, the equipment is advanced, the service is humane and the medical costs are not more expensive than in the public sector, but patients are not attracted to little-known private hospitals.

"Although we have a first-class medical staff, patients won't come because they don't know our hospital," said Han, who used to be the director of the Eye Department at Changhai Hospital under the Second Military Medical University.

In Han's hospital, most of the 80 beds are empty. In the first three weeks, only nine inpatients arrived at the hospital for operations.

"If I am sick, I will go to a big public hospital such as Ruijin or Huashan, because they have the reputation, even though they are always crowded," said Huang Yumin, a local resident.

Several weeks ago, one newly-opened non-State-owned local hospital, Ruixing Hospital, carried an advertisement to recruit a nurse, offering annual pay of 150,000 yuan (US$18,094). The salary was five times that of a nurse's average salary in a public hospital where the range is from 25,000 yuan (US$3,016) to 30,000 yuan (US$3,619).

In the end, Ruixing Hospital failed to get a qualified applicant but at least it was successful in making itself known to the public. Some people criticized he hospital saying it was just putting on a show to call public attention to itself. But behind the issue is a common problem for non-State-owned hospitals - no reputation among patients.

Another popular phenomenon in private hospitals is that most of the medical staff are recruited from outside Shanghai because it's very hard to attract a local medical expert to a private hospital.

Future

"Most local private hospitals are losing money now with too few patients. How can the hospital keep financial balance with about 100 patients in 20 departments," asked an insiders.

"It's too early to talk about making money, because investments in the medical market need a long time to be recouped. Our most optimistic plan is to break even in three years," said a financial chief in a local hospital who refused to be named.

Liu is very confident about the future because he believes the market needs private hospitals. "We are seeking potential customers from the medical insurance sphere. Some big insurance companies have agreed to ask our hospital to receive their VIP customers."

And he also released the news that his Shenzhen-based company would expand its hospital chain to 100 branches all around China in ten years.

(Shanghai Star January 3, 2003)