Governing the Healthcare Market: Regulatory Challenges and Options in the TransitionalChina

The Chinese healthcare system has evolved from acentralized, egalitarian public system (1949-1979) toone which can be characterized as public identity,private behavior, health system (1980-1999). Withblurring of the distinction between public andprivate governing systems, high cost, high volumeservices are offered through excessiveentrepreneurial practices. Regulating healthcaremarket has emerged as an essential issue. Without aneffective state health financing tool, nor maturemarket institutions, China has adopted amanagement-based regulation but the absence ofeffective governance structure hinders effectiveregulation.To improve healthcare quality and contain costs,China will need to develop public financing tools toalter the current perverse incentives of provider.Government will also need to work with civil societyorganizations to develop tools governing clinicalpractice, such as clinical audit for risk managementand hospital accreditation programs. To do sorequires establishing arms-length governancemechanisms between health departments and hospitals,and corporate governance structures within hospitals.