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Overcome the Dependence: Institutions and Interests in China’s Public Hospital Reform


In the 2010s, China launched a reform to reduce public hospitals’ strong dependency on drug revenues as a source of financial compensation. Within the framework of this “Separation” reform, a series of measures, including the “zero-markup” policy, were taken to bring down the share of drug revenues in the total income of public hospitals, which had reached a striking 42 percent by 2009, contributing to corruption and other problems. While post-reform statistics and researches have revealed a relative decrease in hospital drug revenues, questions remain as to how this major cut in incomes impacted the operation of public hospitals as well as the behaviors of hospital employees.

This doctoral dissertation first traces the history of the “drug dependency“ to show how it is not a “side effect” of the post-1979 hospital marketization but rather originated in the Maoist era, and how the underpricing of medical services and the underfunding of public hospitals by the government have cast long-term effects on the patterns of hospital financing, making a true reversal of the heavy reliance on drug profits difficult. Adopting an actor-centered institutionalist approach, the dissertation then analyzes how, in the aftermath of the Separation reform, public hospitals and their employees reacted to the institutional changes as manifested in their interactions with pharmaceutical companies, government insurance authorities, and patients. The in-depth analysis will illustrate the implications of the Separation reform beyond what is revealed by statistical data, and provide insights into the role of local actors in the process of public policies in China.