Medical service fees – a key step forward

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Medical service fees – a key step forward

For years, Beijing’s hospitals relied on profits from drug sales to stay afloat—a system that led to overprescribing, crowded tertiary hospitals (large, specialized medical centers), and underused primary care facilities. In 2017, the city launched a landmark reform to fix this: On April 8, the Beijing municipal government rolled out a “comprehensive medical separation” policy across more than 3,600 public and private hospitals. The reform had three core parts: ending drug markups (hospitals adding profit to medications), introducing medical service fees (MSF) (fees for doctor expertise), and adjusting prices for 435 basic medical services.

Dr. Wei-Ping Jiao, a medical insurance expert at Xuanwu Hospital (Capital Medical University, Beijing), explains why MSF was the reform’s most critical component—and how it transformed healthcare for patients and hospitals alike.

1. MSF fixed the “inverted pyramid” of patient care

Before 2017, Beijing’s healthcare system had an “inverted pyramid” problem: Too many people visited big tertiary hospitals for routine care (like colds or diabetes check-ups), while smaller primary hospitals and community health service centers (CHSCs)—designed for everyday needs—were empty.

MSF changed this by aligning costs with care:

  • Attending physicians (regular doctors): Fees increased at tertiary hospitals but were reduced or made free at primary hospitals and CHSCs.
  • Senior specialists (deputy chief, chief, or honor specialist physicians): Fees stayed the same at all hospitals.

The result?

  • Patients with severe or complex conditions still chose tertiary hospitals (since specialist fees were consistent, but big hospitals have better equipment).
  • Older adults with chronic diseases (like hypertension or arthritis) flocked to primary hospitals/CHSCs—where care was cheap or free, and they could get 2-month medication prescriptions (cutting down on frequent pharmacy trips).

In the first year, tertiary hospitals saw an 11.9% drop in average patient numbers. Primary hospitals and CHSCs? A 16.1–30% increase (per a 2018 report on the reform’s anniversary). The “inverted pyramid” was finally starting to right itself.

2. MSF made hospitals sustainable—without drugs

Hospitals worried losing drug markup income would cripple them. But MSF and price adjustments (raising fees for doctor skills, lowering fees for equipment or drug-related services) reshaped their finances.

Instead of relying on drug sales, hospitals now earned money from expertise—a more stable model. Even hospitals that previously got most of their income from drugs saw higher profit margins after the reform. The fear of financial collapse? Unfounded.

3. MSF let senior specialists focus on what matters

A surprising but welcome change: After MSF, fewer patients visited senior specialists. Visits to deputy chief physicians dropped 9.7%, and chief physicians 22.5% (per 2018 data). Hospital leaders tried to bring back outpatients, but nothing worked.

For the government, this was a win. Senior specialists—trained for years to handle complex cases—no longer wasted time on mild headaches or routine check-ups. Instead, they focused on life-threatening conditions (like cancer or heart attacks) where their skills were needed most. MSF turned “quantity over quality” into “quality over quantity.”

Why this matters for Beijing’s future

The 2017 reform’s goal was simple: Make healthcare fairer, more efficient, and centered on people, not profits. MSF delivered on that. It redirected patients to the right care settings, made hospitals financially sustainable, and ensured senior doctors used their expertise wisely.

For Dr. Jiao—who manages medical insurance at Xuanwu Hospital—this is progress. “The reform isn’t perfect,” he notes, “but MSF has taken us a big step forward in building a system that works for everyone.” Dr. Jiao reports no conflicts of interest.

The study was published in the Chinese Medical Journal in 2019 by Dr. Wei-Ping Jiao, Department of Medical Insurance Management, Xuanwu Hospital, Capital Medical University, Beijing.

References:

  1. Wang JF, Chen ZC, Cui B, He YD, Yang S, Shen YQ, et al. The impacts of separating drug sales from medical services pilots on inpatient expenses in Beijing: a case study of five pilot tertiary hospitals (In Chinese). Chin J Health Policy 2018;11:42–48.
  2. Xu FX. Beijing releases first anniversary reports of the comprehensive reform of the separation of medicine (In Chinese). Capital Food Med 2018;25:4.

doi.org/10.1097/CM9.0000000000000363

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