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Differential effect of China's Zero Markup Drug Policy on provider-induced demand in secondary and tertiary hospitals. | LitMetric

Differential effect of China's Zero Markup Drug Policy on provider-induced demand in secondary and tertiary hospitals.

Front Public Health

Center for Policy Impact in Global Health, Duke Global Health Institute, Duke University, Durham, NC, United States.

Published: May 2024

AI Article Synopsis

  • The 1980s marketization of China's health system led to a 15% markup on medications in hospitals, which incentivized unnecessary prescribing and increased patient costs.
  • In 2009, the Zero Markup Drug Policy (ZMDP) was introduced to eliminate this markup; a study in Shanghai found that while drug expenditures decreased, spending on medical services increased, leaving overall patient costs largely unchanged.
  • The analysis indicated that tertiary hospitals saw a faster revenue increase compared to secondary hospitals, suggesting a shift in provider-induced demand from medications to more expensive medical procedures, highlighting the need for additional policies to tackle this issue.

Article Abstract

Following the marketization of China's health system in the 1980's, the government allowed public hospitals to markup the price of certain medications by 15% to compensate for reduced revenue from government subsidies. This incentivized clinicians to induce patient demand for drugs which resulted in higher patient out-of-pocket payments, higher overall medical expenditure, and poor health outcomes. In 2009, China introduced the Zero Markup Drug Policy (ZMDP) which eliminated the 15% markup. Using Shanghai as a case study, this paper analyzes emerging and existing evidence about the impact of ZMDP on hospital expenditure and revenue across secondary and tertiary public hospitals. We use data from 150 public hospitals across Shanghai to examine changes in hospital expenditure and revenue for various health services following the implementation of ZMDP. Our analysis suggests that, across both secondary and tertiary hospitals, the implementation of ZMDP reduced expenditure on drugs but increased expenditure on medical services, exams, and tests thereby increasing hospital revenue and keeping inpatient and outpatient costs unchanged. Moreover, our analysis suggests that tertiary facilities increased their revenue at a faster rate than secondary facilities, likely due to their ability to prescribe more advanced and, therefore, more costly procedures. While rigorous experimental designs are needed to confirm these findings, it appears that ZMDP has not reduced instances of medical expenditure provoked by provider-induced demand (PID) but rather shifted the effect of PID from one revenue source to another with differential effects in secondary vs. tertiary hospitals. Supplemental policies are likely needed to address PID and reduce patient costs.

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Source
http://www.ncbi.nlm.nih.gov/pmc/articles/PMC11076664PMC
http://dx.doi.org/10.3389/fpubh.2024.1229722DOI Listing

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