During the last years of the Eastern Han Dynasty a physician by the name of Hua Tuo made an extraordinary discovery. He found that a mixture containing alcohol (a lot of it) and stramonium (derived from the jimson weed plant) placed his patients into a state of unconsciousness that enabled him to operate on them.
Chinese historians called Hua Tuo the “divine doctor”. He is said to have performed caesarians and other abdominal surgeries, which his patients would recover from in less than a week. By contrast, European ‘barber surgeons’, as they were known, were still performing operations without the aid of the anaesthetic.
It is perhaps fitting that the world’s largest hospital (according to Chinese media) is now based in Henan province, an area where Hua Tuo worked. The First Affiliated Hospital of Zhengzhou University (FAHZU) in the provincial capital Zhengzhou is a mega hospital. It is projected that by the end of this decade more people will pass through its doors than live in Greece. The province it serves is China’s third largest and is already larger in population terms than the Philippines.
Unsurprisingly everything about the hospital is on an enormous scale. It already has 7,000 beds and there are plans to increase the number to 10,000 over the next couple of years. The second largest hospital in the country, West China Hospital in Chengdu (in Sichuan province), by comparison, has just 4,300 beds.
Last year FAHZU dealt with 4.26 million outpatients and 310,000 admissions. This resulted in 196,000 surgical operations, the largest number of any Chinese hospital. On one record-breaking day, 21,600 outpatients were treated.
However, the hospital has recently attracted the scrutiny of the domestic press. In an editorial published this week, the Global Times asks whether FAHZU is a “malignant or benign” symbol of China’s medical system. A recent investigative report by China Economic Weekly, a magazine run by the People’s Daily, also questions the hospital’s track record as a state-owned enterprise.
At issue is the speed at which the hospital has grown and the profits it is now generating. Dahe Daily, one of Henan’s biggest newspapers, says that revenues have increased from Rmb680 million ($109.7 million) in 2008 to Rmb7.5 billion in 2014, a ten-fold spike. Its nearest rival, Henan Provincial People’s Hospital made just over half that amount in 2014 at Rmb4.58 billion.
FAHZU’s transformation has taken place under the leadership of its CEO Kan Quancheng who joined the hospital in 2008. Since then staff are said to have started working up to five times harder than they did before, while employee numbers have gone up 70%.
Guo Jianjun, the hospital’s director of medical services tells China Economic Weekly that, “while staff are supposed to work five-and-a-half days a week, the reality is they seldom get to enjoy national holidays and it is normal to work until 11pm every night.”
Kan himself appears to be a workaholic who starts each day at 6am making random inspections of the wards to see how they performed the night before. So far, his intensive working regime has led to improvements in patient mortality.
The most recent figures from 2013 show that FAHZU had a mortality rate of 0.14% compared to a 0.37% average among 30 comparable Chinese hospitals.
Guo tells Global Times that, “2012 was a turning point for our hospital”. That year FAHZU invested Rmb200 million to construct a new medical building covering 120,000 square metres. It has 49 wards, 100 operating theatres and the country’s most state-of-the-art equipment.
Since then, FAHZU has gone on to purchase ever more cutting edge equipment including a da Vinci surgical system in 2014. This comprises a robotic platform that includes a 3D camera and miniature instruments for minimally invasive surgery. Other recent purchases include computer axial tomography (CAT) scanners, magnetic resonance imaging scanners and digital subtraction angiography equipment (for complex computerised x-rays of arteries, veins and other organs).
But FAHZU’s ability to monopolise healthcare resources in the public sector has also drawn criticism. In a Caixin Weekly op-ed published in 2014, Cao Jian, an economist at the University of International Business and Economics in Beijing, describes public hospitals as the ‘remnants of the planned economy era’.
He says: “They monopolise the best human resources, enjoy the most government subsidies and occupy the commanding heights of clinical academic research. They are the aristocrats of the healthcare sector.”
Guo Xiadong, deputy director of neurosurgery with the People’s Liberation Army 153 Hospital of Zhengzhou also agrees. “The root cause of the problem is that medical care at grassroots hospitals is very low and quality medical resources are unevenly distributed,” Guo tells China Economic Wekly.
As a result, FAHZU is able to hire a very high concentration of academic researchers and even PhD students. However, this has not led to many medical breakthroughs, prompting the accusation that the hospital spends far too much time focusing on profits rather than pushing the boundaries of medical knowledge.
According to China Economic Weekly FAHZU has produced just one notable piece of research in three years – developing a retrievable vascular stent. “In terms of research, we do indeed have a gap compared to other large domestic hospitals,” admits FAHZU medical director Guo.
One unnamed industry source says that CEO Kan has been able to create such a profit-making machine because of the way he has marshalled his staff. Each department is divided into several sections, each of which is incentivised to admit more patients and add more beds. The teams which deal with the most patients get the biggest bonuses.
In his defence Kan says FAHZU has little choice because it need cater to the huge demand for medical service in the province he is serving. Moreover, patient numbers have increased radically since the government introduced its New Rural Cooperative Medical Care scheme in 2003 – which gave medical insurance to rural farmers, of which Henan has many.
“Patients who previously couldn’t afford treatment are now coming to the hospital,” comments Yang Tongde, a physician at Henan Pingyu Central Hospital to Dahe Daily.
In a bid to improve service quality the State Council announced in May that it intends to open up public hospitals to private sector investment. It has yet to specify what role they will play, but has asked public hospitals to evaluate their assets.
This marks the extension of a pilot scheme, which began in 2010. This instructed 17 public hospitals to stop marking up drugs to inflate profits. Income from prescription drugs was capped at 30% (of revenues), down from the 50% level many hospitals were reporting. Government subsidies were also determined on the basis of service standards.
As for FAHZU’s Kan, outside opinion remains divided. According to China Economic Weekly some view him as a pioneering CEO who has made a public-sector hospital a commercial success. Others say he has lost sight of his public duty and should be ‘investigated’.
In April one of his counterparts suffered exactly that fate. According to the South China Morning Post, the head of the First People’s Hospital of Yunnan in Kunming, was accused of receiving Rmb80 million of bribes. These were in the form of cash and apartments (the nation’s top prosecuting body says the 62 year-old Wang Tianchao owns 100 flats and as many car parking spaces). The kickbacks were allegedly given in return for awarding hospital construction projects, buying medical equipment and arranging promotions for doctors.
© ChinTell Ltd. All rights reserved.
Sponsored by HSBC.
The Week in China website and the weekly magazine publications are owned and maintained by ChinTell Limited, Hong Kong. Neither HSBC nor any member of the HSBC group of companies ("HSBC") endorses the contents and/or is involved in selecting, creating or editing the contents of the Week in China website or the Week in China magazine. The views expressed in these publications are solely the views of ChinTell Limited and do not necessarily reflect the views or investment ideas of HSBC. No responsibility will therefore be assumed by HSBC for the contents of these publications or for the errors or omissions therein.