China’s “zero covid” policy aims to eliminate outbreaks through mass testing and harsh lockdowns, with officials insisting on the policy. Now the healthcare system is brought to its knees.

But the epidemic has continued to break out in many places in the past three years, causing local economies to suffer, many companies are heavily in debt, and even the healthcare industry cannot escape this disaster. The debt of public hospitals amounts to billions, and more than 2.000 private hospitals have been forced to close.

According to the latest “Chinese Medical Statistical Yearbook 2021“, in 2020, the total debt of government-run/ state hospitals is about $260 billion, and the debt-to-asset ratio is about 45.75%. The debt-to-assets ratio (total liabilities/total assets) is mainly used to measure an organization’s ability to repay its debts, and typically more than 50% is considered high risk.

According to statistics from the National Health Commission of China, by the end of 2021, there were 1.03 million medical treatment facilities in China, including 36,570 hospitals, of which 11,804 were public hospitals and 24,766 were private hospitals.

In 2020, the number of hospitals with revenues less than expenditures of 20 provinces accounted for 62.5%.

China’s National Health and Medical Commission announced on July 6 that by 2020, about 40% of China’s second-level hospitals would suffer losses. The proportion of hospitals with losses would increase by 16.75 percentage points compared to 2019, in which 7.51% of hospitals had a debt-to-asset ratio exceeding 100%, with 49.53% exceeding 50%.

The Paper reported on July 19 that Zhenan County Hospital in Dandong City, Liaoning Province, has not paid employees for five consecutive months. The local health department responded that during the epidemic, the hospital clinics’ income dropped sharply, and inefficient operations affected the medical staff’s salary. Some hospital staff revealed that this year only January and February salaries are paid, the hospital still owes March to July salaries, 20-year pensions, heating costs were still reported, and public funds have never been paid.

Over 2,000 private hospitals closed with an average loss of $818 thousand

It is even more difficult for private hospitals to maintain financial stability. According to the “Chinese Health Statistical Yearbook 2021,” China’s private hospitals have a total loss of around $20 billion annually. As of July this year, over 2,000 private hospitals have closed after declaring bankruptcy, with an average loss of $818 thousand. 

Xu Hongfeng, Deputy General Secretary of the Private Hospital Branch of the China Hospital Association, said that under the epidemic’s influence, many private hospitals have stagnated, and some hospitals’ revenue has decreased by more than 20%, directly falling into a loss.

“Before the epidemic, the annual revenue growth rate of a private hospital was generally between 10% and 20%, and the industry average was 15%,” he said.

The manager of a private hospital told Yi Cai, “Some small private hospitals were closed after being unable to survive during the epidemic, and only a portion of them have been publicly reported; some that do not follow legal procedures are not recognized.”

The director of a private hospital also said that many private hospitals in China face the repeated “opening and closing” situation, which directly leads to decreased revenue. It is understood that 60-70% of patients at private hospitals in many first-class cities from all over China cannot maintain the number of visits to pre-epidemic levels.

Regarding the future challenges of China’s health system, Yang Jiyuan, an analyst of the Greater China Medical Group at the Sullivan Research Institute, told Yi Cai that: on the one hand, the problems caused by the closure of private hospitals can lead to the gradual withdrawal of social capital from health system construction projects, the number of people who want to enter the industry will decrease and simultaneously will hinder the health system’s development.

On the other hand, reducing private hospital numbers increases the pressure on medical examination and treatment in public hospitals. It strengthens their dominant position, detrimental to forming the multi-level and diversified medical services system.

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