2 Nov 2009 10:58

Renji Hospital plans to welcome private investment

By Yu Chenxi

Shanghai. November 2. INTERFAX-CHINA - Renji Hospital, affiliated with Shanghai Jiaotong University School of Medicine, may become the first public hospital in China to welcome private investment, Renji Hospital's president Fan Guanrong recently told Interfax.

"At present, we have three domestic companies that are interested in investing. We have been considering such an investment since 2003 as we will need more capital if we want to grow and the government is unable to deploy significant funds to our hospital," Fan said.

Founded in 1844, Renji Hospital is one of the top grade three hospitals in China and comprises the East Branch located in Shanghai Municipality's Pudong New Area district and the West Branch located in Shanghai's Huangpu district. At the moment, the Shanghai Municipal Government is constructing a South Branch in Minhang district.

"Considering we are responsible for almost 95 percent of the total expenses incurred including employee salaries, existing equipment upgrading and infrastructure construction, government investment in public hospitals is woefully inadequate to fund hospital development. As a result, we have been resorting to drug revenues and bank loans," Fan said. The government typically allocates about 5 percent of the hospital's annual expenses to grade three hospitals.

"We are planning to introduce private investment to our West Branch, with the funds to go into reconstructing the main building, procuring new medical equipment and building new infrastructure, which is estimated to cost RMB 500 million ($73.21 million) in total," Fan added.

According to Fan, following the joint stock reform, Renji Hospital West Branch will cater to high-end customers such as foreigners and well-to-do locals while the East and South branches will continue to serve public interest.

"The Shanghai Health Bureau has not commented on Renji Hospital's reform plan because there are currently no detailed regulatory guidelines regarding ownership reform in public hospitals, even though China's health care reform measures call for ownership restructuring in public hospitals," an official from Shanghai Health Bureau, who requested anonymity, told Interfax.

"In China, it has become increasingly common in recent years to see public hospitals recording losses due to rising operating costs and price cuts on drug retail prices. For instance,there were 820 public hospitals across China running combined losses exceeding RMB 10 million ($1.46 million) in 2006," Liu Muqiao, general manager of hospital consultancy Changsha Dongxi Modern Hospital Management Service Co. Ltd., told Interfax.

"As it is unfeasible for the government to fully subsidize the running of public hospitals, it is only inevitable that the government should allow hospitals to seek funding from private avenues," Liu added.