Long-awaited reforms to China's public hospital system received in-principle approval from the country's State Council on Tuesday.

After passing the central government's main policy making body, the Suggestions for Guidelines Related to Pilot Reforms of the Public Hospital System, will now be carried out by the Ministry of Health.

The guidelines were passed at a meeting of the standing committee of the State Council held on February 2. The standing committee encouraged each of China's provincial-level governments to introduce pilot reforms in one or two cities.

Up until now, the Chinese health system has been dominated by public hospitals and private capital had been limited in terms of its access to the sector.

In the guidelines, the central government also calls for an end to policies that restrict hospitals to selling medicine at no more than a 15 percent mark-up from the wholesale prices.

In the past, this policy of limiting profit margins combined with the setting of a maximum price for specific kinds of medicine, led hospitals to encourage patients to purchase the more expensive kinds of medicine in order to boost their profit margin.

Doctors were also encouraged to prescribe more expensive medicines. This has led to major problems in terms of the affordability of medical treatment.

Currently, up to 50 percent of the revenue of public hospital revenue is earned through the sale of medicine. In some regional and lower grade hospitals, the ratio is even higher.

To counter any possible losses that public hospitals may suffer during the course of reform, the guidelines allow hospitals to raise their services fee in order to boost revenue and also pledges to provide government subsidies.

Links and Sources
Gov.cn: Suggested Guidelines (Chinese)