ABSTRACT
In China, medical care is one of the few industries that is still dominantly owned and managed by government. In 2001, privately owned for-profit hospitals accounted for only less than 1% of total hospitals; the number of beds, doctors, and nurses in private hospitals accounted for 1.4, 9.4, and 0.8%, respectively. As it did for other state-owned enterprises, the economic reform brought market competition to state hospitals. Under the current policy, hospitals must be financially independent; funding from the government is fixed and accounts for less than 20% of total revenue for most hospitals. Market competition has forced some hospitals into financial insolvency. Competition has also induced behaviors leading to inefficient resource allocation from societal perspective.
