Thornhill Capital LLC - consulting, financial, accounting, compliance, due diligence, risk management, translation and other services, B2B, USA, China.

Published on Aug 6, 2013 in Asia, China, Featured Articles, News

China’s Doctors

In most countries, being a doctor is regarded as a highly prestigious occupation which many desire to attain. Accordingly, the average general practitioner in the United States earns an average of $186,044 per year, and the average specialist earns substantially more with an annual compensation of $339,738 per year. In China, however, the medical profession is not the prestigious occupation that it is in other countries. On the contrary, each year in China fewer people want to become doctors. Of the 600,000 students who undergo medical training per year, fewer than 100,000 become doctors, with most of the remainder seeking jobs in other health-related fields.

According to the World Health Organization, China has 2,466,000 medical practitioners, more than any other country. However, it also has 1.3 billion people, the largest population in the world. In contrast, the United States has 750,000 doctors for a population of 300 million people. In a recent survey by Lilac Garden, an online community of healthcare professionals, as many as 89% of China’s doctors have thought about quitting their profession. The primary reason for this is pay. According to the Economic Observer, a physician two months out of medical school earns less than $400 a month, or less than a U.S. doctor earns in one day. A doctor with ten years of experience in China can earn the U.S. equivalent of $1,640 per month. In contrast, a medical school graduate who decides against becoming a doctor can work as a pharmaceutical company representative and earn approximately $80,000 per year. Working for a pharmaceutical company is considered the most desirable job for someone attending medical school as it usually involves regular working hours, weekends off, and substantial pay benefits. In fact, 30% to 40% of China’s pharmaceutical staff is comprised of medical school graduates.

Doctors are caught in a Catch 22 in regards to what they’re able to earn. According to Reuters, their pay is set to be in line with the pay scale for government workers. As such, it bears no resemblance to what doctors are paid in other countries. Although hospitals can pay bonuses to doctors, public hospitals are funded by the government and are normally strapped for cash. Therefore, bonuses are usually minimal or non-existent. In addition, the government is committed to making healthcare affordable for its 1.3 billion people. Increasing doctor’s salaries would substantially add to the country’s already rising healthcare costs. According to Time, under the current healthcare system, the cost for a patient to see an oncologist is approximately $1.25. With such low patient payments, hospitals may run a deficit given the fixed amount of funding coming from the government. In order to make up this shortfall most hospitals assign sales quotas to their employees, often having them prescribe more expensive drugs, or directing their patients to take those drugs more often.

Most doctors survive such low salaries by taking bribes. The most common form of bribe is the acceptance of a “hongbao,” or a cash-filled red envelope. This is often presented to a doctor prior to an operation or procedure so that he will take it seriously. In an example given by Time magazine, Huang Dongliang told of his uncle, a cancer patient, who was being ignored by his doctor until he was given a hongbao containing approximately $480. Once that happened, according to Huang, “We could feel an obvious difference. The doctor started to do more checkups, to give suggestions and advice and offered a detailed chemotherapy plan.” A hongbao is also given so that the presenter has the ability to jump the queue and move up on the waiting list for surgery or see the physician they prefer.

The Chinese government knows about these bribes, but has been slow to reform the healthcare system. Reforming the system, and eliminating the need for bribes, would be an expensive alternative for a government already faced with rising healthcare costs. In 2005 there were 4 billion patient visits to Chinese hospitals. In 2011 that number increased to 6.2 billion visits. This increasing number of patient visits has put a strain on the country’s medical resources.

Making front page news recently was the Chinese government’s denouncement of GlaxoSmithKline (GSK) employees for bribing doctors, hospital administrators, government officials, and medical groups to prescribe its drugs. In fact, GSK admitted that some of its senior Chinese executives broke the law in this bribery scandal. However, to virtually all of China, this practice is common and has been going on for as long as people can remember. The problem has less to do with doctors accepting bribes, or drug companies making them, than with the state-run hospitals that receive a small amount of operating capital from the government. Doctors, who are paid as government workers rather than as industry professionals, are barred by many hospitals from adding to their meager income by taking a second job. Subsequently, unless the government raises doctor’s salaries, permits them to work a second job or open a private clinic, taking a red envelope is the only way for many doctors to survive and make a living. Until that happens, don’t expect the hongbaos to stop. There’s no other way for doctors to survive in modern-day China.

Alan Refkin

If you are currently not receiving our newsletters or blogs and would like to, please sign up at http://thornhillcapital.info, or visit our web site at www.thornhillcapital.net, which will also give you access to past editions of our blog’s and newsletters. We would also be pleased to answer any questions you may have by contacting us at info@thornhillcapital.net