Hospitals' Responses to Administrative Cost-containment Policy in Urban China: The Case of Fujian Province

The patterns of hospitals' behavioural changes in response to different insurance systems and payment arrangements have been well documented in the literature on health economics and policy. To understand these changes, it is necessary to look at the shifts in fundamental economic incentives. Meanwhile, hospital practices are also subject to adjustment when administrative tools are realigned. This article examines the dynamics of a health policy campaign started in 2005 by a Chinese provincial health administration that was committed to containing health expenditures using administrative measures. Through a combination of qualitative in-depth interviews and quantitative panel data analysis comprising 30 public hospitals in the sample, this article finds that by revising the structure of administrative measures on the supply side, the Chinese health bureaucracy is able to curb rapid cost inflation in the short term. However, while having to meet the cost control mandate imposed by the health administration, Chinese public hospitals still managed to defend their economic interests by engaging in various unintended opportunistic behaviour. This article analyses a panel database from Fujian province and reveals the strategies adopted by public hospitals and considers their implications for China's ongoing national healthcare reform.