Inappropriate incentives as part of China's fee-for-service payment system have resulted in rapid cost increase, inefficiencies, poor quality, unaffordable health care, and an erosion of medical ethics. To reverse these outcomes, a strategy of experimentation to realign incentives for providers with the social goals of improvement in quality and efficiency has been initiated in China. This Review shows how lessons that have been learned from international experiences have been improved further in China by realignment of the incentives for providers towards prevention and primary care, and incorporation of a treatment protocol for hospital services. Although many experiments are new, preliminary evidence suggests a potential to produce savings in costs. However, because these experiments have not been scientifically assessed in China, evidence of their effects on quality and health outcome is largely missing. Although a reform of the provider's payment can be an effective short-term strategy, professional ethics need to be re-established and incentives changed to alter the profit motives of Chinese hospitals and physicians alike. When hospitals are given incentives to achieve maximum profit, incentives for hospitals and physicians must be separated.
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