By: Our Correspondent

Wang Yung-ching,
Taiwan's richest man built a hospital dedicated to his father,
who died of an undiagnosed stomach illness. Now Chang Gung has become
one of the biggest private hospital groups on the island, serving
27,000 patients a day.

Wang wanted to repeat
in China what he had done in Taiwan – build large hospitals of
international medical and research standards aimed at people on low
and medium incomes , employing talent from both sides of the strait.
But five months after his death at the age of 91 and nine years after
he first announced his ambitious China plans, his projects have
stalled. Plans to build Chang Gung hospitals in Zhengzhou and Ningbo
have been put on hold.

The facility that
opened in Xiamen in May last year has 500 beds but is using only 100
of them. Wang's master plan for Xiamen calls for an investment
of 1.34 billion yuan and 4,500 beds, 3,000 in a general hospital,
1,500 in an old people's wing as well as a nursing college with
4,000 students.

But like the half dozen
other Taiwan-invested hospitals in China, Chang Gung in Xiamen is
unable to hire the doctors and nurses or buy the equipment it needs
or operate a payment system that would give it a profit and patients
a reasonable cost.

Taiwan health care systems began to cross the strait at a crucial
time for China, whose own system underwent wrenching change in the
1990s with the disappearance of the command economy and
cradle-to-grave care along with it. Health care spending had fallen
to about 15 percent of China's fiscal budget by 2006, well
below even the United States, at 21 percent for Medicare and
Medicaid, its primary health care programs. The Ministry of Health at
the end of 2006 estimated that no more than 10 percent of the
population were covered, pushing China into the unenviable company of
industrialized nations like the US in which provision of adequate
health care has become one of society's most pressing problems.

Since private
investment was allowed in the sector in 2000, private hospitals have
grown to provide 10 percent of all beds but less than 3 percent of
inpatient and outpatient services. Public hospitals provide a wide
range of services, including emergency care and specialist
operations, but patients must pay for their care. Public hospitals
enjoy tax breaks, subsidies, training and medical insurance contracts
rarely given to private ones.

It is hard for private
hospitals, including Chang Gung, to register as non-profits, which
would give them these benefits. As commercial entities, they are
treated like businesses in terms of tax and land.

From the beginning, the
Chang Gung institutions in Taiwan were registered as non-profit
entities, which are obliged to plough their profits back into the
hospitals or give them to charity. They were unable to obtain this
status in China.

The Xiamen facility was
approved in 2005. Since Chinese law does not allow 100-per-cent
foreign ownership in hospitals, as Wang initially wanted, it is a
70-30 joint venture between his Formosa Plastics group and a city
medical firm. Its biggest headache is hiring qualified and
experienced staff. The vast majority of Chinese doctors and nurses
belong to city hospitals or other government institutions offering
housing, pay, welfare benefits and a pension. Mobility is limited.

Medical professionals,
especially those with experience, are unwilling to leave their
institution and the benefits they have accrued to work for a
Taiwan-invested hospital, It is too expensive for Chang Gung to rely
entirely on staff brought from Taiwan or elsewhere.

The government sets
quotas for the import of medical supplies and equipment, restricting
what a private hospital can order.

Insurance is another
issue. In China, patients pay about 50 percent of all medical costs
from their own pocket, down from 60 per cent a decade ago but
substantially higher than in many rich countries. In Taiwan by
contrast, the government established a universal National Health
Insurance (NIH) system in 1995. It brought within the insurance cover
the 41 percent of the population who had previously been outside the

Now more than 80
percent of Taiwan's hospitals and hospital beds are privately
owned. Most of the private beds are in nonprofit hospitals that can
earn substantial profits. The NIH and private insurance schemes mean
that hospitals have strong revenue sources.

For the Xiamen
hospital, in-patient care payments covered by medical insurance are
only one third of those in Taiwan and out-patient payments one
fourth, while the costs it must pay for medicines and facilities are
the same or higher.

One option would be to
provide special services and medical checkups, which would bring in
revenue. But this would change the hospital's objectives, which
it does not want to do. Under the current medical system, the Xiamen
hospital does not seem viable. Its best hope lies in a medical reform
package passed by the State Council in January and expected to be
released in the next few months. It calls for the central and local
governments to spend 850 billion yuan by 2011 to improve the quality
and affordability of medical care. It aims to introduce market
reforms, with an improved status for private hospitals, lower patient
payments and encouraging private investment.

But intense lobbying
continues over the details of the package, so the Xiamen hospital
must wait for the final outcome.

China's economic
conditions today are similar to those in Taiwan in 1976, when the
first Chang Gung hospital was built. The economy was booming and
average personal incomes had reached US$2,000. But medical services
lagged the economy, with 11 doctors and seven beds per 10,000 people
and nearly 80 per cent of the beds controlled by the government. The
income of doctors at Chung Gang hospitals consists of an annual
salary, fees from teaching and research and income from clinics. They
are forbidden to accept ‘red packets' – from
patients and their families — and their pay is not linked to sales
of medicines.

In China, such ‘red
packets' – given in the hope that the doctor will give
the patient his best care — are commonplace and many hospitals rely
on the income from overpriced medicines to remain solvent.

The struggling Xiamen
hospital is a far cry from Wang's ambitions in 2000, when he
announced plans to invest US$436 million in major hospitals in
Beijing, Fuzhou and Xiamen. He wanted wholly-owned facilities, but
the government would not allow them. He received provisional approval
for a 5,000-bed hospital in Beijing and was given 120 hectares in
Changping county, on the outskirts. But his own government did not
approve the investment and Beijing gave the project to two domestic
firms instead.

Last May, at the age of
91, Wang attended the opening of the Xiamen hospital, despite failing
health; it was an emotional day for him and for his employees. But
the most successful entrepreneur Taiwan has produced since World War
II was too far ahead of his time in China. He died last October
without seeing the realization of his medical dreams.