The Role of Health Care Transformation for the Chinese Dream

Powering Economic Growth, Promoting a Harmonious Society

by Soeren Mattke, Harry H. Liu, Lauren E. Hunter, Kun Gu, Sydne Newberry

This Article

RAND Health Quarterly, 2014; 4(3):4

Abstract

After having successfully expanded health insurance coverage, China now faces the challenge of building an effective and efficient delivery system to serve its large and aging population. The country finds itself at a crossroads—it can emulate the models of Western countries with their well–known limitations, or embark on an ambitious endeavor to create an innovative and sustainable model. We recommend that China choose the second option and design and implement a health care system based on population health management principles and sophisticated health information technology. Taking this path could yield a triple dividend for China: Health care will contribute to the growth of service sector employment, stimulate domestic demand by unlocking savings, and enable China to export its health system development capabilities to other emerging economies, mirroring its success in building other critical infrastructure. These forces can help turn the Chinese Dream into a reality.

For more information, see RAND RR-600-1-AETNA at https://www.rand.org/pubs/research_reports/RR600-1.html

Full Text

After having successfully expanded health insurance coverage, China now faces the challenge of building an effective and efficient delivery system to serve its large and aging population. The country finds itself at a crossroads—it can emulate the models of Western countries with their well-known limitations, or embark on an ambitious endeavor to create an innovative and sustainable model. In this report, we argue that China should choose the second option and design and implement a health care system based on population health management (PHM) principles and sophisticated health information technology (IT). Taking this path can yield a triple dividend for China: Health care will contribute to the growth of service sector employment, stimulate domestic demand by unlocking savings, and enable China to export its health system development capabilities to other countries, mirroring its success in building other critical infrastructure. These forces can help turn the Chinese Dream into a reality.

China's Economic Progress Is Outpacing Its Health Care System

Since 1980, China has experienced breathtaking economic growth: Its Gross Domestic Product has grown by an average of 10 percent annually and its economy is currently the second largest in the world. With this economic boom has come a precipitous fall in the poverty rate, an equally steep rise in the standard of living, and a nearly 75-percent increase in life expectancy. However, the rapid industrialization of the country has resulted in urbanization and lifestyle changes, such as decline in physical activity, increased preference for Western diets, and a smoking rate that is nearly twice the world average, according to data from the Organization for Economic Cooperation and Development. Combined with population aging, these changes have resulted in what health researchers are calling the epidemiological transition from acute to chronic disease, resulting in a higher burden of disease and disability that has not yet been matched by increased health system capacity. To address this mismatch, China will need to repeat its success in achieving high standards in maternal and child health and improving care for acute illness. But reaching similar standards in chronic care will require a transformational approach rather than an incremental one. The growth in chronic disease prevalence is on a path to overwhelm the health care system in its current form, with its reliance on hospital care and physician services. Without such transformation, China will face a sicker population, threatening not only its vision for a harmonious society, but also its economic development.

The Economic Opportunity in Health Care Transformation

In this report, we argue that rapid economic and societal development provides China a unique opportunity to design and implement a health care system that meets the needs of the 21st century—one that is built on evidence and operated with industrial principles of process optimization and the use of advanced IT. China occupies a unique position, even among large modernizing countries, in having the opportunity to build such a world-class health care system from the ground up. Legacy infrastructure and entrenched interests are holding back health care transformation in Western countries; China is less encumbered by these and can adapt an innovative model for health care delivery that is purposefully designed for the 21st century, rather than emulating inefficient models that exist elsewhere. This novel type of health care system could avoid past mistakes and enable China to focus on what has been referred to as the three-part aim: better care, better health, and lower cost.

Transforming health care has the potential to support broader economic growth in a sustainable fashion and, importantly, to enable China's transition from an economy centered on labor and natural resources to one that is knowledge-based, as is called for in the current five-year plan. In developed countries, health care is one of the largest segments of the service sector, accounting for 7 to 16 percent of the economy, and a substantial contributor to the creation of qualified jobs. In addition, access to high-quality and affordable health care can stimulate domestic consumption by unlocking household savings set aside for health care expenditures.

Population Health Management as the Pioneering Model for World-Class Health Care

We would argue that China's future health care system should follow two design principles. First, to cope with the relative shortage of health care professionals, it needs to leverage highly skilled workers through sophisticated health IT and by shifting tasks to less-trained workers. Second, China should adopt a PHM model, which unites the public health perspective of improving health at the population level and the medical care perspective of individual care delivery.

The PHM model is characterized by three key principles: a focus on the health outcomes of the entire population; coordination of health and medical services through the continuum of care needs, from prevention and health promotion to curative care, disease management, and palliative care; and proactive management of care needs. PHM addresses health care needs from health and wellness to coping with the end of life and encompasses all dimensions of health, including physical, mental, and social well-being (Figure 1).

Figure 1. Health Needs Across the Continuum of Care

Figure 1. Health Needs Across the Continuum of Care

Our proposed PHM blueprint for China's future health care systems has six interrelated components (Figure 2):

  • A sophisticated IT infrastructure will serve as the central cog for the model, as its data and decision support will drive the other components.
  • Data-driven optimization of care processes will allow evidence-based care delivery and will perform gap analysis to identify future research needs.
  • Performance monitoring at all levels of accountability will permit benchmarking, investigation of root causes for underperformance and remediation, and identification of best and worst performers to identify best practices.
  • Effective deployment of health professionals will maximize the productivity of highly skilled professionals by task-shifting, allowing paraprofessionals to perform tasks requiring less skill and training while the country begins to develop the needed health care workforce. Assisting effective deployment will be care team formation, using a model featuring health navigators, specialized paraprofessionals who guide patients through the system.
  • Alignment of incentives with policy goals—namely, better health processes and outcomes and lower cost—will require several considerations. Payment cannot be tied to care settings, but must follow patients. The payment system must be based on value, not volume.
  • Consumer engagement means patients must have some accountability for their care: They must be informed of their choices as well as the consequences of those choices.
Figure 2. The Interdependent Components of the PHM Model

Figure 2. The Interdependent Components of the PHM Model

Conclusion

China's economic and social progress over the past 30 years has outpaced its health care system. The health of China's population is being influenced simultaneously by a rapid rate of aging, growing wealth, and migration from rural to urban living, as well as an increasing reliance on food of low nutritional value and decreasing physical activity. The result is an expanding burden of chronic disease and disability, even as mortality due to acute illness wanes. To handle the new challenges, the Chinese health care system must undergo a transformation.

The current health care system is handicapped by workforce shortages, overreliance on hospital-based care, and a lack of robust IT. Although the central government is investing substantial resources, the system cannot expand quickly enough to meet expected demand, at least not with traditional delivery models. But China has the unique opportunity to chart a different course and adapt an innovative model for health care delivery that is purposefully designed for the 21st century, rather than emulating inefficient models that exist elsewhere.

This PHM model will focus on the needs of citizens and patients and will offer continuous support at all stages of health. It will make use of sophisticated IT to leverage scarce medical professionals, improve quality, promote evidence-based care and accountability, and facilitate planning. The model will also provide a source of service-sector jobs, not just in care delivery and management, but also in IT, and will help to promote economic growth by unlocking domestic savings. Thus, visionary leaders who embark on this ambitious agenda to transform health care in China can divert discontent about access to quality care as a threat to social harmony and use health care to promote the realization of the Chinese Dream.

The research in this article was produced within RAND Health, a unit of the RAND Corporation. The research was funded by Aetna, Inc.

RAND Health Quarterly is produced by the RAND Corporation. ISSN 2162-8254.