Appraisal of regional hospital efficiency and healthcare quality in China: Impacts of subsidies and marketization

In the face of a rapidly ageing population, China's healthcare system is under mounting pressure to meet growing demand for more and better services. This paper aims to identify opportunities to improve the efficiency and quality of healthcare services in China. We first evaluate the healthcare performance of China's 31 provincial regions during the 2005–2019 period. The hospital efficiency is computed by using a window-based super-efficiency composite Data Envelopment Analysis model, while the healthcare quality is evaluated by using a window-based Technique for Order Preference by Similarity to an Ideal Solution method. Then, we investigate the impacts of socioeconomic factors, such as government subsidies, marketization, per capita Gross Domestic Product and demographic structure, on regional healthcare performance by use of regression analysis. The main findings include: 1) The nationwide healthcare performance has improved from 2005 to 2019 in part due to China's rapid economic growth, but more progress has been achieved in improving hospital efficiency than healthcare quality. 2) Government subsidies can improve both regional healthcare quality and hospital efficiency. While marketization can enhance hospital efficiency, private hospitals provide lower quality of care than public hospitals. 3) Regional hospital efficiency and healthcare quality are positively correlated, but a causal relationship cannot be established based on our empirical evidence. Based on our findings, we have the following recommendations for policymaking: 1) The government should increase subsidies to medical institutions in order to improve healthcare quality as well as hospital efficiency. 2) More subsidies should be allocated to regions having a high old-age dependency ratio. 3) More quality control and improvement efforts should be taken at private hospitals.