I. Industry Regulation and KPI Optimization in Public Hospitals

Anti-Corruption and Physician Incentives: The anti-corruption campaign in the healthcare sector is essential. Lessons can be drawn from Taiwan’s experience three decades ago in addressing the issue of red-envelope payments, through measures such as raising physician compensation, establishing a red-envelope donation fund, and redistributing the funds equally. Such reforms address both cultural and institutional practices and require large-scale implementation to be effective.

KPI Adjustment for Public Hospitals: Public hospitals provide approximately 85% of healthcare services in China, yet current KPIs do not adequately focus on core healthcare objectives. Key metrics such as disease recurrence rates and hospital readmission rates—which reflect the quality and efficiency of care—are often overlooked. KPI systems should be optimized to encourage innovation and control costs, rather than focusing primarily on revenue or other single performance indicators.

II. Expanding Commercial Insurance and Defining the Government’s Role

Responsibility of Commercial Insurance: China’s social insurance system faces significant pressure, and commercial insurers need to play a more active role in supporting the healthcare sector. By expanding their participation, commercial insurers can help alleviate the burden on the social insurance system and contribute to the long-term development of the healthcare industry.

Critical Role of Government: The U.S. free-market capitalist model of health insurance has not delivered optimal outcomes. Governments therefore have an important responsibility to establish appropriate industry rules and regulatory frameworks to avoid repeating the shortcomings observed in the U.S. system. This principle applies to many countries around the world, including the United Kingdom and Germany. By creating unified and standardized rules, governments can help ensure that healthcare spending delivers value for money while laying the foundation for healthcare innovation and the application of artificial intelligence.