Legal warnings posted on the door of a private, for-profit hospital in eastern China tracked its descent into financial failure.
Huiren Hospital in the city of Suqian was warned for failing to pay employees. Four months later, a judicial summons said it still had not paid back wages. Finally, in September a paper taped across its entrance declared the building closed.
The hospital, once known for treating men with infertility or sexually transmitted diseases, had been hollowed out. The furniture and equipment were gone. There was no staff.
Public and private hospitals across China are suffering financially. During the Covid-19 pandemic, their expenses swelled from the enormous cost of mass testing — a core component of the government’s campaign to prevent the spread of the coronavirus. At the same time, hospitals generated less revenue because patients avoided crowded waiting rooms for fear of contracting the virus.
After pandemic restrictions lifted, hospitals encountered a new problem: an economy slumping from a collapse in the real estate sector. People put off noncritical care to save money, and local governments failed to provide much-needed financial support to public hospitals.
Hospitals are also facing a more fundamental challenge. As China’s population ages, health care costs are increasing faster than the money flowing into the country’s insurance funds. The government, in turn, is engaged in a campaign to reduce spending. Hospitals have been left in the lurch when insurance has not fully reimbursed them for certain procedures or medications.
Over the past two decades, the number of hospitals in China has more than doubled. Private health care facilities, in particular, grew eightfold. Many hospitals took on loans to expand, serve more patients and offer more services. But as the money coming in slowed, some institutions struggled to repay debts.
The hospital boom coincided with China’s economic rise, resulting in more people living healthier and for longer. The average life expectancy has increased more than 15 years since the 1970s, while the infant mortality rate was below 0.5 percent in 2023, down from 30 percent in the 1950s.
But the country’s recent economic struggles have wreaked havoc on the business of hospitals, an acute problem in a country where people mostly receive medical care in hospitals.
More than 200 hospitals have publicly declared bankruptcy in the past five years, compared with seven in the previous five years, according to a national bankruptcy database. Nearly all of the bankruptcies involve private hospitals. The closings represent a small number of China’s total hospitals — nearly 40,000 at the end of 2023. But the trend is worrisome, experts said.
“This is just the beginning, and there will be more,” said He Bin, an independent Chinese medical industry analyst.
Hospitals borrowed heavily in recent years. Public hospital debt nearly quadrupled from 2011 to 2021, according to the China Health Statistics Yearbook.
In November, the Affiliated Hospital of the Medical College of Jiaying University, a public hospital in Meizhou in southern China, said it had hired an accounting firm to help liquidate its assets. A month earlier, local media said the hospital was suspending operations. Members of the medical staff who had not been paid for 10 months were told to resign.
A woman who answered the phone at the hospital in December said it was no longer operating, but she declined to explain why.
The hospital had invested $16 million for a new building in 2021, hoping to gain China’s highest classification for hospitals. But its revenue plummeted during and after the pandemic. In financial reports, the hospital said business revenue fell by half in 2023.
The country must “prudently resolve the long-term debt problems of hospitals,” Lei Haichao, director of China’s National Health Commission, said last month in an article for a Chinese Communist Party magazine. The National Health Commission told all local government officials in June to pay close attention to budget deficits, long-term debt and unpaid wages.
To hospital workers, the financial woes are all too real.
Nana Yang, who works at a public hospital in Zhejiang Province in eastern China, said her pay had been slashed for the first time in her 12-year career. The hospital also cut staff meal allowances, and her department stopped providing free drinking water.
Public hospital jobs had been considered stable, Ms. Yang said. The pay was lower, but salaries increased over time.
In September, a laboratory worker at a private hospital in Fuyang City in eastern China told the mayor of being owed five months’ pay. The mayor’s office responded that the hospital’s operations were “poor” and suggested a payment plan until “the funds were sufficient.”
The hospitals’ financial problems are being exacerbated by China’s demographic crisis: As a bulging number of older people are adding costs, fewer younger people are paying into the insurance system.
For most of China’s 1.4 billion people, health care costs are paid under one of two insurance programs. The main one, which covers more than two-thirds of the population, serves rural residents and self-employed or unemployed individuals in urban areas, including children and older adults. It is government-subsidized, although people are expected to contribute by paying insurance premiums.
But the number of people paying into the program has declined for four straight years. Economic struggles are causing more people to go without insurance. Health officials in a city in southern China warned that “giving up health insurance is like not wearing a seatbelt on the highway.”
Liu Junqiang, a sociology professor at Tsinghua University, has estimated that the insurance funds will run out of money in the 2030s. In 2019, he proposed lifting the retirement age and getting medical expenses under control, steps the government has taken.
China has decreased how much hospitals are reimbursed, contributing to their money problems, according to a former accounting official at a hospital in southeastern Sichuan Province. He asked not to be identified for fear of retribution.
The government has also created a centralized system for buying prescription drugs. That has reduced overall costs by creating fierce price competition among companies — drawing a public backlash about the quality of medication.
At the same time, patients are turning to cheaper alternatives than a trip to the hospital. Community clinics, the inexpensive backbone of China’s health care system before the hospital boom, are back in vogue, while telehealth visits with a doctor are growing in popularity.
Mr. He, the medical industry analyst, said it was especially painful because public hospitals had expanded at their fastest rate in the past decade. And some of them spent extravagantly to try to gain higher classifications, which could draw more revenue. They invested in new buildings, he said. One hospital even bought a piano for its lobby.
“But the hospitals did not foresee that the economy would suddenly start to decline,” Mr. He added.
Li You contributed research.
