Different impacts of the zero-markup drug policy on county general and traditional Chinese medicine hospitals: evidence from Shandong province, China

BACKGROUND: As a key part of the new round of health reform, the zero-markup drug policy (ZMDP) removed the profit margins of drug sales at public health care facilities, and had some effects to the operation of these institutions. This study aims to assess whether the ZMDP has different impacts between county general and traditional Chinese medicine (TCM) hospitals. METHODS: We obtained longitudinal data from all county general and TCM hospitals of Shandong province in 2007–2017. We used difference-in-difference (DID) method to identify the overall and dynamic effects of the ZMDP. RESULTS: On average, after the implementation of the ZMDP, the share of revenue from medicine sales reduced by 16.47 and 10.42%, the revenue from medicine sales reduced by 24.04 and 11.58%, in county general and TCM hospitals, respectively. The gross revenue reduced by 5.07% in county general hospitals. The number of annual outpatient visits reduced by 11.22% in county TCM hospitals. Government subsidies increased by 199.22 and 89.3% in county general and TCM hospitals, respectively. The ZMDP reform was not significantly associated with the revenue and expenditure surplus, the number of annual outpatient visits and the number of annual inpatient visits in county general hospitals, the gross revenue, the revenue and expenditure surplus and the number of annual inpatient visits in county TCM hospitals. In terms of dynamic effects, the share of revenue from medicine sales, revenue from medicine sales, and gross revenue decreased by 20.20, 32.58 and 6.08% respectively, and up to 28.53, 63.89 and 17.94% after adoption, while government subsidies increased by around 170 to 200% in county general hospitals. The number of annual outpatient visits decreased by 9.70% and up to 18.84% in county TCM hospitals. CONCLUSION: The ZMDP achieved its some initial goals of removing the profits from western medicines in county hospitals’ revenue without disrupting the normal operation, and had different impacts between county general and TCM hospitals. Meanwhile, some unintended consequences were also recognized through the analysis, such as the decline of the utilization of the TCM.