Impact of zero-mark-up medicines policy on hospital revenue structure: a panel data analysis of 136 public tertiary hospitals in China, 2012–2020

OBJECTIVE: To quantify the overall and dynamic effects of the implementation of the zero-mark-up medicines policy on the proportionate revenue generated from medicines, medical services and government subsidies at Chinese tertiary public hospitals. METHODS: The revenue data of 136 tertiary public hospitals from 2012 to 2020 and the implementation-time framework of zero-mark-up medicines policy of these hospitals were obtained from the institutional survey of the third-party evaluation of the China Healthcare Improvement Initiative. The study adopted the time-varying difference-in-differences method and combined it with the event study approach to estimate the effects of the zero-mark-up medicines policy. RESULTS: Following the implementation of the policy, the proportionate medicines revenue decreased by 3.23% (p<0.001); the proportionate medical services revenue increased by 3.48% (p=0.001); and the difference in the proportionate government subsidies revenue was not significant. In the year of implementation, the proportion of revenue generated from medicines decreased by 7.76% (p=0.0148); and that from medical services increased by 8.62% (p=0.0167). The effect of the policy gradually strengthened thereafter. In 2020, the sixth year after some hospitals started the implementation of the policy, the share of revenue generated from medicines decreased the most by 18.43% (p=0.0151), and that generated from medical services increased the most by 15.29% (p=0.0219). The share of revenue generated from government subsidies increased by 2%–5% in the second, third, fifth and sixth years following implementation (p<0.05). CONCLUSIONS: Although the policy goal of adjusting hospital revenue structure has been achieved, the findings were insufficient to conclude whether the policy goal of establishing a scientific compensation mechanism was met by increasing the price of medical services and government input. Additionally, whether there was an unexpected policy effect requires further analysis.