The State Council Gives Messages on Hospital Arrears!

  • 2019-04-22
The State Council: Hospitals shall make payments timely and voluntarily
On April 16, the State Council announced in An Introduction to the Work Related to the Guarantee of Shortage Drug Supply that hospitals shall make payments timely and voluntarily.

Lately, there has been a lot of news about drug shortages and price rises - not just relatively cheap drugs for minorities, but also for more common ones. The monopoly of raw drugs, rising cost of pharmaceutical companies are among the reasons; however, another crucial cause is the lack of payment collection for the manufacturers. In addition to "strengthening anti-monopoly investigation and punishment and cracking down on illegal behaviors such as the monopoly of raw drugs", the State Council also made arrangements for the most concerned issues in the industry.

The State Council is to drive: The medical institutions to voluntarily and timely make payments to the pharmaceutical enterprises according to the laws and regulations.

A pain in the neck -- hospitals' arrears amount to CNY 140 million
It's a headache for the industry that the hospitals' arrears are amounting. According to the reports of Saibailan Co., LTD, last year, the pharmaceutical profession association of a province in the middle China surveyed eight representative commercial pharmaceutical enterprises and found that the payment collection period was as long as 960 days among public medical institutions, which was 32 times of the national specified payment period, 30 days, and the arrears at the highest was as much as CNY 86 million. According to another survey, the average payment days of the secondary and above public hospitals in a provincial jurisdiction are around 640 days, and the total arrears of drug payment to a commercial company is as high as CNY 280 million. The arrears from a 3-A grade hospital in this jurisdiction alone is as high as CNY 140 million. The same is true for the grass-root hospitals. The payment collection period of the county-level city grass-root medical institutions is as long as 400-500 days. The arrears of the drug payment to a commercial company are more than CNY 10 million. Some grass-root medical institutions even prolong the payment collection time to as long as 36 months.

A latent rule: no payment even the fund is ready
It's common in the industry that the arrears are all in large amounts and long payment periods. A Saibailan WeChat official account subscriber revealed that it's not a big deal for a 3-A hospital to owe up to CNY one hundred million. With the total debt counted, it is really common that a 3-A hospital owes one billion, the arrears unpaid for three to five years, without a penny of interest. Some subscribers even express that 960 days are not the worst situation. "As I know, there is a hospital in debt of CNY 4 million for four years, and their annual payment is not higher than CNY 500,000. I do not know when the money could be paid back. "However, at present, the hospitals hold a strong position, many enterprises whose payments are in arrears can do nothing but tolerate, because there are always enterprises which are willing to supply the hospitals in uncollected payments and those who refuse receive no orders. Some enterprises even maliciously let the hospital delay payment to extend their account period, dragging down smaller counterparts. There is even an opinion that it is actually the hospitals that more financially privileged, but in order to construct new buildings, establish branches and update equipment, they choose to delay the payments to the enterprises - which have become a latent rule for the medical ecosystem.

The storm of payment arrears may as well come eventually
In response to such abnormalities, Niu Zhenggan, executive vice President of the China Pharmaceutical Enterprises Management Association, once asked that since every pharmaceutical company, supposedly, has signed a cooperation agreement (contract) with hospitals before supplying drugs to the latter, why do the hospitals not abide by the contract (which is theoretically bound by the Contract Law)? Currently, this problem is common in China (especially among the public institutions in a monopolistic position); it is definitely a serious flaw to all the whole social and economic sectors. For a long time, the pharmaceutical enterprises and business are truly suffering from arrears of hospitals unspeakably. The arrangement made by the State Council this time should form a storm sweeping the payment arrears of the hospitals all over China. In fact, an important guarantee for the smooth implementation of the 4+7 initiative is that the time limit for payment collection by hospitals has been strictly specified. Taking advantage of this, hospital arrears, like a stubborn disease, may be cured eventually.