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By Li Hui and Adam Jourdan
BEIJING/SHANGHAI, May 28 (Reuters) - China will ease curbson foreign investment in joint-venture hospitals, the governmentsaid on Wednesday, as it deepens a sweeping overhaul of itshealthcare system aimed at cutting costs and sprucing upoverloaded public services.
China is an appealing market for pharmaceutical firms andmedical-equipment makers, with spending in the industry expectedto nearly triple to $1 trillion by 2020 from $357 billion in2011, according to consulting firm McKinsey.
In a healthcare reform plan for 2014 published on itswebsite, China's cabinet, the State Council, said it aimed torelax limits on foreign investment in hospitals on the mainland.
The plan would include "reducing restrictions on thepercentage of foreign ownership in medical JVs andcollaborations," it said.
The move would increase the number of locations where HongKong, Taiwan and Macau investors could set up wholly-ownedmedical centres, and let overseas investors set up wholly-ownedhospitals in areas such as the Shanghai free trade zone.
The statement gave no details on the timing of the move.
China's private healthcare sector has drawn investment fromboth domestic and overseas firms as the government opens it upto attract funds and reduce the burden on public hospitals.
Healthcare providers such as Singapore-based Raffles MedicalGroup Ltd, Malaysia's IHH Healthcare Bhd andU.S.-listed Chindex International Inc already operatein China. TPG Capital and China's Shanghai Fosun PharmaceuticalGroup bought Chindex in a $461 mln deal last month.
"You're seeing a wholesale shift with greenfield hospitalsand public-to-private conversions," said Alexander Ng, HongKong-based associate principal at McKinsey.
"Private equity funds, both local and foreign, as well as anumber of conglomerates, are all heading into that area to meetthe demand."
GRAFT CRACKDOWN
The ambitious overhaul also aims to bolster insurancecoverage and crack down on graft, key areas for President XiJingping, who is looking to improve access and cut healthcarecosts for the country's population of nearly 1.4 billion.
Since 2009, China has spent 3 trillion yuan ($480 billion)on healthcare reform, but the system still struggles with ascarcity of doctors, attacks by patients on medical staff and afragmented drug distribution and retail market.
China's underfunded network of 13,500 public hospitalsrelies heavily on drug sales, contributing to inflated prices,kickbacks and tension between patients and doctors.
About 40 percent of public hospital revenue in 2011 camefrom prescribing drugs, Health Ministry data show, while medical services accounted for just over half, with governmentsubsidies and other income making up the rest.
China will clamp down on fake drugs, kickbacks to doctorsand illegal sales tactics, the government said.
Chinese authorities this month charged officials of Britishdrugmaker GlaxoSmithKline Plc with corruption, as thecrackdown on graft and high prices in healthcare heats up.
AFFORDABLE
China will also stiffen monitoring of the prices of importeddrugs and medical equipment, the State Council said.
Although new policies will make services such as surgery anddiagnosis more costly, they will help reduce drug mark-ups,while a government scheme to buy medicines will cut costs.
Health authorities will also extend to the entire country aspecial insurance system to fight major illnesses.
Many people complain that serious illnesses, such as cancerand diabetes, can bankrupt households under the current system,where patients often have to pay much of the cost out-of-pocket.
China will also boost annual subsidies for basic medicalcoverage by 14 percent to 320 yuan per person, the Ministry ofFinance said on Tuesday.
China's poorer western and central areas will get more aidas the government looks to close the healthcare quality gap withthe east coast and inland regions.($1=6.2486 Chinese yuan) (Editing by Clarence Fernandez)
