* Low salaries foster widespread bribery in public hospitals
* State fixes cost of hospital operations and caps drugprices
* Leaves public hospitals with little room to top updoctors' pay
* Britain's GlaxoSmithKline embroiled in bribery scandal
By Kazunori Takada
SHANGHAI, July 24 (Reuters) - Bribery is the lubricant thathelps keep China's public hospitals running, and the healthsystem would struggle to function without illegal payments topoorly paid doctors and administrators, say medicalpractitioners and industry experts.
They say government policies are partly to blame for asystem in which doctors and other staff expect to be paid extrafees to perform operations and take kickbacks frompharmaceutical firms and medical-equipment suppliers.
The profession's ugly underbelly was exposed last week whenpolice accused British drugmaker GlaxoSmithKline ofbribing officials and doctors for six years to boost sales andthe price of its medicines. GSK has called the developments"shameful" and on Monday said some of its Chinese executivesappeared to have broken the law.
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.
The corruption stems largely from doctors' low basesalaries, which are set in line with a pay scale for governmentworkers. Hospitals can pay bonuses but, given public hospitalsare strapped for cash, compensation is usually low, say doctorsand industry experts.
A doctor fresh out of medical school in Beijing earns about3,000 yuan ($490) a month including bonuses -- roughly the sameas a taxi driver. A doctor with 10 years experience makes around10,000 yuan a month, according to Peter Chen, chief executive ofprivately run Oasis International Hospital in Beijing.
"Without the grey income, doctors would not have theincentive to practise," said Yanzhong Huang, a senior fellow forglobal health at the Council on Foreign Relations in New York.
CAN'T SURVIVE ON SALARIES
Over the past 30 years the Chinese government has made itshealthcare sector more market-oriented. That means the country's 13,500 public hospitals have to balance their own books.
Medical services accounted for just over 50 percent ofpublic hospital revenue in 2011, according to Health Ministrydata. About 40 percent came from prescribing drugs while therest was from other income as well as government subsidies,which have fallen steadily since the 1980s.
Hospital administrators can set fees for in-patient care,nursing and laboratory tests. But the state fixes the cost ofoperations to make surgery affordable to ordinary Chinese. Andit effectively caps the cost of many prescribed medicines bysetting a suggested price.
That leaves hospitals little room to top up wages.
One Chinese doctor who used to hold a senior position at aprominent hospital in Beijing said 80 percent of his income camefrom bribes. Without it, he would have earned less than $600 amonth, said the doctor, who left China five years ago to live inBritain where he continues practising medicine.
"These sums (bribes) are essential. You cannot survive onyour salary," said the 50-year-old physician, who spoke oncondition of anonymity due to the sensitivity of the issue.
An industry executive who has worked in China's medicalsector for more than 15 years said bribery and corruptionpermeated every level of a public hospital.
"They are seen as necessities in the current healthcaresystem," said the executive, who also declined to be identified.
The Health Ministry did not respond to a request forcomment. Officials at the National Development and ReformCommission, which sets the prices of prescribed medicines, alsodeclined to comment.
Low base salaries are a legacy of China's planned economy,said Jia Xijin, associate professor at the School of PublicPolicy and Management at Tsinghua University in Beijing,explaining the dilemma faced by the government.
China has also committed to making health care affordablefor its 1.37 billion people. The government has spent 2.2trillion yuan ($358 billion) on the system since 2009, of whichmore than 680 billion yuan was to provide universal healthinsurance coverage, state media quoted the Finance Ministry assaying earlier this year.
RED ENVELOPES
Public hospitals say recruiting new doctors is gettingharder as many physicians are turned off by the wages at a timewhen patient numbers are growing. Health Ministry data showedthe overall number of doctors rose 13 percent from 2008 to 2011,while patient visits jumped 28 percent.
"There will be no doctors left to treat the current doctorswhen they retire," said the accounting director at a Shanghaihospital who declined to be identified because she was notauthorised to speak to the media.
Low salaries have also spawned a system of under-the-tablepayments from patients. The payments are known as "hongbao" -- areference to the cash-filled red envelopes given as presentsduring Lunar New Year festivities -- and cover various servicesfrom jumping the queue for appointments to extra surgical fees.
Bob Wang, a 35-year-old businessman in Beijing, said he gavethe main surgeon who operated on his aunt's femur bonetransplant last year 5,000 yuan in "hongbao" on top of the100,000 yuan he paid to the hospital because he was worried thedoctor would not take the operation seriously otherwise.
There was unstated "hongbao" guidance for each type ofsurgery, he said.
"If my family or myself get sick ... we won't just go to thehospital. Everything will take forever -- from registration towaiting for a bed, to getting seen by a doctor to queuing forsurgery," he said.
According to the doctor now living in Britain, patients andtheir families could sometimes spend two to three times morethan the actual fee in "hongbao".
Critics doubt that an anti-corruption campaign by PresidentXi Jinping will have much impact.
Indeed, a former doctor at a major heart hospital in Beijingsaid eradicating corruption would be nearly impossible.
"It would be easy to find out who was taking money if thegovernment wanted to," said the cardiologist, who has beenworking in the United States since 2009.
"But everyone would be found guilty. How could the hospitalssurvive?"
Glaxosmithkline (GSK)
