Does providing more services increase the primary hospitals’ revenue? An assessment of national essential medicine policy based on 2,675 counties in China

Objective: To understand whether the increased outpatient service provision (OSP) brings in enough additional income (excluding income from essential medicine) for primary hospitals (INCOME) to compensate for reduced costs of medicine. Methods: The two outcomes, annual OSP and INCOME for the period of 2008–2012, were collected from 34,506 primary hospitals in 2,675 counties in 31 provinces in China by the national surveillance system. The data had a four-level hierarchical structure; time points were nested within primary hospital, hospitals within county, and counties within province. We fitted bivariate five-level random effects regression models to examine correlations between OSP and INCOME in terms of their mean values and dose-response effects of the essential medicine policy (EMP). We adjusted for the effects of time period and selected hospital resources. Findings: The estimated correlation coefficients between the two outcomes’ mean values were strongly positive among provinces (r = 0.910), moderately positive among counties (r = 0.380), and none among hospitals (r = 0.002) and time (r = 0.007). The correlation between their policy effects was weakly positive among provinces (r = 0.234), but none at the county and hospital levels. However, there were markedly negative correlation coefficients between the mean and policy effects at -0.328 for OSP and -0.541 for INCOME at the hospital level. Conclusion: There was no evidence to suggest an association between the two outcomes in terms of their mean values and dose-response effects of EMP at the hospital level. This indicated that increased OSP did not bring enough additional INCOME. Sustainable mechanisms to compensate primary hospitals are needed.