Healthcare Reform: A Microcosm and Exploration of New Public Management in China

Abstract: The NPM is considered as an efficacious way to improve effectiveness and efficiency in management control of public health for its market-driven and market-driving characteristics. Theoretically, it is a hybrid of economics and business management in public management. Because of its advanced adaptability and flexibility, the NPM has been widely applied to many fields and yield results. In China’s health care reform, though still in an embryonic stage, the adoption of the NPM has shown an enormous potential in promoting resource utilization and remolding the role of the government. So far, as a corollary of global development of social wealth, medical technology, living standard and educational level, it has come to the fact that health care has been playing an ever-growing role in human lives. However, there are signs that the existing system fails to keep pace with the times and a reform in the area is imperative. Meanwhile, due to a series of problems rooting in either external or internal backgrounds in many countries, the reform in health care has been defined as a cosmopolitan conundrum which is a burning issue. In China, there seems to be more barriers for the issue to be dealt with since numerous factors such as unreasonable resource allocation, highly bureaucratic centralization, legal limbo, historical problems, blind spots in planning, population ageing and economic inequality, especially the rural-urban gap and the coastal-inland gap, have become profound reasons of skewed supply and demand, imbalance in the development of publicly and privately funded health care, cut-throat competition, and deterioration of physician-patient relationship. From the premise, having to confront increasing opportunities as well as booming challenges, the government/county councils/municipals are under pressure to trigger innovation of their public management in health care. Following the principle of gradual improvement, to dispel the inelasticity and explore possibilities of new public management, it is prudent to catalyze a structural reform through carrying out a top-down functional reform which is consistent with China’s national conditions in health care. In the NPM, new institutional economics (NIE) is a major theoretical basis through which resolution to problems related to public choice theory in practice may be created. Ankarloo (2006) presented that theory of evolution has been carried forward and refined by NIE at the economic level while the concepts of markets, supply and demand, marginalism, factors of production etc. are carried on from neoclassical legitimacy. On this basis, he recited five basic concepts of NIE: bounded rationality, transaction costs, property rights, institutions, and the distinctiveness of NIE (Ankarloo D 2006). Within the ambit of NIE, the institutional change theory is always defined as a mainstay of theories of NIE and constituted by formal restrictions (e.g. law and other effective written articles), informal restrictions (e.g. norms, culture and religion) and the way they work in practice (North DC 1990). North (1993) listed five proposals to define the essential characteristics of institutional change. First, the continuous interaction of institutions and organizations in the economic setting of scarcity and hence competition is the key to institutional change. Second, rivalry compels organizations to keep investing in skills and knowledge to survive. Third, the institutional structure directs the types of skills and knowledge perceived to have the maximum pay-off. Fourth, perceptions are derived from the mental constructs of the players. Fifth, the economies of range, complementation, and network externalities of an institutional matrix make institutional change overwhelmingly incremental and path dependent (North DC 1993). In the literature review, the literature will laterally support Ankarloo’s theory. And in empirical analysis, the survey analysis will be on the basis of North’s theory.