The article describes the impact of China’s health sector reform on relatively small hospitals in rural counties. It uses one county hospital to illustrate how pressures to increase revenue, combined with distortionary pricing policies, have led to cost increases. It argues that the introduction of hospital insurance could accelerate the cost increases unless measures are taken to control costs. These measures will include improvements to hospital management and changes to mechanisms of payment for hospital services. Government will have to play an active role to ensure that county hospitals serve the needs of rural people.
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