Deputy Director Li Weihua of the Hainan Provincial Medical Security Bureau recently delivered a keynote speech at the inaugural 2025 Hainan Hospital Conference, focusing on the pivotal role of medical insurance in promoting coordinated development among the “Three Meds”—medical insurance, medical services, and pharmaceuticals. His remarks provided a comprehensive analysis of policy frameworks, ongoing initiatives, existing challenges, and strategic directions for the future, highlighting how coordinated governance can create a sustainable, patient-centered, and innovation-driven healthcare ecosystem.

At the core of the “Three Meds” coordination is the principle of demand-driven planning, payment-led management, and multi-party collaboration. Each sector—insurance, medical institutions, and pharmaceutical enterprises—traditionally operates according to its own logic and priorities. However, through strategic purchasing, rule-setting, mechanism restructuring, and process reengineering under medical insurance, these siloed approaches can be aligned to create synergistic outcomes. By leveraging collective intelligence and fostering a shared vision, the system aims to achieve policy coordination, unified value standards, aligned objectives, information connectivity, and joint supervision mechanisms. This integrated framework ensures that patients receive tangible benefits, hospitals achieve sustainable development, medical insurance remains financially viable, and pharmaceutical innovation is encouraged.

On September 4, 2025, Vice Premier Liu Guozhong emphasized the importance of refining the medical service price formation mechanism at the first plenary meeting of the coordination mechanism for deepening public hospital reform. He highlighted several critical points:

Dynamic price adjustment: Medical service prices should be balanced to reflect both healthcare development needs and societal affordability, with flexibility to increase or decrease prices as appropriate.

Reflecting service value: Measures should be taken to increase the proportion of medical service revenue in public hospital income, thereby better reflecting the value of technical labor.

Optimizing insurance payment models: Reforms should focus on multi-modal payment systems dominated by disease-based payments, making payments more aligned with clinical realities and service costs.

Fund management: Effective mechanisms should be developed to support public hospital growth, including prepayment of insurance funds and accelerated settlement processes.

Building on these national directives, Deputy Director Li Weihua elaborated on Hainan’s specific efforts to implement the coordinated “Three Meds” development mechanism. His speech systematically addressed policy measures, key initiatives, operational challenges, and future development priorities, providing both a macro-level overview and detailed insights.

Key Policy Initiatives and Efforts:

Insurance Catalog Management:

The Hainan Medical Security Bureau has been rigorously managing the insurance catalog to ensure that clinically valuable, economically efficient, and patient-beneficial drugs, medical consumables, and services are appropriately covered.

The dual-channel management mechanism for nationally negotiated drugs has been strengthened, ensuring that patients can access essential medications promptly and efficiently.

Hainan’s Free Trade Port policies have been leveraged to integrate ethnic minority medicines—including Li and Miao traditional therapies—and tropical disease prevention services into the insurance system.

Support for rural healthcare and pharmaceutical development includes preferential inclusion of locally produced Chinese medicinal materials in the insurance catalog, promoting local industry growth and improving healthcare accessibility in rural areas.

Medical Service Pricing Reform:

A scientific and dynamically adjustable pricing mechanism has been established to ensure that medical service pricing is responsive to clinical realities and economic conditions.

Public hospitals are encouraged to increase the proportion of revenue derived from medical services, reflecting the value of professional expertise and high-quality care.

Innovative service pricing models have been introduced for medical procedures that are clinically effective, technologically advanced, and productivity-enhancing.

Traditional Chinese medicine (TCM) has been given greater emphasis, with more TCM-appropriate technologies and preventive treatment programs included in insurance coverage.

Pricing policies have been adapted to meet the needs of an aging society, particularly in the rehabilitation and chronic disease management sectors, ensuring that essential services are accessible and affordable.

Centralized Procurement of Drugs and Consumables:

Timely implementation of national and provincial procurement standards ensures the availability of essential drugs and medical consumables while controlling costs.

Coordination has been strengthened across supply chain management, usage, monitoring, and evaluation, thereby reducing the space for “kickback sales” and promoting transparent procurement practices.

Insurance payment standards have been harmonized with procurement prices to create a consistent and predictable payment environment for medical institutions.

Efforts to integrate nationally negotiated drugs into hospital formularies have been supported, along with improved procurement, distribution, and monitoring platforms.

Medical Insurance Payment Reform:

The inpatient payment system has been refined, with the latest national grouping methodologies implemented across Hainan to ensure consistency and fairness.

Budget management for DRG/DIP funds has been strengthened, and mechanisms such as special case negotiations, prepayments, feedback collection, data workgroups, and negotiation processes have been formalized to support operational efficiency.

Outpatient payment methods are being explored, including per-capita payment models, with pilot programs drawing on best practices from other regions to ensure local applicability.

Development of medical alliances is actively supported, fostering collaboration among healthcare institutions to optimize resource allocation and improve patient outcomes.

Challenges Identified:

Despite significant progress, several challenges remain in fully realizing coordinated development:

Insurance Payment Reform: Systematic and coordinated reform efforts need further strengthening; positive incentives for clinical behavior are not yet fully realized; fund usage efficiency can be improved.

Centralized Procurement: Clinical supply risks exist for some drugs and consumables; supporting measures for procurement implementation require enhancement; incentive and restraint mechanisms for medical institutions need optimization.

Medical Service Pricing: Dynamic adjustment mechanisms are not yet fully operational; coordination with insurance payments and centralized procurement requires improvement; delays exist in pricing approval for new services.

Designated Medical Institution Management: Internal responsibilities are not fully enforced; long-term fund supervision mechanisms are incomplete; the binding power of insurance agreements requires reinforcement.

Strategic Vision and Future Directions:

Deputy Director Li emphasized that the ultimate goal of all reform efforts is improving public health. Ensuring citizens have access to high-quality, accessible, and affordable medical services requires coordinated action across multiple dimensions, including policy direction, goal setting, incentive mechanisms, and evaluation standards. Unified values and collaborative action norms are essential to reduce operational costs, improve overall efficiency, and free up resources for enhanced service delivery.

Specific strategic priorities include:

Expanding insurance coverage for high-value drugs, consumables, and services, especially for rural and underserved populations.

Supporting innovation in medical service pricing to encourage technologically advanced and clinically effective care.

Optimizing procurement and supply chain management to ensure transparency, efficiency, and patient access.

Refining payment mechanisms to incentivize quality care and enhance financial sustainability.

Promoting collaborative networks among hospitals, community health services, and specialized institutions to improve service integration and patient outcomes.

In conclusion, Deputy Director Li stressed that coordinated development of the “Three Meds” is not merely a policy goal, but a practical pathway to patient-centered healthcare, sustainable medical institutions, innovative pharmaceutical development, and effective insurance systems. By aligning policies, resources, and incentives, Hainan is building a model of integrated healthcare governance that can serve as a reference for broader national reform.

Source: Hainan Hospital Association