Liu says another challenge to Chinese healthcare reform is to ensure equality of healthcare insurance, so that rural people, urban citizens and migrant workers can all enjoy the most appropriate form of health care.

"China currently has a fragmented insurance system," Liu says. "Those who have formal jobs in urban cities are covered by a basic social insurance program and those who do not have formal jobs are covered by urban residence insurance, which has less coverage in terms of healthcare provision."

"Therefore, when those with urban residence insurance become ill, and often they are migrant workers, they would pay for the healthcare themselves. Alternatively they can seek healthcare services in rural areas where they have permanent residence, but their condition may have worsened during the waiting time," Liu says.

Private sector

As China's large hospitals are experiencing long waiting times, already some foreign players are expanding into China to fill this market gap. One example is Chindex International Inc, founded in 1981 by two US women who had moved to China in the late 1970s.

Roberta Lipson, CEO of Chindex, says that private healthcare services in China used to have a bad reputation because its quality was perceived to be poor, but Chindex and its healthcare services division, United Family Healthcare, has worked hard to change this perception.

"In the old days, only people who couldn't get care or were embarrassed to get care at public facilities would seek care in the private market," Lipson says.

Lipson says one key challenge that private hospitals experienced was the difficulty to attract Chinese doctors from the public system, for reasons including problems in transferring academic titles and accrued social benefits.

To address this challenge, the Chinese government has devised a new regulation allowing doctors to practice at more than one site. Since then several cities have implemented the rule.

However, Lipson says this is impractical because some public hospital heads do not agree with the policy and do not give doctors permission to practice outside their hospitals. "So the human resources flow continues to be challenging," she says.

Lipson says another challenge is that private hospitals are not covered by health insurance, making the service expensive for patients.

"So we want to say to the government: Please, if the patients get $5 reimbursement for service in the public hospital from insurance, they should get the same $5 reimbursement here and, if the price is higher here, they can choose to pay the price difference themselves," Lipson says.

She says that when United Family Healthcare was first launched, most of its patients were foreigners but, over the past few years, the number of Chinese patients has increased and now more than half of all patients are Chinese.

In recent years, many private hospitals operating on the Chinese mainland have come predominantly from Singapore and Taiwan, says Wu Chen, managing director of the Hong Kong office of Boston Consulting Group.

Foreign investment

"There is great potential for foreign investment in China's hospitals sector because China's pharmaceutical and medical equipment markets are already quite saturated, while the field of hospitals still has plenty of space for development," Wu Chen says.