The insurance center calculates the average costs for inpatients for each hospital. It divides the total number of inpatients who've stayed at participating hospitals for the previous two years by the total amount of income those hospitals have received from them and their insurers. By this methodology, the two hospitals respectively made 9,800 and 8,500 yuan per person per admission. Insured patients enjoy these deductibles every time they receive inpatient service from these hospitals.

A senior manager in the Guangdong labor and social security system who wishes to remain anonymous explains to the EO the main two ways the hospitals swindled insurers.

In one method, according medical insurance standards, an outpatient is only reimbursed for less than several hundred yuan a month, which dries up fast if they have sought even a few simple treatments, with follow up fees paid by them entirely. On the contrary, an inpatient only needs to pay 600 to 800 yuan, and the health insurance center is responsible for most of the follow up fees. Hospitals thus push to move outpatients to inpatient care in order to drive up revenues.

Beyond this, deductibles for treatments of certain diseases are fixed; for example, an appendicitis patient can be reimbursed for 1,500 yuan. Costs beyond this must be born by the hospital, but on the other hand they have the privilege to pocket the difference if the cost of treatment is lower than that. Thus, there is often an incentive for the hospital to divide one admission into two or even cases by discharging the patient when the fee reaches its ceiling and then admitting the patient anew. This allows for income at two or more factors higher than would otherwise be attainable for that patient.

The manager says that there are many other methods, such as excessive usage of assistant medicine, repeated drug usage, misuse of antibiotics, and so on. In December of 2006, specialists from five top provincial hospitals examined patients' medical histories at four municipal hospitals in Foshan, Guangdong province, and all four were found to be employing the above-mentioned strategies.

The Conflict

Analysts point out that systemic problems with health insurance provide possibilities to insurance fraud.