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Note: China Labour Bulletion recently published our healthcare workers' report: Unprotected yet Unyielding: The Decade-Long Protest of China’s Healthcare Workers (2013-2023). This is the Chapter 2 of the report. This chapter explains that the rise of private capital, coupled with the blind expansion of second-tier public hospitals; coupled with the sharp drop in income in non-first-tier cities during the epidemic, created a financial crisis for hospitals. As a result, medical staff continued to be owed wages and social security.
Hospitals’ non-payment of wages, social insurance or Housing Provident Funds (HPF) was the most frequent reason for collective actions, with 62 incidents (45.9 per cent of the total) recorded. Nearly 60 per cent of the incidents occurred in private hospitals and about 30 per cent in public hospitals.
Not paying social insurance or HPF violates China’s domestic laws. Under Article 10 of the Social Insurance Law (社会保险法), the employer and the employee are required to jointly pay the basic old-age insurance premiums established by the state. Those not formally employed (such as part-time workers or gig economy workers) may still participate in basic pension insurance, with the individual paying the basic pension insurance premiums. Similarly, Article 23 of the law also requires basic medical insurance for employees. Other social insurance required for formally employed workers include unemployment, work injury, and maternity insurance. HPF functions similarly to social insurance, with benefits for employees’ housing needs funded through contributions paid by employers and their employees. The Regulation on the Administration of Housing Provident Fund (住房公积金管 理条例) requires all employers to set up HPF and make contributions on time. [1]
In May 2022, Yu Xiaobao, vice president of the private hospital management branch of the China Hospital Association (中国医院协会), revealed that more than 2,000 private hospitals have gone bankrupt and closed since the pandemic, due to reduced patient visits and the increasing pandemic prevention and control workload. Yet, statistics on healthcare workers’ wage arrears protests in CLB’s Strike Map show that unpaid wages and social security are not a recent phenomenon; business pressure resulting from the pandemic only worsened existing problems. Wage arrears in private hospitals are usually related to poor management, lack of state-managed health insurance coverage [2] , financing difficulty, and bankruptcy. In some cases, management openly admitted that workers were owed wages and hospitals were lacking funds, and they suggested that workers seek legal channels to resolve conflicts.
As for public hospitals, debt accumulation and financial problems in secondary hospitals have also led to collective actions for unpaid wages and benefits. According to the 2021 China Health Statistical Yearbook, the public hospital sector of twenty provinces across the country was in the red in 2020, accounting for 62.5 per cent of all provinces, an increase of 56.25 per cent from 2019. Forty per cent of secondary and tertiary hospitals are in the red. About 50 per cent of secondary hospitals have a gearing ratio of more than 50 per cent, while the ratio of tertiary hospitals was 44 per cent, about the same as in 2019. The National Health Commission (国家卫生健康委员会) suggested that the decrease in surplus was due to hospitals’ increased investment in pandemic control measures and higher operating costs, as well as a drop in revenue.
Protests amid mass closures of private hospitals as the pandemic brought market shocks
Protests in Shaanxi Tianyou Group
From the data collected by the Calls-for-Help Map in 2021-2023, Shaanxi has the most cases involving unpaid wages and social security (11 cases). Of these, five cases involved the company Shaanxi Tianyou Medical Management (Group) Co., Ltd (陕西天佑医疗管理集团有限公司) (hereafter “Tianyou Group”). The group is one of the largest private healthcare groups in northwestern China, with seven secondary specialised hospitals, including a children’s hospital, a women’s hospital, a beauty hospital, and four children’s outpatient facilities. The Tianyou Group’s cases will be used as the main case study in this section to explore the private hospitals’ business models and labour issues.
In March 2021, the workers of Xi’an Yanta Tianyou Maternity Hospital (西安雁塔天佑妇产医 院) asked for help on Weibo, saying that the hospital owed them wages, did not sign labour contracts, deliberately avoided paying social insurance and HPF, and maliciously transferred workers to force them to resign. However, the hospital not only refused to respond to the workers but also persuaded them not to resort to labour arbitration.
Six months later, workers at Tianyou Children’s Hospital (天佑儿童医院), another facility in Xi’an, also complained that the hospital began to default on wages in January 2021. They said that only three and a half months of wages were paid for the previous nine months. Employees expressed concern on Weibo: “You know how the hospital treats the patients and their families if this is how they treat their own employees. In hospitals without funds, patients face a lack of medication and less responsible doctors and employees.”
Almost a year later, on 9 July 2022, the Calls-for-Help Map collected another case at Tianyou Group hospitals. Current and former employees at the above two hospitals complained again that the persistent issue of unpaid wages had still not been properly dealt with. Workers wrote online: “Some people complained that more than 30,000 yuan [U.S. $4286] are owed, while some people said that more than 140,000 yuan [U.S. $20,000] are owed.” The district labour arbitration committee (劳动人事争议 仲裁委) accepted 28 cases of wage arrears at Tianyou Children’s Hospital. Of these cases, 12 have been closed and 16 are being processed. The district labour supervision brigade (劳动保障监察大队) said that it will adhere to the administrative procedures and investigate the issue of non-payment of wages in all companies under Tianyou Group.
On 20 July 2022, an online video showed an interview with nurses from another Tianyou Group children’s hospital–Pucheng Tianyou Children’s Hospital (蒲城天佑儿童医院), stating that the hospital had announced a complete suspension of its services on 28 February 2021 but still owed more than 339,000 yuan (U.S. $48,429) in wages to 43 workers. Tianyou Group had reportedly promised that the outstanding wages would be paid in three instalments. However, as similar promises were not honoured in the past, employees hoped to get their wages as soon as possible.
The most recent incident of Tianyou Group’s unpaid wages recorded on the map occurred in February 2023. Chen, a former employee of Xi’an Tianyou Maternity Hospital, told reporters that he was still owed seven months’ salary after resigning half a year ago. He tried going through legal channels, but it did not result in him getting paid in full: “In March 2022, I sued the hospital for payment of my 2021 salary. After the court’s coordination, I was given three months’ salary. In December 2022, I sued the hospital again for payment of my 2022 salary, but the court has not yet processed the case.”
Wage arrears in the Tianyou Group have lasted for more than three years. The selffinancing business model of private hospitals made them vulnerable to huge market shocks during the pandemic. A hospital spokesperson admitted to Chinese Business Views (华商报) that workers’ complaints were true and the company was under operating difficulties: “For the past three years, the impact of the pandemic left a number of our hospitals with difficulty remaining operational, but as a healthcare organization, we cannot simply close down.” The person said the hospital could only wait for investors’ new funds or resort to bankruptcy, selling assets to repay wages: “As an individual, I really cannot promise to solve the wage problem.”
The pressure in Tianyou Group’s hospitals has also led to serious problems of doctors marking up prices and increasing patients’ expenses by exaggerating their conditions. In July 2022, a report by the Times Figure Magazine (时代人物杂志社) revealed that doctors at the Tianyou Maternity Hospitals had coaxed patients to undergo additional surgeries, resulting in an increase in medical expenses of more than eight or nine times. One patient was originally diagnosed with intrauterine adhesion and required surgery. During the process, the doctors kept diagnosing new “conditions”, including cervical erosion, small cysts, and other problems, using terrifying photos to lure the patient into choosing more expensive treatments. What is more shocking is that even though the patient paid for the “conditions” to be resolved, the doctors did not treat the original problem, and the additional treatments could cause secondary damage to the patient. The article compiled complaints against the hospital from other patients who had similar experiences, showing that the problem was not an isolated case.
Government departments failed to monitor labour rights violations and solve the issue of wage arrears before they evolved into serious problems of staff financial distress and medical conflicts. In the case of unpaid wages at the Pucheng Tianyou Children’s Hospital, the county labour supervision brigade and the police made an investigation into the Tianyou Group. Reminders were posted on the hospital’s door by the Ministry of Human Resources and Social Security (人力资源和社会保障局). The Group also issued a written commitment on wage payment in early July, which did not quell the workers’ dissatisfaction and concerns. Even if the employees turned to legal means to solve the problems, the resolution was still delayed.
This case demonstrates that, in the absence of monitoring and preventive mechanisms by the workers, the effectiveness of government departments’ interventions is limited in private hospitals’ wage arrears. Workers also have few options to deal with unpaid wages. Although the group has established enterprise unions in its branch hospitals (such as a union in the Shanghai Tianyou Hospital and a union committee in Liquan, Shaanxi), these unions did not intervene promptly before conflicts broke out. In the end, workers had to rely on government departments to remedy the situation after it had worsened.
Another case of wage arrears at a private hospital not affiliated with Tianyou Group illustrates mismanagement affecting workers’ rights even before the pandemic. In this case, the closure of hospital floors during the pandemic further reduced hospital revenue and intensified the financial pressure, leading to understaffing and unpaid wages and benefits.
A protest in Muchuan, Sichuan
In September 2020, the staff of Muchuan Hospital of Traditional Chinese Medicine (沐川中医 医院) (hereafter “the Muchuan Hospital”) in Sichuan accused the company of defaulting on wage payments. The private general hospital was built according to the standard of a secondary hospital and began operating in October 2018. According to the Cover (封面新闻), only the surgery and operating room were barely holding on by September 2020, while all other departments were essentially closed, and only 89 of the original 184 staff remained. The hospital had not paid all staff on time since November 2018. By September 2020, about 2.3 million yuan (U.S. $328,571) in wages were in arrears. The hospital had also defaulted on social insurance payments since June 2019, with more than 790,000 yuan (U.S. $112,857) in arrears.
The hospital’s legal representative, surnamed Huang, said that one month’s wages were owed due to the hospital’s unsuccessful financing in 2019, while the rest of the wages were owed mainly due to the impact of the pandemic in 2020. The effect of the pandemic caused the second and third floors of the inpatient department to close, and the passageways were being renovated, causing a great impact on the regular diagnosis and treatment of patients. To make matters worse, the closure of most departments not only led to a decline in revenue but also gave rise to cases of admission rejection and frequent verbal conflicts between healthcare workers and patients. In effect, fewer patients showed up, which led to a vicious cycle of reduced revenue and inability to pay wages.
Like in the cases at Tianyou Group, the Muchuan Hospital failed to prioritize the settlement of wage arrears and allowed the problem to accumulate. Eventually, the wages in arrears at the Muchuan Hospital exceeded 2 million yuan (U.S. $285,714).
The wage arrears were eventually dealt with through government intervention. The county government helped the hospital borrow 2 million yuan from a corporation in early 2020 to settle the wages owed in 2019, but this was only a transfer of debt. By 2020, the hospital again defaulted on workers’ wages, and the county gave a monthly subsidy of 150,000 to 300,000 yuan (U.S. $21,429 - 42,857). However, the hospital still went into bankruptcy and reorganization in September, which was a lose-lose ending for the hospital, the workers, and the government alike.
In all of these situations, if hospitals had trade unions that represented workers’ rights and interests, negotiated with management, and looked into their financial situation, a plan could have been drawn up to protect workers’ rights. For example, workers could negotiate a deadline for the hospital to pay their wages. The hospital would be deemed inoperable and have to compensate the laidoff workers systematically after the deadline. Such an arrangement could avoid the accumulation of wage arrears, which benefits both the hospital and the workers.
Larger public hospitals pushed into debt, workers protest against overdue payments
Although public hospitals do not operate to maximise profits, under China’s healthcare reforms, they are under pressure to compete for patients. This is because over time, they receive less financial support from the government or state-owned enterprise funding. Government funding as a percentage of revenue has decreased over the past three decades. In 1980, it accounted for 60 per cent of public hospital revenue; by 2008, it dropped to less than 25 per cent. According to the 2022 China Health Statistical Yearbook, only 7-10 per cent of public hospitals’ annual revenue came from government financial allocations from 2009 to 2019, and the proportion only reached 16 per cent in 2020 due to increased spending due to the pandemic. Consequently, public hospitals have to rely on patient health insurance and out-of-pocket payments as a source of revenue. Expansion has become a significant strategy for hospitals to increase revenue.
The director of the Institute of Asclepius Hospital Management (GAHA), a third-party hospital evaluation agency, noted:
“First, get larger in scale, then stronger competitively, and finally be powerful. This is the basic expansion logic of many local hospitals that do not have a competitive edge since 2010. Some have also referred to these expansions as blind expansion.”
From hospital management’s perspective, expanding in scale can attract more patients, in turn increasing the hospitals’ revenue. So many public hospitals were willing to raise debt for expansion, especially in cases where the local government’s financial support was insufficient.
However, multiple hospitals in a locality expanding simultaneously translates into more intense competition and brings risks for debt repayment. Coupled with the decline in the number of patients’ visits and income during the pandemic, the debt crisis of some secondary and tertiary public hospitals emerged, causing capital ruptures. Construction and equipment payments could not be made to contractors, while workers were owed wages and social insurance.
A protest in Sui, Henan
The incident of wage arrears protests at the Sui County Hospital of Traditional Chinese Medicine (河南睢县中医院) (hereafter “the Sui Hospital”) in Henan Province in 2021 serves as a good example. On 16 January 2021, thousands of medical staff at the hospital petitioned the county government to solve the problem of “long-term unpaid wages”. The secondary public hospital had not paid workers’ performance pay or bonuses since May 2019, nor had it contributed to some employees’ social insurance and HPF for up to eight years. Workers’ health and maternity insurance accounts had also been blocked. In February 2020, the hospital even mobilized its workers to take out loans “voluntarily” and collected their personal information such as identification numbers to borrow money on their behalf from the bank and use it to “pay” workers’ wages
Just one month later, on 17 March, the layoff announcement affecting over 600 workers at the Sui Hospital caused another fierce reaction from workers and even the public. Workers said that most laid-off staff had been working for many years but were “abandoned” by the hospital. Most laid-off workers had worked in the hospital for four or five years, but they were the most vulnerable as the hospital did not sign a formal contract with them. Workers also said: “Even if a contract was signed, the contract we signed had no content or time specification.” As a result, these workers became the main targets of unpaid wages, performance pay, social insurance, and HPF. The workers’ petition was unanswered, and workers ended up being dismissed.
On 20 March, a government statement alleged a“misunderstanding” that personnel without formal employee status were dismissed. The statement said that this personnel would be channelled to work in different locations: employed through qualification examinations, written tests or interviews; assigned to the county and township medical institutions; transferred to the hospitals’ administrative positions; trained by the county human resources and social services department; or recommended new jobs. The problem is that the document did not clarify the proportion or number of workers allocated to various channels. Rather, it confirmed that these workers were dismissed, transferred or reassigned.
Behind the incident is the Sui Hospital’s massive expansion and debt accumulation. A report pointed out that the county’s hospital capacity is more appropriate at around 1,600 beds based on the local population. However, the number of beds in the Sui Hospital had increased from 400 to 1,500, while its competitor, the County People’s Hospital (睢县人民医院), had 1,000 beds after the completion of its new building. The sum of the two exceeds the standard by 56 per cent.
The Health Times (健康时报) cited the latest version of the National Health Commission’s Basic Standards for Medical Institutions (医疗机构基本标准), which states that the total number of inpatient beds in a second-grade traditional Chinese medicine hospital is standardized at 80-299; while those in a third-grade hospital is 300 or more. Yet, as a second-grade hospital, the Sui Hospital has 1,500 beds in its new hospital area, far exceeding the national standard.
In addition to the Sui Hospital’s incentive to expand, the government’s tiered diagnosis and treatment policy (分级诊疗政策) has also fuelled the expansion drive. This policy is that patients are supposed to receive primary care, then be channelled to county hospitals, followed by secondary and tertiary hospitals. This plan is to avoid overcrowding in tertiary hospitals. The previously cited article in the Health Times said the policy pushed county hospitals to expand and increase the number of beds, as the goal is for “counties to handle major illnesses”(大病不出县).
During the Sui Hospital’s expansion, it planned to build a new hospital in 2012, with a total investment as high as 965 million yuan (U.S. $138 million). At that time, the county government’s financial revenue was only 280 million yuan (U.S. $40 million). This means that even after the government provided land at no cost and funded about 40 million yuan (U.S. $5.7 million), the remaining 923 million yuan (U.S. $132 million) had to come from private or corporate capital. From 2011 to 2017, hospital revenue increased year after year, and in 2017, the revenue was as high as 350 million yuan (U.S. $50 million). In 2017, the hospital paid back more than 50 million yuan (U.S. $7.1 million). But starting in 2018, it could not pay back money on time, and by the end of 2019, it still owed 703 million yuan (U.S. $100 million), which laid the root of future wage arrears. In retrospect, the expansion in 2012 overburdened the hospital with massive debts. The number of hospital beds far exceeded the needs of the Sui county and the hospital became unsustainable. While revenues in the short term increased, they were not high enough to repay the private capital in a limited time.
Zhu Zhenhua, secretary of the Party Committee and president of Anhui Province Taihe County People’s Hospital (安徽省太和县人民医院), pointed out in an interview with Health Times in 2021: “There is a big risk for public hospitals introducing private capital for expansion because most of the capital has to be repaid soon in high amounts.” He said he believes that using private capital would lead to the needless expansion of public hospitals, and the debt will “snowball” until the hospital is insolvent.
Summary
The growth of private hospitals in the past decade, coupled with the rapid expansion of secondary and tertiary public hospitals, laid the groundwork for widespread wage and social insurance arrears during the pandemic. Of course, the shrinking revenues in many lower-tier cities during the pandemic also exacerbated the crisis in public hospitals.
For example, on 21 July 2022, posts online reported that a hospital in Dandong, Liaoning province, did not pay wages for several months. On 15 August that year, a public hospital in Leshan, Sichuan province, announced closure. Employees of a public hospital in Suzhou City (hereafter “the Suzhou Hospital”) also complained about non-payment of HPF. The Suzhou Hospital later claimed that it had to vacate the hospital five times to treat patients with COVID-19, resulting in a significant drop in income and that it did not have the financial resources to purchase HPF for its employees.
These incidents also show that the intervention of government departments has minimal effects when healthcare workers are owed wages. This is because the problems are usually severe when workers hold collective actions. In the case of Tianyou Medical Group, the government intervened and the workers went through legal procedures, but incidents of unpaid wages continued. In the Sui Hospital, employees ended up being reassigned and dismissed. The results of these incidents point to the need for employees to have an effective and constant organization in dealing with working conditions and negotiating with management.
To be continued.
Download the full report as a pdf here.
[1]For more information on China’s legally required social security contributions, readers can refer to China Labour Bulletin’s introduction to the issue.
[2] In China, state-managed health insurance schemes play an important role. Urban workers and employers are required to contribute a Urban Employee Basic Medical Insurance Scheme, while urban and rural residents and migrant workers (people not covered by the former scheme) could be covered by other state-coordinated insurance schemes. These schemes are partly sponsored by the state and can pay for general outpatient expenses, treatment of serious illness and hospitalisation in designated medical instiutions–usually public ones. According to 2014 statistics of Beijing, 95% of public hospitals are covered by these government schemes while only 40% of private hospitals are covered.