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hospital accounting, reform, transitional economies, China


This paper is a case study of China’s recent reforms in hospital accounting. We analyze the Chinese health care system in transition to highlight the changing role and nature of accounting services before and after the recent reforms. Prior to reforms, the accounting system provided data solely for government central planning purposes. Reforms were supposed to decentralize hospital decision making, thus signaling a need for a new accounting system that would provide information to managers and resource providers. However, the government continues to maintain control by fixing basic medical service prices at levels below cost while allowing profit margins for pharmaceutical sales and other advanced medical services. This schizophrenic policy of quasi-decentralization/macro-control has resulted in an accounting information system that serves neither the need of managers nor external resource providers. In January 1999, major reforms were instituted in China’s hospital accounting system, creating a more streamlined structure. The legacy of the command economy, however, remains clearly evident in the areas of revenue control and state subsidies. Hospital accounting in China is therefore subject to the ongoing evolution of the government’s health care policy.

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