In the past, hospitals made money in China by marketing up drugs, devices, procedures, and doing many diagnostic tests. Those days are over. As mentioned in our previous newsletters, China’s Volume Based Procurement (VBP) has cut the reimbursements for many high priced and high volume, drugs, and devices. Prices have also been slashed via the implementation of Diagnosis Related Groups (DRGs). With DRGs, reimbursement is done on a pre-set amount per disease, regardless of real cost — based on age, gender and discharge status. In addition, over the last few years, China has implemented the Diagnostic Intervention Packet or DIP system. The DIP system is also in a pilot stage but is in over 75 Chinese cities now. There are over 13,500 DIP groups and 27 General Major Disease Groups in the DIP system. Under a regional budget, DIP is a case-based payment system. Each DIP group is allocated points and the value of each point changes depending on the disease. In the DIP system, the hospital knows the number of points, but the final prices are determined, only later. The DIP scheme leads medical institutions in the same geographic region to “fight” with each other, with more treatments in a specific disease area, eventually getting more funding.