Healthcare Services and Health Insurance in China

Healthcare services in China: how the system is organised

Healthcare services in China are delivered mainly by public hospitals, financed largely through state-run basic medical insurance, and supplemented by a growing private sector and commercial health insurance. Three regulators matter most. The National Health Commission (NHC) and its local counterparts license medical institutions and professionals. The National Healthcare Security Administration (NHSA) runs the basic medical insurance funds, the national reimbursement drug list, pricing governance and centralised procurement. The National Financial Regulatory Administration (NFRA) supervises insurers that sell commercial health cover.

For foreign investors, insurers, operators and suppliers, the system offers scale but imposes structure. Ownership rules for hospitals are still restrictive outside pilot locations; reimbursement depends on designation by local insurance agencies; and the payer is tightening controls on fund use. This page sets out the framework as at November 2026 as general information, from the perspective of international groups entering or investing in healthcare services in China and Chinese groups working with them.

A useful way to think about the sector is as three linked markets. The provider market covers hospitals, clinics, diagnostic centres, rehabilitation, elderly care with medical services and internet hospitals. The payer market covers basic medical insurance, long-term care insurance pilots, commercial health insurance and city-level inclusive schemes. The service market covers third-party administrators, health management, pharmacy benefit services and data services that connect the two. Legal risk and opportunity sit at the interfaces.

Foreign investment in healthcare services in China

The national foreign investment negative list (2024 edition, in force since 1 November 2024) still provides that medical institutions are limited to joint ventures. In practice that means equity joint ventures or cooperative arrangements with a Chinese partner, subject to local health authority approval of the institution itself. The constraint has shaped the market: many foreign groups invested through joint ventures, management contracts or minority stakes rather than full ownership.

That position has been partly relaxed. In September 2024 the Ministry of Commerce, the NHC and the NMPA announced a pilot permitting wholly foreign-owned hospitals in Beijing, Tianjin, Shanghai, Nanjing, Suzhou, Fuzhou, Guangzhou, Shenzhen and the whole of Hainan. A work plan released in November 2024 provided that such hospitals may be general, specialty or rehabilitation hospitals, but excluded traditional Chinese medicine hospitals, barred the acquisition of public hospitals and prohibited high-risk activities such as organ transplantation. Local implementing rules vary, so feasibility must be checked city by city.

Several adjacent activities are open to full foreign ownership, including many health technology, consulting and administration services, although medical diagnosis and treatment itself must be carried out by a licensed medical institution. Where a structure separates the licensed institution from the economic owner, regulators look at substance, so arrangements that resemble disguised control of a restricted institution should be avoided. See our guide to market entry and foreign-invested enterprises.

Licensing, staffing and digital health

Every hospital or clinic needs a medical institution practice licence (or a filing for certain clinics), with approved departments, beds and scope. Doctors and nurses must be registered to practise, and physicians may register for practice at multiple sites, which helps private providers recruit senior clinicians from public hospitals. Large equipment such as certain imaging and radiotherapy systems is subject to configuration permits, and radiation safety, pharmacy, infection control and medical waste rules apply.

Pricing differs by ownership. Public hospitals follow government-guided prices for medical services, while non-public institutions can generally set their own prices, but insurance reimbursement is limited to items and prices accepted by the local insurance agency. Medical advertising requires prior review, and claims must be accurate and within the licensed scope.

Digital health has grown rapidly. Internet hospitals must be attached to a physical medical institution and may provide follow-up consultations for common and chronic conditions, but not first-visit diagnosis. Online prescriptions must be issued by registered physicians, and drug sales online are subject to separate rules. Artificial intelligence may assist clinicians but may not replace physicians in issuing prescriptions. These rules make the physical licence the anchor of any digital model, which is important when designing a cross-border telehealth or second-opinion service. See healthcare AI.

Basic medical insurance and the Healthcare Security Law

Basic medical insurance covers almost the entire population through two schemes: employee basic medical insurance, funded by employer and employee contributions, and residents' basic medical insurance for rural and non-working urban residents. The Healthcare Security Law, adopted by the NPC Standing Committee on 28 August 2026 after three readings, takes effect on 1 January 2027. It has seven chapters and 56 articles.

The law establishes a multi-tier security system with basic medical insurance at its core, supplemented by medical assistance, commercial health insurance, charitable support and medical mutual aid. It provides for a public service list, a long-term care insurance system and, for the first time at statutory level, the merger of the maternity insurance fund with employee basic medical insurance for accounting purposes. Implementing rules and local measures will determine how many of these provisions work in practice, so operators should follow them through 2027.

For providers, the key operational concept is designation. Only institutions that sign agreements with the local insurance agency can bill the funds, and those agreements carry audit, data and pricing obligations. The Regulations on the Supervision and Administration of the Use of Medical Security Funds (effective 1 May 2021) already allow heavy penalties, including fines of multiples of improperly obtained amounts and suspension of designation, for fraudulent billing. Payment reform through diagnosis-related groups (DRG) and diagnosis-intervention packets (DIP) has also changed hospital economics, rewarding cost control over volume.

Commercial health insurance and the multi-tier payer system

Commercial health insurance is the main growth area on the payer side. Products range from critical illness and medical reimbursement cover to high-end medical insurance for private hospitals, long-term care and disability income cover. City-level inclusive health insurance schemes, often called Huimin Bao, are backed by local governments and offer low-premium supplementary cover, and have become a channel for innovative drug access.

Policy support has increased. In September 2025 the NFRA issued guiding opinions on high-quality development of health insurance, aiming for a multi-tier market that covers the whole population and life cycle to be largely in place by 2030. The opinions support more flexible payment for innovative drugs and devices, development of commercial long-term care insurance, and cooperation mechanisms with drug and device companies, including market-based negotiation and outcome-based payment, alongside continued supervision of the market.

In December 2025 the NHSA released, alongside the national reimbursement drug list, the first commercial health insurance innovative drug list, containing 19 drugs and effective from 1 January 2026. The list is designed to channel high-cost innovative medicines that sit outside basic insurance into commercial products, which creates a meeting point for insurers, pharmaceutical companies and hospitals. See our pharmaceuticals page.

Foreign insurers can now own life and health insurers in full, following the removal of foreign shareholding caps in the life insurance sector from 2020, and international reinsurers are active in the health segment. Market entry still requires NFRA approval, capital, governance and solvency compliance. See insurance and reinsurance.

Worked example and cross-border angles

Consider an international operator of specialty eye hospitals that wants to open in Shenzhen and later expand across the Greater Bay Area. Its decision tree looks roughly like this.

1. Ownership. Because Shenzhen is a pilot city, a wholly foreign-owned specialty hospital may be possible, subject to local implementing rules. Outside the pilot cities, later sites would need a joint venture or a Hong Kong-based structure if the group qualifies as a Hong Kong service provider under CEPA.
2. Licensing. The hospital needs approval for its establishment and a practice licence covering the planned departments, plus permits for laser and imaging equipment and radiation safety where relevant.
3. Staffing. Foreign doctors need short-term practice approval or full registration; local doctors may join through multi-site practice registration.
4. Payment. The operator decides whether to seek insurance designation for basic procedures, and which commercial insurers and high-end medical plans to contract with for premium services.
5. Data and brand. Patient data stays in China under a localised architecture; brand and clinical protocols are licensed from the group under an agreement governed by the law the parties choose for the offshore elements.

The Greater Bay Area adds options. Hong Kong-registered doctors and certain Hong Kong professionals have routes to practise in the nine mainland cities, and the policy allowing designated institutions to use certain Hong Kong-registered drugs and devices supports clinics serving cross-boundary patients. Hong Kong also offers a familiar base for regional holding structures, dispute resolution and financing. See our Greater Bay Area guide.

Outbound, Chinese hospital groups, insurers and health technology companies are building partnerships in Southeast Asia and the Middle East, where demand for specialist care, digital health and insurance distribution is growing. These projects raise licensing, foreign ownership and data localisation issues in the host country, and outbound investment filings at home. For healthcare services in China and abroad alike, the same discipline applies: confirm the licensed entity first, then build the commercial model around it.

Compliance risks in healthcare services in China

Compliance pressure in healthcare services in China comes from four directions, and a credible programme addresses each.

• Insurance fund misuse. Fictitious admissions, upcoding, splitting charges and billing for unperformed services are enforcement priorities, increasingly detected through big-data monitoring.
• Anti-corruption. The healthcare anti-corruption campaign since 2023 targets kickbacks in procurement, prescribing and referrals, and reaches private institutions and suppliers.
• Health data. Medical records, genetic data and insurance claims data attract personal information, important data and cross-border transfer rules, and human genetic resources have their own regime. See health and medical data.
• Consumer and sales conduct. Misleading insurance sales, opaque premium increases and aggressive marketing of medical services draw regulatory and consumer complaints.

Data deserves particular care in cross-border structures. A foreign insurer or hospital group that wants to centralise claims processing, analytics or clinical decision support outside China will need to map which data leaves China, rely on an available transfer mechanism, and consider whether any data set may be classified as important data. Many groups adopt a localised data architecture for healthcare services in China and share only de-identified or aggregated outputs.

Transactions and structuring in healthcare services

Deal activity includes acquisitions of private hospital groups, specialty clinic chains (dental, ophthalmology, fertility, oncology and rehabilitation), joint ventures between foreign operators and state-owned or private partners, and investments in insurance-linked health management platforms. Due diligence should cover the items below.

1. Licences: practice licence scope, bed numbers, large equipment permits and any temporary or conditional approvals.
2. Ownership: whether the target is for-profit or non-profit, since non-profit institutions face limits on distributions and asset transfers.
3. Insurance: designation agreements, billing audits, recovery claims and DRG or DIP exposure.
4. People: physician registration, multi-site practice arrangements and employment terms for key clinicians.
5. Property and safety: leases, fire safety, radiation and medical waste compliance.
6. Disputes: medical malpractice claims, patient complaints and regulatory penalties.

Structuring issues include whether a foreign investor can hold the institution directly or must use a joint venture, how to protect brand and clinical protocol rights through licensing, and how to plan exits given approval requirements and limits on transfers of non-profit assets. Disputes between joint venture partners in healthcare are common, so deadlock, management appointment and exit mechanisms deserve careful drafting. See joint ventures in China.

Common mistakes are recurring. Investors sometimes value a target on revenue that depends on a designation agreement under audit, rely on a management contract that a regulator later treats as disguised control, or accept a joint venture partner's undertaking to procure licences without tying payments to milestones. Others underestimate the time needed to recruit and register senior clinicians, or design a data flow that cannot lawfully leave China. Each of these can be addressed with targeted diligence, conditions precedent and staged funding, provided they are identified before signing rather than after completion. Elderly care with integrated medical services, rehabilitation and long-term care are growth areas where the same checks apply, with additional civil affairs licensing for the care component.

How TRW & Co helps with healthcare services in China

We advise international hospital operators, insurers, investors and health technology companies on cross-border strategy for healthcare services in China, and Chinese groups expanding abroad. Our work includes market entry and joint venture structuring, cross-border M&A and licensing documentation under the laws where our lawyers are qualified, insurance partnership agreements, data architecture planning for cross-border operations, and compliance programme design. Where PRC legal advice, licensing applications, regulatory filings or court and arbitration representation are required, we work with licensed PRC law firms and coordinate the overall project. See also our life sciences and healthcare sector page. To discuss a matter, contact us.