Impact of public hospital pricing reform on medical expenditure structure in Jiangsu, China: A synthetic control analysis

Background: The synthetic control method (SCM) is a useful tool in providing unbiased analysis on the policy effect in real-world health policy evaluations. Through controlling for a few confounding factors, we aim to apply SCM in analyzing the impact of the pricing reform on medical expenditure structure in Jiangsu Province, China. Methods: We constructed a synthetic control for Zhenjiang, a city where the reform was piloted in Jiangsu, by selecting weights on those potential control units to define a linear combination of the control outcomes to replicate the counterfactual as if the intervention is in absence. The policy effect was measured by the differences in the percentage of drug expenditure among average outpatient and inpatient care cost per visit in the post-policy period between Zhenjiang and its synthetic control. We also examined the significance of the estimated results by performing placebo tests, and cross-validated the results with a difference-in-differences analysis. Results: The medical pricing reform was found to be effective in reducing the drug expenditure proportions in both outpatient and inpatient care by an estimated mean level of 7.7 and 3.2% (or 16.3 and 9.2% relative decrease to their 2012 levels) respectively. This reform effect was estimated to be significant in the placebo tests and was further confirmed by a cross-validation. Conclusion: We conclude that the pricing reform in public hospitals has significantly reduced drug expenditure incurred in both outpatient and inpatient care. This study also highlights the applicability of SCM method as an effective tool for health policy evaluation using publicly available data in the context of Chinese healthcare system.