Patients customarily complained about the service from State-sector doctors and nurses, who were demoralized by low salaries and busy work schedules. The lack of competition for State-owned hospitals didn't help the situation.

For Xi'an Jiren, the big challenge was keeping medical care charges down, especially because it is in a rural area where patients are very price-sensitive, said Yan.

"We did not advertise - a tactic the majority of private hospitals adopt - at all, which saved a large amount of money," said Yan.

The registration fee at Xi'an Jiren was 1 yuan in the early 2000s, compared with 3 yuan in State-owned hospitals. The hospitalization fee, including medical care and accommodation charge, for each patient was 300 to 400 yuan lower than that at State-owned ones.

"I did not look for quick money. What I cared about most was the number of patients. I squeezed the profit margin for more patients. They could experience our services, equipment and the recovery process and could recommend Xi'an Jiren to their relatives, neighbors and friends," said Yan, adding that the hospital depends on this word-of-mouth advertising to increase the number of patients, thereby increasing sales and sustaining development.

Feng Jianping, a local farmer, always comes to Xi'an Jiren when he or his family members are ill. "It's cheap compared with State-owned hospitals and the doctors and nurses are very nice," said Feng, who suffered from serious hepatitis several years ago and recovered there.

"I trust the doctors here and tell people around us to come here," he said.

"Hospitals are a very unique industry. Their reputation will determine growth or decline, even survival or death," said Zhu Hengpeng, a researcher at the economic research institute under the Chinese Academy of Social Sciences.

Over the last 10 years, Xi'an Jiren's patient visits increased by 18 to 20 percent annually to exceed 100,000 last year, with sales revenue growing at 26 percent. The hospital's fixed assets are worth 150 million yuan currently. In general, a hospital can break even over eight to 10 years after its establishment. Xi'an Jiren turned a profit after eight years.

Liao Jiamei, administration director of the hospital, has been here since the very early days. "During the first several years, I worried so much. How long can this hospital survive? Few patients came here," she recalled. "Now what I worry about is how to coordinate everything because the beds are always full and many patients are waiting outside. Construction of the new building cannot be finished overnight."

Government relations

Yan's namecard lists his titles. They include deputy of Hu county people's congress, member of the standing committee of Hu county's political consultative conference, vice-chairman of the local industry and commerce federation and vice-director of Hu county disabled persons federation.

"I maintain a close relationship with government at all levels and communicate with them. I know there are many problems in China, especially in rural areas, because the nation is still in a developing stage. But I believe complaints are useless. Suggestions and communication are the way to solve problems. Talking with officials in a practical manner is useful," he said.

Zhu said that Yan's strategy is really smart.

"He follows the government policy to earn government support. Besides, the medical care sector is not only an elastic industry with a promising future but also a business inevitably greatly influenced by policies and government initiatives," he said.

In addition to the new building, Yan also plans to diversify Xi'an Jiren's business. As a handicapped person, the first thing he considered was a rehabilitation service. China's medical care insurance now includes this area, making it affordable to poorer patients.

The number of patients suffering from paralysis is increasing in China due to the high incidence of cardiovascular diseases and traffic accidents. As people earn more and pursue a higher quality of living, they have realized the importance of rehabilitation.

Now the hospital has set up an 80-square-meter gym for the service. The province-level Disabled Persons Federation invested 2 million yuan in it.

Yan will also open a nursing home for the elderly after the hospital renovation is finished and everything is on track. "The government called on social investment in this sector because China is becoming an aging society," Yan said.

Statistics from the Ministry of Civil Affairs show that people at the age of 65 and above numbered 123 million in China last year, accounting for 9.1 percent of the population. The figure is expected to reach 20 percent by 2030.

Under the new medical reform plan, to reduce costs the government decided to stop hospitals relying on drug sales for their revenues. Instead they were told they should enhance service quality and are allowed to increase service charges.

The government said it will increase subsidies to the State-owned hospitals and income from service charges will be used to upgrade infrastructure and increase doctors' salaries.

The government said on April 18 that it will carry out trials in 300 State-owned county-level hospitals.

"I have raised a proposal to our congress urging the government to put some of our private hospitals into the trial program," Yan said. "Patients in our hospital could get drugs at lower prices and we could get subsidies to further improve our services. I think that's fair."

liujie@chinadaily.com.cn