The State Council decided on Thursday to put private-capital-invested hospitals in the medical insurance system, a move designed to encourage the development of medical institutions.

Among other measures, the approval process to set up a hospital or clinic will be streamlined, and preconditions including the number of beds will be canceled.

Nonprofit private-capital-invested medical institutions that provide basic healthcare service should get subsidies from the government, and hospitals invested with private capital will see other favorable policies such as tax cuts, the State Council said.

"This is terrific news for such hospitals," said Hu Shanlian, professor from the School of Public Health under Shanghai-based Fudan University. He said many hospitals run by private capital, especially those at the high end, have met great difficulties as they can neither get government subsidies nor join the national medical insurance system.

Hu said there are two possible ways for the government to give subsidies - to give the hospitals money or buy their services.

The State Council also ordered at the meeting that private-capital-invested medical institutions be covered in regional development plans for medical resources.

Raising capital for such institutions - through equity financing and project financing, for example - will be supported.

Pilot programs will be set up to simplify preconditions for doctors to work at different hospitals.

The government will also establish a supervisory system for these hospitals and crack down on illegal medical practices and excessive medical treatment.