An undercover investigation by New Beijing News has exposed a systematic scheme in Hubei province in which private psychiatric hospitals entice patients with promises of “free” long‑term care while fabricating diagnoses, inventing billable treatments and using patients as labour to extract public health insurance funds.
Reporters posed as caregivers and attendants at two private hospitals in Xiangyang and neighbouring Yichang and found wards filled with elderly people, alcohol‑dependent patients and even hospital staff listed as inpatients. Medical records routinely included high‑value items such as “behavioural correction” and psychological therapy that, staff and patients said, were never actually delivered; daily charges recorded in the hospitals’ billing systems averaged roughly RMB130–140 per patient.
Hospital managers and frontline employees described active recruitment operations: staff canvassing markets and villages, offering transport and fee waivers; relatives were sometimes asked to pay only a small “threshold” fee for food while medicines and treatment costs were billed to state medical insurance. Several insiders admitted the motive frankly — the longer patients remained in hospital, the more money the facility could draw from public funds.
The investigation documents other abusive practices that extend beyond financial fraud. Reporters witnessed physical abuse, enforced confinement, the selection of compliant patients to perform kitchen and cleaning tasks, and the routine confiscation of phones to limit communication with families. In one tragic case cited by patients and relatives, a man admitted for alcohol dependence repeatedly requested discharge and later took his own life.
Hospitals also employed a “fake discharge” tactic to evade inspections: patients were formally processed out of the system when auditors arrived, but were kept on site or rehospitalised days later. This manipulation of admission and discharge records allowed facilities to present lower long‑term occupancy while continuing to claim reimbursements for extended stays.
The scale in Xiangyang is striking: investigators catalogued more than 20 private psychiatric hospitals in a single prefecture‑level city, many founded in recent years and sited in rural outskirts to keep costs down and scrutiny limited. Staffing levels and equipment were frequently inadequate, and some hospitals operated more like low‑cost nursing homes or labour camps than therapeutic institutions.
Experts interviewed by the newspaper point to structural drivers: mental health wards often operate as closed units with limited outside oversight, patients commonly lack the capacity to challenge mistreatment, and local competition combined with perverse reimbursement incentives create fertile ground for abuse. The result is not only substantial losses to the medical insurance fund but a deep erosion of trust in mental‑health services among patients and families.
The exposure has already prompted a local response: Yichang authorities announced a comprehensive investigation, and the case highlights the broader policy dilemma Beijing faces as it expands insurance coverage and private provision of mental health care. Effective reform will require coordinated oversight across health, medical insurance, civil affairs and public security agencies, stronger verification of treatment delivery, and safeguards to protect the rights and mobility of psychiatric patients.