* Programme involves both price increases and decreases
* Analysts say programme allows long-term price rises
* National expansion of pilot programme by 2025
BEIJING, Aug 31 (Reuters) - China stepped up its reform of public healthcare service pricing mechanisms with the announcement of a pilot programme aimed at ensuring proper compensation for service providers and affordable costs for consumers.
The plan comes after China had blocked some channels that allowed public hospitals to earn revenues from medical devices and drug sales. The measure reduced over-prescription and illegal rebates but also increased public healthcare operators' reliance on medical services to support their staff.
The new scheme is also aimed at rectifying weaknesses in current pricing mechanisms, where some services are priced too low and medical professionals do not participate in the government's price-setting process sufficiently.
"(Price increase) will be inevitable to make sure doctors' income remains reasonable," said Zhao Bing, a China Renaissance Securities analyst, noting reduced revenue streams for public healthcare operators due to restrictions in sales of drugs and medical devices.
Zhao said the rule does not necessarily mean consumer costs will also increase, as state insurance will help cover the bill.
The pilot programme guideline will specify how public hospitals should adjust service prices and involve both increases and decreases, but will avoid excessive increases in costs, according to the guideline issued late on Wednesday.
The government plans to start the pilot programme in five cities before national launch by 2025, the guideline said.
Under the scheme, authorities will set guide pricing for most services at public institutions, and services eligible for market-driven pricing will be limited.
Private hospitals will be allowed to use market-driven pricing plans, but China will strengthen its regulation and, when necessary, take action such as pricing investigations, summoning hospital operators and public disclosure of price irregularities, according to the guideline.
Shares in private service provider Aier Eye Hospitals Group fell as much as 4.4% on Wednesday before closing 1.4% higher. Hygeia Healthcare tumbled 14.8% earlier but pared losses to close down 2.1%. (Reporting by Roxanne Liu and Brenda Goh; Editing by Miyoung Kim)