China has decided to start public hospital reform with pilot programs in selected cities or districts in each province, autonomous region and municipality, according to a cabinet guideline passed Wednesday.

The guideline on public hospital reform was discussed and approved by an executive meeting of the State Council chaired by Premier Wen Jiabao.

The public hospital reform is aimed to establish a reasonable, effective and optimized medical service system, and to fully motivate all medical workers to provide the public with safe, effective, convenient and affordable medical services, according to a statement issued after the meeting.

It was stressed at the meeting that public hospitals must retain its orientation of serving public interests and giving top priority to people's health.

According to the statement, a coordination mechanism should be established between big public hospitals and grassroots medical service institutions so that they could cooperate with each other with proper division of labor.

The management system of public hospitals should also be reformed so that operation and supervision of the hospitals are conducted separately, it said.

The quality of public hospitals' medical services should be improved, whereas their incentive mechanism of income distribution should be perfected, the statement said.

Public hospitals should also gradually quit profiting from drugs and rely on medical service charges and government subsidies.

The guideline also encourages non-governmental sectors to invest in and set up non-profit hospitals.