(Yicai) Feb. 6 -- Shares of Aier Eye Hospital Group fell after the chairman of the Chinese ophthalmology chain was reported to be connected with several psychiatric hospitals that have allegedly defrauded the national medical insurance fund.

Aier Eye Hospital [SHE: 300015] finished 3.8 percent lower at CNY11.07 (USD1.60) per share in Shenzhen today.

Xiangyang Hengtaikang Hospital, one of the mental health centers previously accused in a media report of defrauding the national medical insurance fund, is actually controlled by Aier Chairman Chen Bank, Jiemian News reported yesterday.

The Chinese news outlet also revealed that Chen has invested in and holds controlling stakes in 20 other psychiatric institution chains through Aier Medical Investment.

Aier Medical is Aier Eye Hospital’s largest shareholder with a 34 percent stake. Chen owns 80 percent of Aier Medical and holds a direct stake of nearly 16 percent in Aier Eye Hospital.

In response to the Jiemian News report, Aier Eye Hospital said today that Xiangyang Hengtaikang Hospital is a joint venture of Aier Medical and other investors, clarifying that it is not a subsidiary of Aier Eye Hospital and that there is no equity relationship or business connection between them.

Xiangyang Hengtaikang Hospital is run by its own management team, and Aier Medical does not participate in its day-to-day operations, Aier Eye Hospital added.

On Feb. 3, Beijing News published an investigative report claiming that several psychiatric hospitals in Xiangyang and Yichang, two cities in China’s central Hubei province, admitted non-psychiatric patients and fabricated their medical conditions to defraud the national medical insurance fund.

Following that report, authorities in Hubei set up a joint investigation team and dispatched investigators to Xiangyang and Yichang to conduct an in-depth inquiry. On Feb. 4, the National Healthcare Security Administration issued a notice ordering local authorities to launch self-checks of psychiatric medical institutions and said it will conduct special inspections this year.

Supervising psychiatric hospitals is more challenging than overseeing other hospitals because insurance officials often lack the clinical expertise to determine whether psychiatric diagnoses and treatments meet professional standards, a medical insurance expert told Yicai, adding that assessment by specialist bodies is frequently required.

Sanctioning psychiatric hospitals poses difficult trade-offs, the expert noted. If a fraud-tainted hospital has its license revoked, that could leave legitimate psychiatric patients without care, potentially throwing them back into the community and creating public safety risks, he said.

Editors: Dou Shicong, Futura Costaglione