Objective To imitate and calculate the ways, input amount and feasibility of governmental compensation to municipal public hospitals in Shenyang city after abolishing drug retail mark-up policy under existing conditions, so as to provide regional demonstration for the decision-making and smooth implementation of public hospital reform. Methods The relevant information of 18 municipal public general hospitals or specialized hospitals during 2008-2010, such as annual basic numeration tables, summary and detailed statements of income and expenditure were collected, and the average data of both national and provincial hospitals in the same or similar level during 2009-2011 were retrieved from China Health Statistics Yearbook. The Questionnaire of Compensation to Medical Institutions was self-designed, distributed and reclaimed in order to get the data of respective hospitals during 2008-2010. Then the following 4 compensation ways were calculated: governmental input compensation, price compensation of medical service, pharmaceutical affairs compensation for price difference, and integrated way of the former 3 compensations; and the feasibility of compensation after health system reform was analyzed. Results a) If the drug retail mark-up policy was abolished in municipal hospitals, the total loss of hospitals would increase from RMB 200 million yuan in 2008 to approximately RMB 330 million yuan in 2010. b) The balance of payments and patient’s cost of Shenyang municipal public hospitals were basically similar to those of both national and provincial hospitals in the same level. c) As for the year of 2010, the new governmental compensation after implementation of new health system reform was at least RMB 438 million yuan, accounted for about 1.8 % of general budget expenditure in Shenyang municipal level. d) The results of the imitation and calculation of 3 price adjustment schemes of medical service showed that, only the third could completely compensate the abolition of drug retail mark-up. e) As to the pharmaceutical service charge based on compensation for pharmaceutical administration, it was RMB 115.6921 million yuan in Shenyang municipal public hospitals in 2010, and it could compensate 58.6% of the drug price difference. f) Compared with the former 3 compensation ways, the integrated compensation way could make public hospitals have general balance of payments which were RMB 115 million yuan, 172 million yuan and 268 million yuan, respectively. Conclusion a) After the abolition of the hospital expense covered by drug revenue, it is reasonable and feasible in increasing governmental compensation according to the annual depreciation cost of permanent assets, adjustment of medical service price, and increase income of pharmaceutical service. b) The second integrated scheme of comprehensive compensation schemes can make most hospitals have some favorable balance; the slightly increasing charge of medical care is affordable by patients and medical insurance departments, so it is operable. c) The successful and sustainable implementation of public hospitals compensation policy depends on the reform of both structure and mode of payment in medical insurance system.