Overview
China is the third-largest healthcare market in the world. The sector enjoys strong growth potential and has slowly been opening up to private investment as part of the government's efforts to improve the quality and accessibility of health services across the nation. In 2009, healthcare embarked on a total makeover reform, which the government pledged to fund to the tune of USD 124bn. By 2013, it turned out that the authorities had actually spent close to USD 400bn, which had helped build new hospitals, improve access to medicines and broaden medical insurance to cover 95% of the population. The sector is experiencing a deep reform, involving more investment in the development of private institutions and services, and of online and mobile healthcare services. The sector’s reform focus changed from R&D and production of advanced equipment, devices and biomedical engineering products in the years around 2010, toward the establishment of a sound basic healthcare system after 2013.
Reforms
In 2014, the government relaxed regulations on FDI in joint ventures involving medical institutions and eased approval procedures for foreign companies in some parts of the country for setting up new hospitals or acquire existing ones under a pilot project. Doctors in Beijing first started working in more than one place without employer permission. Drugs caps by the government were removed partly in 2014 and fully in the middle of 2015. Key points of the hospital reform in 2015 included introduction of a pilot scheme for verification of medical costs and health check reports across different provinces; expansion of a pilot scheme relating to GP practicing mode; a more accurate subsidies standard for basic public healthcare services; and introduction of a healthcare service payment method according to illness. Attracting the private capital became critical for the smooth implementation of the sector reform. With the segment’s opening in the last few years, however, competition has intensified, and in order to increase market share, private hospitals have started entering into various partnerships, with online service providers as well as insurance carriers. Late entrants are expected to face difficulties in securing quality medical staff and building an attractive and trustworthy brand image. Companies that have competitive advantages in hospital operation and management are now seizing opportunities arising from healthcare reform policies, and competing to expand their scope, increase investment and include more hospitals and healthcare institutions in their operations. Developing a large-scale healthcare industrial group is becoming more important in gaining core competitiveness ahead of the industry.
Outlook
The central government plans to expand the healthcare industry’s size to more than RMB 8tn by 2020. The size of the mobile healthcare market is expected to reach RMB 8bn in 2016 and exceed RMb12.5bn in 2017. This will present the greatest development opportunities. So far, there are 100 hospitals that provide full healthcare service online through the WeChat platform, and over 1,200 hospitals that provide registration through WeChat. There are over 2,000 mobile medical apps, including health counselling interrogation, online registration, medical testing, purchase of pharmaceutical products, and other professional services such as information inquiry. This will be the major development trend in the future, together with deeper hospital and services reform. New modes will emerge to enable the entry of private capital in the sector, including government purchase of healthcare services, public-private partnership, restructure-operate-transfer and invest-operate-transfer.