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Overseas operators get increased access to China healthcare market

With the mainland government now keen to improve healthcare screening facilities across the country, restrictions on overseas operators in the sector have been lifted, providing a huge new opportunity in the high-end medical market.

Photo: Screen test: corporate clinic facilities.
Screen test: corporate clinic facilities.

China's medical services market has become increasingly open to overseas investment in recent years. The move stems from the central government openly seeking to improve the quality of the country's healthcare, particularly with regard to screening centres.

Recent years have seen a dramatic growth in the number of mainlanders signing up for private health checks. For the period 2009-2011, there was an average yearly rise of 20.6% in the number of such appointments. Tellingly, over the same period, there was a decline in public hospital visits.

Perhaps predictably, the growth in the number of health screening institutions has been most pronounced in the tier one and two cities. The growth in the sector has recently been tracked by Qianzhan Business Information's Health Industry Research Centre.

According to its study – The China Health Examination Industry Development Prospects and Investment Strategy Planning Report, 2013-2017 – there are now around 8,000 health screening centres operating on the mainland. The sector first opened for business in 2002, when the Ciming Health Check-Up Management Group launched in Beijing. By 2005, there were 2,000 such centres, with the figure reaching 7,000 in 2009.

The sector is clearly hugely profitable, with health screening centres in Beijing, Shanghai and Guangzhou reporting annual turnovers in excess of Rmb3 billion. According to the manager of one health screening facility in a leading Guangzhou hospital, profit margins are typically in the region of 30%. At other facilities, the average is said to be more than 40%, rising to 50% at a number of public hospitals. Certain high-end establishments are thought to enjoy even higher margins.

It is these potentially high returns that are seen as driving a number of venture capital groups to invest in this sector, despite its highly competitive nature. Such moves have been fuelled by a new initiative by the State Council aimed at streamlining the market access requirements for those targetting the medical services sector. Entitled Several Opinions on Promoting the Development of the Health Services Industry, the new strategy document was introduced in October last year.

This more relaxed legislative approach has already seen a number of Hong Kong- and Taiwan-based health screening institutions establish themselves on the mainland. Taiwan's MJ Group, for instance, operates one of the largest overseas-funded health service institutions, while several Hong Kong medical companies have set up independently or formed joint ventures. As health screening centres currently account for less than 5% of the total number of mainland medical institutions, it is believed the market is far from saturated.

Li Peijuan, a Senior Analyst at Qianzhan Business Information, believes there has been a shift in attitude towards health awareness. This is manifesting itself in terms of higher treatment expectations, greater emphasis on preventive care and an increased willingness to spend on check-ups.

One patient of an overseas health company – "Ms Wang" – clearly believes the private sector offers definite benefits when compared to public institutions. She said: "Even if such companies charge two to three times as much, they still have the advantage of offering superior equipment, more comprehensive screening, a more hygienic environment and better customer care. They can also tailor their services to suit the individual, while providing more detailed health screening services."

In terms of her own medical care, Wang is a patient of Ciming Health, the largest health check-up operator on the mainland. The company currently has 42 centres in 13 cities, operating 16 clinics in Beijing alone. In 2011, the group enjoyed a 25% share of the mainland health screening market.

Han Xiaohong is the Chief Executive of Ciming and it was her early career in oncology that convinced her of the benefits of pro-active health screening. Looking back, she says: "Many of my patients were suffering from late-stage cancer. They were already beyond any cure when they were diagnosed. This was because they had never had any health checks. Later, when I worked abroad, I came to realise that such check-ups are pretty much the norm. In light of this, I can see considerable prospects for such a service on the mainland."

Keen to establish its professional credentials, Ciming invests heavily in developing its management information systems and on building its online presence. According to Zhao Li, one of the company's Beijing-based product managers, Ciming's health screening services are now available for group purchase via WeChat, Taobao and a number of other digital platforms. Patients can also be informed that their tests have been completed via SMS, after which they can access their results online.

While Ciming traditionally targets the mass market, it is now seeking funding for a number of high-end projects. Aside from Ciming, a number of other companies are now established as significant players in the sector. Chief among these are the iKang Guobin Healthcare Group (operating mainly in southern China), Beijing's Shengkangda Group (mainly working with first-class or grade three hospitals) and Meinian Onehealth Healthcare (Group) Co Ltd (a specialist in traditional Chinese medicine).

Photos: Bright and welcoming: high-end private med-care.
Bright and welcoming: high-end private med-care.

In the high-end sector, paid subscriptions – such as iKang Guobin's – IT+health management service – are now increasingly becoming the norm. Such systems see subscribers guaranteed a range of services on top of the standard health insurance benefits. Typically, these add-on services include health information archiving, medical check-ups, screening, one-on-one consultations, easy-to-make medical appointments and access to experts. iKang Guobin's annual subscription fee is said to be around Rmb10,000.

MJ Health Screening – a joint venture by Taiwan's MJ Group and Beijing Physical Examination Centre – also targets high-income groups and charges several thousand Rmb for a health check. In addition to providing health logs and general health information, it also offers access to family health managers who provide advice on diet, disease prevention and other related issues.

Currently, around 100 million mainlanders now undergo annual health checks, creating a market that is estimated to be worth some Rmb10 billion. At present, high-end services account one-third of that figure. Overall, the health screening market is enjoying double-digit growth per annum, with the high-end sector expanding by 30%.

The mid-to-low-end market is growing more slowly, however. This is largely because this sector is still dominated by the public health facilities. In light of this, it would seem that the more specialised and high-end sectors offer most scope for those businesses looking to enter the mainland healthcare market.

Jiang Wu, Special Correspondent, Beijing

Content provided by Picture: HKTDC Research
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