Fixing a Trillion-Dollar Healthcare Market

As the population of China ages, the economy grows, and basic health insurance access increases, the healthcare market has seen significant expansions. Simultaneously, there have been notable reforms taking place in the healthcare market to ensure appropriate healthcare services to the entire population as well as increased quality and the ability to meet diverse patient needs.

Private hospitals are one way in which healthcare market expansion can be accommodated. In talking with a few private hospital investors in the region, I’ve seen the following areas of expansion:

• Premium healthcare: Concierge healthcare with a higher price tag catered for the wealthy clientele.
• Specialty chains: Offering services such as cancer treatments, ophthalmology, children’s hospitals, etc.
• General hospitals: Private hospitals looking to compete with the public hospitals. They’re looking to enter the market with an emphasis on quality of life services and health services.

These areas of expansion are in line with the changing and expanding needs of patients in China, as well as meeting the expectations of more knowledgeable patients who demand a higher level of quality and technology incorporated into their health care.

Public hospitals are expected to maintain a dominant position in China’s system. They still have the citizens’ trust at this moment in time. However, national reform is forcing these facilities to examine their operations to reduce costs, increase revenue, and improve care quality. These demands have come about due to the changes in the Chinese population and the nation itself, drawing attention to different areas of interest in health care.

In order to address these changes, it is suggested that public hospitals address five specific areas:

1. Improved performance management systems
2. Improved patient experiences
3. Establishment of mutual trust with patients and marketing management systems
4. Standardization of services and processes
5. Integration and optimization of hospital information systems

These steps can adequately address the needs of Chinese patients as the nation changes, requiring changes to meet the diverse needs of the people.

Rapid Growth

According to a report by Deloitte, health expenditures in China quadrupled between 2004 and 2013, reaching $460B in 2013 and a compound annual growth rate of approximately 17.2 percent. If the trend continues as expected, expenditures will reach $963B by the year 2020. This growth in expenditure has come as a direct result of factors in the nation, including an aging population, urbanization, individual wealth growth, and the advancement of medical insurance. However, this stands in contrast to supply-side growth, which has been sluggish by comparison. Despite the increased demand, the growth in supplies and care providers has fallen short.

Aging Population

The overall population of China is rapidly aging. According to the China Statistics Yearbook, individuals over the age of 65 accounted for 7.6 percent of the population in 2004 — by 2013, it grew to nearly 10 percent. As people age, they are at a greater risk for injury and illness, thereby increasing the need for high-quality health care services on a more frequent basis, especially in comparison to younger population groups. Not only are these needs different from those of younger population groups, but they require different sub-specialties to be successful in the context of risks associated with providing care for older adults. As the population of China continues to age, it’s expected that the need for healthcare services will continue to increase, and we’ll see an uptick in senior care facilities funded by private investors.

Increased Complexity of Health Care Demand

As the economy grows, Chinese people are becoming wealthier, which provides them greater knowledge of health care. As a result, patients expect more complex and diverse health-related services. This includes a stronger emphasis on patient privacy and a willingness to accommodate higher costs for better service and high-tech services. In addition, patients will have greater knowledge of rehabilitative care and preventive screening and treatment, which will increase the demand for these services. As the population ages, the need will increase for age-specific specializations and sub-specializations.

Basic Medical Insurance Expansion

Over the past 10 years, basic medical insurance has been a significant focus point for policy change. The changes that were made have led to greater depth of coverage over that time. The three basic medical insurance systems cover approximately 95 percent of the population. Changes within the systems have made it easier for residents to seek care, and the Chinese government has been promoting critical illness coverage. These policy changes have made care more accessible and affordable for Chinese residents, which will in turn increase the demand for these services.

While there is a desire for many North American healthcare systems to expand their services globally, China is a tough market with a different culture and different expectations. I have seen a few successful entries, but it has been a slow journey. The model of picking up a North American healthcare entity and dropping it internationally may seem like a simple solution, but in reality, it will not be an easy road.

This piece was originally posted by David Chou, Chief Information and Digital Officer at Children’s Mercy Hospital, on his blog page. To follow him on Twitter, click here.