Chinese Health Care Reform

January 2015

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China HealthCare

Environment

Policy Aspect

Status Trend

Structure

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I. China Healthcare Environment Overall Situation:

• Wholly Owned Foreign Enterprise model is welcomed. Joint Public/Private Partnership is not mandatory • Population is aging rapidly • Population income and standards of living is rising faster than any

other country in the world • Desire of more healthcare and better health care is rising

dramatically and will continue

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I. China Healthcare Environment Medical ‘financial’ Model Reforms :

Reimbursement in Public Sector

• Currently Removing Financial Incentives from Drugs

• Projected to Remove Financial Incentives from Imaging

• Physician and Nursing and Room Fees will continue to increase to compensate for financial reductions in other areas.

• Financial Services Industry (Insurance) needs to expand to fund the private healthcare industry. Government action to support is anticipated.

• Currently China spends only about 5% of GDP for Healthcare. Increased spending is anticipated to continue up to a projected goal of least 8%.

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I. China Healthcare Environment Medical ‘Operational’ Model Reforms: Education and Training 1. Significant Shortage of Physicians and Nurses

•This shortage will get worse during next 5 to 10 years before it gets better

•Staff Recruiting from Outside of China is currently almost impossible for nursing, laboratory, pharmacy and radiology.

•Goal is to increase education and scope of responsibilities of Nursing and Clinical Support Staff to reduce over reliance on physicians

2. Creating and Implementing Residency Programs

•Priorities are Family Medicine and Emergency Medicine

•Reduce over utilization of Specialists and Top Hospitals

•Increase speed and safety of patient care in Emergency Rooms Big opportunities for organizations who can educate, train and develop both clinical, professional and customer service skills for the healthcare industry.

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II. Policy Aspect Overall Situation: Some New Policy Initiatives

• All cities in mainland of China can introduce single-ownership hospital from Hong Kong, Macao, and Taiwan

• Capital resources from other countries could be used to establish single ownership hospital in Chinese (Shanghai) experimental free trade zone, and will be gradually expanded to other areas

• Reducing the public approval procedures and improve the efficiency of bureaucracy process

• Contracting with social medical insurance, key discipline development, professional titles, hospital accreditation, apply scientific research grant

• Supporting private capital running non-profit medical hospital as a priority

• Relief the restrictions on the number, scale and location of commercial hospital and medical device and equipment

• Strengthening the administration and supervision system by law

Much investment potentiality lies in rural areas and public hospitals

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Five major milestones of the 3rd Plenum of the 18th Party Congress (Nov, 2013):

1. Improve urbanization of healthcare system

Incorporating city-dwelling farmers into urban social security system

Align rural pension and healthcare schemes with urban system

2. Ease the control on investment access

Promote investment access in healthcare service

3. Establish a more equal and sustainable social security system

Integrate basic pension and healthcare scheme of urban and rural populations

4. Deepen healthcare reform

Promote reforms in healthcare, medical services, public health, drug supply and regulatory system in an integrated and balanced way

5. Public hospital reform

Define government responsibilities for public hospitals

Establish a medical performance evaluation system, and a talent cultivation and compensation system

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The National Health Service System Plan (2015-2020)

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Shanghai Regional Health Planning in 13th Five-Year Plan

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III. Status The Status of High-end Medical Service in Shanghai

Shanghai high-end medical service institutions Stock exchange: Aier Eye Hospital Group Company Limited, Zhejiang Dean diagnosis, I-kang physical exam center, Da An Gene Others: United Family, Shanghai redleaf women’s hospital, The Ciming checkup, Meinian Onehealth, Fine Medical Club

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Collaboration between Public and Private Hospitals

• To support Hongqiao and Pudong international medical park and develop the high-end medial services, a policy regarding to the cooperative role between public hospital and private hospital is being designed.

• Public hospitals can set their branches in the International medical parks to provide high-end medical service, meanwhile, encourage doctors to run multiple-site practice under the policy support.

• To exploit different public-private partnership mode

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The barriers for developing private sector

• The allocation in regional health planning -Limitation to access the social medical insurance schemes

• The coverage of medical insurance system

• Pricing and taxation of medical services

-There is no taxation system to support the development of private sector, heavy burden of taxation for commercial medical institutions (5.5% business tax plus 25% enterprise income tax)

• Provision and purchasing of health services

• Lack of human resources -The flow channel of talent is not smooth, doctor’s multiple–site medical practice has not been implemented

• Quality, credibility and integrity -The proportion of private medical institutions and the number of beds is too low

• Information and management

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Besides hospitals, health and wellbeing services are also developing rapidly

Health Check-up Chains •The largest player in the market as a result of growing health awareness •Share health check from overcrowded public hospital Health Management Integrator •Strong at maintaining relationships with providers and customers and other intermediaries (e.g. banks) •Offer differentiated customized solutions Digitalization •50% of Chinese Netizens use internet for Health & Medical Information Source, though still nascent use of Social Media in health/insurance

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IV. Trend

Boosting demand and policy stimulation drive the development of China healthcare service market

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Private-owned institution market share is increasing, and generally focus on specialty and / or premium

services hospitals

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Privatizing public hospitals has been a key way for private fund to invest in hospitals

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