Beijing has pledged to put money into the country’s public hospitals, but those hospitals aren’t the only source of medical care available. China also has a thriving private medical system that promises a higher level of service than its public counterpart – a promise that is attracting many Chinese.
“Private hospitals offer good service and there are no waiting lines,” said Wu Junci, a patient at Shanghai East International Medical Center (SEIMC) in the city’s Pudong New Area.
Public hospitals are known for their long wait times. Patients are generally seen on a first-come-first-served basis, a process that can sometimes take an entire day. In many private hospitals it is possible to make appointments in advance.
According to official statistics, 2.85 million patients were served by private hospitals in 2007 – almost double the 1.5 million served in 2003. That is music to the ears of private and Sino-foreign joint venture (JV) hospitals such as Shanghai East International Medical Center, Parkway Health China and United Family Hospitals. Foreign medical providers can hold up to 70% of a hospital JV – more than in most other industries. The medical staff tend to be bilingual and trained in Western medicine.
There is just one problem: These clinics and hospitals were set up to serve expatriate and wealthy Chinese residents in cities such as Beijing and Shanghai. Consequently, prices for their medical services are much higher than at standard local hospitals.
Though Chinese people would like to use private services, there is a limit to how much they are willing to pay for the privilege, said David Wood, president and senior partner of the ChinaCare Group, a consultancy. These limits derive from the artificially constrained prices of the public health care system.
“[Chinese are] willing to pay something more than the local-level Chinese hospital prices, but they’re simply not going to pay US-level prices,” Wood said. “Until that changes, the expat model based on European- or North American-level pricing is not going to work.” He points to the fact that many established JV hospitals are not expanding as proof of this.
Some JV hospitals have had success in marketing niche services, such as obstetric and gynecological (OBGYN) services, to Chinese patients. Rachel Wu, marketing promotion manager for the Shanghai United Family Hospitals, said Chinese patients visit the hospital because of its personalized service.
“We provide a many-to-one service,” said Wu. “The OBGYN doctor, the midwife, the anesthesiologist, the nurse and the neonatologist are all involved during the process.”
That is not something public maternity hospitals, with their staff shortages and large patient numbers, can replicate.
Even in a country with a one-child policy, however, cost remains an issue.
“It was US$5,800 for the whole procedure and after-care [at a JV hospital]. For a general baby delivery in a public hospital in Beijing it’s US$400-700. Plus, I can’t get reimbursement for insurance [at a JV hospital],” said a 32-year-old office worker who spoke to CHINA ECONOMIC REVIEW.
Private hospital care is covered neither by local authorities nor by the new US$123 billion spending program announced recently by the central government. Private insurance is available, but relatively few Chinese people buy it.
“Even if they spend US$150-300 on a meal, they won’t spend that much for insurance,” said Jennifer Jiao, marketing director of the Hong Kong International Medical Clinic, Beijing (HKIMC). While many Chinese purchase membership cards from HKIMC, Vista Clinics and others that offer medical services at discount, they don’t find value in insurance, Jiao added.
Meanwhile, JV hospitals aren’t keen on lowering their prices.
“Our prices match our services and we’re working toward providing five -or six-star hotel services,” said Zhang Bei, senior marketing manager for Parkway Health China. “We charge a high price and we definitely won’t lower our price.”
So how can health care providers meet the needs of the Chinese middle class at a price they are willing to pay? Dr Hanif Kanji, CEO of Sinophi Healthcare Partners, believes he has the solution. Sinophi plans to buy existing local private hospitals, many of which were built or purchased by real estate developers more interested in the surrounding land than the hospitals themselves.
“[The hospitals] are not the owner’s core business, yet they’ve got real estate built around them,” Kanji said. “We’re beginning to identify a few targets.”
While most of the doctors in foreign clinics are from overseas and don’t speak Chinese, Sinophi would retain the existing local staff at hospitals it buys. This would overcome one of the major problems unrelated to price in attracting Chinese clients. However, Sinophi would alter hospital culture by bringing in Western managers and raising doctors’ salaries so that they aren’t compelled to take sales commissions from pharmaceutical firms.
From the outside looking in, it might make more sense just to start from scratch. But the cost of building a new hospital to international standards means the cost to the patient would be above the ceiling costs of what the Chinese middle class are willing to pay.
Kanji believes there is another, equally important, reason that favors buying into existing private hospitals: the trust factor. “Why are some hospitals really busy and others 500 yards down the road empty? It’s because a famous doctor is there,” he said. “ This validates the reason to look at busy hospitals – that is where the trust is already developed.”
Although trust is important, value remains the key factor for patients deciding between a private hospital and a return to the public system.
“They’re just not going to pay more than they think it’s worth,” said ChinaCare’s Wood. “It doesn’t make any difference how much money they’ve got in their pockets – their perception is it’s just foolish [to pay high prices].”