A Voice of Experience

Earlier this past week , the CEO of China Senior Care (CSC) in Hangzhou, China was kind enough to spend some time speaking with me about his experience working in China and within the senior care segment of the market specifically.  As way of background, Mark is an attorney by training who began studying Chinese in 1988, first came to the country in 1989, and ultimately moved to the country in 1998.  He gave up his law practice when he made the move because he felt the opportunity to help American healthcare businesses enter the Chinese market was compelling.  His early work in China focused on helping American companies develop strategies for successfully navigating China’s healthcare market.

One of his earliest observations, and one that would ultimately form an important insight as he focused on China’s senior care market, was the long length of stay when Chinese went into the hospital.  Mark shared that at that time, “on average, Chinese average length of stay in major cities was four times longer than in the United States.”  According to Mark, this was related to four factors:  first, because there was no insurance gatekeeper within the Chinese healthcare system, no third-party was enforcing limits on stays for particular procedures.

Second, since Chinese hospitals did not make the majority of their revenue from the procedures, they did not have as much of an incentive to move patients out of the hospital.  For those familiar with what I have written about previously concerning the Anhui Pricing Model, you will recognize something my friend pointed out to me:  the Anhui Pricing Model not only threatens multinational pharma, it is also a threat to China’s hospital system who currently rely on drug prescriptions to generate revenue.  Mark observed a similar dynamic, admittedly years before the Anhui Model became an issue.  The third factor Mark identified was that, as he put it, the average Chinese was in no rush to return to work from their stay in the hospital.

But I sensed it was the fourth factor that most raised Mark’s attention:  the geriatric wards in the Chinese hospitals were full with extremely long average length of stays.  Mark’s explanation on why is fascinating:  “Most of those in the geriatric ward did not have acute health care issues that required hospitalization but instead had chronic issues and need for assistance with activities of daily living that were related to aging that in the West would have resulted in them living in a nursing home and not a hospital.  It was preferable, however, both to the elder and to the family for the elder to stay in a hospital to avoid the loss of face associated with staying in a state-run nursing homes.”

Given Mark’s 14 years in China, he is in a unique position to build what he believes is one of many successful strategies for delivering senior care within the country.  CSC is, as he put it, “going to enter the high end of the market, with international best practices that have been re-visualized for China.”  As Mark sees it, CSC is in a unique position to integrate international best practices with the realities of the Chinese market.  To accomplish this CSC will be building a green field project and not renovating an existing building.  In addition, CSC residents will be needs based in that they can no longer live on their own and they do not have kids around from which to draw support.

Mark pointed out something that I think is important to keep in mind:  Western operators and investors tend to believe that the rough parameters of how care is delivered from the West will be acceptable in China.  His point is that much of the Western model exists because of how the insurance payer model has evolved over the years.  Mark pointed out that in the United States, the distinction care models is often based on regulatory and insurance requirements and not on the best interests of elders.  These sorts of paradigms have to be carefully explored and dissected and, as Mark put it to me, “our care model will be driven by our client’s needs not by a U.S. centered regulatory and insurance framework.”  It is a simple point, yet one easy to overlook:  focus on objectives in terms of satisfied Chinese elderly patients and the most efficacious way of achieving these goals instead of simply localizing Western practices for China.

Towards the end of our conversation, I asked Mark what he believed was the biggest unknown facing the Chinese eldercare market.  His answer surprised me, and is worth reflecting on:  “to me, it is the real estate side.  In the US, someone works really hard, they get to age 60, and they want to retire to a community in Florida or Arizona and then age in place.  In China, which has a very communal feeling, I am not sure a Chinese elderly person will want to move away from the support of the community where they have lived their entire lives.”

I appreciated Mark’s candor and willingness to speak at length with me, something I believe he was willing to do because, as he sees it, the opportunity in China is large enough to support multiple operators with divergent business models.  The CSC model is complimentary to the CCRC approach, even if Mark is proven right about the retirement community model from America’s famous retirement destinations like Florida not properly translating to China.  As Mark put it towards the end of our conversation, “any foreign operator who can properly execute in the Chinese senior care market should ultimately be successful.”