I have referenced Yanzhong Huang’s work before, specifically his superb Foreign Affairs article “The Sick Man of Asia” because I think it captures an essential challenge within China’s healthcare reforms that is under-appreciated by western healthcare companies and investors. Specifically, how the privatization reforms of China’s economy and public healthcare services since the early 80s has actually resulted in decreased quality of care for the average Chinese. This has profound implications to both opportunities and risks as investors seek to carve out profitable operating niches in China’s healthcare market.
In order to understand these opportunities and the structural challenges they will have to overcome, it is worth learning more about where China’s healthcare system is coming from, with an eye towards how it is perceived to have worked well in the past. In his Foreign Affairs article, Huang writes:
“After the launch of the Cultural Revolution in 1966 and the mass purge of senior health officials that followed, the Ministry of Health was marginalized from the policy process. With less bureaucratic obstruction, policy became better coordinated. An unprecedented number of health personnel were sent to the countryside. Some farmers were given informal medical training, and these “barefoot doctors” would then treat common illnesses and promote preventive health care. So-called cooperative medical care (a community- based health insurance scheme) spread rapidly. By 1976, there were 1.8 million barefoot doctors; more than 90 percent of the brigades, or villages, were covered by cooperative medical care; and almost every commune had a health-care center. China had more doctors, nurses, and hospital beds than virtually any other country at its level of economic development. The health of the Chinese people improved remarkably: the mortality rate dropped from 20 per 1,000 in 1949 to about 7 per 1,000 in 1975. According to both official Chinese figures and international sources, average life expectancy increased from 35 years to 65 years during the same period.”
For someone like myself who has spent time in Romania and Moldova after their respective communist regimes collapsed, one of the powerful legacy issues countries recovering from a collectivist past have to rise above is the pain the middle class and rural poor feel as their socialized public benefit systems transition to government-sponsored, but paid for through free-market actors. Speaking in very general terms, the trade these economies are offered is that what people lose as socialized services will ultimately be replaced and ultimately upgraded once the private sector steps in as the economy liberalizes. In Romania and Moldova, at least when I was there, this was not working and many people harbored deep reservations about the exchange. Could something similar happen in China? If Huang’s analysis is correct, he is at least pointing towards the possibility of additional social discontent in China unless the government can further expand healthcare coverage. One of the biggest areas of need as Beijing pursues this is building a competent primary care system, something that to-date does not exist as it needs to.
This point was reinforced to me earlier this week while talking to who while at the University of Pennsylvania of the Chinese primary care system. As Thomas shared with me, “when the Central Government decided to liberalize in the late 70s and early 80s, the transformation was total – it effected everything. The government made a calculation that by shifting the entire economy from a planned centralized economy to a more market based government, the healthcare system would go along. They believed that by upgrading and adopting western standards, everything would become better.” This has not happened, which has soured the attitudes of many Chinese on what privatization and further economic reforms means to them.
The Chinese government understands the pressure they are under to reform the nation’s healthcare system and is undergoing what may be a once in a generation attempt to juice investment by outside healthcare providers, private industry, and the life sciences (pharma, med device, diagnostics, healthcare IT) to develop models that will work in China by addressing both the missing gaps in the country’s healthcare system, but also by providing localized solutions that may in some cases deploy technologies that are still being tested in more developed western economies. One good example of this is tele-medicine, an idea growing in visibility and use in the United States, but which China may well quickly outpace in terms of people cared for. If this happens, it will support an idea I have written about earlier, that opportunities in China’s healthcare system will reflect the same technology adaptation we have seen in the telecommunications space, where China starts out behind the curve only to blow past the west.
With an eye on this, I recently spoke with , the President and CEO of China Primary Care Co., Ltd, on what his company is pursuing within China’s primary care sector. Ming holds a MPH from Yale and was a leadership fellow at the Connecticut Health Foundation where he studied tele-medicine as a means of improving healthcare in disadvantaged populations. He sees the 12th Five Year plan focusing primarily on preventative care (which will make diagnostics a compelling business opportunity in China for some time to come), and primary care. But, as Cheung pointed out, “China is significantly lacking in terms of family physicians, training for them and primary care infrastructure.” Today, the primary care model is being circumnavigated because, according to him, “most people seek care in specialty driven ways … they go to overcrowded AAA hospitals that are overburdened … the government sees this as a problem and is trying to steer people to primary care providers.” Beyond the problem that qualified primary care doctors are scarce, and facilities are as well, consumers do not look at primary care physicians as high quality care (and, to be fair, thus far primary care physicians in China tend to be limited in the evidence based training and breadth of knowledge since the more lucrative positions are in specialty practices or in general medicine in AAA hospitals). Stronger physician training in primary care would add further incentives and support for this sector as well.
He sees several opportunities that are worth pursuing. As he shared, “chronic disease management – diabetes, hyper-tension, high cholesterol, geriatric care are all opportunities. You also want to be an integrator, providing a solution for the district, large corporations, or communities.” Beyond these opportunities, tele-medicine is an opportunity his company is pursuing. They continue to need more products localized for Chinese consumers, specifically home care devices, and patient relationship management systems (both software systems for tracking patient’s vital signs as well as improved tele-conferencing and tele-medicine interactions). In China, these systems may be developed locally because as he pointed out, “this sort of technology is fairly cheap and easy to re-produce. The opportunity is to integrate these into a solution and create a model of care for the local government or business.”
His company is rolling out a test of its integrated tele-medicine program as one of the major public health research, in partnership with the Jiaotong Medical School, Fudan School of Public Health, Ruijin Hospital, and various Shanghai government entities such as CDC, Bureau of Health, and Bureau of Public Insurance. Planned for to go for three years and cover 8,000 people in 4 districts (with a good mix of urban and suburban patients), China Primary Care will be testing whether initial results shown in an earlier beta test of its tele-medicine program scales up as they anticipate. The pilot plan is important for a variety of reasons, not least of which according to Cheung is that “if it works, we have a pilot plan proven that China’s government can get behind. The study is aimed to provide health policy basis for chronic disease manage program in China. Hence, the program measures not only the health outcomes, but also other public health measurements such as healthcare costs, quality of life, provider incentive mechanism, and patient satisfactions. ”
Moving forward, Cheung’s company will be one of the industry pioneers that embraces the structural inequalities that Yanzhong Huang pointed out in his Foreign Affairs column and finds a way to profit by helping China’s Central Government improve healthcare across the country. In China, the nexus between social need and profit potential is where the greatest opportunities lie, but also where the biggest potential for the government to become your competitor exist. Watching how this tension is managed and resolved will be one of the most interesting things to watch over the next 3-5 years as China’s healthcare reform process further advances.
Benjamin Shobert
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Speaking of healthcare-related discontent in China, here’s a story from today: http://www.huffingtonpost.com/huff-wires/20120825/as-china-doctors-attacked/
I’m not sure how China can overcome this confidence crisis in its medical professionals. It’s interesting to me that the patients are described as “overly demanding” simply for seeking levels of care that would be unacceptable anywhere in the West. They face long lines, dirty concrete floors, inattentive staff, demands for payment before being seen, etc. every time they seek care. The frustration is understandable, even though the expectations for modern medicine need to be better managed in situations where the patients lack medical knowledge. One thing that sticks out is that paying a mid-career physician 3500 RMB per month is probably not the best way to attract and retain happy, patient-focused doctors.
My interest is figuring out how to deliver Beijing-quality care in a place like Hengyang. Tele-medicine might help, but it’s difficult to imagine a Chinese peasant trusting a computer screen or voice on a phone if they don’t trust a doctor in their room. Eliminating corruption (by easing the workload of doctors) and learning how to manage patient expectations seem like necessary but very difficult steps.
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