Innovative Healthcare Services in China on the Path to Common Prosperity

At the Future Healthcare Top 100 Conference · VB100 Leaders Summit, hosted by VCBeat, Jiang Xiaodong, Managing Partner of Long Hill Capital, delivered a keynote speech titled “China’s Innovative Medical Services Toward Common Prosperity” as the first speaker in the afternoon session. Below are the highlights from his presentation—

Jiang Xiaodong, Managing Partner at Long Hill Capital:

Good afternoon, friends attending the 6th Future Healthcare Top 100 Conference! I am Jiang Xiaodong, Managing Partner of Long Hill Capital. Thank you to VCBeat for the invitation. It is a pleasure to have this opportunity to gather with you online and jointly explore the future development of innovative medical services in China against the broader backdrop of advancing toward common prosperity.

Over the past 12 months, I believe that, like me, you have strongly felt that China’s economic and social development is entering a brand-new phase. The international redivision of labor in the post-globalization era, coupled with the shift in growth drivers brought about by rapid population aging, has created an interplay of internal and external factors. These forces are propelling Chinese society from an era that prioritized speed—epitomized by the policy of “letting some people get rich first”—toward an era of common prosperity that emphasizes greater security and equity in development. This historical process is profoundly shaping the future trajectories of all industries across China.Healthcare services, as a special industry with both economic and public welfare attributes, must certainly consider how to chart its future development path against the broader backdrop of common prosperity.

When discussing common prosperity and public welfare, people naturally associate them with the well-known “three big mountains”: housing, education, and healthcare. Over the past 12 months, the housing and education sectors have undergone significant changes in macroeconomic policies and regulatory environments. Consequently, practitioners and investors in the healthcare industry have raised various questions and speculations about its future development. I believe we should adhere to the principle of seeking truth from facts and objectively examine the similarities and differences among these “three big mountains,” including their causes, current status, and future prospects.

In China, where the birth rate is declining rapidly, housing and education have become sectors with excess supply. Nevertheless, their prices have surged over a prolonged period, transforming into investment expenditures by the affluent for future gains, while becoming increasingly unaffordable for the general public. This conclusion is readily drawn from comparing the price-to-rent ratios of residential properties and the proportion of education spending to disposable income in China and the United States. Evidently, rapidly rising prices constitute the core challenge facing these two sectors.

The healthcare industry, on the other hand, is an entirely different story.China's rapid population aging, coupled with the relatively slow growth of healthcare service resources, has led to severe supply shortages across the entire industry.On the one hand, due to factors such as stringent regulation, medical service prices have remained relatively stable, with their growth rate consistently lower than the increase in residents’ disposable income.If we compare the per capita healthcare expenditures of China and the United States, the per capita outpatient cost in the U.S. is 10 times that of China, the per capita inpatient cost is 14 times that of China, while the per capita GDP is less than 6 times that of China.On the other hand, the hospital bed occupancy rate in China is 85%, significantly higher than the 65% in the United States.The number of qualified MDs per 1,000 people is less than one-quarter of that in the United States. Unlike housing and education, the core issue in China’s healthcare industry is not rapidly rising prices, but rather accessibility problems stemming from supply falling short of demand.

On May 20 this year, the “14th Five-Year Plan for National Health” released by the General Office of the State Council clearly stated that “improving the quality of health service supply should be prioritized, accelerating the expansion of high-quality medical and health resources and their balanced regional distribution, and continuously enhancing the equity and accessibility of basic medical and health services.” I believe that, for“The pursuit of ‘equitable access’ is the core hallmark of China’s healthcare sector advancing toward common prosperity.”“Fairness” does not mean demanding absolute equality in healthcare inputs and outcomes under all circumstances, but rather achieving a dynamic balance between rapidly growing health needs and effective supply through development, so that all citizens, regardless of wealth, can enjoy timely, effective, and compassionate medical services.To achieve equitable access to healthcare in China, the greatest obstacles stem not only from an insufficient total volume of effective supply but also from the imbalance between supply distribution and demand.According to statistics from the National Health Commission, tertiary hospitals, which account for only 8% of the total number of hospitals, generate 72.2% of the total revenue of all hospitals, while their bed occupancy rate has reached an astonishing and unsustainable 97.5%.

The Scissors Gap in the Supply-Demand Imbalance of Medical Services Has Continued to Widen Over the Past Five Years.On the one hand, outpatient visits, hospital admissions, and per capita healthcare expenditures are all growing rapidly. On the other hand, the growth rate of the number of hospitals and hospital beds is continuously slowing down.Historically, local governments have been the primary source of new healthcare investment in China. The slowdown in growth largely reflects the increasing fiscal pressure on local budgets. Data show that from 2015 to 2020, local government fiscal revenue in China grew at an annualized rate of 3.8%, while health expenditure surged at an annualized rate of 14.1%. Clearly, to address the widening gap between supply and demand, healthcare investment must become significantly more cost-effective.

“Achieving twice the result with half the effort” requires support from multiple parties, and private healthcare providers play precisely this role. As is well known, despite rapid growth over the past decade, private healthcare services in China still account for less than one-quarter of total medical service volume today, with annual social capital investment in healthcare representing only one-third of the total societal investment (the remaining two-thirds comes from public hospitals and government funding). However, judging the role of private healthcare solely by its share of existing stock is misleading. Analysis of data from the Health Statistical Yearbook over the years shows that between 2015 and 2020, private medical institutions handled 67% of the nation’s newly added outpatient visits and 51% of newly added hospital admissions. All this was achieved with only one-third of total societal investment. Meanwhile, after 2015, as the boundary between for-profit and non-profit medical institutions became further clarified, more private healthcare practitioners chose to establish for-profit medical institutions. By 2020, the number of newly added beds in for-profit medical institutions was 2.4 times that of non-profit medical institutions during the same period. Thus, it can be seen thatPrivate healthcare has become a key driver in China’s journey toward common prosperity in the medical sector. Continuing to support and encourage private healthcare provision, including for-profit entities, holds significant practical importance for enhancing the equity and accessibility of medical service supply and advancing China’s healthcare system toward common prosperity.

The ancients said, “Those who bear great responsibilities must first strengthen their strength.”Amid the surge in healthcare demand driven by rapid population aging, China’s healthcare services, advancing toward common prosperity, must identify new pivots for rebalancing supply and demand through continuous innovation.From the demand side, rapid growth is accompanied by structural imbalances, primarily reflected in the high incidence of acute and critical conditions as well as chronic diseases. On the supply side, there is first a lack of effective supply and sluggish growth. Second, given that healthcare services are relatively inelastic necessities with low price elasticity, the service supply sector has long been characterized by low cost-effectiveness. Achieving a rebalancing of supply and demand requires addressing these key issues on both sides simultaneously. I believe that,Continuously expanding effective supply, altering the cost structure on the supply side, and shifting the demand curve through prevention are the three core innovative pathways to achieving a rebalance between supply and demand.Below, I will discuss each case in detail by drawing on some of Long Hill Capital’s investment examples.

To achieve a rebalancing of medical supply and demand, the primary task is to expand effective supply.Early investments by Long Hill CapitalHygeia Healthcare, and it is also a leading enterprise in healthcare services listed on the Hong Kong Stock Exchange, once introducing itself to patients as “the Shanghai hospital at your doorstep.” Over the past decade, Hygeia has introduced advanced medical technologies and management concepts into China’s lower-tier markets, where high-quality medical resources are relatively scarce, such as Shanxian County in Shandong Province and Hezhou in Guangxi Zhuang Autonomous Region. Meanwhile, by leveraging technological means such as the internet, Hygeia has enabled experts from first-tier cities to extend their knowledge and skills—including specialized medical procedures like tumor radiotherapy target volume planning—to its grassroots hospitals, significantly enhancing the quality of healthcare service delivery.

Also an early investment by Long Hill CapitalGushengtang TCM, successfully listed in Hong Kong at the end of last year. Based on community outpatient clinics and internet healthcare, Gushengtang has built China’s largest multi-site practice platform for traditional Chinese medicine (TCM). Leveraging advanced digitalization and standardization capabilities, it has rapidly strengthened its development momentum through an OMO (Online-Merge-Offline) chain model.

Mental Health Service Platform Early Invested by Long Hill CapitalSimple Psychology, it secured over RMB 300 million in financing during the past six months amid the continuous downturn in the capital market. The mental health services industry suffers from a severe shortage of high-quality supply. JianDanXinLi has innovatively established entry standards for online practice by psychological counselors, conducting multi-dimensional assessments and long-term management of their professional competencies. In 2021, the company opened three mental health service centers named “JianDan Forest” in Beijing and Shanghai, integrating offline and online platforms to build a secure mental health service system for users. Additionally, JianDanXinLi has vigorously developed digital therapeutics tailored to diverse service scenarios to address the insufficiency of supply-side resources, successfully combining “cold” digital interventions with its online and offline platform services.

The successful practices of leading enterprises in niche segments of healthcare services, such as Hygeia, Gushengtang, and Jiandan Xinli, demonstrate thatBuilding on traditional healthcare service models and integrating modern digital technologies, the “grassroots expansion + remote care” approach is an effective means of increasing supply.

To rebalance medical supply and demand, it is essential to significantly enhance supply-side efficiency, which in turn necessitates a transformation of the cost structure on the supply side.Portfolio Companies of Long Hill CapitalBaofutongchengAs China’s largest managed-care service platform for oral health, it has established a rapidly expanding nationwide network of dental care services. By leveraging its proprietary channels and deep collaborations with commercial insurers, Baofu has standardized the otherwise complex landscape of dental service offerings and pricing. This approach facilitates a market-driven “volume-based procurement” model within the dental industry, which not only benefits patients but also significantly reduces operational costs for healthcare providers. Consequently, dentists can devote greater resources to enhancing clinical techniques and service quality, thereby achieving a genuine triple-win scenario for patients, physicians, and hospitals.

As one of the earliest innovative technology companies in China to launch virtual representatives, Long Hill Capital’s early investments inQingyun TechnologyDeveloped a comprehensive multi-channel digital marketing solution for pharmaceutical companies. Qingyun Technology’s virtual representatives deliver personalized services to physicians through data-driven and standardized interactions, at the right time and in highly granular scenarios. This close engagement fosters continuous, positive communication between pharmaceutical companies and physicians, significantly reducing service costs while improving efficiency. Furthermore, physician feedback serves as a vital source for iterative improvements in technology and services, enabling rapid response to the evolving pharmaceutical landscape and clinical needs.

Another Enterprise in Long Hill Capital’s Angel Round PortfolioAier Medical, specializing in the research and development of vascular interventional surgical robots. Aibo Medical’s interventional robot, developed through the efforts of three generations of scientists from China and abroad, has the potential to standardize existing complex surgical procedures through intelligent and miniaturized technologies, delivering unprecedented benefits to both physicians and patients. Against the backdrop of China’s pursuit of common prosperity, the Aibo Robotics team adheres to a value-based healthcare orientation in its R&D process, striving for ultimate cost-effectiveness.

Baofutongcheng, Qingyun Technology, and Aiboyi Medical, although facing vastly different market demands, theyStandardize service processes through technological means, thereby significantly reducing service costs and improving cost-effectiveness., there are many striking similarities.

Medical needs possess many unique characteristics, one of which is the imbalance in demand structure. The persistent high incidence of long-term chronic diseases and the resulting acute and critical conditions consumes a significant portion of effective medical resource supply, making it more difficult to rebalance medical supply and demand.While striving to increase high-efficiency supply, how to leverage technological innovation to popularize efficient and convenient prevention, thereby shifting the demand curve for major chronic diseases, will become one of the core propositions in the innovative development of healthcare services.

Long Hill Capital's early investmentsRainbow Doctor, it is a one-stop preventive healthcare service platform centered on vaccination. The company has established China’s largest digital prevention platform and an OMO (Online-Merge-Offline) vaccination service network, dynamically matching supply with demand through big data, thereby significantly alleviating the long-standing shortage of vaccination services.

Cognitive disorders, represented by Alzheimer’s disease, are becoming one of the most burdensome diseases globally. Early prevention, screening, and treatment of cognitive disorders are also major challenges facing global public health. Long Hill Capital’s early investment inBostech, is a digital therapeutics company focused on the field of cognitive impairment, primarily providing end-to-end digital solutions for cognitive impairment to the middle-aged and elderly population. To date, it has cumulatively provided cognitive impairment risk assessment and intervention training services to over 15 million users.

Another Early-Stage Enterprise Invested by Long Hill CapitalPause LabIt is an online “Scientific Psychological Gym”: through evidence-based digital product design, it provides a series of direct-to-user psychological intervention programs to enhance participants’ psychological regulation capabilities and reduce stress-induced psychosomatic distress such as anxiety, depression, and insomnia. Pause Lab innovatively introduces digital therapeutics into the field of preventive mental health services, reducing reliance on professionals while enabling highly personalized and widely accessible interventions through its digital product format.

As clearly stated in the “14th Five-Year Plan for National Health,” it is essential to “give greater prominence to prevention, focus on major diseases, key health risk factors, and the health of priority populations, and strengthen the integration of treatment with prevention and of medical care with public health.” Rainbow Doctor, Bostech, and Pause Lab have each carved out a path in their respective areas of specialization.The Path to Making Prevention Accessible Through Digital Means Offers New Possibilities for Shifting the Demand Curve for Long-Term, Chronic, and Major Diseases.

After months of arduous efforts, China’s major first-tier cities are emerging from the shadow of a new wave of COVID-19 outbreaks, with normal production and daily life rapidly recovering. The impact of the pandemic over the past two and a half years has profoundly reminded us all of the preciousness of life and health. From the insufficient number of ICU beds per capita to the shortcomings in community health services, we have also witnessed the current state of China’s healthcare system: inadequate supply, structural imbalances, and suboptimal quality. According to the 2021 national economic data released by the National Bureau of Statistics, the population aged 65 and above reached 200.56 million, accounting for 14.2% of the total population, indicating that China has entered a stage of deep aging.Rebalancing the Supply and Demand of Medical Services in China: The Time Is Now. As the saying goes, “Strong winds reveal sturdy grass; turbulent times distinguish loyal ministers.” The era calls for innovation-driven private healthcare to assume even more arduous responsibilities on China’s path toward common prosperity in medical care.Long Hill Capital looks forward to working hand in hand with everyone, progressing steadily and sustainably toward greater achievements. Thank you all!