Policy Easing and the Rise of New-Model Clinics: Navigating Opportunities in China's Primary Care Sector | CCDC 2019

In recent years, capital, public opinion, policy, and physicians’ entrepreneurial impulses have exerted a counterproductive, “pulling up seedlings to help them grow” effect on the primary healthcare industry, propelling clinic startups into the spotlight. However, forecasts of a “capital winter” have since returned them to organic growth. As policy constraints are gradually lifted, the increase in the number of clinics has become an inevitable trend. Yet, given the widespread difficulty in achieving profitability, how can this ostensibly “good” business of new-type clinics be successfully operated?

In May 2018, at the First China Clinic Development Conference hosted by DXY, Li Tiantian, founder and chairman of DXY, stated that under policy incentives promoting the decentralization of healthcare resources and the implementation of a tiered diagnosis and treatment system, DXY conducted a preliminary projection estimating that more than 10,000 new clinics would be established annually over the next decade.

This estimate is also supported by official data. According to the National Health Commission’s website, 11,624 new clinics were added nationwide in 2017, while the number of public hospitals decreased by 373. In comparison, the growth rate of clinics has been increasing year by year, whereas the number of public hospitals has experienced negative growth for four consecutive years.

Li Tiantian believes that this is closely related to policy support aimed at improving widely criticized phenomena in domestic healthcare, such as the extreme difficulty in securing hospital beds and appointment slots. The root cause of both challenges lies in the shortage of high-quality physicians; while public hospitals have amassed a large reserve of top-tier medical talent, institutional constraints prevent them from releasing these resources into the market.

Three-tier triage, outpatient bans on IV infusions, cross-provincial practice, implementation of the registration system, and separation of licenses from operational permits—with the continuous rollout of policies encouraging primary care, the healthcare market is becoming increasingly open, and doctors leaving the public system to establish new types of clinics is no longer just talk.

However, extensive policy support has not ensured smooth sailing for the development of new-type clinics. On the contrary, their profitability faces a stark dichotomy.

Surveys indicate that a large number of small, individual clinics operate as private practices, attracting patients through one-on-one services and relatively affordable pricing.

However, for individual physicians, the high upfront investment, low return on investment, and long payback period associated with establishing a clinic often force private practices to pursue profitability by devolving into operations that are “small, fragmented, disorganized, and substandard.” With clinical activities conducted in complete opacity, operators struggling for survival in this narrow margin must prioritize their own viability first. The resulting medical irregularities have subjected emerging clinics to vicious competition.

High Operating Costs for Individual Clinics: Industry Alliances May Be the Appropriate Development Path. At the First China Clinic Development Conference, DXY established the Clinic Development Alliance, connecting its members through a standardized system. This approach aims to avoid excessive reliance on individual personnel in medical service delivery, while ensuring medical safety, enhancing service quality, and improving the patient experience.

“It is a positive trend for bold physicians to leave the public healthcare system; however, without brand endorsement, even highly skilled doctors struggle to guarantee sufficient returns on investment. Without such investment, physicians must bear the high costs of establishing their own practices,” said Li Tiantian. He noted that when opening a clinic, physicians must carefully consider “how much capital I have on hand” and even “who stands behind me in support.”

“Establishing a clinic alliance was driven by two considerations: first, DXY alone could not scale its own clinics sufficiently; second, empowering third-party clinics through an alliance model can unlock the professional productivity of physicians,” said Li Tiantian. The DXY Clinic Alliance structures its offerings into several domains, including management, standards, and system-based training content. Physicians opening clinics can join with minimal setup, thereby eliminating a substantial amount of labor-intensive work. After one year of development, the DXY Clinic Development Alliance has amassed over 50,000 users in the primary care sector.

On May 11–12 this year, DXY will host the 2nd China Clinic Development Conference in Hangzhou. Themed “Uniting Physicians, Creating the Future—Embracing the Next Wave of Opportunities in Clinic Development,” the conference will focus on topics such as primary care, physician entrepreneurs, and clinics. It will bring together industry leaders to jointly interpret development trends and policies in the clinic sector, share advanced best practices in management and operations, and build an open, collaborative, and shared industry platform.

Conference Details and Agenda: