Innovative Custodial Model: Qidi Medical Health Expands into County-Level Diagnostic Testing Blue Ocean
In 2017, Liu Qiang (a pseudonym), an employee of a construction company, accidentally developed hydronephrosis. In his urgency, he underwent surgery at a Grade II Class A hospital in Yunnan Province. However, the kidney became swollen with fluid again after the operation. When he finally went to a Grade III Class A hospital for examination, it was found that he had already developed renal failure and could only have the kidney removed at an appropriate time. In the discussion on Zhihu titled “After Tiered Diagnosis and Treatment Becomes a Major Trend in People's Livelihood Healthcare,” a netizen shared his brother’s personal experience.
Why Is the Tiered Diagnosis and Treatment System Facing So Many Challenges?
“Given that primary care institutions currently lack the diagnostic capacity, even highly skilled physicians have left these grassroots settings for major cities. As a result, primary hospitals now suffer from shortages in equipment, technology, and talent. In the tiered diagnosis and treatment system we often discuss, diagnosis must come first. Even the most competent doctors, in most cases, find it difficult to perform complex surgeries at the primary care level. Why? Because diagnostic capabilities lag behind,” commented Xu Junwu, President of Qidi Medical Health.
In fact, medical resources in county-level cities remain scarce compared to those in first- and second-tier cities, yet they also hold substantial opportunities. It was against this backdrop that Tus-Medical Health, led by Xu Junwu, was established.
Tus-Medical Health, fully known as Tus-Medical Health Technology Investment (Jiaxing) Co., Ltd., was formerly the Clinical Laboratory Division of Yakanbo (Beijing Yakanbo Biotechnology Co., Ltd.), serving as its medical testing services business segment.
Mentioning AccuraGen inevitably brings to mind its robust academic background. Established at Tsinghua University in 2004, AccuraGen is a national high-tech enterprise and one of the earliest in China dedicated to the research and development, production, and services of molecular diagnostic reagents for “personalized cancer therapy.” In 2011, AccuraGen established a wholly-owned subsidiary, Jiaxing AccuraGen Medical Laboratory Co., Ltd., in Jiaxing to expand its testing service portfolio.
In April 2018, Tus-Medical Health was spun off from YK Biotechnology, operating as a fully independent business with a primary focus on establishing medical laboratory centers at the district and county levels. This marked the birth of an entirely new company. Leveraging YK Biotechnology’s “university-affiliated enterprise” background, Tus-Medical Health enjoyed robust technical support from its inception. The company’s founding shareholders include YK Biotechnology and the Yangtze Delta Region Institute of Tsinghua University in Zhejiang.
On the other hand, the management team of Tus-Medical Health is equally impressive. Founder and President Xu Junwu graduated from Tsinghua University and has dedicated 15 years to the medical testing industry. Meanwhile, the entrepreneurial team at Tus-Medical Health includes numerous senior experts in medical laboratory science and seasoned management professionals who have previously held leadership positions at specialized branches of the Chinese Medical Association, provincial (or municipal) clinical laboratory centers, and laboratory departments of large Grade III Class A hospitals. They bring extensive experience in market expansion, quality management, standardization system development, and resource integration. In short, Tus-Medical Health ensures that it maintains high-standard management capabilities even amidst rapid business expansion.
Xu Junwu believes that although China has vigorously promoted the tiered diagnosis and treatment policy to optimize the allocation of healthcare resources and establish a standardized and rational medical service order, the difficulty of accessing medical care has not been fundamentally alleviated. The phenomenon of overcrowding in large hospitals while grassroots medical institutions remain nearly empty remains widespread. This trend is also contrary to national policies. Therefore, he began to focus on grassroots healthcare, introducing advanced global technologies to transform “medical laboratory testing” into true “laboratory medicine,” striving to bring the diagnostic capabilities of grassroots medical institutions closer to those of large medical centers.
The founder possesses extensive industry experience, and the company benefits from high-quality shareholders. Logically, market entry for Tus Medical Health should not have been difficult. Furthermore, support from academic institutions and local government resources would have facilitated its selection of more profitable tier-1 and tier-2 city markets, enabling the establishment of a laboratory medicine network through a third-party platform model. However, Tus Medical Health chose an unconventional path. It neither targeted tier-1 and tier-2 cities nor adopted the third-party platform business model. Instead, it pursued a grassroots strategy by implementing an innovative trusteeship model—partnering with local governments to directly integrate the clinical laboratories of major hospitals within a region into its diagnostic centers for unified management.
When asked why he chose a different path, Xu Junwu stated that areas with genuine shortages of medical resources are generally not at the prefecture-level city level or above. “While securing contracts in a particular city may yield substantial profits, it does nothing to change the status quo.”
Thus, Tus-Medical Health began its operations in districts and counties with relatively scarce medical resources, such as by establishing a standardized primary care model in Qu County, Sichuan. Tus-Medical Health has taken over the management of medical institutions in Qu County, a county-level jurisdiction under Dazhou City with a population of one million. Currently, Tus-Medical Health is focusing on expanding into surrounding county-level hospitals, adopting a bottom-up, point-to-area strategy—after addressing laboratory testing resource gaps at the county level, it plans to expand into Dazhou City.
Meanwhile, compared with the independent third-party and co-construction models adopted by other medical testing companies, the custodial model features asset-light operations and predictable business stability, offering significant advantages. Leveraging Tus-Medical Health’s robust technological capabilities and extensive network resources facilitates direct collaboration with county-level governments. Consequently, the clinical laboratories of major hospitals within the region are directly integrated into the diagnostic centers operated by the testing company, with these diagnostic centers assuming the functions of the hospital laboratories.
Furthermore, Tus-Medical Health focuses on the blue-ocean market of medical laboratory testing in counties and districts, avoiding the fiercely competitive first- and second-tier cities. This strategy has enabled the company to secure substantial business volume from its inception and generate significant profits during its establishment phase. Through this “top-down, point-to-area” expansion approach, Tus-Medical Health has become the leading enterprise in the county-level medical laboratory trusteeship model within just one year.
“Qidi Medical Health will always align its operations with national policies,” said Xu Junwu. With policy support, China’s medical testing market has indeed grown rapidly, offering substantial market potential. The introduction of the Basic Standards for Medical Testing Laboratories (Trial) and the Management Specifications for Medical Testing Laboratories (Trial) by the National Health and Family Planning Commission has also helped standardize the market. On another note, according to a report released by GTJA Investment, the market size of domestic independent clinical laboratories (ICLs) alone reached RMB 13 billion in 2017, with an average annual growth rate exceeding 30% over the past eight years.
However, Xu Junwu himself stated that he did not wish to expand market scale too rapidly, given that the current state of medical resource development in China’s county-level cities has yet to meet the expectations set by the six government departments. According to data from the 2016 Statistical Bulletin on Health and Family Planning, the total number of patient visits to medical and health institutions across China has increased year by year, but the growth rate has stabilized. In 2016, the proportion of outpatient visits to general hospitals rose from 40.0% in 2015 to 41.2%, indicating that a growing number of patients are choosing hospitals rather than primary care institutions as their first point of contact for medical treatment. Meanwhile, the share of outpatient visits to primary care institutions declined from 56.4% in 2015 to 55.1% in 2016. This decrease in the proportion of patients seeking care at the primary level suggests that the rate of initial consultations at primary care facilities remains low, and the tiered diagnosis and treatment system has not yet fully realized its intended effectiveness.
“Since the entire grassroots medical testing market is still in its early stages, blind expansion can easily lead to operational risks,” stated Xu Junwu. “My more than ten years of management and operational experience at Yakanbo have kept me highly vigilant about safety and quality. While Qidi Health’s expansion pace may appear conservative to outside observers, our vision at Qidi Medical Health is to build a high-quality, multi-tiered grassroots testing network. Although scale matters, what is even more critical is the stability and safety of testing quality.”
When discussing the prospects of China’s future medical testing market, Xu Junwu stated that the market offers substantial growth potential, with increasing acceptance among stakeholders. The company has even encountered situations where partners proactively sought collaboration. Looking ahead, Tus-Medical Health will continue to pursue a dual-pronged strategy: expanding its scale at its own pace while striving to introduce advanced overseas testing items and technologies. “An increasing number of companies are venturing into this uncharted territory. We have clearly observed that communications with many local governments have become significantly smoother than before, which is a positive trend.”
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