TongCe Medical 2018 Annual Report: Total Revenue of RMB 1.546 Billion, Net Profit of RMB 332 Million, Operating 30 Dental Specialty Hospitals

VCBeat (WeChat: vcbeat) learned that on March 29, Top Choice Medical Investment Co., Inc. (600763) disclosed its 2018 annual report.

Top Choice Medical Investment Co., Inc. is the first company listed on China’s main board with core businesses focused on dental care and assisted reproductive medicine, committed to building a publicly traded healthcare enterprise with leading advantages in dentistry, reproductive health, ophthalmology, and maternal and child healthcare.

Currently, the company primarily focuses on dental medical services and assisted reproductive technology (ART) services. Dental medical services mainly include dental implants, orthodontics, prosthodontics, pediatric dentistry, and periodontal treatment. Assisted reproductive services primarily encompass diagnosis and treatment of infertility and assisted reproductive technologies such as in vitro fertilization (IVF). Since the company transitioned into the healthcare sector in 2006, it had established 30 dental specialty hospitals of varying sizes by 2018. 

The report indicates that 2018 was a year in which the company’s organic growth maintained a rapid pace. The company’s operational area for medical services reached 112,000 square meters, with 1,472 dental chairs installed. The outpatient volume for oral healthcare services totaled 1.8422 million visits. The company achieved total operating revenue of RMB 1.546 billion, representing a year-on-year increase of 31.05%. Net profit attributable to shareholders of the listed company amounted to RMB 332 million, a year-on-year increase of 53.34%. Basic earnings per share reached RMB 1.04 per share, reflecting a year-on-year growth of 52.94%.

Revenue Composition and Trends of the Zhejiang Regional General Hospital and Its Branches 

In 2018, the revenue from dental medical services in the Zhejiang region amounted to RMB 1.331 billion. Among this, the medical revenue of the regional general hospital was RMB 565 million, representing a year-on-year increase of 17.88%. The regional general hospital accounted for 42.50% of the total revenue of the regional group, showing a declining trend. The medical revenue of the branch hospitals reached RMB 765 million, a year-on-year increase of 35.77%. The branch hospitals accounted for 57.50% of the group’s total revenue, an increase of 3.49 percentage points compared with 2017, indicating a steady rise in their contribution to revenue.

Analysis of Outpatient Volume Growth in Hospitals Within Zhejiang Province (Unit: 10,000 Visits)

In 2018, the outpatient visits at Top Choice Medical’s Zhejiang regional dental clinics reached 1.61 million, with 640,000 visits at the regional general hospital (an 8.47% year-on-year increase) and 970,000 visits at regional branch hospitals (a 19.75% year-on-year increase). The growth rate of outpatient visits at regional branch hospitals exceeded that of the regional general hospital, demonstrating a sustained upward trend.

Analysis of Hospital's Main Business Composition and Growth (Unit: 10,000 Yuan)

In 2018, the company’s orthodontic medical services generated RMB 311 million, a year-on-year increase of 36.43%; dental implant medical services amounted to RMB 232 million, up 39.70% from the previous year; and pediatric dental medical services reached RMB 224 million, representing a 36.99% increase compared to the prior year.

Currently, the initial results of the Stomatological Hospital Group have become evident. The Group’s management headquarters has clearly defined its operational boundaries, adopting a strategy of focusing on major issues while delegating minor ones. It refrains from interfering in matters that individual branch hospitals can handle independently. In daily operations, the Group encourages excellence by highlighting the value of model and benchmark campuses, promoting their best practices, and actively devising solutions to help underperforming campuses address their shortcomings. On the Stomatological Hospital Group’s platform, a comprehensive training and development program has been established to ensure that medical teams across all regions maintain a leading position locally in terms of healthcare quality, patient services, and other key aspects.

Hangkou Group’s goal for the next five years is to achieve comprehensive coverage across Zhejiang Province, establishing an industry position and academic influence commensurate with its scale. The company will continue to adhere to its “regional general hospital + branch hospitals” development model and its group-based replication strategy. It will focus on expanding in regions with abundant medical resources and a foundation of patient education, aiming to build multiple regional dental hospital groups similar to Hangkou Group. Furthermore, through its dental fund, it plans to establish tertiary-level dental hospitals in Wuhan, Chongqing, Xi’an, Chengdu, and Beijing.

Hospital groups are, first and foremost, physician-led organizations; world-renowned hospital systems such as Mayo Clinic and Cleveland Clinic are all physician-led. Physicians constitute the core productive force of hospitals and serve as the primary providers of patient care.

Leveraging prestigious domestic and international institutions such as the University of Chinese Academy of Sciences, the company has established the Top Choice Physician Group, centered on renowned specialists across various disciplines. This initiative optimizes the allocation of physician resources at all levels, maximizes the pivotal role of high-quality medical talent in collaborative practice, encourages broad participation from grassroots healthcare professionals, and comprehensively leverages the professional expertise of physicians at every tier. Through three to five years of dedicated effort, the company aims to build a physician group that is highly competitive within Zhejiang Province, leading in the national dental sector, and truly realizes shared benefits among its members.

The company’s academic-medical partnership model, benchmarked against NewYork-Presbyterian Hospital, essentially involves establishing a physician group. NewYork-Presbyterian Hospital forms its physician group through the medical centers of its two affiliated Ivy League universities—Cornell University and Columbia University—and centrally allocates physician resources across its six campuses, including Lower Manhattan Hospital and Allen Hospital, as well as various community healthcare institutions throughout New York. This strategy has gradually enabled it to dominate hospital management in the New York region and secure a leading position in the U.S. healthcare services industry. Establishing physician groups can help remove career ceilings for physicians.

The university-hospital collaboration model serves as the foundation and cornerstone of the company’s healthcare business development. In July 2018, the company signed an agreement with Hunan University of Medicine to jointly invest in establishing Huaihua Stomatological Hospital, also known as the Affiliated Stomatological Hospital of Hunan University of Medicine. In August 2018, the company entered into a partnership with Beihua University to collaborate on talent cultivation, discipline development, and community medical services, jointly establishing the Affiliated Stomatological Hospital of Beihua University.

Fully implement the CM team-based consultation model. Benchmarking against the Mayo Clinic in the United States, the CM team-based consultation model centers all operations around customer needs, making services tangible to clients and thereby achieving authentic marketing. The Mayo Clinic concentrates its high-quality medical resources on patient diagnosis, with diagnostic reports serving as effective advertising for the institution. In the team-based consultation model, specialists primarily focus on diagnosis, design treatment plans, and participate in key therapeutic procedures. Top Choice Medical has further implemented the Mayo Clinic model at its Hangzhou Stomatological Hospital Chengxi Branch and promoted this approach across other hospitals within its system, resulting in significant increases in both revenue per dental chair and overall income.

Focus of the CM Team-Based Diagnosis and Treatment Model:

1. The team assembles diverse physicians, each leveraging their respective expertise to create value;

2. Multidisciplinary collaboration within the team raises physicians’ professional ceiling, enabling specialists to treat more patients;

3. No referral is required; specialists from various departments collaborate to address patient issues, resulting in a superior customer experience;

4. The Mayo Clinic model draws on Toyota’s management principles, with downstream processes reviewing upstream ones. By adopting a team-based approach, both medical quality control and physicians’ professional competence are improved;

5. The team-based model is superior to the conventional preceptorship model in training young physicians.

In December 2018, Top Choice Medical and Hangzhou Stomatological Hospital Group launched the “Dandelion Plan,” stepping up investment efforts and pooling medical talent from various fields. The first batch of ten new branch hospitals, including those in Shaoxing Keqiao, Huzhou Deqing, Lishui Liandu, Hangzhou Linping, and Jinhua Wucheng, were signed.

The “Dandelion Project” aims to facilitate the “dual downward flow” of high-quality dental institutions and physicians to grassroots counties (cities, districts) across Zhejiang Province. By collaborating with reputable and outstanding dentists throughout the province, the initiative seeks to enhance oral health education and prevention in underserved areas, address the current weaknesses in local dental care, improve the standard of dental services, and increase patient satisfaction, thereby contributing to the promotion of regional health development.

The “Dandelion Project” is a concrete implementation of the natural branching model for physician equity ownership. Leveraging Hangzhou Stomatological Hospital’s brand and technical strengths honed over more than six decades in the industry, along with the physician resource advantages of Top Choice Dental Physician Group, the launch of the “Dandelion Project” has reshaped the landscape of dental healthcare services in Zhejiang Province and comprehensively established the company’s regional competitive edge.

In 2018, guided by government direction and policy frameworks, the Zhejiang Grand Health Industry Fund accurately grasped industry development trends. Focusing on areas such as medical services, precision medicine, and smart healthcare, and leveraging the robust industrial resources of three listed companies—Top Choice Medical Investment Co., Inc., Dian Diagnostics, and B-Soft—the fund identified high-quality enterprises with strong growth potential, innovative business models, and advanced technologies. It actively promoted consolidation within sub-sectors of the grand health industry, accelerated the development of innovative enterprises, and enhanced the value of its portfolio companies.

As of December 31, 2018, the Zhejiang Grand Health Industry Fund had completed investments in four projects, comprising high-quality enterprises in niche sectors of the grand health industry such as POCT and in vitro diagnostics. The total investment amount accounted for 66% of the fund’s total raised capital. Leveraging its accumulated resources and project pipeline, the Zhejiang Grand Health Industry Fund will continue to steadily advance its project investment activities.

In 2018, the Kunming Assisted Reproductive Technology (ART) Center continued to enhance its influence through various initiatives, including physician collaborations, academic conferences, and medical consortiums. The center recorded a total of 63,037 outpatient visits in 2018, representing a year-on-year increase of 29.8%. The number of new patients reached 3,935, a year-on-year growth of 15.1%. In 2018, the center completed a total of 1,592 IVF-ET treatment cycles, comprising 851 oocyte retrieval cycles and 741 embryo transfer cycles.

In 2018, there were 851 fresh oocyte retrieval cycles, representing a year-on-year increase of 40.4%. Meanwhile, a total of 741 embryo transfer cycles were completed in 2018, including 244 fresh embryo transfers (ET) and 497 frozen-thawed embryo transfers (FET), marking an 8.5% year-on-year increase. The overall success rate of IVF treatment remained at a high level, with a single-cycle success rate of 55% in 2018.

As a strategic exploration for long-term development, the Company entered the ophthalmic medical sector in 2017 by acquiring a 20% equity interest in Zhejiang Top Choice Eye Hospital Investment Management Co., Ltd. Leveraging the collaboration between its controlling shareholder, Zhejiang University, the Second Affiliated Hospital of Zhejiang University, and its Eye Center, the Company integrated high-quality resources within the ophthalmic medical services industry to invest in and construct the Zhejiang University Eye Hospital located at No. 1 West Lake Avenue, with plans to commence operations in the summer of 2019.

In 2018, the supply chain division piloted a new model within the corporate system. The company managed the consumables catalog, while the hospital group conducted secondary price negotiations. These secondary negotiations reduced the overall procurement cost of consumables by approximately 5%. In terms of equipment procurement, the company continued to pursue direct cooperation models with general distributors and manufacturers, leveraging multi-project joint negotiations to lower procurement costs, thereby reducing equipment costs for newly established dental hospitals by approximately 3%. By increasing stock reserves, revitalizing inventory across hospitals, and reducing overstock, the consumables-to-revenue ratio decreased by approximately 1%, which to some extent reduced the company’s capital occupancy.

In 2018, the Company organized large-scale unified campus recruitment combined with multi-channel social recruitment to attract numerous outstanding talents to apply for positions and join the organization. The campus recruitment campaign utilized various campus media channels for dissemination and was conducted simultaneously at universities across multiple regions. It focused on covering 26 top-tier dental colleges ranked among the top 30 nationwide, thereby securing high-quality sources of dental physician talent. Specifically, the Company held 16 targeted information sessions, participated in 12 job fairs (with four universities hosting both dedicated sessions and job fairs), and attended one dental exhibition. Meanwhile, online promotional campaigns were launched at universities nationwide, receiving over 1,100 resumes, including nearly 600 from master’s and doctoral candidates, which further expanded the influence of the Hospital Group. Under the Group’s coordinated management, each hospital site (branch) carried out brand promotion, social recruitment, and training activities, selecting and hiring nearly 300 employees on a merit-based basis. Among them, nearly 20 held master’s or doctoral degrees, and nearly 170 were medical and nursing staff.

The Company’s continued implementation of large-scale recruitment not only meets the demand for fresh graduates and expert physicians but also serves brand promotion and development. Furthermore, it holds significant importance for talent pooling for future projects and for cultivating core competitiveness in high-quality medical resources over the next three years.

Adopting the U.S. model of hospitals operating medical schools, we prioritize education and advance scientific research. The Company continues to collaborate with renowned domestic and international universities and medical schools, sharing research achievements to build an integrated platform for medical practice, education, and research. This strengthens the hospital’s clinical capabilities and provides robust support for the Company’s sustainable development.

During the reporting period, the hospitals under the Company continued to achieve strong results in teaching, research, and academic activities. Affiliated hospitals published more than 10 papers in various journals and won 28 awards in implantology competitions and case contests, such as the 2018 BITC International Implant Forum, steadily enhancing their influence within the industry. Throughout the year, the Company’s hospitals organized a total of 355 training sessions, including participation by medical experts and key personnel in domestic and international academic exchange conferences, as well as programs conducted by the Company’s Dental Academy and individual hospitals.

The Company’s medical institutions conducted a total of 1,056 public welfare free clinic events on themes such as the “Caring for Adolescent Growth” campus practice base lectures and periodontal health care for middle-aged and elderly residents in communities, serving 203,700 individuals. Additionally, 588 oral health education sessions were held, reaching nearly 80,000 people, thereby achieving significant positive social impact.

In 2018, Hangzhou Stomatological Hospital, a subsidiary of the Company, was designated as a newly added provincial-level standardized residency training base. The hospital actively and diligently worked to continuously improve various aspects, including base evaluation and management, faculty training and assessment, trainee training and assessment, and the establishment of a dedicated fund management system for training expenses. It trained more than 60 individuals at the provincial level or above, and over 75 at the institutional level. Tailoring to different trainees undergoing rotational training, the program included not only theoretical and practical studies as planned, but also four mini-lectures, two discussions on difficult cases, and at least one professional study session each month.

In 2018, the company continuously optimized its internal control framework, refined work objectives and requirements, and enhanced management efficiency. Top Choice Medical Investment Co., Inc. remained committed to its philosophy of “patients first, quality foremost,” further improved its medical management system, steadily elevated the quality of medical services, and comprehensively advanced an assessment system centered on customer satisfaction. Meanwhile, the company continually strengthened standardized hospital management processes, reinforced daily supervision and control of medical quality standards, clarified and detailed the management responsibilities of each department, and standardized operational practices.

In line with the company’s philosophy that “medical quality is life” and the requirement to further deepen medical quality control from various professional perspectives, in 2018, the Medical Committee and Service Committee of Top Choice Medical Investment Co., Inc. revised and improved the “2018 Top Choice Medical Dental Division Medical Quality Control Management Standards and Evaluation Criteria” and the “2018 Top Choice Medical Dental Division Customer Service Management Standards and Evaluation Criteria.” In accordance with the annual work plan, inspections were conducted at all hospitals under Top Choice Medical, with a total of 16 supervisory checks organized and 55 guidance and training sessions carried out, covering 18 hospital campuses.

The “Top Choice Model” has gained recognition from both the government and society. At the “First Meeting of the Leading Group for the Construction of Healthy Zhejiang” held in April 2018, Zhejiang provincial leaders stated that breakthroughs should be made in privately operated healthcare and that the Top Choice Medical model for private healthcare delivery should be vigorously promoted.

In July, a Zhejiang provincial official in charge stated that “the ‘Top Choice Model’ offers significant reference value for understanding how existing non-government-run hospitals can achieve transformational development and how the government can innovate institutional supply. It warrants in-depth research and systematic analysis to outline a new pathway for social forces participating in healthcare provision.” The Zhejiang Provincial Health Commission released the Report on the Development of Socially-Run Medical Institutions in Zhejiang Province (2017), listing Top Choice Medical’s healthcare delivery model as a typical case of socially-run medical practice in Zhejiang.

Although the labor-intensive nature of dentistry and its heavy reliance on dentists run counter to the prevailing trends of industrialized mass production and refined social division of labor, this inherent drawback of the dental industry has resulted in few successful cases of global dental chain organizations.

Top Choice Medical and its affiliated Hangzhou Stomatological Hospital Group have achieved significant success, with the annual expansion of service outlets and steady performance growth continuously validating the company’s development model. In 2018, Hangzhou Stomatological Hospital Group was listed, and the Hangzhou Dentists Group was established. Under this framework, the company, the doctors’ group, and local medical teams jointly invest in hospitals, thereby establishing a model characterized by physician-led hospital management and shared benefits. The signing of agreements for the first batch of 10 hospitals under the “Dandelion Plan,” jointly initiated by Top Choice Medical and Hangzhou Stomatological Hospital Group, marks another milestone in the company’s healthcare development journey.

The Top Choice Model is primarily summarized as a six-dimensional structure: participation in restructuring reforms, coordinated development between the headquarters and branch hospitals, integrated development of medical care, teaching, and research, natural proliferation through physician equity ownership, patient consultation services delivered by physician teams, and college-style training.

Using the successful restructuring of Hangzhou Stomatological Hospital as a model, we actively participate in the restructuring of public medical institutions. Established in 1952, Hangzhou Stomatological Hospital was originally a specialized dental hospital affiliated with the Shangcheng District Government of Hangzhou. In 2006, Top Choice Group participated in the hospital’s restructuring and acquired 100% equity interest through open transactions, subsequently injecting the hospital’s property rights into its listed company.

After more than a decade of dedicated development, Hangzhou Dental Hospital has grown from a revenue of RMB 53 million in 2006 to over RMB 1.3 billion in 2018, evolving into a large hospital group with 17 branch hospitals within Zhejiang Province. Leveraging the successful model of Hangzhou Dental Hospital, the company has actively participated in the restructuring of public dental hospitals across China, including playing a key role in the restructuring of Kunming Dental Hospital.

A university without a medical school is like an angel without wings; a city without a strong medical school will inevitably face strained medical resources; and a hospital without teaching and research cannot become a first-class medical institution. Benchmarking against NewYork-Presbyterian Hospital, we adhere to collaboration with universities, ensuring the simultaneous growth of medical care, education, and research.

Through collaborations with renowned domestic and international institutions, including the University of Chinese Academy of Sciences, Hangzhou Medical College, and Charité – Universitätsmedizin Berlin, the Group has established an integrated platform for medical practice, education, and research by sharing scientific achievements. This initiative enhances the medical capabilities of its hospitals and provides a strong guarantee for the sustainable development of its subsidiary hospitals.

“Simplicity, Collaboration, Platform, Faith” are the philosophy and core values of Top Choice Medical. The company’s successful expansion and steady growth in recent years have continuously validated its “Regional General Hospital + Branch Hospitals” development model. Under this model, the regional general hospital platform supports physicians’ clinical skills and academic standing while building brand influence within the region. Serving as the general hospital’s “moat,” branch hospitals help rapidly extend brand reach, optimize medical resource allocation, enhance patient access to care, and accumulate a customer base and gain market share in a relatively short period.

Benchmarking against HCA, the company summarizes internal experiences while learning from the management models of leading medical institutions both domestically and internationally, studying and adopting their problem-solving approaches. It adheres to the “Regional General Hospital + Branch Hospitals” model, striving for each regional specialized hospital group to become a large-scale, industry-leading institution in its local area.

For over a decade, Hangzhou Stomatological Hospital Group has undertaken extensive explorations. It currently operates three central hospitals in Pinghai Road, Chengxi, and Ningbo, each of which has spawned more than two branch clinics. This “Regional Central Hospital + Branch Clinics” model has significantly mitigated the management and expansion risks inherent in the artisanal nature of dental care, thereby establishing regional dental hospital groups as a viable business model.

The “Regional General Hospital + Branch Hospitals” development model and the replicable model of regional hospital groupization will be the company’s primary strategic directions going forward.

Benchmarking the Mayo Clinic’s patient-centered Case Manager (CM) team consultation model. The CM model represents an upgrade to conventional care teams; when patients meet specific criteria (e.g., accumulating sufficient loyalty points), they are transitioned to CM team-based care. This approach enables physicians to focus on specialized, high-value tasks; provides junior doctors with increased clinical opportunities for accelerated professional growth; and allows specialist physicians to serve more high-net-worth individuals and patients with complex or rare conditions.

Mayo Clinic’s impact on the entire healthcare system lies in its absence of traditional departments. So-called departments exist solely for internal learning and management purposes. Physicians operate under a primary-care-physician responsibility model, forming dynamic teams based on patient needs to collaboratively address patient issues. Maintaining a “patient-centered” approach is the global direction for healthcare development. Physicians with strong clinical capacity are key targets for cultivation. Those who delegate tasks to other physicians and drive collective growth are considered future partners. Once a team matures, it can further expand into additional teams through natural fission.

Natural branching is correlated with the energy of the field and with values. Today, barbaric growth driven solely by capital, as well as patchwork expansion not bound by shared values, yields no favorable outcomes.

The company adheres to a model of organic branching, wherein the main hospital oversees branch hospitals and doctors hold equity stakes in the branches. After twelve years of development, Hangzhou Stomatological Hospital has established a solid foundation in Zhejiang Province and is now entering a phase of harvest. The company’s “Dandelion Plan” aims to deploy 100 branch hospitals across Zhejiang Province within three to five years.

The company implements a college-based system for disciplinary development and hospital management. Each regional hospital group determines its key specialty areas based on its specific circumstances, encouraging every hospital to strive for a leading advantage in at least one field.

Top Choice Business School conducts training for reserve cadres, fostering shared values and a sense of belonging, promoting rich case study analysis, evaluation, and assessment, to build a 360-degree learning organization.

Top Choice Dental Academy brings together a large number of dental medical experts, including the Vice President of the Chinese Stomatological Association. It comprises not only senior medical professionals who are actively engaged in frontline clinical practice but also specially appointed professors and industry authorities. The training programs offered by Top Choice Dental Academy cover internal standardized training within the group, large-scale forums and premium hands-on courses led by renowned experts and professors, the West Lake International Dental Forum, seminars on complex cases, and practical training for physician assistants and specialized nurses. The high-caliber faculty ensures the high quality and practicality of the academy’s training programs.

Top Choice Medical Investment Co., Inc. has spent 12 years reaching a new high in 2019, which also marks a new starting point. The company continues to deepen its presence in the medical services industry by integrating core medical service resources, striving to become China’s leading comprehensive healthcare platform and one of the world’s largest physician groups. Through three decades of effort, Top Choice Medical aims to become the “Mayo Clinic” of China.

In 2019, the Company formulated its operational plans in close alignment with its strategic planning. On the basis of ensuring a performance growth rate of no less than 30%, it strove to build a hospital group and a physician group that are comprehensively leading in clinical care, teaching, scientific research, and management. The main core tasks included:

The establishment of Hangzhou Stomatological Hospital Group aims to ensure the effective implementation and execution of the Stomatology Division’s “Physician Group Strategy” and “Dandelion Plan.” The mission of Hangkou Group is to build a community of shared interests and destiny for outstanding Hangkou dentists, serve as the investment entity representing physicians in the Dandelion Plan, and provide robust professional support to branch hospitals at all levels within the system. On this basis, the Group will advance the Dandelion Plan to capture more than 50% of the market share in Zhejiang Province, thereby exerting overwhelming industry and market influence.

Meanwhile, the Medical-Education-Research Association, composed of Hangkou dentists, aims to enhance the quality of diagnosis and treatment for dental patients by establishing high standards in oral healthcare education and practice. It upholds clinical standards within an ethical practice environment and implements continuous, improvable management and oversight across its affiliated hospitals. Leveraging the Hangkou Group platform, a comprehensive training and development program has been deepened to ensure that medical teams in various regions maintain a leading position locally in terms of medical care, services, and other aspects.

In 2019, the company will open 10 Dandelion Program dental hospitals, with an additional 10–15 entering the preparatory construction phase.

Company Dental Implant Growth Plan: Implement differentiated pricing based on market segmentation; determine the scope of implant procedures permissible for dentists according to their seniority; have periodontists conduct the initial consultation and jointly formulate treatment plans with implant specialists based on patients’ clinical conditions; implement a three-tier dentist partnership system centered on a mentor responsibility model; and unify settlement, operational deployment, performance assessment, marketing strategy, advertising releases, and after-sales services for implant procedures across the province.

Through the Three-Year Implantation Plan, the company aims to elevate Zhejiang Province’s implant volume to a leading level nationwide, thereby leveraging Hangkou Group’s industry advantages and enabling its practicing entities—young dentists—to rapidly develop into a formidable young workforce.

HMO (Health Maintenance Organization), or Health Maintenance Organization, is one of the common healthcare service models in the United States. HMOs closely integrate payers and providers of healthcare services, sharing both interests and risks.

HMOs are characterized by a member-centric approach, with an emphasis on prevention and health management, as well as innovative payment models. Taking Kaiser Permanente, the benchmark HMO organization in the United States, as an example, it had 11.8 million members, revenue of USD 72.7 billion, and net profit of USD 3.8 billion as of 2017. It operated 680 medical facilities and 38 large hospitals and medical centers, with a compound annual growth rate exceeding 6% over the past five years. At the policy level, the National Health Commission and the National Healthcare Security Administration have continuously sent positive signals regarding private healthcare provision, tiered diagnosis and treatment, and the participation of commercial insurance in the healthcare security system.

The HMO model, which is member-centric and integrates payers with healthcare providers, is gradually emerging as a new paradigm for healthcare service development. In 2019, the company designated the development of an HMO model with Top Choice’s distinctive characteristics as its key strategic focus for future growth, aiming to achieve member-centric integrated care and value-based care, and to establish a benchmark for the HMO model in domestic specialized medical fields. To further improve healthcare services and optimize clinical workflows, the company launched the “All-in-One Healthcare Service Card,” ensuring that every patient has an electronic health record (EHR) and a health card. Blockchain technology is employed to empower patients with control over their electronic medical record data, enabling secure storage, certification, circulation, and sharing. The health card facilitates cross-hospital and cross-regional appointment scheduling, registration, and payment.

Building on this foundation, we will launch oral health membership products tailored to different demographic groups and establish a membership points system leveraging blockchain technology to enhance the membership ecosystem. Within the next five years, we aim to achieve national leadership in China in terms of membership scale, membership fee revenue, and the application scale of medical big data. Meanwhile, we will encourage physicians to participate in members’ health management to reduce the incidence of major oral diseases, thereby realizing health value for members and generating profit margins from health management services, ultimately achieving a win-win outcome for patients, physicians, and hospitals.

A Key Task for Hangkou Group in 2019: Promoting the “All-in-One Medical Card” and Establishing Unified Patient Records. Hangkou Group has progressively implemented project-based management, characterized by clear responsibilities, well-defined objectives, individual accountability, and a transparent system of rewards and penalties. In the coming years, Hangkou Group will continue to serve as the core engine of Top Choice Dental, striving diligently to buy time for the cultivation, growth, and expansion of its regional dental groups.

“Diagnosis-Related Group (DRG) Payment” is a trend in national healthcare reform, helping to alleviate doctor-patient conflicts. In 2019, the company will conduct project-specific analyses for single-disease dental services—including clear aligner/bracket orthodontics, single-tooth implants, full-mouth implants, teeth whitening, veneers, impacted tooth extraction, all-ceramic crown restoration, basic periodontal care, and preventive dentistry—to develop corresponding medical service products and launch “Single-Disease Management.”

The company implements bundled payments for single diseases, adopting a patient-centric approach to cover the complete course of treatment for specific conditions or defined periods for chronic disease management and prevention, thereby achieving favorable therapeutic outcomes. By implementing intervention and guidance measures for patients and prioritizing risk management throughout the entire care continuum, the company creates profit margins through improved medical efficiency, thus balancing the interests of patients, hospitals, and physicians.

In line with business development needs, the company will launch two “Top 100 Talent Programs” in 2019: an external program and an internal one. The External Top 100 Talent Program aims to identify, uncover, and recruit 100 professional and managerial talents for key positions and critical nodes. The Internal Top 100 Talent Program is designed to cultivate 100 young elites who will assume pivotal roles in professional and managerial positions in the years to come.

The company’s future development strategy is clear and well-defined. By recruiting external professionals and managers while cultivating internal talent, and by implementing both external and internal “Hundred-Talent Programs,” the company aims to ensure the efficient execution of its strategic objectives.

Top Choice Medical has established hospital groups and physician groups, committing to market expansion and striving for a larger market share. The company acquired the land use rights for the Hangzhou plot {Hang Zheng Chu Chu (2015) No. 31} through equity acquisition, which will be used to construct the West City Headquarters of Hangkou Stomatological Hospital as well as the corporate headquarters, in line with the strategic development needs of the company.

Upon completion of the project, the Chengxi Hospital building will have a total gross floor area of approximately 20,000 square meters, with its operational area expanding by more than 50%. Located just a few hundred meters from the original site of Chengxi Stomatological Hospital, the new facility boasts a prime location and aligns with the company’s strategic positioning for its Chengxi main campus. As the company’s home base, Hangzhou will see continuously enhanced radiation capacity of medical resources through the establishment of dual headquarters at No. 1 Pinghai Road and No. 1 Xixi Valley.

Over the next five years, the company aims to maintain no fewer than 2,000 dental chairs in Hangzhou. By establishing new specialized branches with distinct characteristics in Zijingang, Xiasha, Binjiang, and Dingqiao, and integrating its digital dentistry strategy, the company intends to position Hangzhou as China’s Eastern Dental Capital, a premier destination for dental tourism and medical care, and the strategic stronghold of Top Choice Dental.

Furthermore, Ningbo Stomatological Hospital has firmly established its brand. The company has acquired over 25,000 square meters of property in Yidu Plaza and has already invested in the construction of the new headquarters for Ningbo Stomatological Hospital. This year, Ningbo will have a tertiary-level stomatological hospital, which will thoroughly solidify the company’s leading position in Ningbo’s dental healthcare sector, creating a superior platform and a joyful, harmonious work environment for the staff of Ningbo Stomatological Hospital.

In 2019, the Company will further optimize the layout of Hangzhou Stomatological Hospital Group, with plans to construct two new campuses: Zijingang and Binjiang. The Zijingang Campus will specialize in digital orthodontics and pediatric dentistry, and serve as an experimental base for future clinic models. The Binjiang Campus will function as the surgical branch of Hangzhou Stomatological Hospital Group, aiming to establish a leading position in maxillofacial surgery in Zhejiang Province. It will assemble a top-tier team, introduce advanced equipment and facilities including an ICU, and vigorously develop dental implant services catering to all consumer segments. Additionally, it will recruit dedicated Principal Investigators (PIs) to conduct scientific research, thereby laying a solid foundation for Hangzhou Stomatological Hospital Group to become a truly large and strong first-class stomatological hospital in China.

China currently has more than 180 dental schools or departments, but fewer than one-third of these institutions have affiliated dental hospitals. In 2017, the Company successfully partnered with the Department of Stomatology at Yiyang Medical College in Hunan Province to establish Yiyang Dental Hospital. In 2018, Yiyang Dental Hospital operated smoothly, achieving significant social and economic benefits.

In 2018, the Company entered into agreements with Beihua University and Hunan University of Medicine to jointly establish affiliated stomatological hospitals, and it will advance the construction of these two affiliated hospitals in 2019. In 2019, the Company will collaborate with additional dental schools or departments, aiming to secure two to three successful partnerships, while simultaneously initiating the acquisition of a specialized nursing school to address the shortage of professional dental care personnel.

In October 2016, the Company, together with its related party Haijun Technology and Haijun Technology’s wholly-owned subsidiary Zhuji Haijun Medical Investment Management Co., Ltd., jointly established the Top Choice Dental Medical Investment Fund, which was directed to invest in six large-scale dental hospitals, including the Cunji Stomatology Centers in Beijing, Wuhan, Chongqing, Chengdu, and Xi’an.

Wuhan Cunjie Stomatological Hospital commenced operations in January 2018, and Chongqing Cunjie Stomatological Hospital began its trial operations in February 2019. Xi’an Cunjie Stomatological Hospital and Chengdu Cunjie Stomatological Hospital are accelerating their progress to open as soon as possible.

In 2019, Wuhan Cunji Stomatological Hospital will further improve management and team building based on the foundation laid in 2018, enhance the quality of medical services, and accelerate business growth. Chongqing Cunji Stomatological Hospital will strengthen its physician team development and market operations, establish and refine management systems, and ensure a successful launch.