The Winter Is Here: How Will China's Non-Public Healthcare Sector Navigate the Crisis?

Author: Liu Mochao, Deputy General Manager of Beijing Aiyuhua Women's and Children's Hospital. The views expressed in this article represent only the author's position.

Amid the biting cold of winter, the counter-cyclical healthcare services industry is also enduring its own harsh winter. Phoenix Healthcare, the first listed healthcare company in China, has been renamed China Resources Healthcare, with its stock price plummeting to just one-third of its initial offering price and a price-to-book ratio below 1. Heimei Medical, the first listed chain of obstetrics and gynecology hospitals, is trading at only one-quarter of its IPO price, with a total market capitalization of RMB 1.4 billion—less than the asset scale of an ordinary public hospital in Beijing—and its market value has fallen below its net asset value on the books. Meanwhile, most other private healthcare providers without capital support are facing even more difficult circumstances.

Over the past decade, capital has come to realize that the healthcare services industry appears to be resistant to investment, resembling a sector where one sows seeds but reaps no harvest. While ten years is not a short learning cycle for investors, it is but a fleeting moment in the development of a hospital and the progress of healthcare reform. The arduous nature of this reform is evident from the fact that it has significantly lagged behind reforms in other industries.

On the other side of the spotlight, both state-driven healthcare reforms and tech giants’ attempts to “disrupt” the medical industry have undergone shifts after encountering obstacles. Many slogans in internet healthcare have transitioned from “disrupting medicine” to “embracing medicine.” Whether internet newcomers or non-public medical institutions, all have faced significant resistance in their exploratory efforts and strategic layouts within healthcare services.

One important reason is the “government regulation–public hospitals–civil service staffing–health insurance payment”Exceptionally Strong Chains. Whether it is commercial insurance or HMO models that focus on the payment level, physician groups that concentrate on the physician level, private hospitals that emphasize the hospital level, or online consultation services that target the customer level, none have achieved significant results. Currently, only operational strategies that supplement the existing system, support healthcare reform and the development of the public sector, or adopt a differentiated and complementary approach to existing systemic resources have achieved phased success.

On the other hand, under the rigid system composed of four behemoths—“government regulation, public hospitals, career-establishment staffing, and health insurance payment”—the state has incorporated healthcare into the category of basic livelihood security. Public hospitals have established the overall market pricing level and subsidy mechanism through lower pricing and health insurance reimbursements, significantly compressing the market space for non-public medical services.

These two factors have significantly compressed the market space for non-public healthcare. At this juncture, the most critical issue for non-public healthcare providers is to determine their “market positioning.” Currently, there are basically two strategic approaches to positioning: one isAvoidance Positioning: to establish a presence in areas that are difficult for public institutions to operate in, have differentiated characteristics, or are relatively niche (such as women’s and children’s health, medical aesthetics, health check-ups, ophthalmology, dentistry, rehabilitation, clinics, and genetic testing); secondly,Supplementary Localization: Developing in niche sectors that support healthcare reform and complement public institutions, such as rehabilitation, smart healthcare, online medical services, AI-assisted diagnostics, and academic training platforms for healthcare professionals. While traditional pharmaceuticals, medical devices, health informatics, and distribution channels also contribute to the development of the public sector, they are not classified as healthcare institutions.

Most non-public medical institutions fall into the first category of positioning. Although public and non-public institutions appear to have different positionings, patients often directly compare them in terms of price, technology, service, brand, location, and accessibility. In these aspects, public Grade 3A hospitals can generally outperform ordinary non-public institutions, especially in regions with abundant medical resources. This advantage extends not only to talent, technology, teaching, and scientific research but also to areas where private institutions once took pride, such as environment, service, and internal management. As a result, non-public medical institutions are under tremendous pressure.

Therefore, I have always believed that capital’s strategic deployment in standalone medical institutions isThe focus should not be placed on the return on investment of individual institutions.In the future layout of the broader health industry, medical institutions (including their connections with physicians), serving as the central nervous system, traffic gateway, and connector within the healthcare landscape, represent a grasp of core resources. As a critical testing ground for future technologies and AI-driven digitalization, and even as one of the core pillars under the entire lifestyle service model, they will play a significant role in the transformation of the broader health sector.

As healthcare professionals deeply embedded in the industry, we cannot help but ask: How will private healthcare institutions survive the winter amid a market space significantly squeezed by public healthcare giants? Private healthcare faces immense challenges in attracting high-quality physicians. It is plagued by poor land locations, insufficient patient coverage coupled with high operational costs, numerous licensing restrictions, and a significant brand gap that erodes public trust. Meanwhile, newly constructed hospitals under public Grade-A tertiary institutions hold an absolute advantage over typical private entities in terms of equipment, facilities, environment, and informatization. It seems that private institutions onlyin terms of mobilization efficiency, flexibility, and market sensitivityThere are still certain advantages. In such a macro environment, how should we leverage our comparative advantages to build core competencies unique to non-public healthcare institutions, thereby ensuring our survival in the future landscape?

How to Address the Above Dilemma: Let’s Begin by Discussing Two Characteristics of Current Hospitals.

The first characteristic isPublic healthcare operates in a typical supplier-driven market., andNon-public healthcare is gradually transitioning into a typical demand-driven market.. The industrial era, ushered in by the Industrial Revolution, resolved the problem of material scarcity for humanity, shifting materials from a state of shortage to one of relative abundance, while the supply-side economy has been gradually transitioning toward a demand-side economy.

Although hospitals are part of the healthcare services industry, they have long exhibited a markedly “inward-looking” character, standing in stark contrast to the fiercely competitive, customer-obsessed ethos typical of the broader service sector. Public tertiary Grade-A hospitals occupy prime locations in city centers, where patients often adopt their most deferential demeanor when interacting with hospitals and physicians. Over the past two decades, there has been little change in the internal processes, environment, departmental structure, and product offerings of public hospitals.

It can be seen from this that the public healthcare sector as a whole is characterized by a typical supplier-dominated market, in which patients are often in a disadvantaged position relative to doctors and hospitals. Meanwhile, patients are continuously raising demands on non-public healthcare providersIncreasingly Stringent Service Standards and the Demand for Advancements in Medical Technology, leading to even fiercer price competition. This situation, characterized by dominant public suppliers and non-public demanders, once left non-public institutions deeply disoriented; in fact, this shift toward the demand side has now been largely completed.

The second characteristic is that healthcare is aLow-frequency demand, a serious and private industry. This point is crucial, distinguishing healthcare from the general consumer services industry.

The first impact: Amid low-frequency demand and information asymmetry, some patients with common conditions self-medicate, while others with the means cautiously opt for treatment at large public hospitals. Consequently, the customer base available to both non-public physical institutions and online platforms is extremely limited. A significant proportion of patients who do visit non-public institutions are drawn by specialists practicing part-time from public hospitals or are referred from public hospitals; this, however, does not constitute the core competitiveness of non-public healthcare providers themselves.

The second impact is that low-frequency demand prevents brands from quickly embedding themselves in customers’ minds, thereby failing to foster repeat consumption and brand recall. As a result, most well-known hospital brands are truly “century-old established names,” whereas private healthcare providers often lack the time needed to build such legacy.

The third impact: Unlike tourism, which is also a low-frequency consumption sector, healthcare demand is inherently passive. This makes it difficult to stimulate user interest through advertising or endorsements, rendering many conventional marketing strategies ineffective.

Fourth, the emphasis on privacy and authority means that customers are often reluctant to share information due to privacy concerns, preventing the word-of-mouth diffusion we might expect (although reputation remains effective in certain departments such as obstetrics and pediatrics, and dentistry, where patients are more willing to discuss their experiences). Government regulations also standardize and block certain types of viral spread, and overly exaggerated viral marketing campaigns often backfire in the healthcare market. While marketing is a competitive advantage for any non-public enterprise, the aforementioned characteristics of demand and the market make life increasingly difficult for private healthcare providers. Traditional, new media, and market-oriented communication methods may not necessarily yield desirable results.

In light of the aforementioned dilemma and two characteristics, I believe that non-public healthcare institutions need to promote a process of “outward-oriented evolution” with a more open mindset, building upon their “inward-oriented” foundation.Acquiring an “Outward-Looking” Perspective, and establish an internal organizational structure and other necessary support systems that are commensurate with it.

This is not to discard the intellectual heritage passed down by predecessors both domestically and internationally, which represents decades of accumulated expertise in hospital management. Examples include budgeting systems, performance evaluation frameworks, cost accounting mechanisms, internal control structures, academic development programs, teaching systems, specialty department architectures, and compensation schemes. Some of these systems are continuously evolving and transforming; most importantly, they embody decades of operational experience—comprehensive and highly practical—making them worthy of reference for every healthcare professional.

While the aforementioned systems are indeed essential conditions for the survival and development of every hospital, a closer examination reveals that they all stem from a hospital-centric perspective, reflecting a “major supplier” mindset toward growth. This underscores that the current domestic healthcare sector remains self-oriented in its thinking—an approach that was suitable for large public tertiary hospitals or non-public medical institutions as they existed ten years ago.

However, it is unrealistic to assume that we can survive merely by establishing a few departments, acquiring some equipment, recruiting a handful of experts, and investing millions in marketing. Nor is it realistic to believe that simply refining the aforementioned aspects of meticulous management and leveraging organizational efficiency will propel us to become industry leaders on par with Peking Union Medical College Hospital or Chang Gung Memorial Hospital. These are necessary conditions for a hospital’s survival, but they are not sufficient.

In a situation characterized by one dilemma and two traits, the first thing we must do isOutward Shift in PerspectiveIt is far from sufficient to focus solely on the efficiency of what one possesses, what one can do, and how to do it. It is absolutely impermissible to consider marketing in isolation from internal operations and medical services. For non-public institutions, promoting “outward-oriented evolution” holistically is a necessary process for development in the new era. Everything is in the stage of exploration, requiring continuous trial and error, followed by further improvement.

The “outward-oriented evolution” of non-public healthcare refers to a shift from “supply-driven” to “customer-driven.” It can be divided into six objectives:

1. Positioning: Market-oriented, differentiated from public-sector leaders;

2. Create departments, items, workflows, and products based on customer requirements;

III. Provide more convenient and accessible services for users;

IV. Provision of Enhanced Medical Services;

V. Conduct marketing that aligns with the unique characteristics of healthcare;

VI. Become a Part of the Flywheel.

1. Positioning based on the market, differentiating from public-sector leaders

For non-public medical institutions, our primary consideration has always been "positioning." During the earlier "blue ocean" period, institutions could define their positioning based on a single standout strength or specialized service. In today’s healthcare services market, however, it is not enough to merely possess specialized advantages in certain disciplines; institutions must also demonstrate keen insight into local demographics, patient needs, disease spectra, and purchasing power. Furthermore, conducting thorough research on comparable departments in public hospitals is essential. Such analysis helps determine an institution’s initial positioning and potential directions for future expansion, with the ultimate goal of establishing unique core competitiveness within the region.

Here, we focus on the research of public hospitals. For instance, if we plan to establish a children’s hospital in Beijing, we can conduct research on two leading institutions—Beijing Children’s Hospital and the Children’s Hospital Affiliated to the Capital Institute of Pediatrics—as well as one private children’s hospital. We can analyze the core internal medicine and surgical specialties offered by these hospitals, assessing the strength and institutional weight of each department based on its size and the number of physicians. Unmet demand can be measured using indicators such as patient volume, appointment scheduling backlogs, the ratio of patients awaiting hospitalization to actual bed capacity, and the proportion of out-of-town patients. The potential for future pricing can be evaluated by examining the proportion of self-pay and high-end clients, as well as market price sensitivity. On the supply side, we can assess whether there remains significant room for growth by analyzing whether public hospital prices are too low, leading to insufficient supply, and whether there are viable services that are currently not being offered. The objective is to identify at least one specialized discipline with a competitive advantage, strive to become the best in the local area, leverage this strength to attract patients comprehensively, and gain broader recognition of the institution’s overall capabilities. For example:

1) For public hospitals’ flagship specialty disciplines—particularly those with widespread renown, a high proportion of out-of-town patients, and severe wait times—non-public healthcare providers should strive to adopt a strategy of co-developing departments with public hospitals in these fields. This approach leverages the reputation and strength of public institutions to build their own departments and absorb patient overflow from the public sector.

2) For departments in public hospitals that are unwilling to operate or are relatively weak, this may be due to active exclusion by public hospitals because of the low cost-effectiveness of patients. If such a specialty also has high patient demand and includes certain services not covered by medical insurance (or allows non-public institutions to set their own prices), we can prioritize it as a strategic focus for development.

3) For several core projects within a department that public hospitals intend to launch but have not yet implemented due to various factors (such as equipment, personnel, policies, pricing, and compatibility with existing operations), particularly those with significant pricing flexibility, these represent key areas for us to prioritize and develop;

4) For public hospital specialties where the majority of consumption is out-of-pocket, not covered by medical insurance, and serves a large number of high-end clients, with low operational difficulty and minimal investment required, these are also areas we should prioritize.

5) We can refer to the disciplinary configuration of leading local private children's hospitals; if their locations differ, their actual operational performance is highly worthy of our reference and benchmarking.

6) Of course, we need to leverage our keener instincts compared to large institutions to identify and lead unmet needs overlooked by the public sector, as seen in previous ventures such as health check-ups, premium women’s and children’s healthcare, dentistry, and medical aesthetics.

After determining the disciplinary positioning and future development direction, we need to recruit suitable talent, generally referring to the following criteria:

1) Possesses a certain level of industry reputation and academic/association resources, establishing a foundation for negotiating collaborations with top-tier tertiary hospitals;

2) Possess the resources and capability to recruit pipeline talent;

3) Possess the capability and awareness for departmental operations and management;

4) Possesses an understanding of and forward-looking vision for discipline development;

5) Possess basic management capabilities for coordinating with other clinical, medical technology, and administrative departments;

6) Possess market and customer acumen, along with strong execution capabilities.

2. Restructure departments, projects, products, and services based on patient needs

1) Starting from patients’ symptoms, perceptions, and immediate needs, hospitals should strategically plan specialized disciplines, such as the currently popular Sports Rehabilitation Center, Cardiovascular Chronic Disease Management Center, Reproductive Medicine Center, Pain Management Center, Fever Clinic, Sleep Disorders Center, Child Growth and Development Center, and Optometry Center. This reflects the mindset and departmental planning capabilities that modern hospitals need to develop.

2) Focusing on the needs arising from “the specific life stages of customers,” we strive to build a closed-loop, holistic service model. Examples include establishing a “Neonatal Center” for newborns, a “Child Health Management Center” for non-ill children, a specialized “Postpartum Rehabilitation Center” addressing various physiological and psychological postpartum issues, and a “Chronic Disease Management and Rehabilitation Center” for the elderly and patients with chronic conditions. These departments do not merely provide medical services at the level of disease treatment; rather, they deliver continuous, sequential services spanning front-end prevention and healthcare, mid-end consultation, treatment, and surgery, as well as back-end chronic disease management, rehabilitation, nutritional dietary guidance, follow-up visits, re-examinations, and exercise programs. This approach better highlights the distinctive characteristics of non-public healthcare institutions, emphasizing family-oriented and continuous care.

3) In addition to structural adjustments at the departmental level, we can offer products and packages that directly address customer needs. For instance, we can reorganize items that are difficult for patients to understand and introduce packages aligned with customers’ cognitive frameworks, such as the Capsule Endoscopy Full Gastrointestinal Tract Examination Package, the Pediatric Growth and Development Assessment Package, the Pediatric Allergy Screening Package, and the Neonatal Jaundice Package. These strategic initiatives aim to precisely target customer needs, address their pain points, and even anticipate forward-looking demands, thereby enhancing the competitiveness of non-public healthcare institutions.

In restructuring the aforementioned departments, products, and services, we face challenges such as the intersection and overlap among traditional clinical departments, diagnostic and treatment centers, and specialized subspecialties within hospitals, as well as the issue of how to reorganize structures to align with new service models. If each clinical unit were staffed by a separate team, it would inevitably lead to a significant increase in costs, while frequent consultations could result in managerial chaos. Therefore, a key challenge to overcome is how to leverage the flexibility of personnel allocation while simultaneously maintaining the academic and technical professionalism of each subspecialty. This issue will be explored in the following section.

3. Provide more convenient and accessible medical services

With technological advancements and rising customer expectations for service, all future services will evolve toward greater “convenience.” Currently, various goods and services around us have become highly personalized, intelligent, and readily accessible; however, healthcare has remained relatively “self-contained.” In the future, as the government vigorously promotes tiered diagnosis and treatment, services such as health maintenance, follow-up visits, continuous care, family doctor programs, and telemedicine, along with various initiatives focused on early prevention and functional enhancement, will become more accessible and valuable.

Although medical services in all forms currently remain dependent on physical healthcare institutions, and specific brick-and-mortar hospitals are constrained by licensing requirements—making them difficult for everyone to access in many provinces and cities—future medical technologies will inevitably make healthcare “more convenient and accessible.” A larger proportion of services will be available at home, while more services will be decentralized from large hospitals to community clinics.

In the future, it is believed that while large tertiary hospitals will continue to maintain an integrated internal structure designed for the efficient management of severe cases as centers for diagnosis, treatment, and specialized disciplines, the vast majority of community hospitals, private healthcare institutions, specialty hospitals, and pharmacy-clinics will evolve into patient “entry points” or “health stewards,” competing for their respective customer bases through wraparound and extended services.

This transformation can be understood by examining the changes in the retail industry over the past decade. Most retail transactions are now completed online from home, while others are handled at nearby convenience stores. Large shopping malls have transformed into providers of irreplaceable experiential services—such as movies, dining, high-end fashion, bookstores, entertainment, and pedestrian districts—rather than mere sellers of physical goods. Although healthcare differs significantly from retail, the same inevitable trends will ultimately prevail.

4. Provide Enhanced Medical Services

Providing enhanced medical services is the fourth area where private hospitals need to transform. Although many large tertiary Grade A hospitals have already achieved very high standards in terms of facilities, environment, and even service quality, service excellence should remain a competitive advantage for private institutions, which ought to perform better in terms of motivation and willingness.

The question that has long been debated in the hospital sector is whether healthcare should be patient-centered or physician-centered. This question is readily answered in practice: hospitals should establish a patient-centered management philosophy and value system, guiding frontline staff to spare no effort in enhancing patient experience, alleviating physical suffering, and providing emotional comfort. This is not only the innate duty of medical professionals but also the primary source of their sense of value. Meanwhile, hospital management must consistently prioritize employees and clinical staff, continuously supporting and improving their work environment while enhancing their well-being and sense of fulfillment.

The purpose of enhanced services is to provide customers with a better, more diverse, and deeper experience. This can be achieved by emulating the premium, warm environments and professional, attentive, and meticulous services offered by most high-end private women’s and children’s hospitals; alternatively, it can involve creating a holistic care model through optimized service processes and formats, ensuring patients receive an optimal experience during both the preventive healthcare phase and the post-discharge rehabilitation phase.

5. Conduct marketing that aligns with the unique characteristics of healthcare

Previously, we discussed the characteristics of healthcare as a low-frequency, private, and serious sector with limited virality. For most disease-oriented non-public medical services (note that obstetrics and gynecology, dentistry, medical aesthetics, and health check-ups fall under service consumption and follow different strategic logics), it is necessary to move away from traditional B2C communication mindsets and adopt a B2B marketing approach. Given that media channels have limited effectiveness in directly motivating patients, and patient-to-patient dissemination is weak, lacking in willingness, and infrequent, our strategy should focus on influencing the key decision-makers who directly impact patient choices, thereby facilitating effective promotion and communication.

For instance, if direct media advertising yields suboptimal results, we can collaborate with media outlets to produce news content, leveraging their credibility and professional authority to endorse our brand. Similarly, if standalone free clinic initiatives deliver only moderate impact, we can partner with hospitals in surrounding areas to establish joint outpatient services and multidisciplinary consultations. By facilitating downstream patient referrals through these consultation arrangements, we can secure professional endorsement of our experts from referring physicians, thereby achieving dual high-level recognition of our specialists from both the medical community and patients.

For instance, word-of-mouth referrals among patients are relatively scarce. We can integrate relevant internal and external departments to facilitate communication and, when appropriate, patient referrals. For example, if direct sales to clients or adding them on WeChat yields poor results, we can leverage insurance companies, local corporate clients, major merchants, community leaders, and administrators of large online groups to promote our services, thereby activating their customer bases and building awareness of our brand.

For customers, certain services represent low-frequency purchases; however, when integrated into a larger platform, they can become a valuable offering that demonstrates channel-based value-added services for clients and reflects corporate care for employees. With customer acquisition costs on the consumer side (C-end) rising steadily, an increasing number of institutions are shifting their focus to the business side (B-end). It is crucial to note, however, that B-end collaborations cannot rely solely on patient referrals or traffic purchasing. Instead, the right approach involves gaining a deep understanding of B-end partners’ business models, fostering innovative win-win synergies with one’s own operations, and delivering long-term value to partners.

VI. Becoming a Part of the Flywheel

Having achieved our objectives in market-aligned positioning, disciplinary restructuring, product R&D, and marketing promotion, we have fully revitalized our organization. How can we further double this momentum? The answer remains to look outward. The implementation of tiered diagnosis and treatment across China is imperative. Regional medical consortia and specialty medical consortia are gradually taking shape, while resources from medical insurance, pharmaceuticals, community care, and other sectors are rapidly integrating into this already spinning flywheel.

For non-public healthcare providers, the opportunity to revitalize and expand lies in whether they can become an integral part of the future core healthcare ecosystem—a rapidly evolving system serving 80%–90% of patients across China. Non-public healthcare institutions can transcend the traditional dichotomy of “public” versus “private” identity, fully embrace the mainstream tiered diagnosis and treatment system, and establish robust, mutually beneficial partnerships with regional tertiary Grade A hospitals, specialized tertiary Grade A hospitals, teaching and research institutions, and community hospitals. By integrating into this operational flywheel, they can jointly serve a broader patient population.

Meanwhile, commercial insurance will continue to expand its health-related functions. Pharmaceutical sales will increasingly rely on pharmacies, and as internet healthcare advances, more services will be delivered online and within communities. A growing number of consumer-oriented, health management, and wellness-focused health institutions and products will also emerge. Under this broader trend, numerous “small flywheels” will form within the broader health sector, interlocking with the “large flywheel” of the public healthcare system to spin rapidly. Non-public medical providers should therefore make greater efforts to establish relationships with the aforementioned commercial insurers, pharmacies, internet healthcare platforms, community services, consumer health entities, and channel partners, thereby leveraging these flywheels to accelerate their own vitality and reach a wider customer base.

The “outward-oriented evolution” of hospitals in the future remains a formidable and long-term endeavor. Anyone involved in hospital management recognizes that each of these changes plunges into the deep waters of internal reform, representing tough challenges that are difficult to tackle. To achieve the aforementioned objectives, we must forge robust organizational resilience and spirit internally, steadfastly advance transformation, and ensure cohesion and unity throughout the process. “Internal improvement” comprises four aspects: 1) Reengineering of internal organization and processes; 2) Introduction of resources; 3) Integration of medical services and business operations; 4) Shaping outward-oriented hospital values.

1. Reengineering of Organizations and Processes

Organizations need to transition from a hospital-centric and discipline-centric structure to a “patient-centered” organizational model. The original discipline-based education system remains unchanged; physicians continue to be defined by their specialized teaching disciplines and professional labels, while the existing departmental structure retains its academic scientific rigor. As discussed in the section on “Outward-Oriented Evolution,” newly established departments should be restructured based on patients’ symptoms, needs, and perceptions. Examples include Centers for Cardiovascular Chronic Disease Management, Sports Rehabilitation, Fever, Sleep Disorders, Child Growth and Development, and Optometry. These centers typically require multidisciplinary collaboration among traditional departments to effectively address patient care.

We can establish patient-centric disease centers as virtual departments, primarily functioning to create more competitive, demand-driven functional clusters through multi-departmental collaboration. Upon a patient’s initial visit, physicians from multiple departments will conduct joint consultations, including expert case discussions, thereby adopting a care model where medical professionals revolve around the patient.

With information system configurations in place, internal physicians and nurses adopt a circular workflow distribution based on patient flow patterns within the hospital. This contrasts with the traditional model, where physicians adhere to fixed schedules regardless of patient volume, leaving patients to revolve around them. It also surpasses the approach taken by some hospitals, which claim to be “patient-centered” merely in a physical sense—where physicians from fixed departments rush between consultation rooms after patients arrive. In such institutions, we aim to enable physicians to participate flexibly in clinical operations as individual units, while engaging collaboratively in academic, teaching, research, and management activities as multi-member teams. This indeed poses greater challenges to the hospital’s organizational and managerial capabilities. Nevertheless, for non-public healthcare institutions with relatively modest scale and lower physician saturation, it is a step worth taking.

The Case of the “World’s Factory” on China’s Southeastern Coast May Offer Insights for the Healthcare IndustryThe Pearl River Delta region in China enjoys the reputation of being the “world’s factory.” Its products demand both specialized expertise and the ability to respond promptly when new brands and models emerge in Europe and the United States. These two requirements are often contradictory: a large manufacturing plant that is highly specialized typically requires substantial investment in advanced equipment, making it difficult to adjust quickly. The Pearl River Delta’s solution has been to cultivate tens of thousands of small, specialized manufacturers, each focusing on precise processing of specific components. Positioned at different stages of the industrial chain, these firms collaborate to deliver highly specialized, cost-effective outputs. Meanwhile, their flexible organizational combinations enable them to meet market demands for agility in launching new products and models. This model offers valuable lessons for optimizing internal division of labor within hospitals.

Building on organizational flexibility, we further advance the transformation of business processes to truly adopt a customer-centric approach, thereby maximizing patient safety, medical quality, care experience, and convenience. Organizational restructuring and process reengineering are often intertwined. In the realms of logistics, supplies, procurement, and information technology, we can similarly implement flexible mechanisms that align resource allocation with patient needs.

Hospitals are relatively closed entities that can explore IoT applications for equipment and supplies by establishing data interconnectivity. For medical supplies, a patient-centric cycle of selection, procurement, warehousing, secondary inventory allocation, intra-hospital distribution, and feedback-based adjustment can be implemented. Similarly, large-scale medical equipment can follow a cycle driven by patient demand, analytical statistics, procurement/leasing, intra-hospital allocation, and feedback-based adjustment. These approaches enhance the utilization rate and competitiveness of supplies and equipment, while also improving internal efficiency, reducing waste, and minimizing significant operational leaks and losses within the hospital.

II. Resource Introduction

Non-public medical institutions are inherently disadvantaged in terms of physicians, nursing staff, academic capabilities, brand recognition, and technical resources. Given their insufficient foundational strength, inadequate medical and nursing workforce, and limited medical technological capabilities, these institutions will face the dilemma of “trying to cook without rice” as they transition toward an “outward-oriented” model. Lacking sufficient resources and extra capacity to deepen medical services, they risk reducing reform to mere rhetoric. Therefore, non-public medical institutions must proactively accumulate all available strengths and actively facilitate the introduction of external resources.

The pursuit of medical resources is endless. Regardless of whether an organization has established its core competencies or even built a so-called regional ecosystem, the acquisition of new resources by non-public institutions must never cease. Given that hundreds of outstanding graduates join Grade 3A hospitals for internships and employment each year, non-public institutions must strive with greater intensity to secure resources; like rowing upstream, they must advance or risk falling behind.

Acquiring resources does not necessarily entail a substantial increase in costs. We can categorize resources and adopt a multi-tiered approach to secure them through various means, including hiring, co-development, collaboration, multi-site deployment, and strategic reserves. Nevertheless, a certain level of financial investment is indispensable for introducing fresh talent from external sources.

At the individual level, every effort should be made to acquire and maintain relationships with physicians and experts both inside and outside the hospital, prioritizing long-term development. At the departmental level, collaborations and joint ventures with other professional institutions, public entities, and private practitioners should be pursued; mechanisms that balance internal entrepreneurship, external competition, and equitable distribution of rights, responsibilities, and benefits are often key drivers of vitality. At the hospital level, an open attitude should be adopted to promote brand and technical collaborations with public institutions and physician groups, with a firm commitment to achieving win-win outcomes. Any unilateral profit-seeking mechanism is unsustainable; even if it yields short-term advantages, it is not a viable long-term strategy. Finally, we must embrace the internet and information technology with an open mindset.

3. Integration of Healthcare and Operations

Another critical issue to address in the patient-centered transformation of hospitals is the integration of mindsets between medical experts and operational management teams. During the optimization of this transformation, medical experts possess a profound understanding of clinical workflows, disciplinary substance, and teaching-and-research systems—knowledge that operational managers often lack. Conversely, operational management teams have expertise in product and service offerings, financial performance management, and strategic planning—areas where medical experts typically have less familiarity.

Consequently, conflicts frequently arise in daily operations, leading to a disconnect or even opposition between medical care and business management, with each side rigidly adhering to its own position and resisting change. It is recommended that there be substantial integration and information flow between the medical and business sides in terms of mindset, knowledge, and capabilities. This is a prerequisite for rational and correct high-level decision-making, as well as a crucial foundation for implementing creative transformations. Each conflict encountered in daily work presents an opportunity for both parties to align and integrate; they should seize these opportunities to achieve convergence between medical care and business management, and jointly proactively seek transformations that align with both medical and business objectives.

Fourth, Shape an Outward-Oriented Hospital Value System

A hospital’s values form the foundation of all actions, serving as the focal point for collective attention and the embodiment of its intrinsic spirit. Private healthcare institutions typically operate as corporate entities, meaning they have their own shareholders, profit motives, dividend distributions, and even listing objectives. While survival pressures and financial metrics may be key concerns for senior executives, they should not define the hospital’s core values or occupy the daily focus of its entire staff. An excessive emphasis on these factors will only lead hospitals to forfeit expansion opportunities and structural transformations beyond a one-year horizon, causing them to concentrate exclusively on short-term cost reduction and immediate process optimization.

The uniqueness of the healthcare industry lies in the fact that medical practice is a profession imbued with a strong sense of ethics and mission. Meanwhile, medical decision-making is often characterized by information asymmetry, with patients largely relying on the guidance of healthcare teams. This dynamic creates an inherent conflict between short-term shareholder interests and ethical imperatives. However, short-term gains are akin to sugar-coated poison, carrying two major side effects. First, they may incentivize fraudulent and excessive medical practices, thereby diverting attention from the essence of healthcare. Second, they cause hospitals to focus solely on achieving short-term performance targets, while reluctance to invest in and pursue medium- to long-term reforms leads to missed opportunities for resource acquisition and structural restructuring.

Shareholders must clearly recognize that adopting short-term performance as the core value for all staff will only trap the hospital in a long-term loss of competitiveness. The long-term competitiveness of non-public medical institutions stems from their ability to implement a “customer-driven,” “outward-oriented” business model, thereby building competitive advantages over large Grade A tertiary hospitals in areas such as strategic positioning, medical service models, product and service offerings, accessibility and convenience, and patient experience improvement. In addressing this challenge, it is crucial for medical institutions to ensure long-term alignment between their own values and shareholders’ operational strategies; misalignment will lead to internal discord and organizational instability.

The aforementioned “outward-oriented evolution” involves adjustments across major pillars such as organizational structure, processes, resources, and products and services. It is a complex systems engineering endeavor that cannot be achieved overnight. Therefore, hospital values must emphasize core elements including customer-centricity, long-term development, innovation, rigorous medical quality, and a strong humanistic spirit. This approach will help hospitals cultivate an “outward-oriented” identity and perspective, while aligning clinical staff around the central theme of “healing the sick and saving lives, and creating well-being for patients and employees,” thereby facilitating the smooth implementation of subsequent optimization and adjustments.

Once the hospital’s core values are established, the corresponding strategic plan should define specific metrics for five-year, three-year, and one-year objectives within this core logical framework. These metrics should reflect concrete economic and financial goals, ensuring that the hospital’s development is underpinned by an “outward-oriented” value system and operational model, thereby achieving medium- to long-term development targets through decisive, high-efficiency measures and execution.

Non-public healthcare faces the predicament of severely squeezed market space, yet it is precisely this pressure that will enable future release. Over the past decade, we have witnessed two distinctive characteristics of the healthcare industry that set it apart from other sectors: the inexorable shift from a supplier-driven market to a demand-driven market, and the low-frequency nature of medical demand. This background and these two traits guide our vision for the future evolution of non-public healthcare: “outward-oriented evolution” is an inevitable path. Non-public institutions lack the resources available to public hospitals; therefore, they are not positioned to adopt an inward-looking, supplier-centric mindset where “patients revolve around the hospital.” Moreover, healthcare must not be subordinated to short-term profitability. We need to integrate all aspects—from positioning, disciplines, products, services, and marketing to organization and values—cohesively from the outside in, to deliver better healthcare for customers.

Original Title: "Winter Has Arrived, How Will Non-Public Healthcare Face It?"》，VCBeat has made modifications without altering the original meaning.