Documenting the Transformation of Primary Healthcare in 600,000 Words: The New Traffic Gateway for Future Medicine [2018 New Year Special]
We are fortunate to have witnessed the rise of primary healthcare at this pivotal moment, documenting a group of entrepreneurs, investors, and physicians who remain confident in its future. Driven by their dreams, they strive to contribute their modest efforts to alleviate the plight of primary care. Full of hope, they have never ceased their endeavors, even as they endure the pain inflicted by the stubborn obstacles entrenched in the system—obstacles so sharp they leave bruises and even draw blood.
Drawing from over 100 articles published last year, we have authored more than 600,000 words, conducted exclusive interviews with dozens of prominent investment firms focusing on primary care in China, and carried out on-site visits and surveys of primary healthcare institutions at various levels. Our findings and analysis indicate that, driven by policy initiatives, primary care is poised to become the key patient traffic gateway for the future healthcare landscape, thereby attracting a greater influx of entrepreneurs and capital into the sector.
Although the vision is ideal, the path to achieving this goal has been fraught with challenges. Between 2011 and 2016, the overall number of primary healthcare institutions in China showed an upward trend, but the growth rate was relatively slow. Notably, in 2012, there was a significant decline in the number of these institutions, primarily due to a reduction in village clinics. This decrease was driven by the accelerating urbanization process, which led to a year-on-year decline in the rural population and a corresponding reduction in the number of village clinics.
Overall, primary healthcare in 2017 can be summarized in two articles:
Compared with other industries, the healthcare sector is significantly more affected by whether policies are liberalized. In all our reports, an essential component is the interpretation of policies concerning primary healthcare.
A series of new healthcare reform policies were intensively rolled out starting in the second half of 2015, including “promoting the development of a tiered diagnosis and treatment system,” “integrating medical care with elderly care,” and “standardizing the management of community health services and improving service quality.”
In response to tiered diagnosis and treatment, we have curated the following featured articles:
The development and enhancement of service capacity and quality at the primary care level are critical to the success or failure of healthcare reform. In recent years, the primary healthcare service network has been further improved, a basic public health service system has been initially established, and there have been significant improvements in the equalization of services and the level of coverage. However, inconsistent with this vertical progress is the fact that the share of medical services provided at the primary care level has not increased accordingly. Statistics show that the proportion of outpatient visits at primary care institutions in 2015 decreased by 5.4% compared to 2009, indicating that primary care facilities have failed to effectively divert the growing demand for medical services.
The state has begun to remove obstacles and provide support for the development of primary healthcare from a policy perspective. In 2016, the government intensified its efforts by issuing multiple guiding opinions, including those on “family doctor contract services,” “the development of professional technical talent teams at the primary level,” and “pilot programs for long-term care insurance.” Recently, the National Health and Family Planning Commission issued a notice announcing a nationwide survey of the medical and health service capabilities of community health service centers. This initiative aims to provide a basis for scientifically formulating the Basic Standards for Medical and Health Service Capabilities of Community Health Service Centers, clarifying their functional positioning, and rationalizing service pricing.
Regarding the interpretation of family doctor policies, we first begin withHubei Promotes Family Doctor Contract Services, with Five Cities Launching Pilot Programs。
Secondly, we have reviewed the implementation measures for family doctor contract systems across various regions and analyzed the changes this policy will bring to the healthcare industry.How Is the 30% Coverage Target for Family Doctor Contract Services in 2017 Being Implemented Across Different Regions?
Finally, the family doctor contracting models in Shanghai and Hangzhou were reported. From August 24 to 25, 2017, the First National Workshop on Excellent Practices and Experience Promotion of Family Doctor Contracted Services was held in Hangzhou.
Why Is Everyone Learning from the Hangzhou Model of Family Doctor Contracting?
The national government’s signals regarding the next key steps for developing primary healthcare services are clear: clearly define the functional positioning of diagnostic and treatment services across medical institutions at all levels and of all types; strengthen the workforce and capacity building in primary healthcare; improve service quality; and ultimately implement a tiered diagnosis and treatment system. The goals include ensuring that, by 2017, primary healthcare institutions account for no less than 65% of total patient visits, and that no less than 70% of residents choose primary healthcare institutions as their first point of care for illnesses occurring within a two-week period. Therefore, to achieve these ambitious objectives, primary healthcare services must undergo breakthrough development, and medical institutions at all levels must be mobilized to foster coordinated growth.
In China, medical institutions are classified into three tiers and ten grades. Among them, primary hospitals (Tier 1) are grassroots facilities that provide comprehensive services encompassing medical care, prevention, rehabilitation, and health maintenance directly to the community, serving as primary healthcare institutions. Their main functions include delivering primary prevention directly to the population, managing patients with common and frequently occurring diseases within the community, ensuring appropriate referral of complex and critical cases, assisting higher-tier hospitals in providing intermediate or post-discharge care, and facilitating the rational triage and distribution of patients.
Secondary hospitals are regional healthcare institutions that provide medical and health services across multiple communities, serving as technical centers for regional medical care and disease prevention. Their primary functions include participating in and guiding the monitoring of high-risk populations, accepting referrals from primary care institutions, providing professional and technical guidance to primary hospitals, and conducting a certain level of teaching and scientific research.
Tertiary hospitals are medical institutions that provide healthcare services across regions, provinces, and cities, as well as nationwide. They serve as comprehensive centers for medical care, disease prevention, teaching, and scientific research. Their primary functions include providing specialized medical services (including subspecialties), managing critical and complex cases, accepting referrals from secondary hospitals, offering professional and technical guidance to lower-tier hospitals, and training healthcare personnel. Additionally, they are responsible for educating advanced medical professionals and undertaking provincial-level or national scientific research projects, while also participating in and guiding primary and secondary prevention efforts.
The classification, layout, and establishment of primary, secondary, and tertiary hospitals shall be determined through unified planning by regional (i.e., municipal or county-level administrative divisions) health authorities, based on the population’s demand for medical and health services. Hospital levels should remain relatively stable to ensure the integrity and rational operation of the three-tier medical prevention and treatment system.
To accelerate coordination and collaboration among healthcare institutions, China’s healthcare reform has introduced the “Medical Consortium” model. We promptly interviewed renowned Grade A tertiary hospitals across the country, including West China Hospital, the First Affiliated Hospital of Chongqing Medical University, and Xijing Hospital, with the aim of sharing their experiences in building medical consortia with a broader audience.
In 2017, the development of medical consortia across China could be described as flourishing. Although not a new concept, it has once again become a driving force for the implementation of tiered diagnosis and treatment under the backdrop of the new healthcare reform, shouldering significant responsibilities in this new era.
This year has been remarkably dynamic. Government agencies at all levels across China have issued numerous policies, prompting hospitals of all tiers to respond actively. The number of medical consortium models has increased compared to previous years, with more than 20 specialized medical consortiums established.
Even with coordinated efforts among medical institutions at all levels, to effectively implement policies and standards, generate synergistic effects, and strengthen primary healthcare, the following three measures must be undertaken:
First, physicians should increase their clinical patient consultations and reduce administrative tasks performed solely to meet performance evaluation metrics. It is essential to clarify that the diagnosis and treatment of common, frequently occurring, and chronic diseases constitute the primary responsibility of physicians. This requires a rational allocation of general practitioners’ workloads to ensure sufficient time for clinical care and the enhancement of clinical skills, while minimizing unnecessary administrative burdens. Furthermore, to incentivize physicians to engage in clinical practice, it is necessary to reform the current model of benefit distribution and establish an incentive mechanism based on surpluses from medical service revenues.
Second, ensure high-quality medical care by breaking through the bottleneck in both the “quality” and “quantity” of healthcare professionals. Having an adequate supply of qualified personnel is key to enabling primary healthcare institutions to deliver effective treatment. To overcome this talent bottleneck, reforms must begin with income levels. A survey of community healthcare workers in Beijing found that 66.54% of those who resigned cited low compensation as the reason. Retaining and attracting talent also requires reforming the performance evaluation system, clarifying promotion pathways and career prospects. For instance, rigid requirements for academic publications and research output in promotion criteria could be replaced with alternative metrics such as clinical case records. Additionally, accelerating the implementation of policies allowing physicians to practice at multiple sites or even engage in independent private practice can help urgently alleviate the shortage of medical professionals.
Third, we must change the current situation of “one disease, a hundred treatments,” achieve standardization and continuity in diagnosis and treatment, and ensure that patients receive the same quality of care at both large hospitals and primary healthcare institutions. Currently, competition between these two tiers has created a “dual siphoning” effect, drawing resources away from both primary care physicians and patients.
Under conditions of insufficient primary care physicians and limited pharmacy capacity, regulations can stipulate that these facilities focus on diagnosing and treating ten common conditions, including hypertension, hyperlipidemia, diabetes, upper respiratory tract infections, osteoarticular diseases, and chronic obstructive pulmonary disease (COPD). They may also provide treatment, rehabilitation, and nursing services for patients with clearly diagnosed and stable chronic diseases, those in the rehabilitation phase, elderly patients, and individuals with advanced-stage cancer. Meanwhile, large hospitals should concentrate on the diagnosis and treatment of acute, critical, severe, and complex or rare diseases. Furthermore, it is essential to ensure that medication availability at primary healthcare institutions is aligned with that of large hospitals, and to implement long-prescription policies for medications used in chronic disease management, thereby guaranteeing continuity and convenience in patient medication access.
Previously, private capital was rarely seen in the healthcare industry, which was dominated by public medical institutions. However, with the advancement of healthcare reform policies, an increasing number of private investors and entrepreneurs have entered the healthcare sector. Some are focusing on health information technology, others on community hospitals, chain clinics, or health management. In fact, they have ventured into every field related to human health.
Among these entrepreneurs venturing into the primary healthcare market, most are recent entrants. They are keen on establishing clinics and community hospitals, and while they have clear business models and teams, they have consistently struggled to resolve customer acquisition challenges.
To support project development, these primary healthcare initiatives are seeking financing. Our observations indicate that the projects securing funding last year were predominantly clinics, giving rise to a cohort of “new-type clinics.” Driven by policy initiatives, the practice environment has undergone further changes, leading to a continuous increase in the number of clinics. According to statistical data from the National Health and Family Planning Commission,In 2016, there were 45,241 traditional Chinese medicine (TCM) outpatient departments and clinics across China, an increase of 2,713 from 2015, with the total number of patient visits reaching 140 million.
Regarding clinics, several trends are evident:
1. Chain or Group Operation. From a market perspective, although standalone clinics in China account for a significant share of the market, few have adopted chain or group-based operational models. With increased capital investment and regulatory liberalization, chain clinics are beginning to emerge. Under this trend, several medical chain and group enterprises are likely to emerge and gradually grow into industry leaders.
2. Greater Convenience. As policies related to tiered diagnosis and treatment and primary healthcare are gradually implemented, medical services will become more accessible in the future.
3. Payment Reform and Insurance Integration. Driven by heightened health awareness and consumption upgrades, medical payment models will undergo a transformation, evolving from price-oriented approaches to value-based accountable care bundled payments. The integration of primary care with insurance will emerge as a major trend.
4. The concept of sharing is emerging. Starting with the multi-site practice platform for physicians and shared workspaces established by Xingren Doctor, Zhang Qiang Doctor Group’s first offline clinic—Hangzhou Sijun Surgical Clinic—is gradually opening its doors to other physician groups. The group seeks to partner with physician teams that complement its existing team, possess high-quality medical expertise, and ideally offer branded services, with the joint aim of building a premier shared platform for surgeons in China.
From the perspective of the industries from which clinic entrants originate, these include real estate, internet healthcare giants, and brick-and-mortar clinics. In April 2017, Wanda Group signed a strategic cooperation agreement with West China School of Stomatology, Sichuan University, planning to invest RMB 9 billion to open 300 dental clinics across Wanda Plazas nationwide. In August 2017, Country Garden officially entered into a strategic partnership with International HealthCare Group (IHG) to jointly develop hospitals and community clinics.
Internet healthcare providers are expanding into offline clinics, with examples including Zhixuei Pediatrics, Mommy Knows, Weier'nuo Pediatrics, and Ruibao Pediatrics, which has become one of their monetization channels.According to six months of operational data from “Mommy Knows Pediatric Clinic,” the clinic’s monthly compound membership growth rate reached 34.9%, leveraging its online user base of 6 million. By the end of 2017, a total of six clinics will successively open in Guangzhou, Shanghai, Shenzhen, and other cities.
During interviews with numerous entrepreneurs, Wang Shirui, Founder and CEO of Medlinker and Penguin Doctor, delivered a speech titled “Penguin Clinic Is Not a ‘Clinic’” at the Health Management Parallel Forum on the afternoon of December 16 during the “2017 Top 100 Future Healthcare Companies” forum.
In his speech, he mentioned that Penguin Doctor would discover during the experience of unmanned shelves and new retail.Rather than layering online filters or relying on search-based and resource-intensive software-and-hardware operations to identify precise users, it is more effective to directly establish an offline clinic as a gateway that provides health services and facilitates user access.For example, the business logic of Mobike involves acquiring precise users by deploying Mobike bicycles offline.
As the dividend of online traffic fades, offline channels have instead become an effective means of attracting users.For example, the average cost to convert WeChat users from Moments or other traffic sources into paying customers is around RMB 500; converting them into stable, long-term health membership subscribers requires greater time and higher costs.
Wang Shirui’s envisioned offline entry points are realized through three channels:
1. Self-built clinics.Establish self-built benchmark high-quality clinics to cover core user groups in key areas, and deliver brand image and quality standards;
Second, build a high-quality clinic alliance.The high-quality clinic alliance system, selected according to Penguin Clinic’s standards, scales up clinic access points and effectively expands user coverage. Regarding clinic scale, Wang Shirui stated that Penguin Doctor would not open clinics one by one on its own; instead, it collaborates with clinics by providing them with systems and management services, thereby becoming part of the clinic alliance.
Third, create entry points for health services.Shared Clinics. Create an entry point for users to access their health data, and provide the most convenient access to health services by deploying shared testing devices.
When multiple physical medical institutions in a community, such as clinics, community health service centers, and community hospitals, serve as small entry points to form a platform, they generate a platform effect.
Whoever can seize the community first, leveraging such a powerful entry point to rapidly achieve scale within a region, may create a highly significant consumption scenario—namely, scenario-based healthcare.