2017 China Independent Hemodialysis Center Market In-Depth Research and Outlook: 2018 Set to Be a Year of Rapid Growth

By Zhang Yongqiang, Aishen Medical

As the tide recedes and the truth emerges, a return to rationality suggests that “certain departments will disappear from hospitals,” including hemodialysis centers. In fact, this is a misconception.

Pathology centers, laboratory medicine centers, imaging centers, and hemodialysis units are all clinical and medical technology departments that support general hospitals in carrying out treatment activities. They will not disappear, as there is a clinical demand for them. The author has visited Singapore, the United States, and China’s Taiwan Province; in these regions with highly market-oriented healthcare systems, comprehensive medical centers still maintain such departments, albeit on a smaller scale and with selective service offerings.

After more than a year of development, the sector now includes licensed operators, active businesses, new entrants preparing to launch, and those planning to exit. Both the market and capital have gained a deeper understanding of this industry; hype and misinformation are detrimental to the long-term, healthy development of any industry.

From Paper Plans to Battlefield Inspections: Moving from the Era of Approvals to the Age of Execution. Previously, the focus was on the number of approval documents held; since 2017, attention has shifted to how many of these approvals can be implemented, with metrics such as the number of facilities under construction, the number opened, and patient volume becoming key measures.

In the second half of 2017, I began to see a rise in cases involving the transfer of approvals for independent clinical laboratories (ICLs) and hospitals, as well as the sale of already-established centers. The advantages conferred by early policy adoption and regional positioning are fading; now, true operational capabilities are being put to the test. This is a positive development for the industry as a whole, underscoring the need for pragmatism. During my visits and interactions with peers, I have made every effort to share relevant experiences, hoping they will prove helpful to others.

(I) Quantity

After the release of “Document No. 67,” how many hemodialysis centers were there in China in 2017?

On August 10, 2017, during the National Health and Family Planning Commission’s (NHFPC) regular press conference for the first half of August, Ms. Jiao Yahui, Deputy Director of the Bureau of Medical Administration and Hospital Management under the NHFPC, stated in response to a question from a reporter with First Health News: “As of now, there are 342 regional medical imaging centers, 689 regional medical laboratories, 185 regional pathology diagnosis centers, 147 hemodialysis centers, and 13 hospice care centers nationwide.” This indicates that, according to the NHFPC’s statistics in August 2017, there were 147 hemodialysis centers, a figure that likely includes the existing facilities in provinces where market access had been liberalized prior to December 2016 (with Guangdong Province having the largest number). It is estimated that the total number of such centers throughout 2017, comprising both newly established and existing facilities, exceeded 200.

Third-Party Software Query (Name: Qi X Bao, as of January 5, 2018): Companies registered as “Hemodialysis Centers”: 180; companies registered as “Hemodialysis Clinics”: 26; total: 206. Based on this, it is roughly estimated that the number of various independent hemodialysis centers nationwide at the end of 2017 exceeded 200. Two issues should also be noted here:

First, prior to the 2016 “Document No. 67,” the centers piloted in certain provinces were all “non-profit medical institutions,” registered with the civil affairs authorities and thus not searchable through industrial and commercial registration databases;

Second, registration requirements for “for-profit medical institutions” vary across local administrations for industry and commerce, with differences between the “license-after-business-registration” and “business-registration-after-license” models; as a result, some entities that have obtained establishment permits but have not yet completed business registration may be omitted.

(II) Quality

We define quality based on several factors: the purpose and planning behind obtaining licenses, and the number of centers under construction or already open. Regarding the purpose of obtaining licenses, some entities intend to engage in hemodialysis services for the long term, while others adopt a short-term, trial-and-error approach. Currently, there are few market players like Aishen Medical that are genuinely committed to long-term hemodialysis services; some are merely chasing market trends or testing the waters. Only those with thorough long-term preparations will make substantial investments, build up personnel reserves, establish operational systems, and clarify their future plans—whether for continuous operation or eventual transfer—all of which significantly impact the quality of independent hemodialysis centers. As for the number of independent hemodialysis centers, based on the author’s understanding of the market (assuming an eight-month preparatory period before opening), approximately 10–15% of licensed centers were expected to be operational and accepting patients in 2017. This translates to roughly 20–30 centers that obtained licenses and began patient care in 2017. Therefore, if a company claims it will launch 30, 50, or even 100 centers within a year, it merely indicates that the team lacks sufficient practical experience in operating independent hemodialysis centers.

(3) “Contestants”

Second-generation industry players, such as Weigao and Huansheng, are extending their parent companies’ existing presence in the hemodialysis sector into service-oriented offerings.

“Second-generation rich” individuals, along with companies directly invested in or established by listed companies and funds, such as Changsheng Medical;

“First-Generation Founders”: Newly established startups in the industry, such as Aishen Medical;

Foreign-invested companies, such as Fresenius, DaVita, and DRE; additionally, there is a segment comprising regional individuals or companies formerly associated with the hemodialysis industry that have pivoted their business (such as distributors and dealers of consumables and equipment), which may become targets for future consolidation.

The author believes that only by possessing the following capabilities can one survive and prevail in the future competition among chain hemodialysis centers:

1. Sustained financing or funding assurance capability;

2. A mature and experienced team for the expansion and operation of independent hemodialysis centers;

3. Possess abundant medical and nursing resources as well as industry resources for cross-provincial operations;

4. Brand Building Capability.

In 2017, Guangdong Province, Heilongjiang Province, Xinjiang Uygur Autonomous Region, and Jiangsu Province successively enacted relevant regulations to supplement and extend the national standards, which can be summarized as follows:

1. Make moderate adjustments on the basis of strict compliance with national regulations

This is the approach currently adopted by the vast majority of provinces, implementing national standards. Provinces that had already liberalized policies prior to the issuance of Document No. 67 by the National Health and Family Planning Commission have also made adjustments:

First, in accordance with the basic principles that “higher-level laws prevail over lower-level laws” and “newer laws prevail over older laws,” the original provincial regulations were repealed following the issuance of “Document No. 67”;

Second is the “retroactive effect of law,” which addresses the issue of previously existing centers (or institutes). The Guangdong Provincial Health and Family Planning Commission provided the clearest guidance: applications for establishment and practice that had already been accepted would continue to be processed to completion (with retroactive effect), while all other cases would be submitted for implementation of the new regulations, with prompt rectification required for those not in compliance with national standards.

Highlights:The division of responsibilities and powers between the provincial and municipal Health and Family Planning Commissions has been clarified, with further elaboration on Article 2 of the “Document No. 67” notice. Specifically, it stipulates that the approval for medical establishment of “hemodialysis centers” shall be granted by the provincial Health and Family Planning Commission, while the practice license shall be registered by the local municipal Health and Family Planning Commission. This resolves the contradiction between the centralization of approval authority for medical institutions and their localized management, streamlines the duties and division of labor between the provincial and municipal Health and Family Planning Commissions, and reflects a pragmatic and rule-of-law-oriented approach.

2. Issue provincial standards and management specifications for independent hemodialysis centers

Primarily, the Health and Family Planning Commissions of Heilongjiang Province and the Xinjiang Uygur Autonomous Region, among others, have formulated provincial and autonomous regional regulations based on national standards. A prominent feature is that some requirements exceed the national standards: the minimum number of dialysis machines has been raised to 20 units.

Raise the required hemodialysis work experience for physicians and nursing supervisors from 3 to 5 years (Heilongjiang); mandate the assignment of dedicated safety and infection control personnel (Heilongjiang); these measures have, to some extent, raised the approval threshold and increased startup costs.

It is worth noting the definition and support for chain hemodialysis centers. First, chain dialysis centers are defined as those with more than five facilities or operating across multiple cities. Second, policies provide limited support by prioritizing and centralizing the approval process for chain hemodialysis centers.

3. Issuance of Planning and Establishment Guidelines for Independent Hemodialysis Centers

The Jiangsu Provincial Health and Family Planning Commission has taken an innovative approach by formulating the "Guiding Principles for the Planning and Establishment of Independent Hemodialysis Centers in Jiangsu Province (2017–2020)," which stipulate:

First, the establishment principle: one facility per 100,000–150,000 population;

Second, the focus is on counties, county-level cities, and districts outside the main urban area;

3. The service radius is 5 kilometers in urban areas and 10 kilometers in counties;

4. Provide guidance on the minimum and maximum scale of the center, with a range of 15–50 units;

Fifth, the concept of a “dedicated positive treatment site” was proposed, stating that “designated dialysis centers for the admission and treatment of special patients who test positive should be established within each region.”

From an analytical perspective, Jiangsu’s approach merits overall affirmation. By providing overarching planning guidance while encouraging the marketization of hemodialysis centers, it has avoided clustered, blind competition and instead promoted demand-driven establishment in districts and counties, particularly those with agricultural areas. “Nearby dialysis and community-based decentralization” constitute the fundamental rationale for the existence of independent hemodialysis centers.

The practice of designating specialized facilities for seropositive patients within a region warrants further deliberation. While the initial intent—to strictly prevent blood-borne infections—is commendable, the risk of infection is not confined to hemodialysis treatment but is intertwined with daily life activities. The prevailing consensus both domestically and internationally is to manage seropositive patients through dedicated machines and designated zones, with no established precedent for creating exclusive positive-patient centers. Furthermore, the number of seropositive patients (those with hepatitis B, hepatitis C, syphilis, or HIV) in each region may not be sufficient to sustain the operation of a dedicated dialysis center, and establishing such facilities across regions would impose transportation burdens on patients. Therefore, the author believes that, with due consideration for patient privacy, seropositive patients—excluding those with HIV—can continue to receive treatment at nearby general hemodialysis centers.

(I) Approval

1. Pre-approval Licenses

This issue remains common, as the authority for approving medical institution establishment rests at the provincial level, while healthcare centers are typically located at the prefecture-level city. Some provinces still require prior planning permission, a requirement not explicitly stipulated in national regulations. The author believes that if local Health and Family Planning Commissions strictly enforce the national policy of “not rejecting approvals for privately run medical institutions on the grounds of absent local planning,” it would be beneficial to establish communication with local health authorities during the approval stage. This is because subsequent professional grading, annual validations, and inspections remain under the jurisdiction of local health bureaus. However, this approach may add procedural steps and prolong the approval timeline. In comparison, the practices adopted by the Jiangsu Provincial Health and Family Planning Commission are more favorable. Given China’s lack of unified health legislation and an administrative accountability system for approvals, such circumstances are understandable. It is hoped that the boundaries between government and market will be increasingly clarified and improved year by year.

2. Complaints and Environmental Impact Assessment

Some time ago, residents of a residential community in a city in Anhui Province staged protests by blocking access to oppose the site selection for a hemodialysis center. An article detailing the reasons for the protest was circulated, primarily questioning whether the applicant company possessed the necessary qualifications to provide hemodialysis services. The author also raised concerns about the company’s frequent changes in shareholders, likening it to a shell company, and warned that the hemodialysis center could introduce significant sources of infection, thereby jeopardizing the health of local residents. In light of this, the following recommendations are proposed:1. Careful Site Selection: Maintain a reasonable distance from densely populated residential areas, kindergartens, primary and secondary schools, and food production facilities. What constitutes “reasonable”? Facilities should not be directly adjacent (i.e., next door or on directly upper/lower floors), pedestrian flows should avoid cross-traffic, and a distance of approximately 500 meters is advisable.2. Strict Compliance with Medical Waste Management: Rigorously manage medical wastewater, waste, and contaminated material pathways, and implement disinfection protocols and systems in full compliance with national standards.3. Effective Stakeholder Communication: Engage proactively with landlords, property management companies, neighborhood committees, and property owners.On a positive note, under the new environmental regulations effective October 1, 2017, institutions such as hemodialysis centers may only be required to file an “Environmental Impact Registration Form,” thereby streamlining the approval process (eliminating the need for resident consent) and reducing both time and costs (subject to confirmation through communication with local environmental protection authorities).

(II) Operation

1. Practice Acceptance

Number of Machines: This is an issue that many likely encounter. Must the number of machines declared in the application match the actual number of machines present during acceptance inspection? Regulations stipulate a minimum configuration of 10–20 hemodialysis machines. In the author’s view, if a dialysis center is planned to have 40 machines, it may undergo acceptance inspection based on 10 machines (20 in Heilongjiang and Xinjiang), with this arrangement noted on the Practice License. Additional machines can be added through a separate application process. This approach is considered reasonable and is recognized by quality control experts across various regions.

Decision-Making on Auxiliary Departments: Should a Laboratory and a Pharmacy Be Established?This is also a contentious issue. The author believes that if routine laboratory tests, such as biochemistry, electrolytes, and the four pre-transfusion tests, can be outsourced to third-party providers like KingMed Diagnostics or Yinfeng Bio-Technology, this approach is generally feasible. However, challenges arise with emergency testing. For instance, when clinicians suspect hyperkalemia in a patient, the turnaround time for test results after blood sampling becomes critical. Given the time required for specimen transport and result transmission, excessive delays would significantly increase clinical risks. The feedback mechanism for critical values faces similar issues. Therefore, it is recommended that hemodialysis centers without an in-house laboratory should still be equipped with certain laboratory devices and staff to handle emergencies.The decision to establish a pharmacy primarily hinges on prescription management and medication safety. Pharmaceutical care management is an integral component of clinical safety. The complete absence of a pharmacy not only inconveniences patients but also poses certain safety hazards. Thus, its establishment should be seriously considered.

Dual Utility Supplies: During operational acceptance inspections, experts often inquire about dual water and power supplies. However, regulations only mandate dual power supplies and do not address dual water supplies. Implementing true dual power feeds is generally challenging; a feasible alternative is the use of backup generators. Similarly, for water supply, since regulatory codes do not specify dual water lines, this should not serve as an acceptance criterion. Nevertheless, based on medical operational needs, viable measures include verifying the availability of backup water tanks in the property during site selection and assessing the local frequency of water outages. Whether to install storage tanks for raw water or reverse osmosis (RO) water should be determined on a case-by-case basis.

Yin-Yang Zoning: This is a challenging issue, as discussed above. With reference to the opinions of local quality control experts, zoning and separate equipment should be implemented while ensuring that passageways and pedestrian flows are kept separate; complete physical isolation is recommended where feasible. Infection control is a systematic engineering endeavor, in which human factors are more critical than physical barriers.

Collaborating Hospitals: This is a long-standing, intractable issue.

2. Medical Insurance Issues

There are several main aspects:

First, there are no regulatory barriers regarding the timing and conditions for inclusion in the medical insurance program; the process has shifted from approval-based to contract-based, with most regions typically offering one to two application windows per year.

Second, whether a one-year operational period is required. Currently, local medical insurance authorities across various regions are able to understand and accept applications from newly established medical institutions; however, these institutions should still be prepared to operate for at least six months without medical insurance coverage.

Third, the issue of facility classification. This point bears reiteration: it is advisable to obtain reference standards from the Health and Family Planning Commission upon acquiring the Medical Institution Practice License. The classification determines medical service pricing (although self-pricing is permitted) and reimbursement ratios, thereby significantly impacting the center’s operations.

3. Patient Source

All efforts are ultimately directed toward clinical operations and patient consultations. Where do patients come from? What attracts them? How can they be retained? These are common challenges faced by operational teams. It is undeniable that existing public hospitals remain the primary source of the first batch of patients for hemodialysis centers.

4. Competition Issues

Undoubtedly, in the short term, the establishment of new hemodialysis centers will certainly have an impact on public hospitals, potentially exacerbating certain tensions related to patient recruitment, visits, and preferential policies. However, based on the author’s experience, stakeholders will likely reach a state of equilibrium within approximately two years, driven by the rapid growth in the patient population in recent years. Ultimately, the patient volume for all parties will not decline; moreover, there remains substantial room for collaboration in areas such as physicians’ multi-site practice and patient referrals. The entry of private hemodialysis centers will help drive improvements in service quality, with kidney disease patients being the primary beneficiaries. Mutual understanding is hoped for among all parties.

5. Procurement Challenges

This is also one of the practical challenges. In the initial stage, procurement volumes are small, prices lack discounts, and after-sales support is inadequate. Particularly in pharmaceutical procurement, which involves supply chain management, hemodialysis centers face numerous difficulties. It is challenging to recruit experienced procurement personnel, and processes such as price inquiry and logistics management are extremely cumbersome. If these issues are not properly addressed, operating costs for hemodialysis centers cannot be effectively controlled or continuously reduced. This is precisely what Ai Shen is currently undertaking: integrating the supply chain to help resolve issues related to procurement, after-sales service, and even financing.

1. “Difficulty” and “Speed”

Speed is essential for the development of both an industry and individual enterprises. In the short term, acquiring specialized hospitals or hemodialysis centers appears to be a relatively easier and faster strategy (provided that capital is not a constraint). However, are there still high-quality acquisition targets available in the market? Furthermore, the difficulty of post-acquisition integration may even exceed that of establishing new centers from scratch. The author believes that the core competitiveness of chain hemodialysis centers lies in the "chain" aspect, which should be reflected not merely in branding but more importantly in management and operations. Recently, the author evaluated several small general hospitals seeking acquisition by or partnership with Aishen (iKidney). It was found that meeting Aishen’s current standards and systems would essentially require a complete overhaul, with investment costs and time commitments far exceeding those required for opening new centers. In the long run, the growth of independent hemodialysis centers will primarily depend on newly established facilities. Therefore, the notions of "difficulty vs. ease" and "speed vs. slowness" are relative, depending on each team’s development strategy as well as their financial and operational capabilities.

2. Competition and Cooperation

Foster Orderly Competition and Jointly Safeguard the Market EnvironmentChina is poised to become the largest dialysis market, with sustained rigid demand for dialysis services. Recently, I participated in an expert review panel for hemodialysis centers organized by the Guangdong Provincial Health and Family Planning Commission. It was evident that there was minimal overlapping competition among the projects submitted by peers within the same region. We should adopt a more open mindset to build industry synergy. In particular, cooperation holds greater significance than competition in areas such as policy advocacy, centralized procurement, and dialysis tourism.

3. Prioritize the Development of Core Competencies

Patient safety comes first. Dialysis treatment is a matter of life and death for patients and their families; we must never follow the outdated path of the “Putian system.” Medical safety and quality are critical to the survival of both enterprises and the industry.

In terms of differentiated competition, private hemodialysis centers still possess unique advantages in design layout, environmental hardware, and service management, enabling them to establish a competitive edge through differentiation.

Emphasizing the Humanistic Value of HealthcareHealthcare is, at its core, a humanistic endeavor. This is particularly pertinent in China today, where strained doctor-patient relationships are marked by mutual biases and shortcomings between healthcare providers and patients. Whether a new medical institution can reconstruct this relationship is an unavoidable question for all stakeholders. It is essential to focus on the “experience” of both healthcare professionals and patients. Only by effectively implementing humanistic care can the hemodialysis service industry in China be imbued with vitality.

2018 was a pivotal year for the development of independent hemodialysis centers. While writing this article, I was pleased to learn that Goldman Sachs, a leading international investment bank, has also invested in domestic independent hemodialysis centers. The entry of such heavyweight institutional investors, coupled with the launch and operation of independent hemodialysis centers by industry giants such as Fresenius and Baxter, will accelerate the growth of independent chain hemodialysis centers in China.