Seven Industry Leaders Explore Seven Core Challenges in the Chain-Operation Model of Primary Care Institutions

On May 17–18, the “2017 China Primary Care Innovation Practice Forum” was grandly held in Chengdu. During the roundtable discussion on the afternoon of May 17, Gao Yi (moderator), Partner at Yuanyi Capital; Yang Sa, Chairman of Xinkang Medical; Wang Weixing, Head of Investment at Huafang Pharmaceutical; Fan Shaofei, Chairman of Ping An Wanjia Medical; He Haiyang, Chairman of Johnson Medical; Jiang Qiang, Chairman of Mingyi Zhonghe; and Yu Haobo, Chairman of Lanka Health, jointly shared their insights on “Exploring the Path to Chain Development for Primary Care Institutions.”

As one of the entry points for primary care, community-based chain clinics have gained significant acclaim due to their scalability, branding, and standardization. They have emerged as an effective solution for transforming the previously unregulated and rapidly expanding standalone primary care clinics. Guided by policies such as tiered diagnosis and treatment, these chain clinics have become a highly sought-after target in the market. Below is a summary and compilation of expert viewpoints, focusing on seven key issues: realizing the value of primary healthcare, rapid replication of chain models, effectively revitalizing primary healthcare resources, information system alignment, talent recruitment, brand building for chain institutions, and health insurance payment mechanisms.

Topic: Prior to chain expansion, institutions can only achieve profitability in the long run by providing value-added services. How do grassroots enterprises realize their value?

Fan Shaofei:Value realization is the core and ultimate issue in healthcare, particularly in primary care. The concept of “empowerment,” which is widely discussed today, was a value proposition first put forward by Ping An Wanjia at its inception.

Ping An Wanjia is committed to building platforms for primary healthcare, focusing on the integration of primary healthcare service resources,Empowering Clinics Holistically with a “Standards + Platform” Foundation, currently capable of providing empowerment through systems, branding, medical security, financial support, referrals, health consultations, training and talent development, centralized procurement platforms, and capital support, thereby meeting the multi-level needs of primary healthcare institutions.

Yang Sa:Xinkang Medical is a chain enterprise integrating medical services, health management, and community public health. How does it create value? It boils down to two key points: first, attracting patients; second, recruiting high-quality physicians, and effectively integrating the two.

ThereforeXinkang Medical’s community services are entirely patient-centric, providing lifelong companionship to patients. This approach fosters strong doctor-patient engagement, resolves the challenge of patient acquisition for physicians, and enables doctors to create greater value.. Over the years, Xinkang Medical has established a comprehensive full-lifecycle big data warehouse through data mining, data collection, and data interaction.

Wang Weixing:Since 2015, Huafang Pharmaceutical has transformed and expanded into the broader healthcare services sector, launching pilot projects and acquiring new clinics through franchising and acquisitions to provide drug supply and management expertise.

FutureWe aim to establish an integrated medical consortium linking grassroots community healthcare providers—such as clinics and outpatient departments—with central hospitals. By developing standardized clinics and replicating this model, we seek to achieve rapid expansion.. Currently based in Hangzhou, with potential for new strategic expansions in the future.

Topic: Chain expansion requires capital support and a strong market entry point. How can efficient replication and expansion be achieved?

Yu Haobo:The expansion of chain clinics does not necessarily mean winning in terms of quantity, but ratherFirst, establish a benchmark.. Just as KFC can be replicated, large restaurants are difficult to replicate due to their extensive menus; however, KFC’s standardized products make replication relatively easy.

Over a period of three to four years, Blue Card has established a comprehensive set of standards and operational models for its self-operated clinics. Whether these clinics are suitable for replication, and whether resource allocation can keep pace during the replication process, directly determine the smoothness of expansion.

Yang Sa:Xinkang Medical is also pursuing standardization, employing a standardized IT system to comprehensively manage all health-related behaviors of residents in its operations. In terms of outcomes, approximately 50 new community health service centers are added each month, with each facility covering an area of roughly 2,500 to 3,000 square meters. Additionally, there are collaborative projects with tertiary Grade A hospitals.

Collaborating with the government to launch the “publicly built, privately operated” model is the most effective way to accelerate replication.In 2017, Xinkang began piloting a model of comprehensive co-management and co-construction of grassroots healthcare systems with local governments on a county-by-county basis. The scale is projected to reach thousands of institutions this year; however, future resource integration will require a higher degree of focus.

Topic: After achieving expansion and replication, the next step is to revitalize resources, such as fostering two-way interactions among tertiary hospitals, specialized hospitals, and clinics within or across regions. What successful experiences exist in this regard?

He Haiyang:In fact, the development of clinics today is a product of the national tiered diagnosis and treatment framework. While there has been significant empowerment directed toward clinics, few companies have truly committed to establishing standardized operations. Under China’s healthcare system, primary care has faced widespread stagnation over the past three decades and urgently requires enhanced vertical integration. Without a robust foundation for primary care networks, achieving these objectives will be considerably challenging.

Currently, vertical patient flow is driven more by administrative mandates within the healthcare system and national policy incentives, making it a passive process. As such, the goal of managing minor illnesses at the primary care level and referring serious conditions to tertiary hospitals remains far from being achieved.A fact is that medical consortiums have deviated from the original intent of the tiered diagnosis and treatment system, gradually becoming a community of shared interests, or even an adversarial medical organization.

The essence of a medical consortium is to implement a tiered diagnosis and treatment model with vertical integration, thereby activating talent mobility; however, the current concept of vertical linkage has been misinterpreted., but Johnson believed it didn’t matter; those within the system should handle system-related matters, while Johnson focused his efforts on engaging from outside the system.

Topic: Chain Formation. After acquiring a large number of clinics, the first priority is robust information system support to strengthen internal management and capture extensive dynamic health data from residents externally. What type of information system is currently needed?

Jiang Qiang:Emphasizing a key concept, Mingyi Zhonghe primarily serves the healthcare system at the township level and below, focusing mainly on the regions of Henan, Hebei, and Shandong. By building a medical “cloud ecosystem” service platform, Mingyi Zhonghe aims to address the shortage of medical professionals and medications in primary healthcare institutions.

Yang Sa:Xinkang Medical operates two information technology subsidiaries and maintains three core systems: the Public Health Service System, the Hospital Information System (HIS), and the Family Doctor Contracted Service System.

System integration requires expansion in both breadth and depth. It is inherently challenging to seamlessly integrate patient health records, long-term chronic disease management, and dynamic updates from family doctors. The Kunming Public Health System serves as a successful case of collaboration between XinKang and the government. By linking three systems together, it has achieved economies of scale, thereby enabling the creation of comprehensive health records.

Topic: With robust information systems supporting chain network outlets, there is still a need to recruit qualified physicians, nursing staff, and management talent for the chain organization. Where should recruitment be conducted, and how can these professionals be trained to enhance their skills and efficiency?

Fan Shaofei:The immense challenge for chain enterprises has been the persistent pursuit of economies of scale, under the assumption that achieving scale will yield cost advantages and thereby realize economies of scale.However, in actual chain operations, it is found that when the scale exceeds three to five stores, the cost of control far exceeds the economic benefits brought by the scale. This is a very common problem., hence it is rare to see chain systems with hundreds or even thousands of outlets in the market.

Ping An Wan Jia’s entry point is to provide a platform that attracts more clinic operators and managers to join, enabling them to effectively manage quality, risk, and cost control. Primary healthcare is not a high-margin industry; it requires meticulous cost management and relies on the accumulation of a loyal customer base.

"Traditionally speaking, hiring a large number of doctors and nurses to achieve scaled operational management would be highly risky in primary healthcare settings. Achieving effective performance control is, in fact, extremely challenging."The future direction of primary healthcare must be supported by platform-based infrastructure, enabling cost-sharing among stakeholders to realize a true sharing economy and enhance the operational efficiency of doctors and nurses., this is the direction for future development.

Jiang Qiang:Mingyi Zhonghe does not operate clinics; instead, it provides comprehensive services to clinics to enhance efficiency. For small clinic chains with one or two thousand patients—most of whom are acquaintances—it is impractical to develop their own systems. Therefore, the “Cloud” Clinic solution, part of the Medical Ecosystem Cloud, empowers clinics by enhancing their daily management capabilities.

In terms of drug supply, many primary care clinics still resort to purchasing a few boxes of medications from county-level pharmacies. To address this, Mingyi Zhonghe has integrated distribution services and empowered medication capabilities through its “Cloud” Pharmacy. Clinics can outsource their procurement to Mingyi Zhonghe, which will source the required medications on their behalf. This is particularly relevant under the current policy framework separating prescribing from dispensing, where there is a substantial demand for professional entities to manage pharmaceutical procurement.

There are also “Cloud” Hospitals, which empower diagnostic and therapeutic capabilities. The “Cloud” Medical School continuously enhances clinical competencies, promotes medical skills, and provides a remote medical education platform to steadily improve the clinical capabilities of clinics, thereby mitigating concerns about varying levels of physician proficiency.

In addition, Mingyi Zhonghe will continue to engage experts to provide targeted services for three key grassroots populations: the elderly, women, and young children. As for how to continuously enhance physicians’ capabilities, the only approach is to provide gradual, disease-specific and procedure-oriented education.

Wang Weixing:Currently, some clinics already possess the intellectual property (IP) of renowned physicians. Huafang Pharmaceutical is focusing on brand development, emphasizing the establishment of standardized clinic management practices to build brand reputation, with its core strategic focus lying in operations.

Currently in Hangzhou, and possibly evenClinics across China are all facing this situation, with over 90% of their revenue derived from pharmaceuticals., such as IV drips, specialized proprietary Chinese medicines, and services like acupuncture and tuina massage, Huafang Pharmaceutical aims to reduce the overall proportion of pharmaceuticals to below 50%-60%.Implement differentiated operations through other value-added services, such as health checkups, chronic disease management, and home-based care., thereby establishing core value and brand value to serve a broader population.

Topic: From an institutional perspective, how to establish one’s brand, and from a patient’s perspective, how to build a strong reputation? This has long remained an unresolved major challenge.

He Haiyang:The essence of a chain system lies in standardization. If a brand cannot be standardized, medical services cannot be productized, and management methods cannot be digitalized, it will be impossible to achieve the ultimate diversification of healthcare payment models and integrate with insurance systems.

Only after chain brands have standardized their clinical pathways, brand image, and departmental structures—ensuring these frameworks are fully established and unified—can they gain customer recognition. If medical services fail to deliver standardized products, a chain model is unviable. The essence of a chain lies in its replicability.

Furthermore, management methods must also be informatized; it is extremely difficult if all management approaches continue to rely on traditional methods. If the aforementioned three elements are achieved, the core focus in the future will be to insure payment mechanisms.

In fact, payment structures determine medical practices. A typical characteristic of China’s healthcare system is the undervaluation of medical services coupled with inflated drug prices. To establish a family physician responsibility system, it is essential to provide consumers with accessible medical care based on a value-based model. If high-quality medical services can be enjoyed at minimal cost, patient acquisition will no longer be a concern. This may well represent the core underlying demand for chain healthcare providers.

Yu Haobo:Brand building is critical in the healthcare sector. A brand is not simply equivalent to the volume of advertising or promotional activities undertaken. Such efforts may yield high exposure, but they do not necessarily translate into a favorable reputation. China does not lack healthcare product brands; what it truly lacks are brands that earn the trust of the general public at the grassroots level.

Whether a clinic can achieve sustainable growth undoubtedly requires strong brand support. Blue Card aims to build grassroots clinics into an artisan-level brand, where not only the physicians but also the services meet artisan-level standards, before scaling up through replication.

To build brand reputation, Blue Card requires all patients to rate the service after their consultations. At newly established clinics, the proportion of patients giving “very satisfied” ratings is significantly high, resulting in strong patient stickiness. This is also a key factor attracting them to seek medical care at primary healthcare facilities.

Fan Shaofei:Building a medical brand is a process of long-term accumulation, and brands in primary healthcare require an extraordinary journey. The establishment of the Primary Healthcare Management Branch under the Non-Government Medical Institutions Association aims to consolidate grassroots strength, engage every primary care practitioner as an integral part of the brand, form a broad alliance, and build trust in primary healthcare—this trust serves as the foundation of the brand.

It is not only about standardization, normalization, and capability enhancement, but also about helping patients solve their problems. Standardized diagnosis, treatment, and medication management must yield tangible results, thereby earning patients’ trust., thereby fostering long-term patient trust. Furthermore, beyond technological interventions, primary care requires a humanistic approach to build its brand through sustained engagement over time.

Yang Sa:In the course of serving grassroots communities, Xinkang Medical did not deliberately cultivate its brand. Many of its initiatives operate under a “privately run with public assistance” model, receiving substantial government support. When implemented effectively, these initiatives significantly benefit the public. The designers of the public health system are truly visionary. Over time, the public has progressed from unfamiliarity to trust, and ultimately to reliance. The establishment of Xinkang’s brand should be attributed to government support.

Topic: The payment process is inseparable from both public health insurance and commercial insurance. Although the reimbursement scope of public health insurance has expanded, its funding capacity remains limited. Commercial insurance, however, serves as a crucial, even decisive, force in transforming the overall healthcare landscape. What impact do changes in payment models have on the entire healthcare system, and what opportunities do they present?

Jiang Qiang:Drawing on the experiences of Shandong, Hebei, and Henan provinces, providing primary healthcare services cannot rely solely on medical insurance. After all, the annual outpatient reimbursement amount is only slightly over 100 yuan. Once the insurance card balance is exhausted, it takes two to three months to settle the claims and recoup the funds.

Basic medical insurance offers limited coverage for outpatient services. Data show that institutions genuinely committed to serving the public fare far better than those relying solely on the advantage of being designated as medical insurance providers.

Grassroots private healthcare represents a strategic direction, seeking survival and growth by serving a broader population. Across many regions in China, the issue of medical insurance has been widely discussed, with “cost containment” being the most frequently cited term in government documents. However, as total healthcare expenditure already accounts for a relatively small share of GDP, the significance of cost containment is limited; out-of-pocket expenses for outpatient visits are well within the financial reach of ordinary citizens.

He Haiyang:The driving force behind healthcare reform is cost containment. With the aging population, the number of elderly people reached 250 million by 2020, leading to insufficient supply in medical insurance coverage; therefore, the primary impetus remains cost containment.

In essence,Johnson provides market-oriented services, aiming to encourage the general public to pay for high-quality care.With consumption upgrading, the general public has sufficient financial resources to afford outpatient fees. Therefore, reliance should not be placed solely on government medical insurance, which serves primarily to address issues of trust.

Therefore, commercial insurance holds significant promise for the future. However, for it to thrive, it requires robust support from private institutions, diverse payment mechanisms, and entities dedicated to cost containment; without these, increased sales of commercial insurance would simply lead to higher claims payouts. Nevertheless, the prevailing trend suggests that the true future lies in the integration of primary healthcare with insurance.