China's Independent Hemodialysis Center Policy Liberalization: A Milestone for Industry Development and Market Access

By Zhang Yongqiang, Aishen Medical

On December 6, 2016, the National Health and Family Planning Commission issued Document No. 67 [2016] of the National Health and Medical Administration. The issuance of this document holds two significant implications: first, it establishes unified national standards for independent hemodialysis centers; second, it fully liberalizes the establishment of independent hemodialysis centers across China. The author entered the field of private independent hemodialysis centers in 2007, participated in the pilot application and preparatory work for independent blood purification centers during 2010–2011, and served as the legal representative involved in the operational management of a dialysis center. Since 2013, the author has been responsible for the construction of independent hemodialysis and blood purification centers in Shandong, Hebei, Shanxi, and Guangdong provinces. Now that policies governing hemodialysis centers in China have matured, the following text is organized as a summary and source of mutual encouragement, based on the author’s experiences and relevant materials. Any shortcomings are subject to correction.

1. A Ray of Light in the Wilderness Era—Shenyang Sunshine Pharmaceutical’s Exploration

The so-called “wild era”: “wild” refers to the prevalent practices of deploying various types of equipment and contracting out hospital departments, which were legally ambiguous or even illegal; “barren” denotes the low level of development and limited scale of blood purification services in China at that time, with many county-level public hospitals lacking hemodialysis units altogether. Around 2009, Shenyang Sansheng Pharmaceutical (a domestic producer of erythropoietin, EPO) established “Sansheng Kidney Patient Homes” in Jinzhou and other areas of Liaoning Province, initiating the creation of a “chain of grassroots hemodialysis centers.” The author once met and communicated with relevant executives from Sansheng at that time. However, those “Kidney Patient Homes” were operated within existing medical institutions and did not hold independent medical institution practice licenses or legal entity status.

2. Milestone – Approval of Pilot Programs for Weigao Group and the Bethune Foundation Management Committee

In December 2010, the former Ministry of Health approved two institutions to launch pilot independent blood purification centers in Shandong Province, marking a milestone for independent hemodialysis centers in China. The significance of this milestone lies in the following: 1. “Independent blood purification center” emerged as a new category of medical institution specially authorized by the Ministry of Health; 2. The national health administrative authorities established preliminary standards for “independent blood purification centers,” laying a beneficial foundation for future legislation and expansion to other provinces.

3. Acting with Slight Urgency: The Sequential Opening of Hebei, Shanxi, Fujian, and Guangdong Provinces

“Hasty Implementation” refers to the fact that, as the National Health and Family Planning Commission had not yet summarized the pilot programs or issued normative documents, the pilot initiatives in various provinces were neither clear nor standardized. Since neither policy nor legislation should be expanded before conclusions are drawn from pilot programs, policies in relevant provinces have exhibited certain issues. For example: some provinces have restricted the entities eligible for pilot status and imposed regional divisions. How is the qualification of pilot entities determined? What is the basis for the regional division of pilot entities (why are some entities allocated larger regions)? Why is the establishment of for-profit hemodialysis centers prohibited? Can foreign-invested enterprises apply? Ultimately, the problem lies in hasty implementation; particularly in the field of healthcare legislation, the proliferation of lower-level regulations without guidance from higher-level laws poses significant risks.

1. Background

The author believes that there are three reasons for the issuance of this document. First, the National Health and Family Planning Commission (NHFPC) released a draft for public comment in 2014, but no official version was ever issued. Second, various provinces have been successively introducing their own policies, creating an urgent need for regulatory documents at a higher level and with greater authority. Third, in the “Decision on Amending the Detailed Rules for the Implementation of the Regulations on the Administration of Medical Institutions (Draft for Public Comment)” issued by the NHFPC on November 1, 2016, “hemodialysis centers” were already included as a standard category of medical institutions under Article 3, Item (10). Therefore, it is essential to establish basic standards for such facilities to facilitate approval and oversight.

2. Core Interpretation

(1) Definition of Medical Institutions

What Constitutes a Hemodialysis Center? A clear definition has been established, with two core criteria: first, it must be independently established, not affiliated with or subordinate to other medical institutions, meaning it holds an independent Medical Institution Practice License; second, it must provide hemodialysis services, defining its scope of diagnosis and treatment. A point worthy of consideration is whether such departmental delineation—where the “diagnostic and therapeutic specialty” is listed as “Nephrology,” yet the “departmental setup” only specifies a “Hemodialysis Room” along with pharmacy, laboratory, diagnostic imaging, and sterile supply departments—can adequately meet actual clinical needs. This issue will be explored in the following section.

(2) Entry Criteria

Miniaturization and Community-Based Care: The entry-level standard for an independent hemodialysis center is defined as 10 hemodialysis machines, constituting 10 dialysis units. It is foreseeable that within the next 3–5 years, patients with end-stage renal disease (ESRD) in China will receive treatment within their local communities. Community-based hemodialysis centers may be established with a service radius of 3–5 kilometers, making dialysis as convenient as grocery shopping or visiting a supermarket.

(3) Approval Process and Authority

There are two core keywords: first, “independently established,” and second, approval by authorities at the provincial level or above. The authority to approve applications for such medical institutions rests with the Health and Family Planning Commission at the provincial level or above, meaning that the Provincial Health and Family Planning Commission issues the Medical Institution Practice License. The process generally takes two forms:

A submits the application for establishment to the Provincial Health and Family Planning Commission → Preliminary review by the Provincial Health and Family Planning Commission → Solicitation of opinions from the Municipal Health and Family Planning Commission → The Municipal Health and Family Planning Commission solicits opinions from the proposed medical institution → Feedback to the Provincial Health and Family Planning Commission → The Provincial Health and Family Planning Commission issues an approval or disapproval decision;

B. Solicit opinions from the county-level Health and Family Planning Commission in the area where the proposed medical institution is to be established; upon approval, solicit opinions from the municipal-level Health and Family Planning Commission; upon approval, submit the application to the provincial-level Health and Family Planning Commission, which will approve or disapprove the establishment.

Prior to the issuance of this document, most provinces basically adopted an approval system administered by the health administrative departments at the district/county level or the prefecture-level city to which they belonged (either based on scale or through direct stipulations). After its issuance, it can be understood that the approval authority has been elevated and centralized, which is conducive to standardizing the approval process, but also implies an increase in the hierarchy of approval levels.

(4) Multiple Regulatory Oversight

Multiple regulatory oversight refers to: first, the provincial Health and Family Planning Commission is responsible for licensing oversight (issuing Medical Institution Practicing Licenses); second, routine medical management and supervision by local health authorities; and third, operational oversight by quality control centers, including timely data submission and acceptance of operational inspections.

(5) Institutional Nature

Breaking through the original regulations mandating that hemodialysis centers be non-profit, the principle of “freedom unless explicitly prohibited by law” applies. Since the relevant documents do not explicitly specify whether such facilities must be “for-profit” or “non-profit,” applicants may determine the nature of their medical institutions in accordance with current laws and regulations. This clarity eliminates the need for ambiguity, making it feasible to establish a medical services company operating a national or regional chain of hemodialysis centers, and even to enter the capital market. It is worth noting that all approved hemodialysis centers in Shandong Province and Hebei Province are designated as non-profit medical institutions (the prohibition on shareholder dividends precludes independent capital operations). Consequently, “first-mover advantage” may turn into a “first-mover burden.” To pursue market-oriented and capitalized operations as an industry, it is necessary to change the institutional status from “non-profit” to “for-profit,” a challenging and cumbersome process involving national policies, taxation, and other issues.

(6) Provisions for Foreign Investors

There are no specific regulations, nor can they be practically established, as foreign investment in the healthcare industry involves issues at the level of legislation, legislative bodies, legal bases, and national policies, which cannot be resolved by the National Health and Family Planning Commission (NHFPC) alone. The absence of specific regulations means that existing laws and regulations regarding Sino-foreign joint ventures and cooperative applications for medical institutions must be implemented. If foreign capital seeks to establish hemodialysis centers, the following restrictions apply: wholly foreign-owned hemodialysis centers are prohibited (except in specially approved areas such as the Shanghai Free Trade Zone); the minimum investment scale is RMB 20 million; the Chinese party’s equity share must be no less than 30%; the term of cooperation or joint venture shall not exceed 20 years; approval from the Ministry of Commerce is additionally required; and the establishment of branch offices is not permitted. Hong Kong and Macau capital enjoy certain advantages (e.g., permission for wholly owned operations and lower investment thresholds). As evident from the above regulations, some foreign dialysis service providers’ acquisitions of “specialized hospitals” in China offer no substantive help in participating in or expanding hemodialysis center businesses; these moves are merely tactical entries into the Chinese market.

(7) Whether it is fully open across China

Does the release of this document mean that operations can be launched nationwide? From a regulatory perspective, the answer is yes. However, the author believes that the true signal for full liberalization should be the formal promulgation of the “Decision on Amending the Detailed Rules for the Implementation of the Regulations on the Administration of Medical Institutions.” This is because the Regulations on the Administration of Medical Institutions are administrative regulations formulated by the State Council, while the Detailed Rules for the Implementation of the Regulations on the Administration of Medical Institutions are departmental rules issued by the Ministry of Health to implement the higher-level law. This would ensure complete consistency in terms of legislative hierarchy and content, thereby providing a stronger legal basis for the establishment of hemodialysis centers.

(8) Other Standards

There have been no significant changes to the standards for personnel, equipment, facilities, and management in hemodialysis centers, which basically continue to follow the “SOP” requirements, demonstrating that China’s hemodialysis industry has gradually become standardized and improved.

1. Significance

(1) Legislation is invariably lagging and conservative; however, China has finally established a unified regulatory framework for the construction of independent hemodialysis centers. This development facilitates the standardized growth of such centers and safeguards the medical safety of dialysis patients. Particularly against the backdrop of fragmented and outdated health legislation in China, this achievement reflects the rigor, efficiency, and decisiveness of the National Health and Family Planning Commission’s legislative approach.

(2) A standardized, transparent, and fair market environment has been created for social capital to participate in the establishment of independent hemodialysis centers. With unified regulations implemented across all provinces in China, there are no longer any special “policies,” “licenses,” or “first-mover advantages.” All participants compete openly and fairly, thereby eliminating speculative practices. The author believes that only through transparency and rationality can enterprises genuinely committed to providing dialysis services align with investors who have a strong confidence in the dialysis industry, achieving a win-win outcome and fostering the emergence of respected hemodialysis service providers.

(3) The standards emphasize miniaturization and community-based services, enabling dialysis patients in China to receive dialysis at nearby community centers in the future. This will reduce transportation and time costs associated with dialysis treatment. Indeed, facilitating “nearby dialysis” was one of the original intentions behind the state’s early pilot programs for hemodialysis centers. Proximity not only offers convenience to patients but also serves as a crucial prerequisite for reducing healthcare expenses and promoting patients’ reintegration into society.

2. Limitations

(1) There should be clear guidelines on how to align with the “Blood Purification Centers” and “Hemodialysis Centers” that have already been approved and established in various provinces. Prior to the release of this document, a significant number of similar medical institutions had already been approved and established in many provinces (with some companies disclosing that they were operating as many as 100 such facilities). Key questions remain: Are approvals granted but not yet constructed still valid? How should applications currently under review be handled? How should already operational facilities be managed? While these issues could be addressed by applying legislative principles such as “the supremacy of higher-level laws over lower-level laws” and “non-retroactivity of law,” or by seeking individual instructions, issuing explicit handling principles would be more efficient and standardized.

(2) Whether the departmental structure of hemodialysis centers should be expanded. In 2010, the application to the Ministry of Health for a pilot program was for an “Independent Blood Purification Center,” considering that the scope of “blood purification” technology is broad: both hemodialysis-related and peritoneal dialysis-related techniques can be implemented. In actual clinical practice, it is necessary to combine hemodialysis and peritoneal dialysis technologies based on clinical needs. Peritoneal dialysis also requires community-based and small-scale service models. The author believes that it is feasible for hemodialysis centers to provide peritoneal dialysis services, which would enable better and more convenient management of peritoneal dialysis patients while increasing the center’s revenue. Additionally, outpatient clinics can be established. In the future, as hemodialysis centers expand on a large scale, they should become the frontline for kidney disease education and prevention.

(3) Whether to break down the “glass door” and seek a balance between openness and safety. The term “glass door” refers to the requirement that hemodialysis centers must sign service agreements with Tier 2 and Tier 3 hospitals; without such agreements, it is difficult to obtain or renew their “practice license” or pass the “annual inspection.” The “glass door” can be interpreted as follows: first, it is mandatory to sign a medical service agreement for the treatment of acute complications in hemodialysis patients and establish a “green channel” with comprehensive hospitals at Tier 2 or above within a 10-kilometer radius; second, it is mandatory to sign a medical service agreement for the diagnosis and treatment of chronic complications in hemodialysis patients and establish a “two-way referral channel” with Tier 3 comprehensive hospitals within the region. Without these agreements, obtaining a practice license or passing the annual inspection becomes highly challenging. While we fully understand the state’s emphasis on medical safety, consideration should also be given to the possibility that such regulations may ultimately allow Tier 2 and Tier 3 comprehensive hospitals to become the “gatekeepers” of hemodialysis centers. Even among public hospitals, competition exists and two-way referrals face difficulties; this poses a significant challenge for socially funded healthcare institutions.

(4) The classification level of medical institutions for “hemodialysis centers” is not clearly defined. Previously, some provinces stipulated that “hemodialysis centers” and “blood purification centers” should be managed by reference to secondary specialized hospitals. Although this provision may appear optional and was not clarified in the recently issued document, it has a significant impact based on the author’s practical work experience. The classification level of a medical institution holds two important implications: first, it determines the fee standards for medical services; for similar medical procedures, higher-level hospitals charge more—for example, the fee difference for hemodialysis between tertiary and secondary hospitals ranges from 30 to 40 yuan. Second, it determines the reimbursement rate under basic medical insurance; the higher the hospital level, the lower the reimbursement rate. Although private medical institutions are now permitted to set their own prices and dialysis services are often covered under single-disease bundled payment models, the absence of a clear definition of institutional classification levels creates considerable difficulties when applying for designated medical insurance provider status (which has been abolished in principle) and signing medical insurance agreements. These challenges arise due to the need for cross-institutional coordination, a sentiment shared by colleagues who have handled medical insurance matters. It is hoped that the National Health and Family Planning Commission will consider this issue and address it through appropriate legislative measures.

1. Key Points and Challenges in Establishing Hemodialysis Centers Under the New Policy

1.1 Policy Implementation

Policies must be implemented on the ground to truly take effect. From this perspective: First, provincial Health and Family Planning Commissions require time to fully digest and interpret national policies. Second, time is needed to issue supporting regulations and implementation standards; currently, there are significant variations across provinces in the authority, procedures, and requirements for approving medical institutions, necessitating systematic clarification. Third, the promulgation and implementation of the Detailed Rules for the Implementation of the Regulations on the Administration of Medical Institutions also require time. Finally, entering the approval stage necessitates prior communication and applications with county/district, prefecture-level city, and provincial Health and Family Planning Commissions. Therefore, while the policy benefits for hemodialysis centers are clear, the comprehensive rollout of their establishment and construction remains challenging. This involves not only policy-related issues but also the mindset of regulatory authorities. As this situation applies universally, it poses even greater difficulties for foreign manufacturers.

1.2 Medical Personnel

Currently, over 95% of the more than 4,000 dialysis institutions in China are various types of public medical facilities, all of which are expanding or planning to expand. The opening of hemodialysis centers will intensify the demand for medical professionals specialized in hemodialysis. A shortage of such medical technical personnel is itself a long-standing and difficult challenge facing China’s healthcare reform. First, there is the quantitative requirement. In his article “Nephrology in China,” published in September 2013, Academician Liu Zhihong stated: “According to statistics, there were approximately 8,000 registered nephrologists in China in 2008.” According to widely accepted market estimates, the number of dialysis centers in China will reach approximately 9,000–10,000 in the future, representing an increase of about 5,000 centers. This expansion will require at least 5,000 additional registered nephrologists—a target that is already difficult to achieve, let alone recruiting physicians with intermediate or senior professional titles. Second, there is the qualitative requirement. Professionals must not only possess solid medical expertise to ensure patient safety but also adapt to corporate culture and institutional requirements.

1.3 Management Personnel

In recent years, the professionalization and specialization of healthcare management have become a consensus in public hospitals. Hospital presidents may increasingly serve as “professional managers” dedicated to hospital operations, rather than necessarily being medical experts. This trend is even more pronounced in privately run healthcare institutions. Particularly during the expansion phase of the hemodialysis center sector over the next 3–5 years, 90% of facilities will be newly established or constructed, involving coordination with numerous departments and matters such as health, industry and commerce, environmental protection, urban construction, fire safety, taxation, social security, electricity, and water supply. Therefore, medical administrators of hemodialysis centers should prioritize managing these responsibilities. However, constrained by the current development level of China’s private healthcare sector (excluding certain affiliated groups), professionals who possess foundational medical and hemodialysis knowledge, legal expertise, experience in administrative licensing, and strong communication skills remain scarce.

1.4 Brand and Core Competitiveness

The essence of healthcare services lies solely in “medical safety and quality”; a brand is established only when it earns patient recognition and trust in practice. It is essential to respect life, value medical professionals, properly balance the relationship between medical ethics (“yi”) and economic benefits (“li”), and maintain a profound reverence for medicine. The core competitiveness fundamentally consists of clinical service capabilities and enterprise management abilities that “enhance dialysis quality while ensuring dialysis safety.” Due to the country-specific and unique nature of healthcare, all market participants—whether industry pioneers, international giants, or newcomers—start on an equal footing.

1.5 Perseverance

Hemodialysis centers remain a nascent industry and novel concept in China, with no precedents to follow or models to emulate. Confronted with numerous uncertainties and challenges in policy implementation, we must persevere. Amid constraints on market resources and talent, we must adopt appropriate strategies to complete approval, construction, and layout. In the context of an increasingly open healthcare market and the gradual socialization of physicians, it is essential to establish suitable mechanisms for employment, collaboration, and resource sharing to attract medical professionals. “We must have both passion and patience and perseverance!”

2. Industry Analysis

2.1 “The First Movers”: Being first is both an advantage and a burden, as this advantage is built upon policy dividends and immature regulatory frameworks. The more facilities established, the greater the rectification tasks faced. For instance, if capital operations are desired, the issue of the “non-profit” status of medical institutions must be resolved promptly. There is also a hope to create a favorable environment and reputation for the industry.

2.2 A surge of “followers” is emerging. First, companies related to the hemodialysis industry are likely to enter, such as those providing hemodialysis consumables, equipment, and pharmaceuticals. Second, publicly listed healthcare companies will enter, including those in pharmaceuticals, medical devices, diagnostics, and other medical services. Third, long-awaited foreign “giants” will enter; these are leading international enterprises that currently have virtually no presence in China. Fourth, major “deep-pocketed investors,” such as various fund investment institutions and real estate developers, will join. Finally, industry innovators, such as internet healthcare companies and physician groups, will enter the market.

2.3 An Objective View of the Economics of the Hemodialysis Services Industry

Characterized by stringent requirements, specialized technology, substantial investment, and slow returns, the hemodialysis service industry is a “heavy-medical” sector, distinctly different from medical aesthetics, andrology, gynecology, or proctology. With dialysis-related expenditures under national health insurance rising year by year, rational cost containment has become an inevitable trend. Moreover, China’s current reimbursement rates are significantly lower than those in Taiwan, Japan, the United States, and Europe. In Taiwan, the profit margin for chain-operated dialysis centers is less than 10%. From an economic perspective, the dialysis industry is undoubtedly stable but will never yield exorbitant profits.

2.4 Industry Segmentation

The liberalization of hemodialysis policies does not mean that self-built or chain dialysis centers are suitable for everyone. The industry requires specialized division of labor and the outsourcing of professional services to third parties; there is no need to handle every aspect in-house from scratch. A mature healthcare market demands a professional third-party service ecosystem, adhering to the principle that “specialization yields expertise,” a model long established in developed countries such as the United States and those in Europe. For instance, patient education and management can be fully delegated to third-party providers. Enterprises specializing in nutrition, psychological counseling, and out-of-hospital care management for dialysis centers will also emerge. iShen Medical’s iShen Network is a representative example of such entities.

2.5 Application of New Technologies

It refers not only to innovations in medical technology (expectations) but also to leveraging IT innovations, ranging from mobile health and telemedicine to smart healthcare, big data, and cloud computing. These are critically important for a company aspiring to build a chain of hemodialysis centers, and they represent the gap between us and foreign “giants.” If chain-operated dialysis centers achieve informatization, they will accumulate vast amounts of clinical medical data and patient records—surpassing any single public hospital. Moreover, these data are collected for the enterprise’s own management and evaluation purposes, rather than being mandated by regulatory authorities for reporting. Consequently, such data exhibit higher quality, better structure, greater accuracy, completeness, and timeliness. This may well become the foundation for future research in China on hemodialysis care, pharmaceutical development, medical device innovation, and preventive medicine.

2.6 Enhanced Industry Collaboration

Currently, there are various privately operated hemodialysis service organizations. While competition exists, collaboration is equally important. It is hoped that through diligent practice, industry participants will gradually gain a thorough understanding of market dynamics and propose legislative recommendations conducive to industry development, thereby returning to the essence of medical care and preventing incidents similar to the “Wei Zexi case” from occurring within the sector. The author believes that collaboration outweighs competition in at least the following aspects: First, regarding the improvement and supplementation of industry management standards, it is essential to establish interactive communication with health administrative authorities and professional regulatory bodies; a unified voice carries greater weight. Second, centralized procurement. The hemodialysis center business operates on low profit margins, with major costs attributed to rent, labor, and consumables. Practitioners without industrial backing will constitute the majority of the industry. Therefore, engaging in centralized negotiations with manufacturers for the procurement of dialysis machines and key dialysis consumables can secure more favorable pricing. This approach not only helps reduce costs and prevent unfair competition but also partially offsets the competitive disadvantages faced by independent providers when competing against integrated enterprises such as Weigao and Fresenius, which both manufacture consumables and provide services.

As a witness to the evolution of policies governing hemodialysis centers in China, I am filled with profound reflections. Borrowing from Dickens, it can be said that for China’s hemodialysis service industry, “it was the best of times, it was the worst of times.” Let us join forces to improve the well-being of dialysis patients in China and realize our professional aspirations.

AiShen Wang, co-founded by the author and several colleagues, is a professional online platform dedicated to renal nutrition. It provides one-stop, whole-course nutritional management services for patients with kidney disease, including one-on-one dietary guidance from dietitians, nutritional management for kidney disease patients, online consultations on renal nutrition issues, public education on renal nutrition, and a specialty food store offering kidney-friendly products. Additionally, AiShen Wang brings together China’s earliest team specializing in the application, design, establishment, management, and digitalization of hemodialysis centers. We look forward to collaborating with industry peers to benefit patients.

The above represents personal opinions; please correct any inaccuracies. I look forward to more exchanges with colleagues in the industry.