Jack Ma's Entry into Health Checkups Ignites Debate Over 'Internet + Health Screening' Light vs. Heavy Business Models

By Zhou Chao and Bu Yan

Two weeks ago, Yunfeng Capital, affiliated with Jack Ma, proposed to take iKang Healthcare Group private, bringing an end to the nearly six-month acquisition battle between iKang and Meinian Onehealth. Over the past half-year, both parties continuously drove up the offer price, from an initial $17.8 per ADS to $25 per ADS. iKang even filed lawsuits against Meinian on three occasions, accusing Meinian of infringing upon iKang’s trade secrets and violating the Anti-Monopoly Law during its acquisition of Ciming Health Checkup.

Had it not been for Jack Ma’s sudden emergence, the acquisition battle between iKang Healthcare Group and Meinian Onehealth would have been dismissed as just another melodramatic corporate showdown. However, his involvement has compelled us to reevaluate the status and significance of the health checkup industry in the mind of this godfather figure of China’s internet sector, as well as the value and prospects of “Internet + Health Checkups” within the future RMB 10 trillion healthcare market.

What is certain is that Jack Ma’s move to acquire iKang Guobin will inevitably accelerate the consolidation and M&A activities among private health checkup providers. In the future, it is even possible that, driven by capital forces, iKang Guobin and Meinian Onehealth could merge, similar to the earlier merger of Didi and Kuaidi.

However, a fundamental reality of the health checkup industry is that public hospital checkup centers across China account for more than 90% of the market share, and this landscape is unlikely to change for a considerable period. Therefore, the significant opportunity for the health checkup industry in the next 3–5 years lies in avoiding direct confrontation with large capital’s aggressive, asset-heavy consolidation efforts, and instead leveraging an asset-light model to skillfully tap into and integrate the vast checkup market dominated by public institutions.

Jack Ma’s “Grand Ambition”: A Closed-Loop Healthcare Industry with Health Checkups as the Entry Point

Jack Ma’s vision and ambitions for the healthcare industry are widely known, but progress has not been smooth. Take Alibaba Health, the integrated platform for Jack Ma’s healthcare initiatives, as an example: its development over the past six months has been quite challenging. The China Food and Drug Administration (CFDA) revoked its operational rights to the drug electronic supervision code system; the plan to integrate Tmall’s online pharmaceutical business into Alibaba Health was terminated; and progress in its online hospital services has been considerably slow.

China’s healthcare system is inherently highly administrative and fragmented. Regardless of Jack Ma’s substantial financial strength and operational capabilities, it would be difficult to effectively disrupt this entrenched industry landscape in the short term. Perhaps for this reason, Jack Ma has chosen to enter through the more market-oriented health checkup sector, leveraging robust capital and market operation capabilities to consolidate the industry. By coordinating with Alibaba Health and other healthcare businesses under his umbrella, the ultimate aim is likely to build a comprehensive industrial closed loop covering all aspects, including health management, medical services, pharmaceutical e-commerce, medical insurance payment, and commercial health insurance.

Reexamining the Health Checkup Industry: As health checkups primarily target healthy individuals, they enable effective tracking and monitoring of health status before the onset of disease. This allows for the provision of comprehensive health management services, along with various medical services such as consultations and referrals, and health insurance plans, naturally positioning the industry as a key entry point into the healthcare sector. Furthermore, the entire checkup process accumulates lifelong health data, which, together with hospital electronic medical records (EMRs), forms a complete electronic health record (EHR). This serves as the foundation for future tiered diagnosis and treatment systems and various internet-based medical services, underscoring its significant strategic value.

iKang Guobin, the target of Jack Ma’s latest move, is the second-largest private chain of health checkup centers in China, trailing only Meinian Onehealth. It is predictable that iKang Guobin will accelerate its scale expansion and actively pursue synergistic integration with Jack Ma’s healthcare businesses. Regardless of whether Meinian Onehealth ultimately merges with iKang Guobin, following the trajectory of Didi and Kuaidi in previous years, or seeks backing from other BAT giants apart from Jack Ma to continue its “love-hate” rivalry with iKang Guobin, the future of China’s private health checkup market will undoubtedly be a capital-driven feast.

Heavy-Asset M&A Battle: Is Meinian Onehealth Healthcare Defecting to Jack Ma or Accelerating Fundraising?

The health checkup industry war, starring Meinian Onehealth, iKang Healthcare Group, and Ciming Health Checkup over the past few years, has consistently adhered to an asset-heavy model. Competing parties have raced to secure financing and go public, using the substantial capital raised to accelerate the self-construction of health checkup centers and the acquisition of regional small- and medium-sized private chain health checkup institutions.

Before Jack Ma made his move on iKang Guobin, Meinian Onehealth held a dominant position in terms of both the number of health checkup centers and annual checkup visits. According to an April research report released by Dongxing Securities Research Institute, Meinian Onehealth operated 150 checkup centers after acquiring Ciming Health Checkup, compared with 86 for iKang Guobin. Data from third-party consultancy Zhongwei Information showed that Meinian Onehealth and Ciming Health Checkup together conducted 9.5 million checkups in 2015, while iKang Guobin handled 3.5 million.

In terms of expansion speed, Meinian Onehealth has also significantly outpaced iKang Healthcare. According to a report by Sinolink Securities Research Institute, from 2012 to 2014, Meinian Onehealth added 21, 23, and 34 new health examination centers respectively (excluding Ciming Health Checkup), while iKang Healthcare added 10, 9, and 13, respectively. Clearly, Meinian Onehealth held a distinct advantage.

Prior to Jack Ma’s entry, Meinian had undergone multiple rounds of financing and achieved a back-door listing on China’s A-share market, thereby establishing substantial capital strength. According to the privatization offer issued by Meinian Health to iKang Guobin on November 29, 2015, the consortium behind the privatization boasted an exceptionally strong background, comprising renowned foreign private equity firms such as Cathay Capital and Sequoia Capital; domestic financial institutions including Ping An Insurance, Industrial Bank, Huatai Securities, and Haitong Securities; as well as state-owned entities such as Shanghai International Group Co., Ltd., Shanghai Huangpu District State-Owned Assets General Company, and Anhui Foreign Economic Construction (Group) Co., Ltd.

However, with Jack Ma joining the camp of iKang Guobin, the balance of power seems to have gradually shifted away from Meinian Onehealth. If Meinian Onehealth does not wish to “surrender” to Jack Ma, it must accelerate its financing process to reserve sufficient “resources” for the upcoming battle of acquisition and integration.

What has placed Meinian Onehealth in an awkward position is that, although it successfully listed on the A-share market through a reverse merger with Jiangsu Sanyou, a fundamental turnaround in the A-share market is unlikely within the next one to two years, making equity financing from this market no easy task.

Based on the financial data from the first quarter of 2016, Meinian Onehealth’s debt-to-asset ratio was 29.03%, its current ratio was 1.45, its quick ratio was 1.43, and current assets accounted for 38.3% of total assets. Although there is room to further increase financial leverage, doing so would undoubtedly be a risky move for future operations.

The asset-heavy model of self-construction and acquisitions has played a significant role in the development of private health checkup institutions in recent years. However, its drawbacks are also quite apparent, not only leading to excessively high debt ratios and financial leverage but even resulting in the loss of corporate control to external parties. The withdrawal of Zhang Ligang, founder of iKang Healthcare Group, from the privatization of iKang may serve as the most illustrative example.

Third-Party Platforms: A Shortcut to Tapping into Public Institutions That Hold 90% of the Market Share

While this major competition has captured significant attention, a fundamental industry fact determines that no monopolistic giant will emerge in the future of the health checkup sector: public hospital health checkup centers account for over 90% of the total market share, while private institutions hold less than 10%. The two largest private chain health checkup providers, Meinian Onehealth (including the acquired Ciming Health Checkup) and iKang Guobin, collectively hold only around 3% of the market. Due to institutional factors, the public institutions, which command more than 90% of the market share, will maintain an independent and fragmented landscape for a considerable period.

However, the development of public health examination institutions has long been plagued by numerous issues. It is widely acknowledged within the industry that public institutions lack operational and management mechanisms adaptable to market competition, lag behind in service attitude and environment, hold a weak position within hospitals, and possess limited capacity to mobilize resources. Yet the most significant challenge for public institutions lies in their inability to meet users’ increasingly personalized demands for comprehensive healthcare services—spanning pre-examination, post-examination, clinical treatment, and rehabilitation—when major capital players at the scale of Jack Ma are providing backend support for health examinations through an integrated closed-loop healthcare ecosystem. In contrast, fragmented and isolated public institutions are only capable of offering standalone services during the examination process itself.

Large public institutions have keenly felt the chilling effect of rapidly encroaching big capital. Yet, they can neither be acquired by such capital nor single-handedly counter its sharp edge in integrating the healthcare closed loop, leaving them in a truly disadvantageous position.

Asset-light third-party health checkup platforms, if capable of rapidly integrating a vast number of small and medium-sized public and private health checkup institutions internally to create synergies, while extensively establishing collaborative partnerships with external stakeholders in health management, medical services, and commercial insurance, may offer an effective solution to the challenging predicament faced by these small and medium-sized public and private health checkup institutions.

Currently, there are few third-party health checkup platforms in China, with Zhongkang Health Checkup Network and Kangkang Health Checkup Network being the two major players. Originating in Fujian Province, Zhongkang Health Checkup Network has established cooperative partnerships with over 1,000 hospitals and specialized health examination centers across China. Its services cover 100 cities, including Beijing, Shanghai, Shenzhen, Hangzhou, Guangzhou, and Fuzhou. The company’s offerings include online booking for individual, family, and corporate health examinations, as well as overseas medical and health checkup services in countries such as the United States, Japan, Australia, and Switzerland. Unlike the broader health checkup industry, where corporate clients constitute the majority, 90% of Zhongkang Health Checkup Network’s customers are individual users, with corporate accounts accounting for only 10%. Lin Qifeng, founder of Zhongkang Health Checkup Network, stated that the platform plans to recruit teams of physicians to join its network and will launch a mobile application providing professional interpretation of health examination reports for patients.

Kangkang Health Checkup Network, headquartered in Shenzhen, currently covers more than 4,000 medical checkup institutions across China, including over 3,000 public checkup facilities, spanning more than 600 cities nationwide. Its corporate clients include many well-known domestic enterprises such as Huawei and 58.com, while its individual user base has exceeded 1 million.

KangKang Checkup Network has been able to rapidly capture the public health examination institution market, largely thanks to the resources and experience accumulated by its parent company, Tianfangda, over a decade of serving these institutions. According to Li Dianzhao, founder and CEO of Tianfangda, the company, originally an HIS (Hospital Information System) vendor, recognized the significant opportunities in the future health examination market around 2004. It subsequently pivoted to develop the “Xinglin Qixian” health examination software, which rose to become the leading product in China’s domestic health examination software market within a few years. With a market share exceeding 30% among public institutions, it effectively secured its position as the primary entry point for “Internet + Health Examination” information services.

Li Dianzhao told VCBeat that Kangkang Checkup Network is integrating the “pre-examination, during-examination, and post-examination” segments of the health checkup industry chain. It provides users with personalized pre-examination plan customization, optimized processes during examinations, and post-examination tracking and management services. Together with Tianfangda’s Minkang Clinic SaaS platform and the Kangkang Online APP, it connects multiple resources—including appointment scheduling, pharmaceutical e-commerce, chronic disease management, and health management—to build a one-stop medical and healthcare service system with health checkups as the entry point.

Ultimately, the discussion returns to Jack Ma’s strategic layout in the broader health industry and the potential moves he may make in the physical examination sector. As is well known, Jack Ma has reached the pinnacle of success by adhering to an “asset-light” model, and he is likely to become the world’s richest person in the near future. His ventures, such as Taobao, Tmall, and Ant Financial, exemplify this approach. Jack Ma has always focused on building platforms rather than engaging in self-built, self-operated businesses.

So, after acquiring iKang Guobin, will Jack Ma “wield capital to command the lords,” launching large-scale mergers and acquisitions of health checkup institutions? Or will he continue his previous approach, aggregating a vast number of small and medium-sized public and private institutions through a third-party platform? If it is the latter, will Jack Ma choose to build a brand-new platform or acquire an existing third-party platform with certain market influence? This is the suspense Jack Ma has left for us, and also the biggest highlight for the health checkup industry in the near future. Welcome to add WeChat ID yeyurenlei to jointly follow and discuss the future development trends of the big health industry.