How to Select Hospital Investment Targets: Insights from Regional Healthcare Data

Since the second half of last year, hospital investments have once again become highly active. Particularly in the first half of this year, numerous listed companies and industry players have increased their investments, while many M&A funds and financial investors have been actively scouting for hospital acquisition targets.

Data from a medical industry publication also reflects the status of hospitals (primarily including primary, secondary, and tertiary hospitals, excluding other healthcare institutions) from two to three years ago, mainly covering information such as the number of hospitals, bed counts, and outpatient visits across various regions. These three indicators will be the primary data points discussed in this article. Since hospitals in different regions are subject to the same statistical criteria, comparisons among them are reasonably valid. First, let us examine Figure 1, which provides an overview of total medical resources by province. The radar chart illustrates the total number of hospital beds and total daily outpatient visits, representing capacity or potential.



In terms of capacity, the top 10 provinces and municipalities ranked by total daily outpatient visits across all hospitals are: Guangdong, Shandong, Liaoning, Jiangsu, Beijing, Zhejiang, Sichuan, Henan, Hebei, and Shanghai. (Specific figures are not disclosed at this time due to differences in reporting periods, but they can be used for year-over-year cross-regional comparisons. Note that Guangdong’s data includes Shenzhen.)

After review, I have the following observations:

1) Either coastal provinces or populous provinces possess the greatest capabilities;

2) Regions with more significant progress in healthcare reform are either provinces with greater potential or areas with weaker capabilities (individual pilot sites);

3) Beijing and Shanghai may rank relatively lower within the top 10 due to their large populations, but they still make it into the top 10 thanks to the influx of patients from other provinces. (This ranking is based on outpatient volumes across all departments and specialties; if the assessment were focused solely on high-level specialized care, Beijing and Shanghai would likely rank much higher.)

Let’s examine the second chart, which provides an overview of medical consultations across provinces. The radar chart reflects the overall average number of hospital beds and the average daily outpatient volume, representing efficiency.



Potential alone is insufficient for a region; efficiency is one of the factors investors prioritize. From this perspective, the top 10 regions ranked by average total daily outpatient visits per hospital are: Shanghai, Guangdong, Beijing, Tianjin, Zhejiang, Jiangsu, Hubei, Tibet, Guangxi, and Fujian.

Several observations stand out as well:

1) Economically developed regions still demonstrate higher efficiency, with Shanghai, Guangzhou, and Beijing ranking in the top three, which is not surprising;

2) Tibet unexpectedly broke into the top 10; this may suggest that resource scarcity has led to higher efficiency, but further analysis is required.

3) Through meticulous analysis, hospitals with an average total daily outpatient volume below a certain threshold may not be priority investment targets (thereby saving considerable time).

Moreover, regions with more favorable healthcare reform policies, coupled with higher efficiency, can attract greater investor attention.

Next, let’s examine Figure 3, which presents an overall comparison of resources by hospital tier.

While the distribution proportions of Tier 1, Tier 2, and Tier 3 hospitals among China’s tens of thousands of healthcare institutions are already well known, this chart has still been created (with circle area representing daily outpatient volume and the Y-axis indicating bed capacity by hospital tier). It roughly conveys the following points:

1) Secondary hospitals handle the largest volume of outpatient services and also possess the greatest bed capacity;

2) Although there are more Level 1 hospitals, their workload capacity remains insufficient;

3) The distribution across provinces remains uneven (as derived from more granular analysis).

Furthermore, given the variations in local policies, tilt angles, and investment costs, this analysis can provide guidance for selecting appropriate investment strategies across different regions.

One final chart remains. Similar to the third chart, it presents an overall efficiency comparison by hospital tier (average daily outpatient volume).



Similarly, this is an analysis from the perspective of averages.

1) The average number of beds in tertiary hospitals was 605 (based on the statistical scope for that year; current estimates are significantly higher);

2) The average number of beds in secondary hospitals is 196, which should currently be far exceeded;

3) There was little change in primary hospitals. The area of the circle represents the average daily outpatient volume; there is a significant disparity between primary and tertiary hospitals, which requires no further explanation.However, it seems plausible to speculate that secondary hospitals may have greater potential for improvement or investment.

The above analysis merely provides a brief overview of several fundamental metrics for hospitals across China based on four charts. Further analysis can reveal variations in resource distribution, regional priorities, and operational efficiency. By integrating local policy insights with in-depth data analysis—particularly through the deep mining of key benchmark indicators—investors can formulate more effective investment strategies to identify high-quality targets.

(This article is reposted from the WeChat official account of "Xiaoan Daxia," authored by a private equity practitioner.)