Who Will Be the Next Cross-Border Healthcare Giant? Insights from a Newly Filed Prospectus

Jack Ma once predicted that the next person in China to surpass him would undoubtedly emerge from the healthcare and medical industry. Meanwhile, another tycoon, Wang Jianlin, has invested RMB 15 billion into the high-end medical market. According to a research report by the U.S. market consulting firm Transparency Market Research, the global medical tourism market size is projected to rise from the current USD 10 billion to USD 30 billion by 2019, reflecting a compound annual growth rate (CAGR) of 17.9%. Cross-border travelers are increasingly consuming local health management, medical check-ups, cosmetic surgery, and other services. Due to the high quality of service experiences, consumer demand continues to grow steadily. Cross-border healthcare has become a new growth point in the global market.

Cross-Border Healthcare Is Not Exclusive to the Wealthy

As early as 2008, Wang Shi, Chairman of Vanke, chose to undergo a procedure involving the placement of six coronary stents in Japan. Why did he opt for treatment in Japan rather than at hospitals in China?

The following is a summary of his personal account: “Starting from September 6, 2008, I suffered two myocardial infarctions, one critical illness episode, underwent four cardiovascular interventional angiography procedures, and had six stents implanted in three major coronary arteries. Exactly two years later, I chose to seek medical treatment in Japan. My friend, Zhang Liling, told me that Sakakibara Heart Institute in Japan is the best cardiac hospital in the country, regarded as world-class. This hospital boasts the top cardiologists globally. Currently, the most reliable method for assessing cardiovascular conditions in China is cardiovascular angiography, which is quite painful for patients; cutting into arterial vessels is frightening under any circumstances. However, Zhang Liling informed me that angiography at Sakakibara Hospital does not require cutting into arterial vessels. This was the most important reason that motivated me to go to Japan for a cardiac examination.”

After achieving fame and fortune, an increasing number of wealthy Chinese individuals have begun to focus on their personal health—a lifelong “project” and “endeavor.” Their substantial financial strength has also afforded them new options. According to the Hurun Wealth Report, as of May 2015, there were approximately 3.14 million high-net-worth individuals in mainland China with assets exceeding RMB 6 million, while the middle class numbered over 11.97 million. To optimize their medical service experience and improve the quality of care, these groups are upgrading their consumption patterns, making overseas medical treatment, health check-ups, and cosmetic procedures increasingly popular items that the middle class is willing to pay for.

However, cross-border healthcare is by no means an exclusive privilege of the wealthy.

The trend of consuming overseas medical services in Europe and the United States emerged a decade ago. Burdened by the high costs of diagnosis and treatment in developed countries, citizens of these regions have increasingly sought minor treatments, such as cosmetic procedures and minor surgeries, in neighboring countries with lower prices. For instance, British patients travel to more affordable Eurasian countries for cosmetic surgery and dental care; Germans engage in medical tourism in Eastern Europe; Italians seek medical treatment in Germany, where they can even use their national health insurance cards; and Americans flock to Costa Rica for cosmetic procedures, which cost half as much as in the U.S.

Nowadays, the rapidly developing global cross-border healthcare industry is no longer limited to medical referrals. People’s needs have become more diversified, shifting toward consuming a wider range of medical services. Internet technology is gradually penetrating the market, making remote consultations accessible to the general public. Patients can now access international medical resources and obtain second opinions from authoritative hospitals worldwide without leaving their home country.

According to data from overseas medical service providers, “the number of Chinese patients seeking medical treatment abroad has tripled since September 2015 compared with the beginning of the year, and explosive growth is expected within the next one to two years.” A report by the Development Bank of Japan points out that by 2020, the number of Chinese visitors traveling to Japan solely for health checkups is projected to exceed 310,000 annually, and the potential market size of Japan’s medical tourism will reach 550.7 billion yen (approximately RMB 30.28 billion).

"Revolutionizing" the Traditional Healthcare Industry

Via the Internet, China’s two richest men are quietly “revolutionizing” the traditional healthcare industry.

In early January 2016, Wang Jianlin announced that Wanda Group would invest RMB 15 billion and sign a cooperation agreement with the UK-based International Hospital Group, making bold strides into the high-end healthcare sector. Meanwhile, Jack Ma was strategically positioning Alibaba in both medical payment solutions and new healthcare systems. Tencent and Baidu have also entered the healthcare field through various approaches, including investments and the development of proprietary platforms.

As China’s affluent population grows and its society ages, the healthcare market is poised to unleash even greater demand in 2016. According to a report released in late 2015 by a research institute under China’s Ministry of Industry and Information Technology, the total size of China’s healthcare industry will exceed RMB 8 trillion by 2020. In Jack Ma’s own words: “Due to today’s smog, our water, and our food, Chinese people will suffer from many more diseases in ten years.”

Since seeking medical treatment and preventing diseases naturally require healthcare services.

Currently, China’s inadequate healthcare service system is in urgent need of an upgrade. However, as the government often adopts a gradual and cautious approach to healthcare reform, the timeline for completing the upgrade remains uncertain.

Consequently, China’s domestic healthcare system is increasingly failing to meet patient needs. First, care delivery is inefficient: securing appointments with renowned specialists or top-tier hospitals is difficult, often forcing patients to compete with scalpers for slots. Second, the service experience is poor; even after successfully obtaining an appointment, patients frequently encounter subpar care. Third, the preventive health system is inadequate. Despite high cancer incidence rates and strong demand for cancer prevention in China, routine check-up providers fail to satisfy the surging need for early cancer screening. As a result, the rapidly growing middle class is no longer willing to tolerate this status quo. They are prepared to pay slightly higher prices—or even less than domestic costs—to access better-allocated medical resources and enjoy superior service experiences. A wave of healthcare consumption upgrades, led by the middle class, is now sweeping across the country.

Investment Community Pays Close Attention: 2016 May Mark the Launch Year for the Cross-Border Healthcare Industry

Following the successful emergence of mobile health apps such as Chunyu Doctor, Dayima, and Ping An Good Doctor, technologies including health big data, health management, and cloud computing have continued to mature. Industry insiders believe that in 2016, the “Internet + Healthcare” sector will enter its second half, with new market growth drivers relying on the integration and optimization of global mobile health resources and the healthcare industry chain. By the end of 2015, investment in the internet healthcare market gradually shifted toward rationality and cooled down.

In 2016, while the global consensus anticipated prolonged downward pressure on China’s macroeconomic performance, substantial capital remained bullish on the future of the healthcare industry. During economic downturns, consumers tend to prioritize value-for-money spending. Demand for consumer healthcare services is a fundamental human need; this robust market demand remains resilient to broader economic trends. Consequently, the segment of medical services driven by consumption upgrading will continue to be a key focus for investment.

As early as 2014, Shengnuo Yijia, a service provider specializing in “overseas medical treatment,” secured RMB 50 million in Series A financing from Sequoia Capital. The Sequoia Capital team stated, “There is definitely significant demand for overseas healthcare, far greater than what exists today. This investment does not anticipate short-term returns; rather, it primarily seeks long-term growth and brand impact.” (Source: Caixin report)

In July 2015, Chunyu International, the holding company of Chunyu Yisheng (Spring Rain Doctor) under Chunyu Mobile Health, which focuses on an internet-based cross-border medical service platform, completed its Series A financing of RMB 15 million.

According to data released by the Stanford Research Institute (SRI) in the United States, the global health and medical tourism industry was valued at approximately $438.6 billion in 2013, accounting for about 14% of the total global tourism economy. With the global market already taking shape, the scale of China’s cross-border healthcare market is projected to exceed $10 billion in the future.

In the second half of 2015, the State Council issued the Guiding Opinions on Actively Promoting the “Internet Plus” Action Plan, which proposed: vigorously supporting the development of emerging consumption models characterized by internet-based platforms and online-offline interaction; accelerating the growth of emerging services such as “Internet Plus” healthcare and health; encouraging the integration and optimization of online and offline resources and services to improve operational efficiency. Thus, cross-border healthcare began to ride the wave of national strategic development.

As the architect of society, the government has initiated a broader strategic layout for cross-border healthcare. The nascent cross-border healthcare market in China is poised to give rise to an industry giant.

China’s Market Is Poised to Birth the Next Cross-Border Healthcare Giant

Currently, China’s cross-border healthcare market remains a blue ocean. Beneath the surface, capital flows are surging; every day sees the emergence of new, phenomenal companies, just as it witnesses the quiet demise of startup teams. The entire market is now brewing the rise of a dominant player. But who will it be?

First Possibility: Intermediaries Continuously Optimizing Offline Services.

Currently, there are over a thousand companies engaged in the cross-border healthcare industry in China, most of which operate as service agencies similar to traditional study-abroad consultancies. Centered on offline services, they charge service fees and provide users with recommendations for overseas hospitals, assistance with appointment scheduling, translation and organization of patient medical records, visa and flight arrangements, and even overseas medical interpretation services.

Such agencies charge service fees similar to intermediaries, but their pricing is opaque, typically ranging from over 100,000 to several hundred thousand yuan.

The industry veterans with a long track record include Shengnuo Yijia, Youxiang International, MyDoctor, and Hope Ark. Among them, Shengnuo Yijia stands out as the market leader, specializing in overseas cancer diagnosis and treatment. It has partnered with top-tier hospitals and enjoys an excellent reputation for its services.

Second Possibility: Overseas Hospital Offices Opening in the Chinese Domestic Market.

In addition to traditional intermediary service providers, the industry includes numerous China offices of foreign institutions, each with varying levels of strength. Renowned hospitals such as the Mayo Clinic and Cleveland Clinic in the United States have established representative offices in Beijing, aiming to facilitate patient referral channels from domestic hospitals. Their flagship referral services, focusing on oncology, pediatrics, and hematology, have gained popularity among patients who trust major international hospitals, while also making significant contributions to academic exchange and collaboration between the domestic and global medical communities. For an overseas healthcare group to fully penetrate the Chinese market, it must not only bear the high costs of localized operations but also engage in government relations work, with its competitive advantages primarily lying in the aggregation of medical resources from individual institutions.

Third Possibility: Building a Platform-Level Product that Creates a Closed-Loop Service Integrating Online and Offline Channels.

Platform-level products that emphasize the integration of online resources and the development of offline services are currently best represented by “Chunyu International,” which spun off from Chunyu Doctor, China’s leading mobile health provider. Chunyu International focuses on the “Internet + offline medical services” model, curating a global network of healthcare suppliers, including hospitals, medical aesthetics clinics, health examination centers, and dental practices.

Chunyu International’s operational strategy is to aggregate information and global suppliers online, continuously optimize the offline service experience, and then have high-quality private doctors on the Chunyu Doctor platform handle follow-up services after users return to China, thereby completing the transaction loop.

According to the financial report, Chunyu International achieved transaction metrics and global supplier growth rates in just six months of operation that are equivalent to those of traditional overseas medical intermediary agencies over two years. Moving forward, Chunyu International plans to integrate resources by channeling traffic from Chunyu Doctor’s 90 million users and 420,000 physicians, establish an overseas medical institution management system, and expand its network of Chunyu International clinics to facilitate hospital exchange services between domestic and international institutions.

The growth and success of every giant in the internet industry require the test of time. In the cross-border healthcare sector, which is still a blue ocean, who will emerge as the ultimate winner? Only time will tell.

Author: Xiao Kun. A senior media professional with over a decade of experience in internet and copywriting, focusing on the venture capital sector and healthcare.