Future Development of Chinese Medical Groups: Pathway to Optimized Physician Resource Allocation Under Healthcare Reform

As healthcare reform enters its deep-water zone and internet-based healthcare flourishes, innovative medical service models represented by physician groups are developing rapidly and garnering increasing attention. Recently, the renowned securities firm CITIC Securities released a report titled “Special Report on Physician Groups: The Inevitable Path to Optimizing the Allocation of China’s Physician Resources Amidst the General Trend of Healthcare Reform” (Parts I and II; hereinafter referred to as the “Report”), which provides a comprehensive and detailed analysis of the background, conceptual characteristics, business models, representative cases, and investment strategies associated with physician groups. VCBeat has compiled an excerpt from the report.

Physician Groups Are the Inevitable Path to Achieving Independent Practice and Optimizing Resource Allocation

The report argues that the core issue to be addressed in China's healthcare service reform is:

• How to Sustain Growth in Healthcare Service Supply to Meet the Population's Aggregate Demand for Medical Services;




• How to rationally allocate medical resources to meet the demand for medical services across different levels, types, and payment capacities;




• How to Address Healthcare Payment Challenges Amidst the Pressures of an Aging Population and the Continuous Growth of Chronic Disease Patients.

The focus of healthcare reform lies in improving the allocation efficiency of medical resources. The core of enhancing this efficiency is the optimized allocation of physician resources, and the inevitable path to achieving independent practice and optimal resource allocation is through physician groups.

The report suggests that physician groups can offer physicians who intend to practice independently:

• Patient Acquisition: By adopting models such as personalized diagnosis and treatment and providing technical support to primary healthcare institutions, a sufficient patient base can be secured—encompassing both patients from primary care settings and mid-to-high-end patients with greater payment capacity—thereby establishing a clear pathway to profitability.




• Brand Effect: After leaving the public hospital system, physicians face pressure to build their personal brands, as establishing a strong individual brand is essential for attracting patients. Physician groups offer synergistic benefits across multiple dimensions in addressing this challenge.




• Mitigating Risks and Sharing Resources: In addition to better attracting patients and securing adequate clinical revenue, how to reduce and control medical risks and coordinate healthcare resources are also critical issues that physicians must carefully consider after transitioning to independent practice. By forming or joining physician groups, doctors can share risk mitigation mechanisms and fully leverage high-quality medical equipment resources, allowing them to focus on clinical expertise itself.

The report also breaks down the core elements of physician groups into the following five dimensions, serving as the foundation for a financing evaluation model for physician groups:

• Technical Expertise: Physicians’ clinical proficiency within their specialties, mastery of emerging clinical technologies, and differentiated high-end diagnostic and therapeutic capabilities; furthermore, the academic foundation accumulated in public hospitals can serve as a primary source of patient attraction for physician groups in their early stages.




• Talent Structure: As the founders and owners of physician groups, physicians are tasked with both clinical practice and the operational management of the group. However, operational and managerial expertise is not a strength for most accomplished physicians. Therefore, integrating healthcare operations managers into the governance structure of physician groups is a critical factor influencing their sustainable development in the future.




• Management System: The academic foundation and patient appeal of a physician group often rely on several or even a single physician, while the stability of the management team, decision-making mechanisms, and allocation of responsibilities and authority are all factors affecting operational efficiency;




• Business Model: Aligning with the trend of physician resource allocation is the foundation for the existence of physician groups. However, constructing a sound business model that fully leverages the industry restructuring brought by “Internet Plus” and integrates with payers such as commercial insurance is key to determining whether physician groups can efficiently monetize their expertise and achieve sustained revenue growth.




• Scalability: The ability to onboard more physicians or cover a broader range of disease conditions, thereby achieving multi-dimensional expansion.

Analysis of the Business Model of Physician Groups

Multiple physician groups have emerged in China, with their developmental resource elements encompassing the following aspects:



Based on differences in fundamental attributes, domestic physician groups are categorized into two dimensions and four major categories:

• Single-Specialty and Multi-Specialty: Physician groups are categorized as single-specialty or multi-specialty (and even platform-type) based on whether the scope of specialties covered is singular.




• Within the System and Outside the System: Physician groups within the system refer to those in which physicians have not completely severed ties with the public sector, retaining their established positions (bianzhi) in public hospitals while participating in physician group activities only during their spare time. In contrast, physician groups outside the system are formed by physicians who have completely detached from the public hospital system.

Therefore, physician groups can be categorized into four major types: single-specialty within the public system, multi-specialty within the public system, single-specialty outside the public system, and multi-specialty outside the public system.

Single-Specialty Physician Groups: Moving Toward Specialization and Multi-Dimensional Monetization of Expertise

Single-Specialty Physician Groups refer to physician groups that focus on a specific specialty area, providing comprehensive solutions for that specialty. They are typically formed by several key physicians from public hospitals in the field.



Its profit model mainly lies in:

• By continuously recruiting physicians and assistant teams from similar departments, we aim to enhance sub-specialty coverage and expand the patient base.




• Meanwhile, by establishing partnerships with various hospitals or ambulatory surgery centers, and subsequently building self-owned surgical centers to cultivate a specialized brand, it is possible to gradually pursue multi-dimensional monetization models:




• Achieving premium pricing through superior surgical quality, postoperative follow-up services, and patient care experience.

The report outlines the major single-specialty physician groups currently operating in China. From a development perspective, these groups are primarily concentrated in the fields of cardiovascular and cerebrovascular diseases, the nervous system, and nephrology. These conditions involve procedures with high technical complexity and significant room for service charges. Consequently, the clinical value of high-quality physicians is more pronounced, and given the large patient population, there is ample scope for out-of-pocket payments and commercial insurance coverage.



Multi-specialty Physician Group: Integrated Output of Management and Technology for Deep Collaboration

Faced with numerous challenges after separating from the public hospital system—such as insufficient support for acquiring large-scale medical equipment, limited clinical space, a relatively single source of patients, and the need to independently manage payment settlements—some physician groups have chosen to form multi-specialty or even platform-based groups. This strategy aims to mitigate risks, reduce costs, and strengthen their brand identity. By covering multiple specialties, these groups can attract a broader patient base and spread out operational expenses.

Its profit model primarily lies in:

• Routine technical outputs, such as surgical technique collaborations, ambulatory surgery centers, and private-hospital PHP programs;




• Leveraging its larger scale, richer physician resources, and more ample financial support compared to relatively single-specialty groups, it can pursue deeper collaborative partnerships with primary care hospitals or partnered non-public hospitals;




• Achieve controlling stakes in or acquisitions of small medical institutions to establish a footprint in offline physical healthcare facilities.

The report outlines the major multi-specialty physician groups currently operating in China:



Representative Cases of Physician Groups

Dr. Zhang Qiang Medical Group



The Zhang Qiang Doctor Group is the first physician group in mainland China, composed of outstanding surgical specialists formerly affiliated with top-tier (Grade 3A) hospitals in Shanghai and Beijing. Leveraging world-class medical expertise and a strong reputation, it provides safe, convenient, accessible, and high-quality healthcare services to a broader population. On July 1, 2014, Dr. Zhang Qiang officially launched the country’s first multi-specialty physician group, Dr. Smile Medical Group, at the 1788 International Center in Shanghai. In accordance with historical practices in the pharmaceutical industry and international conventions (such as those followed by Johnson & Johnson, Mayo Clinic, and Merck), the group was named after its founder, Dr. Zhang Qiang. Subsequently, several experts from Grade 3A hospitals joined the group, forming seven high-quality specialty teams. In January 2015, Ms. Tong Weinan, who brought extensive experience from multinational corporations such as GlaxoSmithKline, Nycomed, and Avon, joined the organization, introducing management and operational expertise aligned with international standards. In March 2015, the group initiated an internet clinic investment plan and accelerated the development of clinical bases. By the end of 2015, it had established partnerships with eight hospitals under the PHP model:

Currently, the Zhang Qiang Doctor Group has established PHP cooperation models with eight leading private medical institutions in China (four United Family Healthcare facilities, Shanghai Huixin, Shanghai Word, Beijing Shanfang, and Hangzhou Greentown). On the payment side, it already accepts most medical insurance plans provided by high-end insurers, such as Allianz Global Assistance, Assistance Online, AXA Assistance, Cigna, Ping An Health Insurance, Shenci Insurance Brokerage and Services, Sunshine, Vanbreda, and ICBC-AXA. Patients paying out-of-pocket can also enjoy certain discounts.

In the future, the Zhang Qiang Doctor Group is expected to gradually expand its layout of internet clinics, leveraging an internet-based infrastructure to enable remote consultations, patient follow-ups, second medical opinions, and other services. The Zhang Qiang Doctor Group has completed adjustments to its corporate structure, implemented shareholding system reforms, and registered Zhang Qiang Medical Technology Co., Ltd. in a Free Trade Zone. All these strategic initiatives are underpinned by the exceptional clinical expertise accumulated over many years of practice in public hospitals by the group’s core team. Currently, the group has attracted multiple senior physicians to join and has established a well-structured division of labor among chief experts, physicians, expert assistants, and customer service secretaries.

Kairui Physician Group



CareRay is China’s first physician group specializing in nephrology, focusing on the hemodialysis market. It boasts a prestigious team of experts, including core specialists who are among the nation’s leading authorities in nephrology and hemodialysis. In addition to managing large-scale dialysis centers at their respective public tertiary hospitals, most of these experts have long been involved in the establishment and daily operations of numerous private and foreign-invested dialysis centers, accumulating extensive hands-on experience. Beyond its expert team, CareRay also employs hospital operation and management specialists from Taiwan as well as senior executives with many years of experience in operating nephrology hospitals in mainland China. In September 2015, the group signed an agreement with its first partner medical institution, the Liulitun Community Health Service Center in Chaoyang District, Beijing, and established the Nephrology Dialysis Industry Alliance to provide specialized dialysis expertise to small and medium-sized hospitals. By the end of 2015, it had reached intentions for cooperation with four medical institutions, involving equity participation of 30% through the output of medical technology.

CareRay’s team of experts and operations professionals will provide comprehensive, one-stop support to small and medium-sized hospitals that are planning to establish dialysis centers or have already launched hemodialysis departments. This support covers preliminary design and construction, expert guidance, deployment of medical and nursing personnel, patient referral, and operational management. Meanwhile, CareRay has partnered with multiple industry manufacturers and investment firms to jointly establish a Dialysis Industry Support Fund, providing upfront financial assistance to small and medium-sized hospitals for launching dialysis services.

In the domestic market, China currently has approximately 2 million patients with end-stage renal disease (ESRD), among whom only 300,000 are undergoing dialysis. This corresponds to a dialysis penetration rate of merely 15%, far below the 75% rate observed in developed countries in Europe and the United States. With advancements in treatment standards, the average duration of dialysis per patient is expected to exceed 10 years, with annual costs ranging from RMB 60,000 to RMB 100,000. The future trend in the dialysis market indicates a shift of patients toward small-scale community dialysis centers. Taking Taiwan as an example, patients treated at community dialysis centers account for 75% of the total, whereas in Beijing, this figure stands at only 25%, indicating substantial room for growth.

It is projected that CareRay will rapidly capture the market across China by acquiring controlling stakes in numerous Tier 1 and Tier 2 hospitals, transforming them into specialized nephrology hospitals and large-scale hemodialysis centers. Meanwhile, it will establish partnerships with more hospitals through various models, including technology transfer, management export, and equity swaps, to form a national nephrology dialysis consortium.

The report suggests that CareRay represents a physician group model that achieves growth by deeply cultivating a specific specialty through various approaches, including self-established facilities, joint ventures, and the export of technical operations. This model imposes high demands on the core team’s capabilities in resource integration, operational management, and the standardization of technical protocols.

Wanfeng Medical Group



Wanfeng Physician Group is the earliest physician group in China. Dr. Wan Feng is a top-tier cardiac surgery expert in China. He joined Fuwai Hospital in 1983. After returning to China in 1996, he served as Director of the Department of Cardiovascular Surgery at the Post and Telecommunications Hospital. In 1999, he presided over the establishment of the Peking University Minimally Invasive Coronary Surgery Center. From 2007 to 2009, he served as the General President for the Beijing Region of Phoenix Healthcare, President of Beijing Jian’gong Hospital, and Director of the Phoenix-Wanfeng Heart Center. In 2009, he became Director of the Department of Cardiovascular Surgery at Peking University Third Hospital.

The Group originated in 1998 when two cardiac surgeons, Wan Feng and Zhao Qiang, co-founded Wanzhao Kaixin. Subsequently, in collaboration with one of its contracted hospitals, Qingdao No. 2 People’s Hospital, they established the first independently incorporated cardiac specialty hospital founded by physicians. In 2008, leveraging the Wan Feng Cardiovascular Experts Alliance established in 2001, Wan Feng founded Shenzhou Haide Group. The Group currently operates Qingdao Star International Heart (Center) Hospital, Dezhou Cardiovascular Disease Hospital, and the Cardiothoracic Center of Changsha Taihe Hospital. Its more than ten managed centers across China are typified by Angang General Hospital, Zaozhuang Mining Group Central Hospital, and Nanjing Jiangbei People’s Hospital.

By leveraging its extensive and high-quality network of cardiovascular specialists, Wanfeng Group has established diverse models for collaboration with hospitals:

• Top-tier experts and management teams will assist grassroots hospitals in establishing excellent heart centers, covering everything from design and operations to promotion, with a commitment to the sustained growth and development of their advanced “patient-centered model” within the cardiovascular specialty.




• Establish long-term, stable, and timely clinical technical cooperation and service relationships, including consultations, ward rounds, surgical guidance, discussions of complex cases, seminars, and research collaboration, to elevate the cardiovascular care standards of partner hospitals to an internationally advanced level.




• Through controlling acquisitions of specialized cardiovascular hospitals, Shenzhou Haide will assume full responsibility for determining the operational strategies and managing the operations of both acquired and equity-participated hospitals. By adopting an asset-light model to accumulate sufficient physician resources and operational expertise, Wanfeng Doctor Group has successfully transitioned to an asset-heavy structure, gaining controlling stakes in three specialized cardiac hospitals. The group plans to continue establishing its own physical hospitals in the future, thereby providing a stable foundation for the sustainable development of its business model.

Analysis of Investment Layout Models

Different entities investing in physician groups bring distinct resource endowments, leading to varied expansion models. The report suggests that, under the current industry and policy landscape, the main entities capable of and willing to invest in physician groups include healthcare service providers, pharmaceutical manufacturers, pharmaceutical retailers, insurance companies, and internet enterprises:



Related Listed Companies:

• Among publicly listed companies, forward-thinking healthcare service providers have partnered with medical schools to establish an integrated system for clinical practice, scientific research, and teaching, thereby thoroughly addressing issues related to physician stability and recruitment. Complementing this model with internet-based platforms supporting tiered diagnosis and treatment and telemedicine, these companies enhance the autonomy and professional stratification of physicians’ practice, as exemplified by Topchoice Medical.




• Excellent pharmaceutical companies with a strong foundation in prescription drug resources for major diseases and a firm commitment to healthcare services are poised to become key participants in physician groups, such as Yibai Pharmaceutical.




• In China, the separation of prescribing from dispensing and the tiered diagnosis and treatment system are being progressively implemented. Pharmaceutical retail chains are deploying light consultation services through their own store networks, which is expected to foster collaborations with physician groups, as exemplified by Yifeng Pharmacy.




• For listed companies with private hospital operations, the concentration of physician resources in public hospitals has constrained their growth. The acquisition of more high-quality physicians by physician groups could help private hospitals overcome talent bottlenecks, as exemplified by Fosun Pharma.




• Specialized medical service providers are poised to enhance their specialty care standards and accelerate scale expansion by integrating physician groups, as exemplified by Aier Eye Hospital.




• Meanwhile, insurance companies and internet enterprises have the opportunity to participate in the layout of physician groups by leveraging their distinct resource endowments and entry points.

Healthcare Service Enterprises: Strategically Positioning or Integrating Physician Groups to Absorb Physician Mobility

One of the biggest challenges facing the expansion of healthcare service enterprises is the scarcity of physician resources, a factor that severely constrains the development of private hospitals. Even private institutions with relatively successful development models, such as United Family Healthcare and Aier Eye Hospital, mostly adopt boutique and chain-based business models. Although they have achieved a certain degree of success, their operations are largely confined to niche segments characterized by insufficient high-quality diagnostic and treatment resources in public hospitals and strong demand for differentiated services.

The rapid development of physician groups will gradually ameliorate this situation in the future, offering viable solutions. Furthermore, the offline resources accumulated by medical service enterprises constitute a competitive advantage in their strategic deployment of physician groups. Since the National Health and Family Planning Commission and other authorities issued the "Several Opinions on Promoting and Regulating Physicians’ Multi-Site Practice" in 2014, physicians have increasingly moved out of the public system to form physician groups. In this context, providing practice facilities has become a primary mode of collaboration between medical service enterprises and physician groups. Physician groups contract with private hospitals to utilize their consultation rooms, operating theaters, and other facilities for clinical practice. A notable example is the collaboration model between Dr. Zhang Qiang’s Physician Group—specifically its vascular surgery team—and Beijing United Family Hospital and Shanghai United Family Hospital.

From the perspective of reallocating physician resources, independent practice enables a large number of high-quality physicians in public hospitals to become mobile, and physician groups will emerge as an effective organizational model for physicians. Private hospitals with favorable practice conditions can attract physician groups to establish their presence or directly invest in and form such groups, thereby better addressing development bottlenecks. Therefore, with the growth of physician groups, private hospitals are poised to be direct beneficiaries.

The aforementioned model serves as the foundational framework for the integration of physician groups and healthcare service enterprises. To truly consolidate physician resources and establish a robust development structure, it is essential to facilitate mobility among physicians, hospitals, and medical schools. Only by engaging with medical schools can organizations secure long-term, sustainable capabilities for physician training, while also providing research environments and support for senior physicians, thereby ensuring stable career prospects.

Meanwhile, by establishing an integrated tripartite framework encompassing physicians, hospitals, and medical schools, with the medical center of the medical school serving as a talent reservoir, a robust physician group has been formed. These physicians also constitute the faculty of the medical school, thereby achieving a positive feedback loop for physicians within the system. In the U.S. market, a typical example of this model is the NewYork-Presbyterian (NYP) Physician Group. In China, Topchoice Medical is the listed company that has clearly signaled its intention to adopt a similar strategic layout.

From the perspective of domestic physician resource distribution, top-tier experts are predominantly concentrated in leading Grade A tertiary general hospitals, most of which are affiliated with premier medical schools—a pattern resulting from historical resource allocation mechanisms. A similar distribution of resources is observed in overseas markets; however, this stems not from administrative allocation but from long-term market development. In the future, optimizing the allocation of physician resources in China will not simply involve physicians flowing out of the public system, but rather requires a market-oriented system with an equivalent structural framework to absorb and support this mobility.

With this resource ecosystem in place, a diverse practice system will be formed by strategically laying out general hospitals, specialized hospitals, rehabilitation and physiotherapy services, and elderly care and health support, while supplementing these with technical output, management services, and the construction of a tiered diagnosis and treatment system for primary healthcare institutions. This will be further enhanced by telemedicine and mobile health platform technologies in the internet era, thereby accommodating a sufficiently diverse pool of physician resources.

Currently, Topchoice Medical has established the Cunji School of Medicine in partnership with the University of Chinese Academy of Sciences. In the future, it is expected to cultivate professional, large-scale nursing talent by acquiring nursing schools and establishing colleges of nursing. By leveraging its existing internet platforms in dentistry and assisted reproductive technology, the company aims to build a standardized, replicable, and nationally consistent process management system. This will enable the creation of a healthcare ecosystem centered on medical schools and general hospitals, grounded in physician resources, and structured around tiered diagnosis and treatment as well as internet-based healthcare. Through this framework, Topchoice Medical intends to effectively attract, establish, and nurture physician groups.

Pharmaceutical Manufacturing Enterprises: Resource Re-exploitation and Strategic Layout for Single-Specialty Physician Groups

Taking international pharmaceutical companies such as Pfizer and Johnson & Johnson as examples, their business models can be categorized into two types. First, the research-oriented model, where companies focus their resources on the discovery of new drugs, developing original novel therapeutics and securing patent protection. Second, the development-oriented model, where companies concentrate their resources on the development phase of drug R&D, obtaining innovative products through limited-scale research, development, and innovation activities.

These two models are currently the mainstream approaches adopted by pharmaceutical companies. With the overall growth rate of the pharmaceutical industry slowing down, many companies are continuously exploring upgrades and transformations or expanding into new sectors. As the downstream demand side of the pharmaceutical industry, the healthcare services sector has seen a growing number of domestic companies gradually attempting to enter this field.

Drawing on the development models of physician groups abroad, the establishment, growth, and expansion of such groups all require leveraging external resources. The resources accumulated by pharmaceutical companies through their past operations align closely with those needed by physician groups. The report suggests that pharmaceutical companies possess distinct advantages in strategically positioning themselves within the physician group sector:

• From product R&D and academic promotion to market sales, pharmaceutical manufacturers maintain close ties with clinicians. When establishing physician groups, pharmaceutical companies primarily leverage expert groups formed by specialists emerging from public hospitals, which represent the most accessible talent pool currently available. The ready access to these experts—facilitated through clinical trial collaborations, academic promotion teams, and sales representatives—lays the foundation for pharmaceutical companies’ strategic development of physician groups.




• Pharmaceutical manufacturers, with their diverse product portfolios covering various disease indications and sales spanning hospitals of different tiers across multiple regions, have access to a broad base of physicians specializing in different fields and located in various areas. This provides favorable conditions for establishing multi-specialty physician groups and achieving their chain-based expansion. In contrast, prescription drug companies focusing on a single major disease indication possess concentrated resource advantages, giving them an edge in developing single-specialty physician groups aligned with their therapeutic focus.




• Large-scale pharmaceutical manufacturing enterprises possess ample funding sources and robust cash flow. Such abundant financial resources are essential for investing in physician groups, providing the necessary support throughout their establishment, development, and expansion.




• Publicly listed pharmaceutical manufacturers can also provide greater incentives to members of physician groups through standardized equity incentive plans. This approach not only ensures the stability of physician resources but also attracts more high-quality physicians.




• Pharmaceutical manufacturers also hold advantages in drug supply and distribution; some have integrated retail pharmacy and medical distribution operations, enabling them to provide physician groups with enhanced pharmaceutical support services.

Based on the above analysis, the report posits that pharmaceutical manufacturers’ strategic entry into physician groups represents a trend of resource re-exploitation amid slowing industry growth, while such engagement also offers these enterprises new opportunities for transformation.

Taking Yibai Pharmaceutical as an example, the company boasts a robust oncology product portfolio and has accumulated extensive resources through years of prescription drug operations. Over the past two years, Yibai Pharmaceutical has been progressively advancing its layout in the oncology diagnosis and treatment system. In September 2015, Yibai Pharmaceutical took an equity stake in the establishment of an Oncology Center at Jinshazhou Hospital of Guangzhou University of Chinese Medicine, while also setting up an oncology industry M&A fund, among other initiatives. In October 2015, it jointly established Guizhou Baiyang Yibai Oncology Easy-Follow-Up Big Data Co., Ltd. with Baiyang Health, aiming to cover 20,000 oncologists within six months. Leveraging its own and partner hospitals’ oncology centers as a foundation, the company plans to attract and form physician groups, thereby constructing an oncology diagnosis and treatment system integrating physicians and hospitals. The company is gradually incorporating oncology medical services into its strategic transformation development process.

Pharmaceutical Retailers: Deploying Light Consultation Services in Chain Pharmacies; Physician Groups Help Address the Supply of Doctors

While pharmaceutical retail companies have established a mature presence in the healthcare services sector in overseas markets, this model remains in its early stages of development in China. Currently, pharmacy clinics are not only seeing substantial demand but also benefiting from gradually easing regulatory policies. As a result, pharmacy clinics in China are facing significant industry-wide opportunities:

• Chronic Disease Management Needs: China has a large and rapidly growing population of patients with chronic diseases. Large medical institutions struggle to meet the needs for long-term follow-up care, whereas pharmacy-based health services within community settings can provide patients with ongoing guidance on medication adherence and dietary management.




• “Common Illnesses” Demand for Convenient Diagnosis and Treatment: For common conditions such as the common cold and wind-cold syndrome, patients generally only need to take prescribed medications, placing greater emphasis on the convenience of diagnosis and treatment. The convenience offered by light consultation services at pharmacies meets this demand.




• Policy Orientation: The 2010 "Administrative Measures for Traditional Chinese Medicine (TCM) In-Store Clinics (Trial)" proposed allowing pharmaceutical retail enterprises to establish TCM in-store clinics; the "12th Five-Year Plan for the Development of Traditional Chinese Medicine" issued by the State Administration of Traditional Chinese Medicine in 2012 further affirmed the model of pharmacies operating clinics, indicating a gradual liberalization of policies.

Driven by the combined impetus of market demand and policy support, some well-established pharmacies in China have begun to expand into the healthcare services sector. The prevailing models currently include on-site Traditional Chinese Medicine (TCM) consultations, family doctor services, and licensed pharmacist consultations. On-site TCM consultations involve pharmacies employing physicians to provide clinical services, primarily addressing patients’ needs for the diagnosis and treatment of common ailments. Family doctor services refer to partnerships between pharmacies and licensed community physicians to deliver medical care, mainly catering to the needs of chronic disease management. Licensed pharmacists provide further medication counseling to patients receiving treatment, thereby enhancing the comprehensiveness of pharmaceutical and healthcare services.

However, pharmacy clinics also face numerous challenges that significantly constrain their development:

• Pharmacy Sector: The "Administrative Measures" stipulate that pharmacies establishing clinics must meet certain hardware and software requirements, thereby excluding many potential pharmacy participants. Additionally, whether a pharmacy can integrate with the medical insurance system is a critical factor determining its operational sustainability, representing the primary regulatory barrier for pharmacies entering the medical services sector.




• Physician Side: The scarcity of physician resources is the most significant challenge facing pharmacy clinics. Physicians constitute the main body and core of pharmacy clinics, and high-quality physician resources are fundamental to ensuring the quality of medical services and attracting patients.

With the implementation of the policy abolishing the approval process for designated medical insurance provider qualifications, the report suggests that the challenges pharmacies face in integrating with the medical insurance system will be initially resolved. At that point, the greatest challenge facing pharmacy clinics will be the scarcity of physician resources:

• The emergence of physician groups offers a viable solution. By investing in physician groups, pharmacy enterprises can address the challenge of securing physician resources and unlock greater development opportunities.




• Pharmacies offering lightweight consultations and community health services can provide physician groups with a relatively general-practice-oriented, primary-care-based pathway for clinical practice.

Insurance Companies: Building a Closed-Loop Ecosystem for Integrated Medical and Elderly Care

Under the integrated medical and elderly care system, numerous insurance companies have begun to enter the healthcare sector, building closed-loop systems that combine medical services with elder care. In fact, insurance companies’ investments in the health sector can generate strong synergies. In the United States, this “insurance + medical/elderly care” model has already proven successful; for example, Kaiser Permanente has integrated its health insurance operations with hospital services, creating a sustainable and successful business model.

Specifically, insurance companies’ strategic layout across the healthcare and elderly care industry chains offers the following advantages:

• By integrating multiple segments—including insurance claims, medical care, health management, and elderly nursing—a closed-loop consumption ecosystem is formed, ensuring that customers’ insurance funds remain within the insurer’s system and thereby generating greater commercial value.




• Against the backdrop of population aging, insurance companies’ integrated medical and elderly care business model strives to provide more comprehensive services to meet the needs of elder care.

Taking Taikang Life as an example, the company began planning its retirement communities in 2007 and entered the medical services industry in 2012. To date, it has invested in and constructed seven retirement communities across China. In 2015, Taikang participated in the restructuring of Nanjing Xianlin Gulou Hospital, acquiring an 80% equity stake through investment. Located adjacent to Taikang’s retirement community in Nanjing, the hospital has helped create a new ecosystem for retirement living that integrates medical care with elderly care.

Meanwhile, the company has achieved full integration of health insurance with hospitals and elderly care communities. Patients and seniors at Xianlin Gulou Hospital and its affiliated elderly care communities can not only access high-quality medical and elderly care services but also purchase Taikang’s health insurance to cover potential medical expenses. This model truly realizes a closed-loop business structure for the company:

However, this model still faces the challenge of physician resource shortages; both retirement communities and private hospitals lack high-quality physicians.

Furthermore, there is the issue of specialized medical data. Currently, China’s commercial health insurance market is characterized by a small scale and high loss ratios. The root cause lies in the lack of first-hand medical data and accumulated historical patient records, which makes it difficult to reasonably price health insurance products and manage the insured population. The participation of physician groups will undoubtedly enhance the integration of insurance with medical and elderly care services.

• Physician groups can supply them with a large pool of high-quality physician resources. As the primary vehicle for physician talent, physician groups offer an ideal solution to this challenge. By establishing physician groups, insurance companies can effectively address the physician staffing needs of their affiliated medical institutions.




• Physician groups can provide medical data for insurance pricing. By partnering with physician groups, insurers can obtain detailed information from physicians regarding patient diagnosis and treatment, thereby enabling them to take measures to reduce costs during the medical care process and eliminate unnecessary additional medical expenditures, ultimately lowering medical claims expenses.

The report suggests that insurance companies will become a major investor in physician groups, leveraging their capital and resource advantages to build a closed-loop ecosystem integrating medical care and elderly care.

Internet Companies: Building Physician Practice Platforms on the Foundation of Healthcare Informatics

Physician groups have inherent weaknesses from their inception, which happen to be the strengths of internet companies. It is this complementarity that determines internet companies will be a key participant in physician groups. Once physician resources are organized into physician groups, they will inevitably face the following development obstacles:

• Rebranding: Having lost the influence afforded by large public hospitals within the state system, physicians struggle to effectively communicate their technical expertise, making a significant decline in patient visits difficult to avoid.




• Service Quality: Only by providing more personalized and higher-quality medical services can physician groups compete with public hospitals that possess mature and comprehensive healthcare systems, which places higher demands on every independently practicing physician.




• Commercial Insurance Integration: Failure to integrate with commercial insurance would render the consultation fees of physician groups prohibitively high, thereby further excluding patients with limited payment capacity.

In response to these issues, internet companies have proposed solutions based on medical informatization:

• Internet companies can digitize physician resources and distribute them to the market. For instance, by establishing individual physicians’ consultation platforms, patients can seek medical advice from doctors on these platforms. Such physician-branded consultation platforms help doctors build their professional brands in the market.




• Internet companies can digitize diagnostic and treatment information, establish health records for each patient, and assist physicians in tracking and managing patient conditions. With the support of such mobile products, physicians can deliver more personalized diagnostic and therapeutic services, thereby differentiating their offerings and enhancing competitiveness.




• Internet companies can collect more data related to patient diagnosis and treatment, such as electronic medical record information and health indicator monitoring information. This can make insurance companies more willing to cooperate with physician groups to achieve integration with commercial health insurance.

Source: WeChat account “CITICS Pharma,” reposted with permission