Dr. Zhang Qiang on Medical Groups: A Candid Share Ahead of IPO Filing
[Key Insights]
1. The so-called "independent practice" refers to physicians leaving the public healthcare system to become independent practitioners, no longer receiving salaries from their former institutions, and instead entering into new contractual agreements with hospitals. In this model, the relationship between hospitals and physicians shifts from a hierarchical manager-subordinate dynamic to one of equal partnership.
2. Some physicians seek to join physician groups to increase their income; some will voluntarily opt out due to the uncertain prospects of independent practice; and for another subset of physicians, our assessment reveals that they may have seriously underestimated the difficulties and challenges associated with independent practice.
3. Everyone came with strong psychological preparation, able to sustain themselves for a year even without any income.
4. We have not deliberately sought ways to avoid or evade taxes. Our hope is for our physician group to become a publicly accountable enterprise, operating with full transparency and under public oversight, which aligns with our original intent.
5. "We have very limited experience in managing asset-heavy operations, which could potentially lead us into certain pitfalls."
6. We will only operate benchmark or demonstration surgical centers, while a large volume of procedures may be performed in hospitals that partner with us.
7. At this stage, the priority is to standardize all of our processes, including safety protocols and clinical regulations, to better meet the needs of our current mid-to-high-end patient demographic.
8. First, we do not regard the Internet as our core business with the aim of becoming a major platform; second, we deploy our internet-based products among our patient population, refining them into mature solutions before evolving into an open platform.
9. First, at the legal level, the institution signs contracts with hospitals. Revenue is derived from commissions paid to physicians based on overall patient treatment costs. The physician team does not receive salaries from the hospital; however, physicians are compensated for their labor during the treatment process. This compensation is transparent and subject to lawful tax payment.
10. We aim to bring together trustworthy, patient-focused specialist teams to create a premium “hospital in the sky,” with services that can also be delivered through offline channels.
(Zhang Qiang “spars” with his son)
Fresh from a “sparring session” with his son, Dr. Zhang Qiang arrived punctually for the VCBeat VB Group interview, where he discussed the development of the Zhang Qiang Doctor Group and the various pitfalls encountered on his entrepreneurial journey with over 10,000 WeChat group members. Below is an edited transcript of Dr. Zhang’s remarks and the Q&A session.
Positioning of Physician Groups
Leaving the System to Become a Free Agent
At the end of 2012, I resigned from Shanghai East Hospital affiliated with Tongji University. At that time, I served as the Director of the Department of Vascular Surgery, General Manager of the Hospital Management Company, and concurrently held the position of Head of Health Promotion for all external collaborations of the hospital. After relinquishing these positions, I began practicing as an independent physician.
So-called "independent practice" refers to physicians leaving the public healthcare system to become independent practitioners, no longer receiving salaries from their former institutions, and instead entering into new contractual agreements with hospitals. In this model, the relationship between hospitals and physicians shifts from one of administrative subordination to an equal partnership.
Actually,When I first left the public sector, there were200Multiple patients were waiting for me to perform surgery, but after coming out, there was only5A patient came to see me., which posed a significant challenge for physicians. At that time, I took many detours, but I also received support from various quarters; within three months, the patient volume began to increase.
“Physician Groups” Best Align with Our Vision for Future Development
After more than a year of independent practice, some physicians employed within the public healthcare system have reached out to me, expressing their interest in exploring independent practice as well. I realized that my pioneering experiences could be shared with them. Therefore, on July 1 last year, we established a physician group in an office building in Jing’an District, Shanghai.
In fact,At that time, we had only two doctors, but our vision for the future was to achieve at least100Doctor, so the domain name we registered at that time was “www.TopDoctor100.com”.
How did this physician group come into being? You won’t find it in dictionaries or academic literature. At the time, we referred to the American term “medical group.” We deliberated at length over how to translate it, as “group” can mean a small team, a clique, or a corporation. Ultimately, we believed that “corporation” best aligned with our vision for future development.
We are very similar to physician groups in the United States; essentially, all our specialists have resigned from their public-sector positions to leave the state-run system and join our physician group.
70%-80%"I would advise him to wait."
A steady stream of experts has come to inquire about physician groups. However, we have found that many of them are not yet fully prepared in various aspects and still hold only a preliminary understanding of physician groups.Some doctors argue that joining physician groups can lead to higher income.。
In fact, we have found that many physicians working in public healthcare institutions enjoy substantial incomes, both from their affiliated hospitals and from external sources, owing to their strong clinical expertise. After conducting further inquiries,Some individuals will proactively opt out, as the prospects for private practice remain uncertain, and there are currently no success stories in China.Including the prototype of physician groups—the Wan Feng team, which later experienced many twists and turns. In the end, its founder, Wan Feng, returned to the public healthcare system, illustrating the considerable challenges involved. Therefore, given the uncertainty about the future, many physicians are unlikely to rashly leave their positions.
To my great surprise, two of the experts were still hesitant just a week ago, saying, “You go ahead and give it a try; we’ll join you later.” A week later, they resigned from their positions and joined us directly.
AlsoAfter evaluating a subset of physicians, we found that they may have significantly underestimated the difficulties and challenges associated with independent practice., because our own capabilities were quite weak in the early stages, and even I was uncertain about the future prospects. Onboarding a large number of physicians at that time would have posed significant challenges. Therefore, I advised 70%–80% of the doctors to wait and join us once we had achieved scale. As a result, we selectively recruited a small group of experts to join our physician group.
(While Zhang Qiang was sharing, his son was causing a disturbance; took a photo of the moment.)
On Revenue and Financing
Can Survive for a Year with Zero Revenue
Since the establishment of the physician group, weAfter more than a year of development, these experts have gradually established their reputation among patients.In fact, we faced significant psychological challenges in the early stages, as the number of patients declined markedly within six months, soEveryone was well-prepared mentally when they joined, ready to sustain themselves for a year even with zero income.。
“If he finds that sustaining himself for a year is truly unfeasible, he can always return to the public sector; even taking it easy there would be fine, given his strong technical skills. With this mindset in place, he went all out, deciding to give it a try—after all, you never know unless you try.”
Our physician group has gradually expanded to nine teams, specializing in spinal surgery, vascular surgery, hernia surgery, plastic surgery, pediatric surgery, urology, oral and maxillofacial surgery, and colorectal surgery.。
4hours, we received the “term sheet”
Due to the rapid development in the early stages, a financing plan was already in place by the end of last year,We aim to expand our team to cover all surgical specialties and invest in building our own high-end surgical center.
Therefore, we proposed raising RMB 50 million in financing by offering a small equity stake, and the market responded quickly.4hours, we received the “term sheet(Venture Capital Agreement), we signed the formal financing agreement around the beginning of this year.
It may go public by the end of the year, or alternatively list on the New Third Board.
Whether physician groups will go public is also something we are considering, because from an income perspective, operating a physician group or choosing independent practice carries significant risk, potentially leading to a substantial decline in revenue—including for myself (although my current income now exceeds the previous level).Currently, all our tax affairs are fully transparent and compliant; however, the tax burden is substantial, with limited opportunities for deductions.Over time, we have come to view our work as a mission-driven endeavor, since nearly half of our earnings are paid in taxes to the state, with the remainder directed toward charitable causes. For instance, I personally donate my monthly income from my Beijing outpatient practice to the Children’s Foundation. Consequently, many of us experts are undergoing a shift in mindset: rather than focusing on maximizing personal income, we regard our profession as a meaningful cause and a life challenge. This perspective has empowered us to work with greater autonomy and devote considerable passion to our endeavors.
We have not made any deliberate efforts to avoid or evade taxes., while conversing with many investor friends, the idea of going public came up, so we may list on the Shanghai Equity Exchange by the end of the year, or alternatively make strategic adjustments to shift toward the New Third Board.
"Our hope is that our physician group will evolve into a publicly accountable enterprise, operating with full transparency and under public oversight, thereby aligning with our original mission."Our goal is not merely financial gain; rather, through the efforts of our pioneering team, we aim to chart a replicable path for future generations. This will foster positive transformations in China’s healthcare landscape, reducing physicians’ grievances and enhancing patient experiences.
# Adjustment of Strategic Direction
Limited experience in managing asset-heavy operations; focus efforts on vertical sectors.
After the completion of the shareholding reform in the first half of the year, we identified potential issues with our previous strategic direction, specifically that the asset-heavy model is largely unfamiliar to us. I believe that diverting resources and capital into asset-heavy investments could adversely impact our development."Given our significant lack of experience in managing asset-heavy operations, we risk falling into certain pitfalls."After several months of discussion by the Board of Directors, we have decided to communicate with our investors to abandon the fundraising plan and readjust our strategic direction.
The first strategic adjustment is the downsizing of the physician team, forming three physician groups.: Vascular Surgery Physician Group, Hernia Physician Group, Plastic Surgery Physician Group.Thus, we will concentrate all our efforts on these vertical sectors, aiming to establish benchmark specialist teams in China within these three areas.
The second strategic adjustment involves a significant revision to our asset plan for the surgical center. Originally, we intended to invest RMB 30 million in the surgical center; however, we are now considering adopting a more asset-light approach. This decision is driven by two factors: first,We center on brand building, leveraging technology, market presence, and service to drive valuation.. Second, when constructing the surgical center, we will keep its scale small.We will only establish benchmark or demonstration surgical centers, while the majority of procedures may be performed in hospitals that partner with us.
Following the adjustments, our collaboration with institutions has significantly accelerated. On one hand, each of our three specialties is establishing a clinical base within every medical institution. On the other hand, we have initiated our first partnership with the medical insurance department at Zhejiang Greentown Hospital, and we are also exploring ways to extend our high-end medical services to cover a broader segment of the market.
Not in a rush to expand and replicate.
The physician group’s cash flow is relatively healthy, so there is little urgency to expand and replicate. WeAt this stage, the priority is to standardize all our processes, including safety protocols and regulatory frameworks, to better meet the needs of our current mid-to-high-end patient demographic.
Now we are for5Endorse a product
Then, the physician group is also focusing on areas beyond surgical services, such asWe are now for5endorses products, including the latest radiofrequency ablation technology for varicose veins, GE Healthcare’s handheld ultrasound devices, and Annuo’s surgical gowns, caps, and workwear; it also provides endorsements for certain internet-based products.。
Implement Internet-based products among our patient population
We also place significant emphasis on internet infrastructure development.Currently, we are focusing on the remote segment, specifically remoteB2B、B2C. Remote consultation.Now that our system is in place, we aim to build a premium virtual platform for physician teams in the future, while also facilitating offline conversion.
For us, our offline presence is a competitive advantage. Because we understand the needs of both patients and physicians, we develop internet-based products with this insight in mind, allowing us to offer unique features.First, we do not intend to make the Internet our core business or transform into a large-scale platform. Second, we deploy our internet-based products among our patient population for practical application, refining them into mature solutions before evolving into an open platform., which may differ from existing internet products.
About the Operational Model
PHPThe model is a collaborative relationship between physicians and hospitals.
To date, our physician group has not established any hospitals or clinics, nor do we own any physical facilities. Our current operations adopt the PHP model. I recall first introducing this concept at last year’s Annual Conference of Hospital Presidents, where it was proposed in the context of the Public-Private Partnership (PPP) model for public hospitals.PHPJustphysician hospital partnershipthe English abbreviation, referring to the collaborative relationship between physicians and hospitals.The term “PHP model” has also gained widespread recognition; this year, many hospital presidents and policy research experts have tacitly accepted the concept of the PHP model.
First, at the legal level, the institution signs contracts with hospitals. Revenue is derived from commissions on physicians’ fees for the entire treatment process. The physician team does not receive salaries from the hospital; however, physicians may receive compensation for their labor during the course of treatment. This arrangement is transparent and compliant with tax laws.
Contracted hospitals must extend medical liability insurance coverage to all our contracted experts.
Our physicians are registered with the institutions we have contracted with. For cross-regional services, we adopt a model involving consultations and multi-site practice within the joint system. In the event of patient disputes, medical liability insurance is linked to hospitals in accordance with current practices in China.
When we sign contracts with hospitals, there is a prerequisite: medical liability insurance will cover all the experts we have contracted. That is to say,We adopt the internationally widely used CPT coding system, which itemizes every cost incurred during a surgical procedure, including physician fees. Moreover, most of the hospitals we have contracted with are international hospitals, whose CPT coding systems are already comprehensive.For patients with commercial insurance, we will apply the original fee schedule. Meanwhile, to expand our presence in the domestic market, we have introduced a bundled pricing package offered at a discount below the commercial insurance rates, thereby alleviating the financial burden on self-pay patients.
Currently, our physician group faces numerous restrictions regarding business registration with the Chinese authorities.The company cannot be called a physician group, so we registered as Zhang Qiang Medical Technology Co., Ltd., located in the Shanghai Free Trade Zone. We have our administrative headquarters in both Beijing and Shanghai; the Shanghai office is in Xuhui District, while the Beijing office is in the Central Villa Area of Shunyi District. In the future, we will also establish an office in Hangzhou.
We have currently signed contracts with nine hospitals, including four United Family Healthcare hospitals (in Beijing, Shanghai, Tianjin, and Qingdao), as well as Shanghai Word Medical Center and Shanghai Shin Kong Hospital of Taiwan’s Lianxin Group in Shanghai. Recently, we have also signed agreements with Hangzhou Greentown Hospital and Beijing Shanfang Hospital.
About the Future
Provide patients with a second medical opinion online
The physician group has several upcoming initiatives, one of which is in the internet healthcare sector. We will launch a highly specialized and vertically integrated telemedicine program, which includes second opinions. Our goal is to provide patients with access to second medical opinions online.
This platform nextWe aim to bring together trustworthy specialist teams dedicated to solving patient problems, creating a premium "hospital in the sky," with the understanding that these services can also be delivered through offline channels.In this way, we will establish an O2O closed loop on the internet. However, it should be noted that this platform will not be open to all physician teams.
"Hoping China Can Also Establish Its Own Medical Tourism Brand"
Another initiative we hope to promote in China is medical tourism. As everyone knows, India, Singapore, and Thailand have performed exceptionally well in this sector, and we aim to establish China’s own brand in medical tourism.We are also currently scouting for a surgical center cluster project, which will feature stunning mountain and lake views and house several surgical centers.We also hope to attract the best team of physicians to jointly develop this initiative, which we plan to announce publicly in early next year; discussions are currently still in their early stages.
To ensure our patients also achieve profound psychological healing.
(Proposed Location for the Surgical Center)
"We aim for our surgical center to be the best in China, so the entire design, including the exterior views, is also top-notch, ensuring that our patients not only achieve physical recovery but also receive excellent mental comfort."
This image depicts a future standalone ambulatory surgery center. There are such buildings currently in the planning stage.18Dong, there are plans to develop it into a surgical center cluster.
Other Remarks
(Shanghai Xuhui District Administrative Headquarters)
This is our administrative headquarters located in Xuhui District, Shanghai. Featuring a beautiful garden, it serves as a frequent venue for brainstorming sessions. Every afternoon, friends from various industries with ties to healthcare join us for afternoon tea, sparking intellectual exchanges. Many of the insights that have guided our physician group to its current success have originated from these diverse connections.
Overall, the medical sector lags behind other industries in terms of marketization. Historically, physicians have tended to operate within a relatively closed professional circle., so now that physician groups have become independent entities, they engage in exchanges with various sectors of society and can draw valuable insights from other industries. Meanwhile, many industries also use physician groups as a window to gain a better understanding of doctors.
Selected Q&A Highlights
Question: Is the physician group considering entering the insurance sector?
Zhang Qiang: When we reach a certain scale in the future, our physician group will also intervene as an entity into insurance or develop into a membership model, thereby gradually reducing the burden of medical services for patients. We are actually still following the slogan we previously established.Ensuring access to high-quality healthcare for all is one of our long-term goals."If this journey were a marathon, we may have only covered one kilometer, but our direction will not change."
Q: How do physician groups handle medical disputes? How can physicians feel a sense of security within a physician group?
Zhang Qiang: How does our physician group currently handle medical disputes? There is one point that everyone needs to understand: when high-quality medical care is provided to patients, medical disputes are rare. We perform over a thousand procedures annually, and to date, we have not encountered a single medical dispute. When youWhen you can spend twenty minutes carefully understanding the patient and still have ample time to assess their psychological state,You will find that communication with patients is actually very smooth. In this regard, we are in fact safer compared to public hospitals.
On the other hand, there is medical liability insurance.Previously, when issues arose with patients, physicians might not have had such protections in place. Now, all our doctors carry multiple medical malpractice liability insurance policies. Should any incident occur, legal and insurance support intervenes immediately, alleviating most of the physicians’ concerns. Furthermore, regarding practice models, adopting a patient-centered approach significantly reduces the likelihood of medical disputes. From my personal perspective, I often felt anxious while working at public hospitals; now, I find the practice environment much more relaxed and secure.
The third difference is that visiting surgeons return to their home institutions immediately after performing surgery, leaving them with no capacity to manage patients’ postoperative care when their schedules are busy.If postoperative complications arise, it is difficult for visiting surgeons to return and manage the situation. In contrast, each specialist in our physician group is supported by a dedicated team comprising relevant physicians and specialist assistants. These assistants monitor patients’ conditions 24/7, ensuring that postoperative patients can contact the relevant specialists at any time and from anywhere.
Question: What is the biggest challenge for physician groups? Patients? Physicians? Policy?
Zhang Qiang: I believe the challenges mainly stem from several aspects,One is the patient's healthcare-seeking behavior,Of course, this habit is gradually improving. For instance, we had a patient who flew from Guangzhou to Shanghai for an outpatient consultation and then flew to Beijing for surgery, as he trusted only the physician; with air travel available, he felt that receiving medical care in any location was essentially the same.Additionally, there are some misconceptions among peers, many of whom fail to understand these emerging innovations., believing that we are making huge profits, while in reality we feel that we are paving the way for them. Therefore, we sometimes feel lonely due to being misunderstood, and there are also many policy restrictions and inadequate safeguards in various aspects.
Of course, I believe that all of this is not the greatest challenge,The greatest challenge lies in our own insufficient capabilities.In other words, it is a significant challenge to break away from entrenched mindsets and transition to a corporate group structure with a joint-stock board of directors. How to effectively lead and organize them remains a major difficulty. Therefore, I believe that learning capability is crucial; we have been continuously learning, which has naturally drawn considerable attention.
From the perspective of policy challenges, current policy trends are increasingly favorable to physician groups.This is because the medical services provided by our existing public healthcare system often fail to meet the needs of the general public, leading to pronounced doctor-patient conflicts. Dissatisfaction is evident among hospital administrators and government authorities alike, indicating that our current healthcare model is flawed and requires improvement. For physician groups, our value in this field lies in how we can reinvigorate physicians’ drive to serve patients. In this regard, our direction aligns with the broader reform efforts, so I believe that policies will continue to improve.
Question: How do you plan to integrate Internet thinking?
Zhang Qiang:First, the Internet is an important tool in this era, capable of reshaping the landscape of many traditional industries,The healthcare industry is no exception, which is why we place great emphasis on the internet. However, as an online model, the internet sometimes conflicts with the nature of healthcare. For instance, in offline settings, patients often seek medical care far from home rather than nearby, whereas the internet aims to provide convenience. Ordinary citizens in China prefer traveling to Beijing or Shanghai for treatment, prioritizing higher-quality medical services over convenience. Yet, we cannot rely on the internet to match patients with nearby hospitals, as there is inherent distrust toward primary care institutions among patients. In this regard, the internet fails to address the issue. Therefore, I believeThe Internet can improve physicians’ work efficiency, but it cannot yet transform the existing healthcare environment.
Healthcare is highly localized. In this regard, physicians differ significantly from lawyers and teachers. For a physician to practice, various equipment or fixed facilities are required. Whether we can leverage the internet to develop a new model is currently being explored by many.
Our physician group places greater emphasis on internet-based mobility. We will not develop traditional Hospital Information Systems (HIS), as our physicians are contracted across multiple practice sites. Given that the future medical workforce will be mobile and relatively decentralized, we are also developing a mobile platform.Currently, we are leveraging third-party platforms to store patient medical records, such as Bingli Jia (Medical Record Folder), and we also utilize Haodf for doctor-patient interactions., of course, we now have our own WeChat backend and our own remote consultation platform; in the future, we will conduct high-acuity consultations on our own platform.
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