Zhu Hengpeng: Finding Hope in Despair – The Rise of Community Clinics in Internet Healthcare (Stardust Medical Salon Open Class Session 2)
Event Name: Xingdong Xiangyihui Phase 1 Open Course
Event Date: November 7-8, 2015
Organizers: Legend Star, VCBeat, BlueRun Ventures
Guest Speaker: Zhu Hengpeng, Deputy Director of the Institute of Economics at the Chinese Academy of Social Sciences and Director of the Center for Public Policy Research.
Zhu Hengpeng said, “I am the best expert on healthcare reform policy, bar none.”
Below are the highlights from Professor Zhu Hengpeng’s speech. For the full presentation, please follow VCBeat on WeChat (vcbeat) to watch.
10. We must find hope amidst despair, and that hope lies in the rising volume of outpatient visits at community clinics. This data is derived from Beijing urban employee basic medical insurance patients, all of whom are Beijing residents. A staggering 88% of outpatient expenditures flow to hospitals. Do Beijing residents also predominantly seek care at tertiary hospitals? This constitutes the "despair." In this scenario, it becomes evident that nothing can grow under the shadow of these giants; apart from tertiary hospitals, the tiered diagnosis and treatment system appears virtually nonexistent. This is what I mean by "despair." However, why has a glimmer of hope emerged? Data from Beijing reveals that due to severe strain on the city's medical insurance fund, stringent cost-containment measures have been imposed on hospitals. Consequently, Beijing has pioneered a nationwide shift: 35% of insurance funds are allocated to inpatient care, while 65% are directed toward outpatient services. This trend will eventually spread across China, as financial constraints will inevitably restrict inpatient admissions—the area with the greatest waste and thus the most immediate potential for cost-saving impact. Therefore, the so-called "glimmer of hope" is that outpatient services will account for the majority of healthcare expenditures. This is an area where you can make a significant contribution.
11. The core of pharmaceutical policy is tendering. Zhejiang’s tendering model mandates a 10% price reduction, whereas Beijing has discontinued its tendering process, opting instead to adopt the lowest tender price among the 31 cities nationwide. For products with an existing market in Beijing, it is advisable to avoid price reductions in that province.
Original imported drugs from foreign-invested enterprises are essential for inpatient care; joint bid rigging is feasible, allowing prices to remain unchanged. However, exclusive proprietary Chinese medicines must reduce their prices, as they are not clinically indispensable. Consequently, failure to lower prices during tendering may result in market exclusion. Although significant price reductions may secure a winning bid in Beijing, hospitals may still refrain from procuring the products. Tertiary Grade A hospitals will not abandon outpatient services, making the separation of prescribing and dispensing unfeasible.
Alibaba Health’s pilot program for online prescription drug sales in Shijiazhuang last year ultimately failed, as prescriptions could not be released from hospitals; both physicians and hospitals were unwilling to participate.
12. The issue we currently face is that while the policies appear sound, they lack coordination. Therefore, when analyzing trends through policy lenses, do not rely on initiatives requiring multi-faceted coordination. Why, then, have I included this point? Because I believe the breakthrough in healthcare reform does not lie in simultaneous, across-the-board advances, but rather in focused, single-point advancements. Once one area is effectively addressed, other policies will naturally follow suit.
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