Chuiyangliu hospital, pictured in January 2023 in Beijing, in the previous couple of years finished renovations that allowed for a six-fold increase in every day patents to five,000 a day, in accordance with official estimates.
Yin Hon Chow | CNBC
BEIJING — At the highest of the shopping list for anyone of their late 20s or older in China is health, sports and wellness. That is in accordance with an Oliver Wyman survey late last yr, as China finally began to end its Covid controls.
For people planning to spend more on that health category, 47% said in December they intend to spend more on medical insurance. That is up from 32% in October, the report said.
“There is a much higher health concern after this latest wave, but after the complete pandemic the health consciousness of the Chinese consumer has increased quite a bit,” said Kenneth Chow, principal at Oliver Wyman.
Even for people of their early twenties, health is just second to their plans to spend more on dining, the survey found. The study ranked the categories by the proportion of respondents who said they intended to spend more on each item, minus the proportion of respondents planning to spend less.
The pandemic pressured hospitals world wide. But China’s situation — especially since Covid cases surged in December — revealed the gap between the local public health system and the country’s global economic heft as second only to the U.S.
The U.S. ranks first on this planet by health expenditure per person, at $10,921 in 2019, in accordance with the World Bank. For China, the identical figure was $535, just like that of Mexico.
Households in China also pay for the next share of their health care — 35.2% versus 11.3% for Americans, World Bank data showed.
Extreme pressure on public hospitals — including lack of capability — drove many latest patients for Covid and non-Covid care to facilities operated by United Family Healthcare in China, said founder Roberta Lipson. She said her company has 11 international-standard hospitals and greater than 20 clinics in major Chinese cities.
“Growth in awareness of the importance of assured access to health care, in addition to UFH as a substitute provider, is driving increased demand for our services from patients that may afford self-pay care,” she said.
“This experience can be driving increased interest in business medical insurance which could cover access to premium private providers,” Lipson said. “We’re helping patients to grasp the advantages of business insurance. This may have a long-lasting impact on demand volume for personal healthcare services.”
Latest Frontier Health, of which Lipson is vice chair, acquired United Family Healthcare from TPG in 2019.
In early December, mainland China abruptly ended its stringent Covid contact tracing measures. Infections surged, with hospitalizations reaching a high of 1.6 million nationwide on Jan. 5, official data showed.
Between Dec. 8 and Jan. 12, Chinese hospitals saw nearly 60,000 Covid-related deaths — mostly of senior residents, in accordance with Chinese health authorities. By Jan. 23, the entire exceeded 74,000, in accordance with CNBC estimates from official data.
Although latest deaths per day have fallen sharply from the height, the figures don’t include Covid patients who can have died at home. Anecdotes depict a public health system overwhelmed with people at the peak of the wave, and long wait times for ambulances. Doctors and nurses worked additional time at hospitals, sometimes while they themselves were sick.
Medical insurance
A lot of the 1.4 billion people in China have what’s called social medical insurance, which provides access to public hospitals and reimbursement for medicine included in a state-approved list. Employers and their staff each contribute regular payments to the government-run system.
The penetration of other medical insurance — including business plans — was only 0.8% as of the third quarter of 2022, in accordance with S&P Global Rankings.
Analyst WenWen Chen expects business medical insurance to grow quickly this yr and next. “Following Covid, we do see people’s risk awareness rising. For [health insurance] agents, it’s easier for them to ascertain conversations with clients.”
Among the players in China’s medical insurance industry include Ping An, PICC and AIA. Local authorities are also testing a low-cost insurance product called Huimin Bao.
Oliver Wyman’s survey in December found that 62% of non-policyholders planned to purchase medical insurance, and that 44% of existing policyholders were considering a rise of their coverage.
During the last 15 years, the Chinese government has dedicated financial and political resources to developing the country’s public health system. The subject was a complete section in Chinese President Xi Jinping’s report at a serious political meeting in October.
Hospital funding
Nevertheless, one among the barriers to improving China’s public health system is its fragmented financing system, in accordance with Qingyue Meng, executive director at Peking University’s China Center for Health Development Studies.
Health-care providers in China receive financing from 4 sources — social medical insurance, the federal government health budget, essential public health programs and out-of-pocket payments — each “managed by different authorities without effective coordination in budget management and allocation,” Meng wrote in The Lancet in December.
“Hospitals and clinics are reluctant to supply public health care attributable to the absence of economic incentives and the essential variety of regulations,” he said, “which further separate[s] hospitals and [specialized public health organizations such as the Centers for Disease Prevention and Control].”
For comparison, HCA Healthcare, the biggest hospital operator within the U.S., said over half of its revenue comes from managed care — often company-subsidized plans which have a network of health providers — and other insurers. Most of HCA’s other revenue comes from government-related Medicare and Medicaid medical insurance plans.
In China, United Family Healthcare’s Lipson claimed that being a privately managed business allowed it to react more quickly. “We finance our own growth and might acquire talent and expertise by offering competitive pay packages, so we may flex beds to the extent of care that is required.”
“Having observed the course that pandemic surges took in other countries, and since our patients are private pay, we were capable of order sufficient supplies of medication, PPE etc, as we began to see the numbers of Covid cases grow in China,” she said.
Her company had excess capability in the beginning of the pandemic because it opened 4 hospitals up to now two years, Lipson said, noting the general public system added 80,000 intensive care unit beds over the past three years, but struggled to fulfill the demand from the surge in Covid cases.
A shortage of specialised doctors
Ultimately, the pandemic’s shock offers the chance for broader industry changes.
The health care payment system doesn’t have a direct impact on China’s hospitals, because most are directly under government oversight, said George Jiang, consulting director at Frost&Sullivan.
But he said macro events can drive needed systemic changes, similar to tripling ICU capability in a month.
China’s tiered medical system had forced doctors to compete for just a few advanced intensive care departments in just the largest cities, resulting in an absence of qualified ICU physicians and hence beds, Jiang said. He said recent changes mean smaller cities now have the capability to rent such specialized doctors — a situation China hasn’t seen up to now 15 years.
Now with more ICU beds, he expects China might want to train more doctors to that level of care.
There are a lot of more aspects behind China’s health care development, and why locals often go abroad for medical treatment.
But Jiang noted the greater use of the web for payments and other services in China versus the U.S. means the Asian country can develop into essentially the most advanced marketplace for medical digitalization.
Chinese corporations already within the space include JD Health and WeDoctor.
— CNBC’s Dan Mangan contributed to this report.
Correction: This story has been updated to reflect that Roberta Lipson is founding father of United Family Healthcare and vice chair of parent company Latest Frontier Health.