Many Chinese towns and villages have made their names (and fortunes) by devoting themselves to a single economic activity. But there are few better illustrations of this quasi-tribal working culture than the healthcare bosses of Putian (population: 443,000).
This powerful clan from Fujian owns more than 8,600 hospitals in China and accounts for as much as 80% of the country’s private sector medical market. How did a small city achieve such dominance?
Their story has unlikely beginnings, dating back to the late 1970s, when a Putian native named Chen Deliang was working as a busker’s apprentice. He made his living touring the countryside with the busker and his performing monkey, earning cash by selling ointment for skin disease. After learning his master’s secret recipe for skin cream, Chen went his own way, crisscrossing the country claiming to be a physician. As his fortunes grew he recruited disciples from his hometown, who passed on their knowledge to other Putian natives. The gang grew in number and fame.
In the 1990s the travelling doctors expanded their expertise into the treatment of sexually transmitted diseases (STDs) – the incidence of which were on the rise thanks to a boom in prostitution (as China’s commercial sector took off after decades of Maoism, so too did its black economy – a major portion of which catered to male carnal desires).
Few public hospitals were offering treatment for STDs and many patients were too embarrassed to seek medical help. The physicians from Putian set up small clinics in alleyways around the country, and promoted their treatments – on ads glued to lamp posts – as originating from an “old military doctor”. This dubious advertising later turned into a half-truth, when the People’s Liberation Army (PLA) started to reform its network of hospitals. Putian’s doctors grabbed their chance, signing commercial contracts to operate inside some of the clinics, gaining legitimacy for themselves. Before long they were opening hospitals of their own and branching into new lucrative forms of medical treatment.
As the internet became more prevalent, the Putianese entrepreneurs were quick to see that it would be an effective way to attract new patients to their clinics. Today their medical network is so expansive that Putian’s healthcare advertising has been estimated to account for as much as half of revenue at Baidu, China’s search engine giant (see WiC276).
The rise of Putian’s medical clan is well-documented in China’s media – with many of the early articles on the phenomenon focusing on the community’s hard work, solidarity and entrepreneurial verve.
However, their coverage has turned much more critical this month, after the death of a young cancer patient in Shaanxi province. National attention has also been drawn to some of the other participants in the scandal, most notably Baidu as well as the military-linked clinics that provided the failed – and now highly controversial – treatment.
What is the scandal about?
It started with a question two years ago on Zhihu (a question-and-answer website similar to Quora) – what is the worst evil in human nature?
For a while there was nothing particularly special about the post until a 21 year-old called Wei Zexi came up with an answer in February. “I believe the answer is synovial sarcoma,” the computer science student wrote, sharing his experience of battling soft tissue cancer.
Wei then told the story of his disastrous treatment. He had looked for help on Baidu and the top search result, a sponsored listing, led him to the Second Hospital of the Beijing Armed Police, where he spent more than Rmb200,000 (about $30,500) on immunotherapy.
Wei’s form of cancer is more generally treated with surgery and chemotherapy, and he accused Baidu of taking money to promote less proven treatments.
A doctor with the hospital is said to have told him that the treatment was developed by Stanford University, and was 80 to 90% effective. Later Wei learned the therapy is only in clinical trials in the US and doesn’t have a high record of effectiveness.
“Baidu: we did not know how much evil it could do,” he lamented, drawing on the ‘Don’t be evil’ motto of Google, a company Baidu has sought to emulate.
Wei’s story made him into an internet celebrity and in the last two months of his life he kept up a running commentary on various internet platforms, reiterating his desperation not to die.
On April 8 Wei made the journey home for the final time. He left the Second Hospital of the Beijing Armed Police to return to Shaanxi’s capital Xi’an, where doctors there determined that further treatment would be futile.
On April 12, he died, triggering not only widespread sympathy online but a renewed torrent of abuse directed at Baidu and its unseemly role in the affair.
Is Baidu at fault?
Not surprisingly, Baidu’s bosses had been keeping a close eye on Wei’s case ever since he’d achieved celebrity. So when news of his death became public its marketing unit published a long weibo article.
While paying tribute to Wei’s battling spirit, the search giant pointed out that Wei went to the military backed hospital (the ‘armed police’ are under the PLA) not only because of Baidu’s sponsored search result, but also because of advertisements for the clinic that were featured on the state broadcaster CCTV.
Baidu also said that the hospital Wei used was formally accredited and that it had provided the search engine with proper certification.
The effort to play down its culpability proved counterproductive, however. By May 2 the weibo article had been viewed more than two million times, drawing still more attention to Wei’s death, and making the case not only the hottest topic on social media platforms but in the conventional press too.
Some netizens saw the tragedy as symptomatic of Baidu’s dominant position in the country’s internet search market where it controls nearly 80% of it.
Some observers have argued that were the Great Firewall not barring internet users from accessing foreign medical content, or making searches using competing services such as Google, Wei might have avoided the flawed treatment promoted by the search engine.
“Baidu has long been known to mix paid information among its search results, so as to guide users to the websites of those that pay for it to do so. Some who have paid for such ‘hits’ have been found to be involved in fraud and there have been many victims,” the China Daily suggests. “The only way to stop such harmful activities is to break Baidu’s search monopoly.”
The internet giant sells highlighted or higher ranked ad positions for its keyword searches, which is why the Second Hospital topped the search results when Wei was seeking medical help. This is a common model for search engines worldwide, but Baidu’s critics say that the company is not doing enough to differentiate paid searches from unsponsored links (which rank highly because the search algorithim judges them to be the most useful and popular results to be associated with the keywords). Baidu has also come under fire for failing to vet advertisers’ claims and not doing enough to reject ads placed by unscrupulous companies.
“Companies that are involved in services that deal with human life should be particularly conscientious of their duties when conducting their businesses,” pronounced the People’s Daily.
“Billions of net users trusted Baidu for their search engine and online forum services, the company is hence responsible for the trust and is obligated to take up their social responsibilities.”
In the face of the public’s anger, the Cyberspace Administration of China said last week that it had dispatched a team of investigators to Baidu. The internet watchdog also set up a joint task force with the National Health and Family Planning Commission (the top healthcare regulator) and the State Administration of Industry and Commerce to review if Baidu’s business practices abide by the law.
Following that announcement, Baidu’s Nasdaq-listed shares fell nearly 8% (they are off 13% since the scandal broke).
Putian creating problems again…
Regular WiC readers will recall that this isn’t the first time that a healthcare issue has mired Baidu in bad press. In January it was ridiculed
for selling the management role
on a discussion forum about haemophilia to a private hospital. After this news broke, there was more digging by the press and disgruntled netizens. Soon it was claimed that 40% of the 3,000-plus medical discussion forums on Baidu were being sold to hospitals or pharmaceutical firms to promote their businesses, despite the fact that some of them had been exposed as unlicenced operators (see WiC309).
Nor is it the first time that Baidu has shared the headlines with Putian’s medical entrepreneurs. Last year the company’s shares lost $4 billion in market value when investors were rattled by news that the Putian Health Industry Chamber of Commerce was threatening to boycott Baidu for overcharging on medical ads (see WiC276).
That dispute made plain how reliant Baidu and its Putian clients were on each other. Now – in the wake of Wei’s death – many are also asking why the Putian hospital network isn’t facing more scrutiny for how it markets its medical services.
The department of the Second Hospital, where Wei Zexi was treated is said to have been run by a Putian-related businessman. And the immunotherapy treatment it provided to Wei was purchased from Shanghai Claison, a company owned by another Putian native, according to ThePaper.cn.
“It is common for doctors in these Putian-run private hospitals to overprescribe medication in exchange for financial incentives. The doctors receive a percentage of the sales and are required to meet certain quotas,” Chen Xiaolan, a retired doctor who now devotes her time to exposing malpractice in the industry, told Sixth Tone, a sister publication of ThePaper.cn.
Other newspapers went further in their condemnation. “It is necessary to conduct an in-depth review, alongside a serious investigation over whether Baidu’s business is legal, of why, despite prohibitions and supervision, a number of Putian system medical institutions can still rely on swindling to become a formidable presence in China’s medical market,” the Beijing News demanded.
Netizens have also been circulating the names of hospitals in their locality that are linked to Putian’s medical clan. “Now I know that’s why our healthcare service has been so bad,” one internet user wrote on weibo using the trending hashtag ‘List of Putian hospitals’.
Putian’s manipulative hand is now being imagined in other parts of the economy as well, with the forwarding of an old article via social media which alleges that the healthcare tycoons have been contracted to run 90% of China’s temples and monasteries. The official Buddhist body denied the rumour, but the stocks of Putian-controlled medical groups have been battered this month. The Hong Kong-listed Huaxia Healthcare, for one, plunged more than 13% in a single session.
How about the PLA hospitals?
During the period of Mao Zedong’s rule people often turned to the military’s medical staff at moments of crisis. This was at a time when the army’s reputation with the public was riding high (hence the mentions of an “old military doctor” in many of the early Putianese medical ads, in an attempt to win trust). The same reputation provided the initial impetus for many PLA units to set up their own hospitals. But what began as a quest to “serve the people” was soon being commercialised, with the military hospitals gaining beneficial exemptions from some of the national rules.
For example, public hospitals have been banned from sub-contracting medical departments to outsiders (a malpractice known as ‘a hospital within a hospital’) but many PLA clinics continue to do so, in just the way the paramilitary hospital did that treated Wei. In fact, the military hospitals have become key strategic business partners for the Putian clan.
That is now backfiring. Following Wei’s death, a crowd of cancer patients that had received treatment at the Second Hospital began protesting outside, and demanded refunds. The hospital has since suspended services to new patients, pending an investigation by the authorities. But the trial by media has continued, much of it online. Among the most forwarded material was a list of the 80 or so army hospitals run by Putian tycoons, as well as a weibo post by a CCTV commentator, detailing the monetary gifts presented by Putian bosses to military medical facilities.
“The PLA hospitals were the platforms that transformed Putian’s ‘barefoot doctors’ and uncertified physicians into healthcare billionaires,” a popular article on WeChat suggests.
As the scandal intensified the state censor called a halt to coverage this week, barring the People’s Daily and Xinhua from reporting on it.
The military, meanwhile, has taken up a defensive posture. “The army will never tolerate any behaviour contrary to its principle of serving the people,” the PLA Daily insisted in an editorial, adding that the nation shouldn’t “ignore the contribution of the military to the Chinese medical system.”
What is the remedy?
The People’s Daily insists that “the opportunity has come” to reform the Chinese medical system, including the role of the military hospitals. In fact, the Central Military Commission has announced that the PLA will end all commercial activities in three years, implying it will exit hospital ownership too.
Elsewhere, there have been calls for supervision to be improved by the healthcare regulator, the National Health and Family Planning Commission (NHFPC).
“What has the NHFPC been doing? Shouldn’t it be the one responsible for vetting which kind of cancer treatments are available in our medical system?” one internet user wrote on Sina Weibo.
Among the best of the many online answers to that question: “Among the top 10 officials of the NHFPC, only one is a medical expert, the rest are all specialists in sterilisation [family planning].”
Meanwhile, Baidu has been ordered by China’s internet watchdog to clean up its search operation. Promotional content is to be more clearly labelled as advertising, and feature more reminders about the potential risks of sourcing treatment online. Baidu has also been told to restrict the share of commercials in its search results to less than 30% of each screen page.
The case has also led Baidu’s founder and boss Robin Li into some soul-searching. “In the middle of the night, I often think, ‘Why do so many daily Baidu users no longer love us?’ Our values have become distorted and financial performance has become more important to us than user experience,” he wrote in an open letter. “If we lose the support of our users, we lose hold of our values, and Baidu will truly go bankrupt in just 30 days.”
In the meantime Putian’s vast hospital network continues to operate across the country, charging millions of patients for medical treatment and advice. Its role in the Wei case still isn’t clear, although Chen Deliang, the founder of the clan, admitted to Sixth Tone that the department that treated the student was run by a Putian-related business until a few months ago. Chen said he was not personally involved in the Wei case, however.
“I have left this industry,” he explained. “I now devote myself to religious work.”
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