Healthy returns

Why investors are pouring cash into new private practices set up by doctors

zhang qiang

Doctor Smile founder Zhang Qiang

Antagonism towards the medical profession in China seems to be getting more common. The Chinese Medical Doctor Association has estimated that more than 70% of its members have suffered verbal abuse or physical violence and in 2014, 347 people were charged for assaulting hospital staff (see WiC252 for examples).

Besides irate patients, doctors have lately found themselves being hunted down by another demanding group: venture capitalists.

According to Time Weekly, so-called ‘doctor groups’ have been springing up as a sought-after investment concept. “Pharmaceutical products, medical equipment and hospitals have all been connected with the capital market in China. The securitisation of the scarcest of resources – medical doctors – will offer the biggest opportunity in the healthcare industry over the next decade,” the magazine claims, citing a verdict by Citic Securities.

What is a doctor group? Essentially it’s what’s called a ‘group practice’ in the United States, or a team of doctors who share resources across their own private practice, often partnering with hospitals.

In the past most physicians in China were contractually bound to a single hospital. While public healthcare offered job security, it also prevented doctors from offering their services in more than one place. This changed last year when the government allowed doctors to sign contracts with different entities. More than 50 doctor groups have since emerged, with 10,000 physicians from state-run hospitals joining them.

One example is the Brain Doctor Group founded last year by Song Donglei, a surgeon. His medical start-up has attracted six neurosurgeons and set up cooperation agreements with four Shanghai hospitals. “I can work better as a private practitioner. I feel less restricted compared to doctors who are still in the system. I’m more focused and I feel more valued,” Song told CCTV.

The private equity firms often want to invest in doctor groups linked to particularly respected practitioners, says Caixin Weekly, which reports that Dr Smile Medical, a Shanghai-based group founded by vascular specialist Zhang Qiang, has raised “tens of millions of yuan”.

Another outcome of the rise of the doctor groups is that some of the power in the healthcare system is being transferred away from the state or powerful business groups such as the Putian gang (see WiC276).

Healthcare regulators also hope that the creation of these doctor groups may help to ease the overload on the public medical system – diverting those with means from the handful of the leading state-run hospitals in major cities that are huge overcrowded with patients.

Earlier this year, the internet giant Tencent launched its own app called Tencare Doctor, offering a platform for doctors to build their own branded services. Tencent has also formed a partnerships with nine doctor groups, matching up the physicians with paying patients in need of consultations. “Eventually we would like to become an information sharing network between physicians, patients and hospitals,” a spokesman for Tencare told Time Weekly.

Ping An, a leading insurer, is also taking an interest in the trend, suggesting the growth in doctor group activity could be fuelled in future by sales of private health insurance

But in China’s low trust environment, the new groups will have to quickly establish a reputation for quality medical care. That said, CCTV seems to think these newer, better-funded partnerships could improve doctor-patient relations among customers with the money to afford their services. “I feel the service is really good. They are highly efficient. We will leave the hospital in two days and we will stay in touch with the doctor via the internet to have remote consultation,” the husband of one patient told the state TV channel of his positive experience with a doctor group.

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