Are American Hospital Systems Setting their Sights on China?

Cleveland Clinic and Mayo Clinic are some of the most reputable hospital systems in the world. Situated in Cleveland, OH and Rochester, MN, each hospital system treats people from around the world on an annual basis. Last year, Mayo Clinic treated patients from 137 countries while Cleveland Clinic welcomed patients from 170 countries2,3. Both hospitals already have international recognition and patient populations. Instead of patients traveling to the United States, both hospital systems have recognized international expansion as a potentially successful next step.

 

Mayo Clinic Collaborates

 

In late 2017, Sir Run Run Shaw Hospital in Hangzhou, China agreed to collaboration with Mayo Clinic and joined the hospital system’s already massive network4. This Chinese based hospital now has access to Mayo Clinic’s resources, including multidisciplinary boards, medical experts, and electronic consults4. From a business perspective, this Chinese hospital will now get operational and business objectives from Mayo to help improve efficiency. By collaborating with Sir Run Run Shaw Hospital, Mayo Clinic now has access to an additional 2.6 million patients annually4. This Chinese hospital is also affiliated with a medical school, meaning that Mayo Clinic will also now have influence over a small part of Chinese medical education4.

 

Cleveland Clinic Looks to Build

 

Cleveland Clinic has previously expanded to Toronto, Canada and Abu Dhabi, United Arab Emirates with huge success. Last year, the Abu Dhabi hospital recorded seeing 337,000 patients5. The Clinic is now working on its London based hospital, hoping for a 2020 opening date5. The hospital system has recently signed an agreement with a Chinese health care provider currently building a hospital in Shanghai. Bill Peacock, Chief of Operations at Cleveland Clinic, confirmed this agreement for a hospital in Shanghai6. However, Chinese expansion remains in preliminary stages and the outcome of this agreement is not yet known.

 

2009 Chinese Healthcare Reform

 

In 2009, the Chinese government looked to reform healthcare. There were several important focuses to the reform, aiming to increase coverage and reinforce healthcare infrastructure. Medical insurance coverage for over 90% of Chinese citizens became a priority7. Public health services came to the forefront, with a focus on health education and screening. China previously did not have a defined focus on primary care, meaning that people often got their care in hospitals, leading to overcapacity.8 Thus, the government planned to invest in building the necessary infrastructure for community health centers and primary care clinics. Smaller hospitals were known for not having as good of staff and care. The government worked to update the infrastructure on these hospitals.  

 

Regulatory Changes Promoting Private Investment

 

There were significant regulatory changes with the 2009 healthcare reform that made China more desirable for private investment.  The government previously allowed physicians to work in one medical site8. In other words, the government banned physicians to work in multiple hospitals/sites. Most physicians chose to work for public, government owned hospitals thinking it would provide them with a more stable career7. Now, physicians and other providers can work for more than one medical site.

Private hospitals were previously not reimbursed for treating those on government based health insurance, especially in rural settings8. In more urban areas, private hospitals had a chance of getting reimbursed, but at lower rates8. With these physician regulatory changes and an increased certainty of reimbursement, there is now a role for private hospital growth in China. Physicians can now go work at higher end private hospitals and public insurance will hopefully reimburse private hospitals in the future.

With over 1.3 billion people and a growing healthcare sector, there are tremendous opportunities for hospital expansion into China. Some hospitals may choose to collaborate with current hospitals while others may choose to build their own hospitals. Nonetheless, expansion into China can more than double the number of patient encounters that these hospital systems already see.