China’s health system, which serves nearly 1.4 billion people, is moving toward an increasingly private, for-profit model to provide better care. The Healthcare Reform Act in 2000 helped to drive that shift, creating a new classification of medical institutions to allow two categories—for-profit and nonprofit. Prior to 2000, nearly all healthcare institutions were state-owned, public and entirely nonprofit, according to a market report by Hong Kong-based consulting firm ChinaCare Group.
With the development of private hospitals in China still early, Hoag Orthopedic Institute in Newport Beach recently hosted students from the University of Michigan’s Ross School of Business and students from Beijing-based Cheung Kong Graduate School of Business who were part of Ross’ global MBA program, to learn about its model.
The institute is a for-profit joint venture between nonprofit community hospital Hoag Memorial Hospital Presbyterian and physician owners. The model aims to provide specialized orthopedic care in a quality setting at lower costs by aligning hospital and physician interests.
“Most physicians are not owners of hospitals. [In the U.S.], there are less than 100 hospitals that are physician-owned,” said Dr. James Caillouette, an orthopedic surgeon and an early innovator of the model when the institute started in 2010. He said bundled payment means care providers are paid less and have more responsibility in patient recovery. Hoag Orthopedic has shown that by allowing physicians to participate, the model incentivizes both parties to work together to achieve value.
For-profit hospitals in China are significantly smaller than state-owned, public hospitals—for-profits represent 18.6% of all hospitals and 5.9% of hospital beds, according to ChinaCare. They offer more specialized care.
Students from CKGSB said patients in China cannot use private hospitals on a large scale because most are excluded from the public insurance network. But that’s changing as affluent consumers in China have shown that they are willing to pay for good healthcare—Chinese people took an estimated 500,000 overseas trips for medical care or plastic surgery last year, a fivefold increase from a year earlier, according to Ctrip.com International Ltd. in Shanghai, a Chinese travel booking agency.
Chinese multinational conglomerate Dalian Wanda in Beijing announced in January 2016 that it would pump $2.3 billion into building three private hospitals in Shanghai, Chengdu and Qingdao. In April, it said it will invest $10 billion in a Chengdu healthcare park comprised of general hospitals, eight smaller specialized hospitals, and other healthcare-related firms.
Caillouette said the visit from the University of Michigan and its global MBA students is purely educational. But he has been approached by Chinese investors interested in setting up that structure in China.
Expansion
Orange-based Western Dental Services Inc. acquired eight offices from Children’s Dental Group, including six in Southern California—Carson, Eagle Rock, Norwalk, Santa Ana, South Gate and Whittier—and two offices in Northern California—San Jose and Sunnyvale. Terms were undisclosed.
La Palma-based Children’s Dental Group consists primarily of pediatric and orthodontics practices.
Western Dental is an integrated, full-service dental and orthodontics organization.
“This latest acquisition adds to our strong presence in Southern California and also increases our visibility in the San Jose area,” said Chief Executive Officer Daniel Crowley.
Western Dental will expand orthopedic services in those offices and upgrade in-office technology.
Robotics
Norwalk, Conn.-based Xerox Corp. and PARC in Palo Alto, a Xerox company, will partner with Innovation Lab in Newport Beach. The lab is part of the La Palma-based Innovation Institute, which develops healthcare products and services under three units: a lab, an investment fund, and a cash-generating division that acquires firms that provide services to healthcare providers, including construction, staffing, billing and medical office design.
The partnership aims to develop products in printed electronics, machine learning and artificial intelligence used in healthcare delivery.
Bits & Pieces
Rose-Hulman Institute of Technology in Terre Haute, Ind., named Edwards Lifesciences Corp. Chief Executive Michael Mussallem an institute alumnus to its board of trustees. Mussallem earned a bachelor’s degree in chemical engineering from the college in 1974. … Fitch Ratings upgraded Irvine-based Sabra Health Care REIT Inc. to investment grade following the completion of its merger with Chicago-based Care Capital Properties Inc. The combined entity created a 564-property portfolio of skilled nursing and senior housing facilities. … Newport Beach-based Cure Medical LLC introduced a catheter made for children. The single-use, 10-inch pediatric hydrophilic cure catheter doesn’t include chemicals such as DEHP, BPA and rubber latex, to which children may be allergic. … Mission Viejo-based surgical laser maker OmniGuide Inc. promoted Ajay Bhave from vice president of operations to chief technology officer.
