1、The epidemic will spur progress in regulation,digital tools and consumer options.By Kevin ChangHow the Coronavirus Will Transform Healthcare in ChinaKevin Chang is the leader of Bains Greater China Healthcare practice and a member of the Private Equity practice.He is based in Hong Kong.Copyright 202
2、0 Bain&Company,Inc.All rights reserved.1How the Coronavirus Will Transform Healthcare in ChinaAt a Glance In response to the burdens COVID-19 has placed on the healthcare system,the Chinese government will likely accelerate reforms,mirroring the reaction to SARS in 2003.To avoid contamination and cr
3、owds at hospitals,more consumers are embracing innovative and digital B2C healthcare delivery modelsand we expect these behavior changes to stick.Faced with major shifts in Chinas healthcare system,companies can take six steps to navigate the disruption.For the past two months,the campaign to contro
4、l,diagnose and treat the novel coronavirus has been a taxing struggle.Stretching Chinas healthcare system further than the 2003 SARS epidemic,the fast-moving and deadly COVID-19 has resulted in overcrowded hospitals where medical personnel have worked tirelessly to provide care.Beyond the direct eff
5、ects of the virus,the epidemic has taken a toll on normal healthcare activities.As other patients avoid highly contagious hospital facilities,and resources are diverted to fi ght the epidemic,regular medical services have crawled to a standstill.The Chinese Medical Association has delayed all academ
6、ic meetings scheduled before April.And healthcare companies whose major busi-nesses are not directly related to the epidemic could take a hit in the fi rst quarter.When the coronavirus outbreak wanes,what will Chinas healthcare industry look like?While lessons from SARS can provide guidance on how g
7、overnment entities,companies and consumers are likely to react,the implications of the coronavirus are far broader.In a healthcare system already in transition,we expect to see an acceleration in reform,digitalization and patient empowerment.Reforming healthcare after the coronavirusAfter the SARS e
8、pidemic,the Chinese government quickly launched an overhaul of the healthcare system to improve access to such things as services and high-quality supplies.It invested in systems for disease surveillance and reporting,as well as epidemic prevention and control.Centers for disease control were built
9、across the country.And public insurance programs were vastly expanded to provide affordable care for the rural population.Since then,the transformation has moved beyond the basics to focus on effi ciency and quality.But the coronavirus outbreak exposed the remaining cracks in the nations healthcare
10、system.In the wake of COVID-19,we anticipate the government will once again institute sweeping reforms focused on access to high-quality care,cost management,product innovation and digitalization.2How the Coronavirus Will Transform Healthcare in ChinaFigure 1:Despite recent progress in major cities,
11、Chinas tiered healthcare system is still in early stages100806040200201220162018100806040200201220162018Number of visits in ChinaNumber of visits in BeijingCommunity health centers(CHCs)Class I hospitalsClass II hospitalsClass III hospitalsSources:National Healthcare Commission;Beijing Municipal Hea
12、lth Commission%Access to quality careChinas tiered healthcare systemin which smaller community health centers(CHCs)and Class I institutions provide fi rst-contact care,and larger Class II and III institutions provide specialist referral servicesis designed to distribute patients based on need,freein
13、g up resources at big,congested facilities.But implementation has been arduous.While Beijing and other cities have made some headway with recent decreases in Class III visits,patients still habitually seek treatment from large hospitals(see Figure 1).In the fi ght against the coronavirus,CHCs,Class
14、I and Class II hospitals have played an important role in identifying and preventing disease,and isolating patients.Of the 203 CHCs in Wuhan,the epicenter of the virus,199 were designated for COVID-19 screening and triage.And the fi rst group of patients admitted to Wuhan Jinyintan Hospital included
15、 referrals from Class II hospitals.At the same time,with a shortage of public healthcare resources,private facilities and third-party diagnosis and treatment services have provided much-needed relief.However,only 10 of Wuhans CHCs were prepared to admit and treat patients with coronavirus symptoms,e
16、mphasizing a gap in institutional capabilities.After the epidemic ebbs,the Chinese government will likely double-down on improving the quality and availability of CHCs,particularly 3How the Coronavirus Will Transform Healthcare in Chinain small cities,boosting the effi ciency of entire healthcare sy
17、stem.Meanwhile,the high demand for specialization will continue.Hospitals will increasingly outsource to private and third-party institutions that have scale,technology and cost advantages.Cost managementChina has taken multiple measures to control healthcare costs and cut fees since the SARS epidem
18、ic,including centralizing procurement,buying drugs in bulk and implementing a two-invoice policy to eliminate layers of distributors.But compared with SARS,the coronavirus will take a larger toll on Chinas economy and the healthcare system.SARS reduced Chinas GDP by approximately RMB 100 billion,whe
19、reas the coronavirus could cost as much as RMB 500 billion.During the recovery,the government will doubtlessly intensify cost and productivity efforts.SARS reduced Chinas GDP by approximately RMB 100 billion,whereas the coronavirus could cost as much as RMB 500 billion.Product innovationIn December
20、2019,Chinas amended Drug Administration Law established the market-authorization-holder system,making it easier for pharma companies to bring new drugs to market.Other recent moves,such as fast-track approval for certain medical devices,have likewise paved the way for health-care innovation.And whil
21、e cutting the red tape encourages local companies to experiment with alter-native medicine,China is also ramping up approvals on foreign drugs.To fi nd a treatment for COVID-19,Chinese health authorities are working with the US company Gilead Sciences to conduct trials of remdesivir,an antiviral dru
22、g,at hospitals in Wuhan.Meanwhile,Chinas contract research organizations(CROs)have been involved in the R&D of a preventative vaccine.But outside of coronavirus-related developments,pharma and medtech companies,CROs,and contract developing and manufacturing organizations(CDMOs)are grappling with sig
23、nifi cant delays to normal operations.What does this mean for the future?China is likely to speed up approvals of medicine and medical devices.Some high-end products will achieve greater awareness and penetration.Leading pharma and medtech companies will further invest in innovation,from artifi cial
24、 intelligence(AI)to partner-ships with emerging digital health organizations.CROs and CDMOs will have more buy-in from the government,pharma and medtech companies,and medical facilities.With additional support for R&D,contractors will play an elevated role in the next round of reforms.4How the Coron
25、avirus Will Transform Healthcare in ChinaDigitalizationEchoing a global,industrywide sentiment,the Chinese government has called for the integration of big data,artifi cial intelligence,telemedicine,online pharma retail and more.But healthcare still lags behind other industries in the digital revolu
26、tion.The coronavirus epidemic puts a glaring spotlight on the opportunities in digital.While some tech-nologies,such as AI-enabled fever-detection devices,are being rolled out quickly in response to the outbreak,other developments,such as the widespread adoption of electronic medical records,could i
27、mprove the systems effi ciency and transparency in times of crisis.To relieve current pain points and prepare for future epidemics,the digitalization of Chinas healthcare system needs to rapidly advance.Electronic records,digital prescriptions and other IT infrastructure will systematically track an
28、d analyze extensive patient data.AI and big data will eventually help hospitals reallocate scarce resources and improve diagnosis accuracy.These digital measures can break down silos between hospitals,pushing the tiered system forward.A digital,patient-fi rst futureBeyond systemwide reform,another f
29、orce is quietly transforming healthcare in China.Although physically locked down in their homes,consumers have become more empowered decision makers.COVID-19 has spurred them to embrace innovative B2C delivery models,reshaping their traditional behavior.Even after government restrictions are lifted
30、and virus fears subside,changes in patient atti-tudes toward online medical services,retail pharmacies and commercial health insurance will stick.Online medical servicesAs the number of coronavirus cases climbs,Chinas online healthcare platforms are growing explo-sively.Trapped indoors,many patients
31、 are turning to Internet-based options for diagnosis and treatment.Ping An Good Doctor,a healthcare services platform,had a nearly 900%increase in new users from December 2019,before the World Health Organization identifi ed the virus,to January 2020,when the virus spread across China(see Figure 2).
32、The number of online users and visits also has surged at Ding Xiang Yuan,an online community for healthcare professionals,and Chunyu Doctor,a tele-medicine platform.Prior to the outbreak,Chinese consumers typically visited physical institutions for their healthcare needs.Digital adoption was low:Acc
33、ording to a Bain survey,only 24%of Chinese respondents had used telemedicine.However,97%expressed interest in digital health services,if the costs were covered by an insurance provider or employer,and 64%expected to use telemedicine within the next fi ve years(see Figure 3).If consumers develop digi
34、tal habits and a greater willingness to pay for services during the epidemic,that timeline could be signifi cantly shorter.Companies can expedite the move online by deepening their understanding of new user behavior and providing support in this time of need.In the long run,successful digital health
35、 companies will partner with offl ine providers to provide comprehensive care at scale.5How the Coronavirus Will Transform Healthcare in ChinaFigure 2:Coronavirus has accelerated the growth of Chinas online medical platformsNew usersVisits by new usersActive usersOnline visitsActive usersOnline visi
36、tsSources:Ping An Good Doctor;Ding Xiang Yuan;Chunyu DoctorPercentage increase,December 2019January 2020135%30%800%215%100%900%Ding Xiang YuanPing An Good Doctor Chunyu DoctorFigure 3:Chinese patients expect to use more digital services within the next fi ve yearsNotes:Consumers were asked,If digita
37、l health services were covered by your insurance plan(if any)or your employer,would you be willing to use the services?The 97%of respondents who answered yes were then asked,From the list of tools and systems below,which(1)have you used in the past 12 months,(2)would you use in the next 5 years if m
38、ade available,or(3)have you not used and do not expect to use in the future?Source:Bain Frontline of Healthcare APAC Survey 2019(China n=300)Percentage of respondents1009080706050403020100TelemedicineLong-term illness managementDigital recordsSelf-diagnosis appsOn-demand servicesHealth/life insuranc
39、e appsLifestyle/wellness monitors%+164%+98%+80%+52%+33%+21%+11%CurrentFuture6How the Coronavirus Will Transform Healthcare in ChinaFigure 4:The SARS outbreak fueled a short-lived boom in commercial health insuranceYear-over-year growth in commercial health insurance premium costs%January 2002March 2
40、003August 2003December 2003Source:National Bureau of Statistics of ChinaNews ofSARS breaksOutbreak iscontainedSARS epidemic0100200300400Type somethingT TNew ws ofSARS b breakseak isOutbreainedcontaRetail pharmaciesAttempting to avoid contamination and crowds at hospitals where they traditionally pur
41、chase drugs,Chinese consumers initially turned to retail pharmacies for prescription drugs,over-the-counter medicines and face masks.And as the outbreak escalated and lockdowns were enforced,more shoppers have relied on online channels.While sales of medicines and related supplies are likely to drop
42、 sharply after the coronavirus threat ends,the overall demand for additional sales channels is unlikely to let up.As more drug sales move to retail pharmacies,large chains that use scale to their advantage will come out on top.Online retail pharmacies will collaborate with hospitals on e-prescriptio
43、n and online-to-offl ine delivery.Commercial health insuranceJust 17 years ago,commercial health insurance was an emerging product in China.During the SARS outbreakwhen many uninsured citizens had to pay out-of-pocket for medical expensescommercial health insurance experienced a short-term boom(see
44、Figure 4).Similar to the SARS epidemic,premium growth rates will return to normal after the coronavirus epidemic.But the public health crisis has put private insurance top-of-mind for many people.While 7How the Coronavirus Will Transform Healthcare in Chinamost of the population is now covered by pu
45、blic insurance,the coverage is limited.In response,several insurance companies have added virus coverage to their offerings.Epidemic-related concerns,coupled with the development of private healthcare and a growing range of digital services,will push more Chinese consumers to purchase private insura
46、nce.Leading commercial insurers will harness large hospital networks,digital capabilities and a wealth of analytics.As more drug sales move to retail pharmacies,large chains that use scale to their advantage will come out on top.Online retail pharmacies will collaborate with hospitals on e-prescript
47、ion and online-to-offline delivery.Next steps for healthcare companiesWhile general trends from the previous epidemic-induced reforms and current consumer behavior can illuminate a path ahead,many things remain uncertain.Local and multinational healthcare companies should size up the situation,act r
48、esolutely and be prepared to move quickly as opportunities and challenges present themselves.We recommend six steps as the industry moves forward.Immediate actions Assess the impact of the epidemic.Adjust annual business targets and budgets according to market conditions and future implications.Be s
49、ure to protect key competitive capabilities.Join the fi ght against the epidemic and collaborate with government stakeholders.Offer support to relevant government bodies,medical associations and the greater community through funds,products and research to prevent and control epidemics.Lay the founda
50、tion for partnerships to help improve the healthcare system in the long term.Be ready for opportunities as well as challenges.Identify the capabilities your business needs in order to become more resilient,and determine how you would acquire them if opportunities arise over the longer term.Future ac