China’s healthcare industry has reached a crossroads. In Tier-1 cities, public hospitals are overcrowded. Patients wait in long lines and receive at best 6-7 minute consults. The elderly and patients with chronic illness travel long distances for treatment and are often turned away because of doctor shortages. In terms of health insurance, the picture is no better, as a majority of Chinese citizens are not satisfied with their public health insurance plan.
In light of this, since the Chinese government relaxed healthcare restrictions on private and foreign companies in 2014, a series of innovative apps have begun to address these problems and attract serious attention from global investors.
What is Digital Healthcare?
Before we delve into China’s digital health boom, let’s define a few terms. When investors refer to digital health, they are talking about a series of apps and online platforms that allow patients to make appointments, receive virtual diagnoses, order prescriptions, manage private insurance options, and arrange video consults with doctors across the country. In essence, a few apps and websites have taken the entire healthcare process – from purchasing insurance to receiving diagnoses – and moved it entirely online. Any consumer with a smartphone and Wi-Fi can access these 24-hour services, and save time otherwise spent in line or in transit.
What Problems Do These Apps Solve?
In addition to saving time, private insurance and healthcare apps also have some serious cost-saving benefits. In 2015, the Chinese government began offering a 2400-yuan tax credit to customers who switched from basic medical insurance to private insurance (provided that it costs more than 2400-yuan).
Not only does digital private insurance come with tax rebates, but also more extensive coverage and lower out-of-pocket expenses than their public insurance plans. Basic insurance plans on average require 50% out-of-pocket. Paired with platforms like Alipay and WeChat Pay, payments through private insurance apps are also relatively quick and easy.
The most obvious benefits – apart from cost-saving features – are directed toward the elderly, patients with chronic illness, and public hospitals. Digital health apps allow people in rural areas 24/7 virtual access to doctors. Essentially, they even-out a geographic imbalance in medical resources. Doctors can also manage less intense workloads, as apps more evenly distribute patients across available doctors, and virtual services limit overcrowding in hospitals.
Who are the Major Players?
Private insurance companies like Ping An Health are responsible for many of China’s most popular digital health apps. The three most frequently downloaded doctor-consult apps include Guahao Technology, Spring Rain Software, and Ping An Good Doctor. Ping An alone is projected to reach 500 million users by 2019.
According to Boston Consulting Group, these apps will drive investment over the next four years. Investment in digital healthcare is expected to grow from $3 billion in 2014 to $110 billion by 2020.
Any Potential Risks?
The digital health market is an exciting, but inherently risky one. While apps have solved a few gaps in healthcare provision, they have yet to address some serious problems. How can the Chinese government and investors more effectively monitor these apps, and screen their doctors, hospitals, and medical professionals? How can we avoid paid promotion of unlicensed hospitals, like with Baidu in 2015? Without new regulatory bodies to monitor these apps, patients will have no way of distinguishing between qualified and unlicensed professionals and could lead to a series of harmful, and in some cases, fatal misdiagnoses.
This article was written by Collective Responsibility Research Analyst, Alison Schonberg.