In October 2019, while the American and Chinese governments were as far apart on a trade agreement as the two countries are physically, the University of Pittsburgh Medical Center (UPMC) broke ground on a new hospital its building in Chengdu, China in collaboration with the Wanda Group, a multinational conglomerate based in Beijing.
Since that day, the U.S. and Chinese governments have agreed upon an initial trade truce — although it’s unclear how effective it might be without further actions. What’s more evident is that this impasse between the two countries hasn’t stopped the American health care industry from a different kind of exporting: looking eastward for expansion opportunities. Payers, providers and life sciences companies are looking to grab a piece of China’s multi-trillion dollar health care pie, with spending in the country expected to triple in 15 years.
While UPMC has international efforts in Kazakhstan, Ireland and Italy as well, its Chinese endeavor may be its most ambitious yet. UPMC will help Wanda open five hospitals in the country across major cities. The hospital in Chengdu is the first to open in 2022.
“China understands the need to make investments into health care to improve the quality of care. The fact the government is getting behind it is important. The fact private corporations were motivated and had the financial wherewithal is important. And the country’s growing middle class is demanding it,” says Chuck Bogosta, president of UPMC international. “Of all the places in the world, we couldn’t imagine not being in China, quite frankly, because there is such a large population and a growing middle class.”
David Chou, a health IT veteran who is currently the CIO of Luye Medical Group, a Singapore-based health care provider that is working with the Cleveland Clinic to develop a “Cleveland Clinic Connected” hospital in Shanghai, agrees that because of China’s population, which will include more than 400 million senior citizens in this decade, the demand is there.
“There’s a big need in China’s health care market because of the huge population, the amount of hospitals is not enough to serve the country, so there’s a desire to have expertise from the U.S. set up operations there,” says Chou. “They also have a lot of chronic diseases, so there is a need in that regard too.”
He also sees it as an opportunity for health care organizations here to increase revenue overseas, with American reimbursements declining. “Everyone is cutting costs, making small margins, so going international is an opportunity to increase revenue,” Chou says.
Payers and life sciences companies
China, the second largest health care market in the world and the fastest growing one of the top five, hasn’t just appealed to providers interested in international expansion. American life sciences companies, perhaps less surprisingly, have seen more growth from the market in recent years too.
Recently, Robert Bradway, CEO of Amgen, the biotech firm based in Thousand Oaks, California, predicted that one-quarter of the company’s growth in the 2020s would come from Asia. “China and Japan are the second and third largest markets in our industry,” he told Reuters. “In the case of China, it is a rapidly growing market.”
Chou adds that China is also fertile ground for pharma and clinical trials. “If companies can figure out how to crack into that ecosystem, because of the patients and amount of data you can generate there – it’s better than just North America,” Chou says.
American health insurance companies are looking towards opportunities in China as well. Jason Sadler, President of International Markets at the Bloomfield, Connecticut-based Cigna said to the South China Morning Post that he expects China to overtake South Korea as its biggest market. In an investor presentation, Cigna said it has seen 33 percent revenue growth in China from 2015-2018 and that it has achieved 4.2 percent market penetration. It has plans to expand into further reaches of the country in 2020 and 2021.
What’s helping these American companies is the rise of the private health care market in China, with the public hospitals unable to serve the country’s needs. As such, the country has seen a dramatic increase in private insurance, according to a report from Ernst & Young.
