China’s Private Hospitals are Growing

The growth of private hospitals and clinics in China has been phenomenal in the last few years driven in part by the Chinese government’s objective of relieving the burden on usually over-crowded public hospitals and the desire of some patients for higher-quality of medical services even though they have to pay more. Over the last 10 years, the compound annual growth rate (CAGR) of private hospital beds was 31%, significantly higher than the 6% growth for public hospital beds. Moreover, during the 2011-2017 period, the number of private hospitals doubled to 16,900, and currently these hospitals account for 57.2% of the total in the country.

Despite the remarkable growth in the number, private hospitals combined generated below 10% of all hospital revenue in China in 2016 due to lower patient volume, which can be attributed to the fact that private hospitals are mostly smaller and specialized hospitals. 83.5% of private hospitals have fewer than 100 beds, versus the average 280 beds for public hospitals and more than 4,000 beds for some of the mega state-owned facilities. Since private hospitals are more expensive, involving higher out-of-pocket expenses for patients, only people with supplementary private insurance, foreign expatriates and wealthy individuals can afford.

Because of relatively lower caseload, physicians at private hospitals can often spend more time with each patient, allowing them sufficient time to make correct diagnosis and provide preventive and more personalized care. These are viewed as competitive advantages of private hospitals.

The promotion of the private healthcare system is supposed to help the public system cater to the anticipated rapidly-rising demand for medical services from China’s booming aging population and the spread of chronic diseases in the country. A series of measures have been taken to drive the growth of the private sector. For example, in China’s 13th Five-Year Plan, foreign investors are permitted to wholly own private hospitals without subject to the restriction of assuring the Chinese business partner(s) to have at least 30% of ownership. Moreover, private capital is encouraged to invest in elderly and home care services.