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Health, not wealth, is main driver

2014-03-13 10:19 China Daily Web Editor: qindexing
An operation to treat cancer at a hospital in Wuhan, Hubei province. Cancer was the leading cause of death in 2012 in China when 2.7 million people died from it. Hu Weiming / for China Daily

An operation to treat cancer at a hospital in Wuhan, Hubei province. Cancer was the leading cause of death in 2012 in China when 2.7 million people died from it. Hu Weiming / for China Daily

Private healthcare sector boss is passionate about battle against cancer cases in nation

Doing business in real estate or the finance sector in China may be the easiest way to earn money, but Yang Jianyu, chairman and chief executive officer of US-listed Concord Medical Services Holdings Ltd, chose to focus on the nation's healthcare service industry because he sees greater value in it.

Yang and his company joined hands with global leading investment company The Carlyle Group LP and US hospital MD Anderson Cancer Center to set up cancer treatment hospitals in China that will use multidisciplinary diagnosis and care to cure Chinese patients.

Under the terms of its cooperation with Chinese public hospitals, Concord Medical Services now has 144 facilities around China and also owns 52 percent of Chang'an Hospital in Xi'an, Shaanxi province, via an acquisition in 2012. Chang'an Hospital has reached a strategic alliance with Fox Chase Cancer Center to focus on the oncology department. The hospital will be transformed to focus on oncology and other related departments.

"Our next focus is to build three high-end specialty cancer hospitals in Guangzhou, Beijing and Shanghai by ourselves containing the most advanced equipment and multidisciplinary diagnosis and treatment solutions to help Chinese cancer patients. I believe the work is very meaningful," Yang said.

Currently, Concord Medical Services is finalizing design plans for its Guangzhou hospital, which is expected to undergo construction in the first half of this year. The other two are waiting approval from the Chinese government.

Yang said the investment return rate of a hospital is about 10 percent. The annual revenue of a specialist hospital is between 500 million yuan ($81.41 million) and 1 billion yuan.

"Operating hospitals is a long-term business. We have patience," said Yang. "In addition to making profits, I regard it as a meaningful career that brings benefits to people."

Before joining Concord Medical Services, Yang served as CEO of Eguard Resource Development Co Ltd from 2003. The Shenzhen-listed company is mainly engaged in providing solutions for solid waste recycling and sewage treatment.

Yang left Eguard Resources in 2007 and was planning to return to the United States to enjoy family life with his wife and children, but one of his friends asked for his help to run Concord Medical Services.

In July that year, Yang visited a diagnostic imaging center run by his friend in a military hospital. Lots of cancer patients regarded him as a leader of the hospital and stood up to welcome him. Yang saw a strong desire in their eyes to survive, a sight that deeply affected him.

Yang's friends and relatives had also encountered difficulties in seeing doctors because of the high demand for and short supply of healthcare services in China. It helped to prompt Yang to join Concord Medical Services as an investor and as its CEO.

Yang now spends all his time on the job, even at weekends. If he is not on a business trip, he likes to be at the office. He enjoys exercise, mostly running.

As a professional manager, Yang learned about healthcare and what it could achieve through his job. He also undertook courses in healthcare management at Yale University.

Concord Medical Services started business in 1997 along with the development of radiotherapy treatment in China, when hospitals in China could not afford such equipment. Concord Medical Services initiated equipment leasing business and training services for hospitals to develop an ability in radiotherapy and diagnostic imaging.

In 2008, China released a rule regulating large medical equipment imports. Meanwhile, hospitals were becoming richer and the price of large equipment was decreasing. Consequently, Concord Medical Services' leasing business was facing a challenge. It was in 2011 that the Chinese government allowed foreign companies to set up independent healthcare institutions. Yang said it was good for them to transfer the business from leasing to operational work at hospitals.

"China has a large number of cancer patients and the number is increasingly large. The medical resources in the public hospitals are so limited that patients cannot obtain multidisciplinary treatment solutions to cure their illness in the best way," said Yang.

Cancer was the leading cause of death in 2012 in China when 2.7 million people died from it, accounting for 13 percent of total deaths that year, according to the National Center for Cancer Registration. An aging population, urbanization and tobacco usage, environmental pollution, food contaminants and a high-pressure lifestyle have also contributed to the high rates of cancer in China.

The Chinese radiotherapy market is growing fast. The market size would is expected to total 48.5 billion yuan in 2015, against 16.2 billion yuan in 2008, according to Concord Medical Services' research.

There are three ways - surgery, chemotherapy and radiotherapy - to treat cancer.

In the United States, an oncology patient will be diagnosed by doctors from the three departments together and obtain a multidisciplinary diagnosis and treatment solution.

In China, a patient usually undergoes surgery first. Radiotherapy is often regarded as the last life-saving straw for a seriously ill patient.

"We want to improve conditions and provide multidisciplinary treatment solutions and advanced technology for cancer patients," said Yang. In addition, low-side-effect therapy equipment developed by MD Anderson Cancer Center based in Houston, Texas, will be introduced, which costs 400 million to 500 million yuan for each unit.

Yang said the Chinese middle class has strong demand for healthcare and a growing purchasing power. In 2012, about 90 Chinese patients went to MD Anderson in the US to see doctors.

The registration and treatment fees of Chinese public hospitals are considered to be low. Prescribing medicine is the main way for them to earn money.

Yang said Chinese middle class people target their hospitals. Instead of gaining revenue from expensive medicines, they charge higher registration and treatment fees and provide good-quality services and technology.

Concord Medical Services and its cooperating hospitals have treated around 100,000 patients in recent years. The company said so long as 3 to 5 percent of those patients come to the three Concord Medical Services hospitals, the private medical services can be fully operational.

So far, there are few private hospitals run well in China. Those that are include Wuhan Asia Heart Hospital, United Family Healthcare and Amcare Women's and Children's Hospital.

But their pace of expansion is slow because of strict registration procedures and a shortage of talented staff and brand cultivation.

Xiao Feng, a managing director at The Carlyle Group responsible for investment in Concord Medical Services, said: "China has many large medicine and medical equipment companies with high sales, but medical services are few, which provides a big opportunity." He added the revenue from medical services is likely to increase substantially after the new hospitals are ready.

Concord Medical Services forecast its net revenue in 2013 was between 930 million and 975 million yuan, representing a 40 percent to 47 percent increase from 2012.

Chen Yiyou, CEO of Percans Oncology and former chief scientist at Crown Bioscience, said prospects look good for developing cancer treatment hospitals in China because of the large and increasing demand.

"Sources of patients and traffic can be two important factors for the success of a cancer treatment hospital," said Chen, explaining that patients prefer public hospitals or well-known doctors and convenience.

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