A renowned Chinese doctor and Weibo influencer is changing the status quo for Chinese medical practitioners, who have long been trapped in the troubled public hospital system.
Dr. Zhang Qiang announced in July 2014 that he has founded China’s first medical group, a model imported from the US. Now hopes are riding on the group medical practice model to let more Chinese doctors go into private practice, which works under more of an open market mechanism.
Last Friday, Zhang’s company announced that it has secured tens of millions of yuan in Series A financing from Share Capital, an investment fund founded in 2007 that concentrates on healthcare projects.
“With this round of investment, we will finish setting up non-medical departments, including accounting, HR, IT, quality control, etc., and incubate five to ten specialty medical groups this year,” Zhang told AllChinaTech.
What is Dr. Smile Medical Group?
Zhang is one of the top vascular surgeons in China, and a Weibo celebrity with 320,000 followers. A believer in an upbeat attitude towards life, he calls himself “Dr. Smile”, thus the name Dr. Smile Medical Group.
The company is registered in the Shanghai Free Trade Zone, with administrative offices in Beijing and Shanghai. The company does not have its own hospitals or clinics. Physicians registered with the company provide medical services in hospitals that have signed partnership contracts with the company. Currently, they have deals with nine hospitals, all of which are international hospitals, including United Family hospitals in four major Chinese cities.
In Zhang’s words, this is a “Physician Hospital Partnership mode”, under which doctors are no longer signed employees at hospitals and don’t receive salaries from them. Instead, doctors receive commission from every medical service they deliver.
Besides Zhang’s vascular surgery team, there were originally three other specialty teams in the group, including hernia surgery, male plastic surgery and oral and maxillofacial surgery, which were later spun off as independent medical groups. Zhang’s company holds major stakes in these groups.
Why leave the public hospital system?
After graduating from the Zhejiang University School of Medicine, Zhang worked at public hospitals for about two decades. Before quitting his job in 2012, he worked as the department head of a public class A hospital, Shanghai East Hospital, with decent remuneration. Then why did he quit?
In China, state-controlled public hospitals dominate the medical system, serving 90 percent of China’s patients. Doctors are required to work at the hospital to which their practice licence is bound.
Besides being underfunded by the government, hospitals are covered by the national insurance system, which regulates a fixed pricing system for medicine and medical services provided by hospitals. Since the prices are kept low, kickback from pharmaceutical and medical equipment companies have become an important source of revenue for hospitals and doctors are often pressured to prescribe excessive medication.
As a consequence, doctors are getting less and less satisfied with their jobs. This is also due to a suboptimal level of compensation, low social status and increasingly tense relationships with patients. Although a reform initiative in 2009 now allows doctors to practice medicine at multiple locations, the situation hasn’t changed much.
Yet doctors will seldom leave the system, because once they quit, they will lose their “iron rice bowl”, which means a secure long-term job with state benefits.
Zhang is among the few who are unsatisfied and have taken action to change the system. After 2012, he became one of the mainland’s few freelance doctors to practice independently in private hospitals, including the Shanghai WorldPath Clinic International, a joint venture by US and Chinese professionals targeting expats and wealthy Chinese.
How will the group practice model make a difference?
Opening a private clinic or hospital is pricey, and the development of private sectors in the Chinese medical system is lagging behind. According to the 2015 report released by the National Health and Family Planning Commission of the PRC, there are 12,166 private hospitals among the total of 26,000 hospitals as of November 2014. Although large in scale, the service volume delivered by private hospitals only accounts for 10% of the total volume.
The emergence of medical groups might change the picture. An investor in the Dr. Smile Medical Group estimated that if 1% of over one million Chinese doctors leave the public hospital system to practice in medical groups, this market could grow to be as large as hundreds of billions of yuan, since a doctor can perform at least 1000 surgeries a year.
“I’ve been able to go back to my original dream of being a doctor who saves lives and helps people ever since I’ve left the public system,” Zhang said.
According to Zhang, his resignation in 2012 made him more confident and triggered the even more adventurous move of switching from a freelancer to an entrepreneur.
Last year, there was a rumor that Zhang’s medical group failed a round of financing. “It was just a strategy adjustment,” Zhang said to address the rumor. “We received RMB 50 million and later gave it back to the investors. Originally we planned to build our own surgery center, but later we thought an asset-light model may be more practical if we want to help create more medical groups.”
According to the company’s official WeChat account, it has plans to invest and help five other doctors form medical groups.
When asked what kind of doctors they would like to attract, Zhang said that all the doctors in the group left jobs at top-tier public hospitals in Beijing and Shanghai, and approached Zhang themselves. “We are recruiting leaders, or managers, who should be not only capable in medical practice, but also have a sense of entrepreneurship,” said Zhang.
Zhang obviously has a good sense of entrepreneurship. He is well aware of the importance of social media platforms like WeChat and Weibo, on which he shares thoughts, company news and details from his personal life. He is a KOL on Weibo with 320,000 followers.
“Doctors should return to the market. Only then can hospitals, doctors and patients all enter a benign ecosystem,” said Zhang.