Pri­vate den­tal care grows fast

China has the low­est den­sity of den­tists per capita of any G20 coun­try

China Daily (USA) - - BUSINESS - By DAVID BLAIR david­blair@chi­

As con­sumer de­mand for more so­phis­ti­cated ser­vices rises along with dis­pos­able in­comes, the Chi­nese mid­dle class is pay­ing much more at­ten­tion to den­tal care.

So, the pri­vate den­tistry mar­ket in China is boom­ing, with a growth rate of about 30 per­cent per year. But, prob­lems in qual­ity as­sur­ance, pa­tient fi­nances and in­sur­ance, and mar­ket frag­men­ta­tion are keep­ing many po­ten­tial cus­tomers away.

Ac­cord­ingto theWorldHealthOr­ga­ni­za­tion, China has the low­est den­sity of den­tists per capita of any G20 coun­try — only half that of India and less than a quar­ter of theUnited States.

Un­til re­cently, Chi­nese use of den­tistry was one of the low­est in the world. But, that’s chang­ing fast. A study by ZhongAnIn­surance Co es­ti­mates that China’s to­tal den­tal rev­enue will reach 120 bil­lion yuan ($18 bil­lion) this year, and will ex­ceed 200 bil­lion yuan by 2019.

Many Chi­nese are re­luc­tant to go to pri­vate health­care, be­liev­ing that the large pub­lic hos­pi­tals are bet­ter reg­u­lated and more qual­i­fied than the pri­vate sec­tor.

Zhang Liang, an or­tho­don­tist at the Shanxi Med­i­cal Univer­sity summed up the dilemma: “I’ve seen so many pa­tients com­ing here to get fur­ther treat­ments, as they’ve been wrongly di­ag­nosed or treated in those pri­vate clin­ics. ... I’mnot say­ing they are all bad since they at least­make up for the in­suf­fi­cient med­i­cal re­sources and save peo­ple the trou­ble of wait­ing and get­ting reg­is­tered. The in­dus­try is in­deed head­ing bet­ter, but through mis­takes and trou­bles. ... The pa­tients should care­fully dis­tin­guish the bad ones from the good ones and re­lated reg­u­la­tions must fol­low up.”

Many in­vestors be­lieve that Chi­nese health­care of­fers great longterm op­por­tu­ni­ties, but they have not yet found prof­itable busi­ness mod­els.

Ac­cord­ing to the re­port from Zhong An, about half the den­tal rev­enue goes to pub­lic hos­pi­tals and the other half to the pri­vate sec­tor.

Den­tistry is less reg­u­lated than other health­care and com­pe­ti­tion from State-owned hos­pi­tals is weaker since the ba­sic so­cial med­i­cal in­sur­ance cov­ers lit­tle den­tal care.

So, Chi­nese den­tistry is at­tract­ing big in­vest­ments. For ex­am­ple, Le­gendHold­ings Co Ltd, the par­ent com­pany of Len­ovo Group, in­vested 1 bil­lion yuan in the BYBO Den­tal Group in 2014. The US-based pri­vate eq­uity firm KPCB and Chi­nese firm Qim­ing Ven­ture Part­ners are ma­jor in­vestors in the high-end Ar­rail Den­tal In­ter­na­tional Group. And, the pri­vate eq­uity fund of famed investor Wang Yawei is fund­ing the den­tal ben­e­fits man­age­ment com­pany, The B round of in­vest­ment of Malo Clinic China chain, which is a joint ven­ture with Europe’s largest cen­ter for im­plants and cos­metic den­tistry, wasled by the world’s largest ven­ture cap­i­tal firm, Shang­hai-based GGV Cap­i­tal.

The larger chains, which re­ceive about one-fourth of to­tal den­tal rev­enue, are try­ing var­i­ous strate­gies to grow and, es­pe­cially, to as­sure pa­tients about their qual­ity.

Ar­rail, which has the largest num­ber of clin­ics, around 75, and is grow­ing about 40 per­cent per year, aims for wealth­ier clients and charges higher prices, ac­cord­ing to its founder and CEO Robert Zou. This gives the com­pany re­sources to hire den­tists from the top 5 den­tal uni­ver­si­ties, give them train­ing, and do fre­quent peer-to-peer eval­u­a­tions.

On the other hand, Hangzhoubased TC Med­i­cal Corp has grown largely through ac­qui­si­tions and fo­cuses on hos­pi­tals in its na­tive Zhe­jiang province rather than stand­alone clin­ics. It has also part­nered with the Tem­ple Univer­sity med­i­cal school in Philadel­phia. It bought Hangzhou Den­tal Hospi­tal, now the world’s largest, and just ac­quired Kun­ming Den­tal Hospi­tal through a joint ven­ture with the Kun­ming mu­nic­i­pal govern­ment. Its 2014 an­nual re­port ar­gues that “bring­ing in a top over­seas part­ner can solve the prob­lem of the pub­lic’s mis­trust to­ward non-State-owned fa­cil­i­ties.”

Many pa­tients would like to have den­tal in­sur­ance and more ex­pen­sive pro­ce­dures of­ten need to be fi­nanced. But, to­day, the den­tal in­sur­ance and lend­ing mar­kets are al­most nonex­is­tent. The lack of in­for­ma­tion on costs and on pa­tients lim­its the abil­i­ties of in­sur­ers, banks and other fi­nan­cial ser­vices firms to par­tic­i­pate in this mar­ket.

Cloud-based busi­ness-to-busi­nessto-con­sumer, or B2B2C, ca­pa­bil­i­ties could change that. For ex­am­ple, Beijing-based startup seeks to close the gap through its soft­war­eas-a-ser­vice, or SAAS, prac­tice man­age­ment plat­form for den­tists and their pa­tients. Ac­cord­ing to CEO Wayne Cui, it was founded in 2015 and al­ready is used by 20,000 smaller den­tal clin­ics. The com­pany will link the den­tists to in­sur­ers and lenders for on­line fi­nance and will al­low the small clin­ics to deal more di­rectly with sup­pli­ers, cut­ting out ex­pen­sive mid­dle­men.

De­spite rapid growth and high de­mand, den­tal care in China is still lack­ing. Den­tal schools and com­pa­nies need to fo­cus on train­ing more den­tists, and those must be highly qual­i­fied. In­sur­ance and fi­nan­cial com­pa­nies need to be able to sup­port the mar­ket. Iron­i­cally, more govern­ment reg­u­la­tion might boost com­pa­nies by re­as­sur­ing cus­tomers and weed­ing out the less com­pe­tent.

In many ways, the is­sues and op­por­tu­ni­ties of the den­tal care mar­ket are har­bin­gers of the com­ing much larger gen­eral health­care re­form.

num­ber of smaller den­tal clin­ics that use Qiezzi’s soft­ware-as-a-ser­vice

Gao Songya, in Beijing, con­trib­uted to this story.


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