Ail­ing Mar­ket

On­line Health­care:

NewsChina - - CONTENTS - By Zhao Yi­wei and Xie Ying

Wang Shuna, a work­ing mother in Bei­jing, reg­u­larly uses med­i­cal apps to help di­ag­nose and treat her four-yearold daugh­ter's mi­nor ail­ments, such as colds and triv­ial skin prob­lems. On­line med­i­cal ser­vices have saved her plenty of time that might oth­er­wise have been wasted lin­ing up out­side hos­pi­tals, but she stresses she would not use them to man­age a se­ri­ous con­di­tion, given the un­cer­tain­ties.

“On­line med­i­cal ser­vices should only sup­ple­ment tra­di­tional hos­pi­tals where face-to-face in­quiries and med­i­cal tests guar­an­tee a much more re­li­able di­ag­no­sis and treat­ment, es­pe­cially for se­ri­ous dis­eases,” she told Newschina.

Wang's be­liefs match how Chi­nese of­fi­cials in­tend to man­age on­line med­i­cal ser­vices, also known as telemedicine ser­vices. Just two months ago, the gov­ern­ment si­mul­ta­ne­ously is­sued three trial doc­u­ments on the sub­ject, stat­ing that any group that pro­vides on­line med­i­cal di­ag­no­sis and treat­ment should be put un­der or con­nected to a tra­di­tional li­censed hos­pi­tal. None are al­lowed to make a pre­lim­i­nary di­ag­no­sis.

The doc­u­ments are be­lieved to be the most de­tailed pol­icy on telemedicine man­age­ment. They are in­tended to clamp down on fraud as well as re­duce the like­li­hood of mis­di­ag­no­sis. But the strict de­mands on the qual­i­fi­ca­tion of ser­vice providers and the ban on first di­ag­no­sis also sparked con­tro­versy, with op­po­nents wor­ry­ing they would hin­der the free de­vel­op­ment of the new in­dus­try and even cause the com­pa­nies in­volved to col­lapse. Given Chi­nese peo­ple are not ac­cus­tomed to pay­ing for the ser­vices be­yond the range of di­ag­no­sis and treat­ment, it is hard to say whether or not on­line med­i­cal ser­vice providers will sur­vive by shift­ing to other sec­tors of med­i­cal care as ex­pected.

On­line med­i­cal ser­vices, many of which are smart­phone based, emerged in China around 2011 and boomed in 2014, when in­vest­ment in the field to­taled US$700 mil­lion. The same year, ii­me­dia Re­search, a world-lead­ing data col­lec­tor and an­a­lyst, re­vealed that China's telemedicine mar­ket was val­ued at about three bil­lion yuan (US$434M), nine per­cent of the world's to­tal.

Since then, on­line med­i­cal ser­vice com­pa­nies and apps sprang up like mush­rooms, ac­com­pa­nied by gov­ern­ment doc­u­ments on deep­en­ing med­i­cal re­form and pro­mot­ing on­line ser­vices re­lated to big data and cloud com­put­ing. By the end of 2016, the scale of the mar­ket, ac­cord­ing to data from Qianzhan, a Chi­nese mar­ket anal­y­sis in­sti­tute, had ex­panded to 22.3 bil­lion yuan (US$3.2B), a stag­ger­ing 340 per­cent growth on 2011 fig­ures, with the num­ber of users re­port­edly hit­ting 195 mil­lion. Ac­cord­ing to New­tio, an­other Chi­nese mar­ket anal­y­sis com­pany, Chi­nese telemedicine main­tained av­er­age com­pound growth of 38.7 per­cent be­tween 2012 and 2016.

Bub­ble Burst

But the craze did not last long enough for the in­dus­try to de­liver its in­vestors a re­turn. Prof­its were hard won, and on­line di­ag­no­sis and treat­ment came un­der scru­tiny amid ac­cu­racy and re­li­a­bil­ity doubts. In­vestors fled. In 2017, more than 1,000 on­line med­i­cal ser­vice providers quit or were elim­i­nated, leav­ing the re­main­ing 50 or so strug­gling to find an exit strat­egy.

The gov­ern­ment added fuel to the bon­fire when it be­gan to tighten reg­u­la­tion of the in­dus­try. In early 2018, a leaked but un­ver­i­fied of­fi­cial doc­u­ment be­gan spread­ing among in­sid­ers which said the gov­ern­ment planned to force all on­line med­i­cal ser­vice com­pa­nies to rereg­is­ter and would for­bid them from pro­vid­ing any di­ag­no­sis or treat­ment be­sides con­tracted ser­vices for chronic dis­eases.

The leaked doc­u­ment led many new­com­ers to sus­pend their in­vest­ment and caused ex­ist­ing ones to col­lapse. Many ex­claimed that the doc­u­ment was no less than a death sen­tence for the in­dus­try, and Wang Shiyue, CEO and founder of Medlinker, an on­line so­cial

plat­form for on-the-job doc­tors to share ex­pe­ri­ences and ex­change ideas, re­port­edly de­scribed this pe­riod as “the dark­est time” for the Chi­nese on­line med­i­cal ser­vice.

Luck­ily, doc­u­ments that were ul­ti­mately pub­lished were a much softer touch than ex­pected and only banned pre­lim­i­nary di­ag­no­sis. “We feel that the gov­ern­ment still holds an open and tol­er­ant at­ti­tude to­ward on­line med­i­cal ser­vices. Many com­pa­nies were in­vited to join in the dis­cus­sion about the new poli­cies and parts of their sug­ges­tions and ad­vice were ac­cepted... [Com­pared to the leaked doc­u­ment,] the for­mal ones were a com­pro­mise that en­cour­aged the com­pa­nies to try new things,” Li Tiantian, founder of DXY, a lead­ing Chi­nese on­line med­i­cal ser­vice provider, told Newschina.

Light Treat­ment Chal­lenged

Sev­eral years ago, when on­line med­i­cal ser­vices were just sprout­ing in China, they were seen as highly promis­ing, and Zhang Rui, founder of an­other lead­ing on­line med­i­cal ser­vice plat­form Chunyu Doc­tor, even sug­gested that the ser­vices would dis­rupt tra­di­tional med­i­cal care. Zhang would not live to see this dream re­al­ized – he died sud­denly of a heart at­tack in Oc­to­ber 2016. On the con­trary, the “light treat­ment,” a kind of on­line med­i­cal ser­vice re­port­edly ini­ti­ated by Chunyu Doc­tor that en­ables users to con­sult on­line doc­tors and ask them for di­ag­no­sis and treat­ment, was the sub­ject of grow­ing con­tro­versy.

At a di­a­logue pro­gram hosted by fi­nan­cial por­tal aicai­ in 2015, Zhang was heav­ily chal­lenged by Wang Shan, pres­i­dent of Pek­ing Uni­ver­sity Peo­ple's Hos­pi­tal, who to­tally ve­toed “light treat­ment.” “You will see big prob­lems arise when peo­ple go ‘see' an on­line doc­tor,” Wang warned. Wang said med­i­cal qual­ity and pa­tient safety should al­ways be the top pri­or­ity of med­i­cal ser­vices and tra­di­tional doc­tors and hos­pi­tals were core guar­an­tees of those two pri­or­i­ties.

Zhang spoke far less than Wang, but con­tin­ued to ar­gue that ser­vices fo­cus on meet­ing a wider range of con­sumer de­mands. He did not con­vince Wang. Fol­low­ing the pro­gram, Zhang com­plained that tra­di­tional hos­pi­tals were not in the same chan­nel of think­ing as on­line ser­vice providers and that his sta­tus in the fierce ar­gu­ment rep­re­sented the sta­tus of in­ter­net med­i­cal ser­vice against tra­di­tional ones.

How­ever, as in­ter­net med­i­cal ser­vices were be­ing poorly man­aged at the time, prob­lems did arise in line with Wang's con­cerns – users com­plained that many “on­line doc­tors” were fake or that they were just us­ing the plat­forms to sell medicines and med­i­cal de­vices. Oth­ers scolded the on­line doc­tors for not re­ply­ing in a timely man­ner or even ask­ing their in­terns to do the work.

This neg­a­tive cov­er­age was nib­bling away at peo­ple's trust in on­line med­i­cal ser­vice plat­forms and dis­cour­ag­ing both users and in­vestors from be­ing in­volved.

In March 2017, Wang Lang, a del­e­gate to China's high­est leg­isla­tive body the Na­tional Peo­ple's Congress, and pres­i­dent of Long­mas­ter, a Guizhou-based com­pany which of­fers re­mote med­i­cal ser­vices, pre­dicted a “win­ter” for the mar­ket. He re­vealed to the press that telemedicine had gained lit­tle at­ten­tion from in­vestors since the end of 2016. “Telemedicine ser­vices are not purely an in­ter­net thing, but an in­te­gra­tion of all sorts of so­cial re­sources. Be­sides, in con­trast to other on­line ser­vices, they are a mat­ter of life and death, and are highly risky if they lack man­age­ment and reg­u­la­tion,” he told news web­site fi­

His words ex­plained why the gov­ern­ment has now peeled di­ag­no­sis and treat­ment off from the other on­line med­i­cal ser­vices and rolled them into “core ser­vices” which are not al­lowed to launch be­fore they are con­nected to a tra­di­tional hos­pi­tal.

It is quite un­der­stand­able and rea­son­able, ac­cord­ing to Cao Jian, a re­searcher at the Re­search Cen­ter for Health­care Man­age­ment, Ts­inghua Uni­ver­sity. “There is no triv­ial thing in the field of med­i­cal care,” he told Newschina. “Take the flu for ex­am­ple. It has very sim­i­lar symp­toms to an or­di­nary cold and is hard to cor­rectly di­ag­nose on­line with­out tests in a tra­di­tional hos­pi­tal, es­pe­cially when the pa­tient in­ten­tion­ally or un­in­ten­tion­ally un­der­states or ig­nores some of his/her symp­toms,” he added.

The gov­ern­ment has now tried to place re­spon­si­bil­ity on on­line med­i­cal ser­vices by com­pul­so­rily bind­ing them to tra­di­tional hos­pi­tals, he ex­plained. “An ‘in­ter­net hos­pi­tal' will jointly bear re­spon­si­bil­ity with the tra­di­tional hos­pi­tal it con­nects to. They have mu­tual re­spon­si­bil­ity, we can say. That's how we can unify the man­age­ment of on­line and off­line hos­pi­tals [which is eas­ier to im­ple­ment],” Jiao Yahui, deputy di­rec­tor of the med­i­cal care pol­icy and man­age­ment bureau un­der the Na­tional Health Com­mis­sion, said at a press con­fer­ence for the new poli­cies. “It is a chal­lenge for us to su­per­vise in­ter­net hos­pi­tals since fakes and frauds flour­ish in the vir­tual world. But if there is no su­per­vi­sion, we can nei­ther deal with med­i­cal mal­prac­tice aris­ing from on­line med­i­cal ser­vice nor en­sure med­i­cal se­cu­rity,” she added.

‘Tool’ of a Tra­di­tional Hos­pi­tal?

Ac­cord­ing to Cao Jian, the new poli­cies aim to turn on­line med­i­cal ser­vice into a “tool” of tra­di­tional hos­pi­tals. “The new doc­u­ments have em­pha­sized ‘in­ter­na­tion­al­iz­ing tra­di­tional hos­pi­tals' and ‘con­struct­ing in­fras­truc­ture for in­ter­net hos­pi­tals' many times. The gov­ern­ment ac­tu­ally hopes that ex­ist­ing in­ter­net med­i­cal ser­vices will be­come a tool to up­grade [ex­ist­ing] med­i­cal care mod­els, op­ti­miz­ing re­source dis­tri­bu­tion and rais­ing their ef­fi­ciency,” he told Newschina.

How­ever, the so-called “tool” is nei­ther the pri­mary busi­ness of cur­rent on­line med­i­cal ser­vice providers, nor what they ex­pected.

Ali­health, an on­line med­i­cal ser­vice plat­form run by Alibaba, for ex­am­ple, has been build­ing an in­for­ma­tion­ized plat­form for tra­di­tional hos­pi­tals for many years. But a per­son in charge, who did not want to re­veal his name, told Newschina that they were still ex­plor­ing a proper way to co­op­er­ate with hos­pi­tals and they have not yet turned a profit from it so far. “Ali­health has been con­cen­trat­ing its ef­forts on build­ing an in­for­ma­tion­ized plat­form, try­ing to re­al­ize med­i­cal AI. Yet, not ev­ery in­ter­net com­pany has the re­sources and money to do so... This is a big, costly busi­ness which de­mands ad­vanced tech­nol­ogy, and the re­turns re­main un­clear. I don't think it fits most on­line med­i­cal ser­vice providers,” said the anony­mous source.

There is a big­ger headache. Even com­pa­nies that can af­ford the kind of heavy in­vest­ment re­quired will be forced to con­tend with a lack of co­op­er­a­tion from hos­pi­tals. When the gov­ern­ment is­sued the new poli­cies, sev­eral on­line med­i­cal com­pa­nies an­nounced they had signed con­tracts with top hos­pi­tals to co­op­er­ate on big data col­lec­tion and dig­i­tal­iza­tion, but none have re­vealed how their busi­ness mod­els will turn a profit.

“It is easy to sign con­tracts but hard to get re­sources,” said Ts­inghua re­searcher Cao. “Most of the cur­rent co­op­er­a­tion be­tween tra­di­tional hos­pi­tals and in­ter­net com­pa­nies has turned out to be su­per­fi­cial... When the tech­nol­ogy is im­ma­ture and the gov­ern­ment guide­lines are vague, hos­pi­tals gen­er­ally take a very con­ser­va­tive at­ti­tude to­ward data shar­ing, partly to pro­tect their core ad­van­tages and partly to pro­tect the pri­vacy of their pa­tients,” he ex­plained.

Li Tiantian agreed. “Tra­di­tional hos­pi­tals have the ad­van­tage

when it comes to bi­lat­eral co­op­er­a­tion but they aren't gen­er­ally will­ing to share their core in­for­ma­tion and re­sources with other com­pa­nies. So much of the co­op­er­a­tion is merely in on­line regis­tra­tions and in­quiries. Be­ing kept away from the core busi­ness [of tra­di­tional hos­pi­tals], in­ter­net com­pa­nies can't set up ef­fec­tive busi­ness mod­els, re­gard­less of how many con­tracts they get,” he said.

New Di­rec­tion?

Fol­low­ing the gov­ern­ment's new poli­cies,, an in­for­ma­tion ser­vice provider which aims to in­tro­duce new con­cepts and tech­nolo­gies to the tra­di­tional econ­omy, said in an ed­i­to­rial that the new poli­cies have ac­tu­ally sup­ported al­ready ad­van­taged pub­lic hos­pi­tals while fur­ther squeez­ing the profit space of in­ter­net and pri­vate hos­pi­tals. As there is lit­tle mo­ti­va­tion for tra­di­tional hos­pi­tals to truly co­op­er­ate with in­ter­net ones, these have them­selves shifted to what the gov­ern­ment calls “non-core” busi­nesses such as health­care con­sul­ta­tions, post-treat­ment care and sales of health­care prod­ucts.

Ac­cord­ing to Frost & Sul­li­van, a global mar­ket and in­dus­try anal­y­sis com­pany, on­line health­care con­sul­ta­tions rose from 29.8 mil­lion in 2012 to 148.4 mil­lion in 2016. Mean­while, China's ex­pen­di­ture on med­i­cal and health­care grew from 2.8 tril­lion yuan (US$405.8B) to 4.6 tril­lion yuan (US$666.7B) over the same pe­riod. Frost & Sul­li­van's re­port pre­dicted that on­line health­care con­sul­ta­tion will cover an ex­pand­ing group of users in China and keep ris­ing at an av­er­age an­nual com­pound growth rate of 39.8 per­cent to 4.2 bil­lion con­sul­ta­tions by 2026.

Like Frost & Sul­li­van, many an­a­lysts and in­sid­ers be­lieve that China's telemedicine mar­ket still has great po­ten­tial, de­spite the burst bub­ble and gov­ern­ment re­stric­tions. Be­fore the po­lices were is­sued, some in­dus­trial pioneers like DXY and Chunyu Doc­tor were al­ready shift­ing their fo­cus.

“The peo­ple out­side hos­pi­tals have grow­ing de­mands for health­care. They have pow­er­ful con­sump­tion po­ten­tial but are not well served yet,” Li Tiantian said.

Iyiou's com­men­tary, how­ever, ar­gued that po­ten­tial will not cre­ate profit un­less peo­ple are will­ing to pay. When “light treat­ment” was pre­vail­ing and not re­stricted, Chunyu Doc­tor's for­mer CEO Zhang Rui re­vealed to me­dia that he had over­es­ti­mated users' will­ing­ness to pay. Chunyu Doc­tor be­gan col­lect­ing mem­ber­ship fees from Jan­uary 2016, only to find that the vol­ume of in­quiries on the plat­form dropped dras­ti­cally from 30,000 to 3,000 within one month. Zhang had be­lieved it would be a good time for the change given his plat­form's 99 per­cent sat­is­fac­tion rate among users.

The pow­er­ful Ali­health is an­other ex­am­ple. Its 2017 fi­nan­cial re­port showed that most of its rev­enue came from sales of health­care prod­ucts and de­vices, while the costly busi­ness re­lated to in­no­va­tive health ser­vices re­turned lit­tle.

No on­line med­i­cal ser­vice provider wants to stop at be­ing a sales­man, how­ever. That's why Li Tiantian ap­pealed for the gov­ern­ment to loosen con­trols on “light treat­ments,” or at least not to im­pose the ban on ev­ery de­part­ment and dis­ease.

“In my opin­ion, the value of on­line med­i­cal ser­vices should lie in solv­ing the prob­lems that tra­di­tional med­i­cal ser­vices can­not. They should be al­lies charg­ing for dif­fer­ent busi­nesses which form a whole, com­plete in­dus­trial chain to­gether,” he said.

Yet, ar­gues that pol­icy is not the so­lu­tion. “The plight of on­line med­i­cal ser­vices will not change as long as Chi­nese peo­ple are still highly de­pen­dent on tra­di­tional pub­lic hos­pi­tals and un­will­ing to pay for ser­vices out­side med­i­ca­tion and treat­ment,” warned the ar­ti­cle.

“The mar­ket is far from reach­ing its peak, but if en­ter­prises can­not re­pair their de­fects [com­pared to tra­di­tional hos­pi­tals] and users do not change their idea of health­care con­sump­tion, no in­no­va­tion in this field will pros­per, even that sup­ported by pol­icy,” it added.

Lung dis­ease ex­perts from all over the coun­try gather at an off­line work­ing sta­tion of an in­ter­net hos­pi­tal in Wuzhen, Zhe­jiang Prov­ince, to con­sult on the case of a lung dis­ease suf­ferer from Shang­hai, Septem­ber 10, 2016

A doc­tor from the First Af­fil­i­ated Hos­pi­tal of Zhe­jiang Uni­ver­sity con­sults with an 80-year-old pa­tient via an on­line med­i­cal plat­form, Au­gust 31, 2010

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