Monday, May 29, 2017, 11:51 AM CST – China

Economy

Online Diagnosis

Breaking Through

China’s health regulator has tightened its grip on online diagnosis service to curb malpractice. Do the country’s online healthcare providers have what it takes to meet this challenge?

Spring Rain CMO Liu Chengping Photo by dong jiexu

In early May 2015, Spring Rain, China’s leading online healthcare provider, unveiled an ambitious plan to launch 25 brick-and-mortar clinics in five major cities across the country, promising to expand to 300 by the end of the calendar year.

This is not the first time an online medical group has attempted to tap China’s offline market. In November 2014, DXY, one of the country’s largest online healthcare service providers, made public its initiatives to develop offline clinics after receiving a US$70 million investment from Chinese Internet titan Tencent. Nevertheless, DXY’s offline campaign has seen sluggish progress in its bid to achieve government approval.

Integration

Beset with difficulties, DXY CEO Zhang Jin remains optimistic regarding his strategy to develop offline clinics. During an interview with NewsChina, Zhang said that online consultation is important but the format makes it “hard to map out complete medical treatment for patients.”

“If a patient has high blood sugar, for example, it is still necessary for the patient to get their blood glucose tested after receiving online advice,” he said. “Doctors can’t really assist the patient until they see the test results.”

Zhang explained that positive interaction between online and offline treatment programs is the right solution. He said that China’s private hospitals often have poor reputations and the average public hospital wouldn’t voluntarily cooperate with an online institution. Zhang has never attempted to cooperate with public hospitals because, in his words, “generally speaking, public hospitals have no lack of patients.”

Founded in 2000, DXY began to consider opening offline clinics in 2012 when online healthcare service providers swamped the market and a growing number of online companies vowed to transform China’s traditional healthcare model with innovative Internet technology. The medical sector was one of the few industries that had not already been completely transformed by the Internet, so business opportunities abounded.

Spring Rain CMO Liu Chengping told NewsChina that the company came into being along with this change in the market and the growing demands of consumers. Spring Rain currently has 58 million users. Liu says 70 percent of user issues can be resolved online; only 30 percent require a diagnosis from an offline clinic for diagnosis.

Unlike DXY’s business model of building its own offline clinics, Spring Rain provides doctors and services while its partner hospitals provide equipment and facilities. Liu said he abandoned the idea of constructing clinics because it would take at least one or two years to open a clinic after navigating the complicated process of getting government approval, registering, selecting a location and renovating the interior.

DXY’s Zhang Jin has been going through this lengthy procedure over the past six months. He told NewsChina that official accreditation involves getting approval from three governmental bodies: an environmental watchdog, the fire department and a health agency.

Zhang said he was grateful that today’s approval process has been simplified, adding that some restrictive regulations have been eliminated. “Before, you couldn’t open a clinic if there was another one within 500 meters. Now this distance requirement is gone and it’s down to the owner whether a private clinic is profitable or not,” he said.

Clinics

DXY’s first brick-and-mortar clinic is expected to open by September in Hangzhou, Zhejiang Province. After that, Zhang Jin said DXY will open more clinics in China’s first-tier cities, including Beijing and Shanghai.

“DXY will not confine its service to first-tier cities; we’re targeting second- and third-tier cities as well. China’s first-tier cities are home to the country’s best medical resources including leading doctors and hospitals,” said Zhang. “China’s second- and third-tier cities have relatively inferior medical resources and services, so local residents’ strong healthcare demands will be a huge market for DXY.”

Spring Rain is scheduled to open its first clinics in Beijing, Shanghai, Guangzhou, Hangzhou and Wuhan. “Clinics should be established where demand is high. Another consideration is that it is easier to find qualified doctors in a city with good medical resources,” Liu explained.

Spring Rain has set up strict criteria for selecting doctors and partner hospitals. For example, the company chooses its offline clinic physicians from its pool of 100,000 doctors, only picking those who have a strong desire to work there and a license to practice in multiple locations. What’s more, the selected doctors must be head physicians from China’s top-tier hospitals.

DXY, meanwhile, has opted to build its own general practice clinics. In order to coordinate its online and offline services and enhance work efficiency, the company also needs to create a massive information portal, according to Zhang.“Otherwise it’s barely different than traditional clinics,” he added.

Zhang added that China currently has no complete general practice service system, and the moment a doctor starts working in a hospital, he/she enters a specialty and receives little further general practice training. DXY, Zhang said, will provide its own general practice classes to systematically train their general practitioners.

Zhang hopes to bring China’s and even the world’s best medical resources to DXY’s offline clinics. The company’s informatization project, which will seamlessly integrate its online and offline resources, has already launched.

“Some leading doctors in Beijing and Shanghai have signed contracts with us; theoretically, patients can already receive their consultations at DXY clinics,” Zhang said.

Policy

At a press conference in late April, the National Health and Family Planning Commission (NHFPC), China’s health regulator, announced that medical diagnosis should not be carried out online — hospitals can provide online medical advice, but not treatment.

The regulator’s spokesperson Song Shuli explained that the ban was unveiled to ensure medical quality because, otherwise, online services might be provided by unqualified personnel, unlike face-to-face diagnoses. She added that “both hospitals and doctors should be qualified for online treatment in a specific field” before that service is offered.

Last August NHFPC held a conference for many of the Internet companies offering online medical services. Zhang Jin told NewsChina that the main topic of the meeting was the issue of regulating online medical service providers, and a consensus was made – online medical services are efficient but should only be provided by healthcare facilities. NHFPC also asked the companies about their opinions regarding the healthcare system.

For doctors who work for either DXY or Spring Rain offline clinics, their main job is to provide patients with diagnosis and treatment. They’re prohibited from cashing in on selling medicine to patients at a time when surgical procedures and expensive pharmaceuticals are proving to be the biggest moneymakers in China’s healthcare industry. Both Zhang and Liu hope their respective clinics will become examples of a new business model.

Zhu Hengpeng, director of the Center for Public Policy with the Chinese Academy of Social Sciences, told NewsChina that offline clinics are necessary for China’s online healthcare companies. “The transformation of China’s healthcare service sector and improvement of the doctor-patient relationship both depend on the development of [offline] clinics,” he said.

Professor Li Ling of Peking University’s China Center for Economic Research agrees. She told our reporter that the Internet is only a medium and seeing a doctor at a hospital is essential. But she also added that it’s too early to tell the precise impact these offline clinics will have on the healthcare industry.

Zhu said the government approval process is the biggest obstacle standing in the way of online companies looking to go offline. These clinics will need to develop more fully, she added, to the point where they reach a level of influence that compels relevant government bodies to loosen their grip.

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