China's Rx: Foreign-Owned Hospitals

Dr. Wang Jingming, who runs Chang’an Hospital in Xi’an in Northwest China, is brimming with ideas on how to boost income from the 1,000-bed facility, including wringing more profit from its convenience store, the canteen, and even the mortuary. He’s already installed electronic swipe cards to track patients—and to identify underperforming doctors by gauging their treatment times. If the former People’s Liberation Army senior colonel sounds a lot like a sharp-penciled private equity investor, he should: Chang’an in June sold majority control to Concord Medical Services Holdings, which is backed by the U.S. private equity firm Carlyle Group. Wang points to how China’s hospitality industry benefited when foreign investment and business know-how was encouraged in the 1980s. “It’s now our hospitals that need to be better managed,” he says.

China’s hospitals may get more of Wang’s brand of management medicine following the government’s announcement in March that it wants 20 percent of the nation’s hospital beds to be privately owned by 2015. With 260 million Chinese suffering from cancer, diabetes, and other chronic diseases, Beijing wants private investors to help upgrade medical services in a hurry. One draw for private operators: 95 percent of Chinese had government-provided health insurance in 2011. Better yet, China’s medical services market is growing 18 percent annually and is projected to reach 3.16 trillion yuan ($500 billion) in 2015, says Deloitte China.