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Opportunity or Threat?

Taiwan's Hospitals Chase Renminbi


Taiwan's Hospitals Chase Renminbi


Chinese hospitals are trying to replicate the Taiwan model in building an effective medical system. It represents a window of opportunity for Taiwan's medical sector, but one that may soon slam shut.



Taiwan's Hospitals Chase Renminbi

By Whitney Huang
From CommonWealth Magazine (vol. 528 )

The 600-bed No. 1 People's Hospital in Jiande, about 100 kilometers southwest of Hangzhou in China's Zhejiang province, may be the area's biggest medical facility, but its standards and services are anything but top notch.

Enter Huang Chien-Feng, the vice president of a hospital management consulting company opened by Taiwanese in China. Standing at the nursing station of the hospital's cardiology ward, he offers guidance to nurses in the ward's quality control circle.

The nurses surrounding Huang pepper him with questions, such as, "What should we do if patients don't take their medicine?" and "How can we improve our procedures for dispensing medicine?" Huang, who worked in Taiwanese hospitals for many years, draws on Taiwan's time-tested methods to answer them one by one and provide suggestions for improvement.

On the other side of the nursing station, a young nurse pushing a mobile nursing cart stops outside a patient's room to check records from the cart's computer before giving the patient medicine. The cart she's using was developed by Taiwan's Chang Gung Memorial Hospital, and the scanner used to verify patients' ID wristbands is also a Taiwanese product.

"Today, mainland hospitals are all studying the Taiwan model," says Hong Ying, the director of the No. 1 People's Hospital's outpatient service center.

Hong, who has worked at the hospital for more than 20 years and previously spent a week visiting Taiwanese hospitals, cannot help but praise Taiwan's medical services.

Cloud Computing, Wooden Poles

Cloud computing is the next area in which the hospital hopes to learn from Taiwan, Hong says. By sending patients' medical data to the cloud, doctors can check on the patients' conditions in real time on their smartphones. In the event of any abnormal vital signs, physicians can be notified by phone or text message.

At the same time as Hong was contemplating the hospital's future, a family was strolling around the hospital's outpatient lobby on the first floor, with a little child in one of their arms. The child was on an IV drip, which one of her relatives, a casually dressed young man, was hoisting on a wooden pole.

It is amid this match of cloud computing and wooden pole – this uneasy co-existence of the modern and the primitive – that Chinese hospitals are engaging in major reforms designed to vault them into the high-tech age.

To Taiwan, the trend represents both a threat and an opportunity. Taiwan's medical talent is being sucked away by China's magnetic allure, but its medical sector can exploit new commercial opportunities by riding the momentum of China's medical reforms.

According to a report issued in June by the Boston Consulting Group on "Investing in China Hospital Market," Chinese hospitals totaled 1.25 trillion renminbi in revenue in 2011, more than 12 times the expenditures of Taiwan's health insurance system last year.

China is already the world's third largest health care market, but serious problems such as the lack of access to care and its high cost represent potential time bombs that could easily trigger social turmoil, underscoring the urgency of medical reform.

"The Chinese government has created the '3521 Project' to promote the development of a health information infrastructure," says C.J. Tseng, the vice president of Chung Shan Medical University Hospital. Under the plan, China's more than 30,000 hospitals will focus their efforts over the next five years on the areas of "hospital management" and "information," he says. 

That offers Taiwan's medical sector an opportunity: Instead of trying to make money the hard way by opening new hospitals, it can cash in on its medical management and information experience.

Tseng himself is an example of the trend. About five years ago, a week after Tseng stepped down as convener of the Department of Health's committee on the management of electronic health records, he was asked by China's Ministry of Health to serve as a consultant.

Over the past four to five years, Tseng has traveled to China once or twice a month on average to look at hospitals in Beijing, Hangzhou, Shanghai and other areas, identify their shortcomings, and recommend improvements.

In the past two years, Tseng says, China has invested 880 billion renminbi on medical information infrastructure and required every hospital to spend 2 percent of its revenues on information technology.

That has created demand in all medical service fields, from quality consulting, process improvement, cost accounting, and performance assessment to guiding China's hospitals in getting international certifications and even managing hospitals or planning new facilities.

And Taiwanese doctors are not the only ones getting in on the medical gold rush. Taiwanese hospitals, which like Taiwanese doctors are more advanced than their Chinese counterparts, have also joined the charge.

One of them is Changhua Christian Hospital, represented by vice superintendent Chen Hsiu-chu.

Dressed in a magenta blouse and straight black pants, Chen exudes competence in her office on the 40th floor of the Jin Mao Tower in the Lujiazui area of Pudong district in Shanghai, which overlooks the Bund along the Huangpu River.

Chen currently serves as the executive vice president of the Horizon Healthcare Management Limited of Shanghai. The company is a subsidiary of Far East Horizon Ltd., a Hong Kong listed enterprise that itself is part of the Chinese state-owned SinoChem Group. Far East Horizon wants to leverage Changhua Christian Hospital's expertise in health care management and care quality to develop its medical business.

The two sides signed a letter of intent on cooperation last year, and the Changhua hospital sent a three-person team, including Chen, to Shanghai in January as part of the deal. 

"My main means of commuting is the airplane," Chen says with a chuckle. In fact, her suitcase can be seen in a corner of the office, ready for when Chen heads to the airport after she finishes her interview with CommonWealth Magazine to catch the last direct flight of the night back to Taiwan.

Three-quarters of her time is spent in China, leading Taiwanese and Chinese colleagues in flying around China to offer guidance to mainland hospitals. Horizon Healthcare Management has set a sales goal of 5 million renminbi, but "we will definitely surpass the target," Chen says confidently.

Her team recently signed a management contract with an 800-bed hospital in Inner Mongolia, which has a rating level of 3A (indicating size and standards equivalent to a medical center in Taiwan). The management contract includes such services as space planning and operations planning.

A Vital Source of Income

These deals earn the Changhua hospital at least NT$30 million to NT$40 million a year, a vital source of income to supplement the reimbursements it receives from Taiwan's National Health Insurance system. Even more important, the partnership has expanded Changhua Christian Hospital's influence in Chinese medical circles.

"We hope to extend Changhua Christian Hospital's service philosophy (throughout China)," Chen says. She even hinted at the possibility of working with a Chinese hospital to give Taiwanese medical professionals another stage on which to exploit their skills.

The export of medical information systems represents another growing niche for Taiwan's medical sector.

On a Tuesday morning in mid-July, a meeting room on the China Medical University campus in Taichung has come to life because the university is transferring the technology behind its hospital management information system to a Taiwanese hospital management company operating in China. That company will adapt the system into a version suitable for Chinese medical institutions. 

"The rights fees are NT$5 million, plus at least an additional 10 percent cut of all future contracts, which will be of some help to the school's finances," says China Medical University vice president Walter Chen.

The new system will be used first in Qingyuan People's Hospital in central Guangdong province.

Zhou Haibo, the hospital's president who attended the signing ceremony in Taichung, was at China Medical University Hospital for two weeks to observe firsthand the operations of a Taiwanese hospital.

"This was the fifth group of people our hospital has sent. There are still two more groups to come," Zhou says.

Taipei Medical University Hospital, located near Taipei 101 in the city's Xinyi district, is another focal point for Chinese hospitals looking to learn from Taiwan.

Aside from accepting visits from Chinese medical professionals, the Taipei hospital has developed a medical service model that comprehensively caters to Chinese demand, offering options such as on-the-job classes (at a cost of NT$5,000 per student) and having instructors teach in China (at a cost of 10,000 renminbi per instructor), and it has even set up hospital administration courses there. The programs earn the hospital about NT$10 million a year.

Chu Tu-bin, vice superintendent of Taipei Medical University Hospital, believes the model with the greatest potential involves turnkey hospital management projects that accentuate the use of information technology, mobile devices and cloud computing.

A Short-lived Niche

In line with Chu's vision, the 3,000-bed Taipei Medical University Hospital system has brought together hardware and software vendors from Taiwan's information and communications technology sector to introduce much needed information, nursing, and mobile physician order entry systems and cloud computing capabilities at Ningbo First Hospital in Zhejiang Province.

"The whole system is worth more than 1 million renminbi," says an excited Chu.

Other hospitals that will receive integrated systems include Tongde Hospital of Zhejiang Province, Kunming Children's Hospital and nearly 10 newly built facilities. Taipei Medical University Hospital has also been hired as a general consultant to help plan and manage the new hospitals.

Chu believes that this turnkey service model can further drive growth in Taiwan's information technology sector and generate greater production value.

The opportunity may be fleeting, however. Taiwan's Cabinet has made medical service exports a priority, but Lin Tzou-yien, the deputy minister of the new Ministry of Health and Welfare cautioned that while Taiwan still has a niche, "if it doesn't get things up and running in the next three years, the door will be closed after that."

In their pursuit of renminbi, Taiwan's hospitals must also not forget China's predatory strategic framework consisting of five steps: importing, digesting, absorbing, innovating and overtaking. China sets its sights on a new technology, learns about it from the outside world, replicates it and then undercuts its former partners and other players in the sector using cutthroat pricing.

This consistently successful model has already victimized many Taiwanese businesses in China trying to go it alone, offering a cautionary reminder to Taiwan's medical sector that it cannot feverishly chase renminbi without contemplating the potential long-term consequences of its actions.

Translated from the Chinese by Luke Sabatier