[헬스코리아뉴스 / 임대현] It turns out that the overseas expansion of Korean medical institutions is still mainly conducted in China. That is a proof that the Chinese medical market is attractive.
According to the’Investigation and Analysis of Applicable Laws Related to the Establishment of Medical Institutions in China’ recently published by the Korea Health Industry Promotion Agency, medical overseas expansion notification and report confirmation certificates are issued by the end of 2019 after the’Medical Overseas Expansion Act’ enforcement on June 23, 2016. There were a total of 66 organizations.
China (32 cases, 48%) was the largest in 18 countries, followed by Vietnam (6 cases, 9%), Kazakhstan (4 cases, 6%), UAE and Mongolia (3 cases, 5% each). , Peru, Singapore, Malaysia, Qatar, and Russia (2 each), followed by (US, Bangladesh, Sri Lanka, Armenia, Chile, Cambodia, Kuwait, and Thailand (1 each)).
This reflects the fact that although the overseas expansion of Korean medical institutions, which began in 2000, is increasing to many countries, there is still a high dependence on China.
The reason why overseas medical institutions are highly dependent on China is because of their marketability. For example, China’s population, economic power, and medical consumption purchasing power in one province are overwhelming enough to have an edge even compared to the CIS countries and all Southeast Asian countries, so the demand for high-quality medical services is that high.
One of the reasons is that Korean medical institutions that have entered China have developed various entry models through trial and error over the past 20 years. In addition to securing experience in various fields such as expansion of treatment subjects and diversification of service methods, sophisticated operation, and marketing, changes and developments in structural aspects also had an impact.
The report said, “In the case of selecting a cooperation partner, which is a key issue for entering China, at the beginning of the advancement, it remained only in cooperation with medical institutions, but in line with the changes in the Chinese market, it became an individual investor, general company, real estate company, listed company, and institutional investor. It has expanded”, suggesting the attractiveness of entering China.
In particular, the Chinese government is encouraging the opening of general hospitals, specialized hospitals, and private clinics in accordance with the privatization strategy of public hospitals, and the report predicted that Korean medical institutions could create more opportunities for cooperation in the future.
However, the report pointed out that the high dependence on local partners is a risk for our medical institutions.
For example, if there is a dispute with a partner during the cooperation period, there are a number of cases where it is unfavorable.
Therefore, the report advised that medical institutions aiming to enter China will be successful only when they develop strategies for operation and understand and analyze Chinese laws related to the establishment and operation of medical institutions in China.
You need to be familiar with Chinese laws to succeed.
According to the report, the form of corporate or medical practice of Korean medical institutions in China is: ① Sino-foreign joint venture hospital, ② Chinese internal hospital, ③ in-hospital hospital, ④ business trip (technical cooperation), and ⑤ consignment. It can be divided into operation, ⑥ consulting, and ⑦ remote treatment.
For convenience, this form can be reorganized by expressing it in a legal (formal) entry method and an illegal (abbreviated or transformative) method. The establishment of a medical institution in China is considered a legal or common basic form of a Chinese-foreign joint venture hospital made up of equity investments between the capitals of both countries. Although this method has a large amount of capital, it is imperative for non-profit corporations, such as medical foundations, university hospitals, and general hospitals, to enter the plan. There are a lot of cases.
Therefore, most of the overseas advancement agents are mainly doctors who operate private clinics, medical consulting companies, or general corporations such as MSO (Management Service Organization Hospital Management Support Company). This is done through methods such as medical treatment, hospital visits, business trip (technical cooperation), consignment operation, and consulting.
Other than Chinese-foreign joint venture hospitals, there are cases where illegal factors are overlooked due to a lack of legal understanding of establishment, and the Chinese partners are vulnerable. This can result in the withdrawal of the invested assets without properly recovering them.
The laws that apply according to each form of establishment differ in the process and procedure of fund investment and recovery, various tax payment regulations, and details related to reporting or permitting to government agencies of both countries, and based on this, the format and content of partial/joint contracts are also different. . The contract also guarantees advancement with legal stability and is the basis for legal protection in the event of a conflict of interest with a partner.
The report stated, “In case of choosing an illegal structure, even though the understanding and application of the laws of the country of entry is very important for overseas expansion, the difficulty of investing and recovering funds due to the lack of legal understanding, and the fidelity of reporting to both countries. There are cases of violations and unintentional tax evasion,” he cautioned.
History of Korean hospitals entering China
The history of Korean medical institutions entering China, which started in 2000, can be divided into three periods.
#2004 ~ 2009 1st period = Korean companies started to enter the local market in 1992 when China opened the market. Accordingly, many expatriates were dispatched, and international students to Taiwan and China to learn Chinese culture and Chinese also increased. In 2000, the Chinese government announced the’Sino-foreign Joint Joint Medical Organization Management Ordinance (中外合资、合作 医疗机构管理暂行办法)’, at which time many Korean companies began to enter China in earnest and established representative offices or business corporations in the region. It was established to identify and prepare business possibilities. The representative company is SK CHINA.
SK China selected the hospital business as a new business, and after three years of preparation, SK China opened the first Chinese-foreign joint hospital’SK Aikang Hospital’ in Beijing after the announcement of the ordinance of the Chinese government in 2004.
Then, in September 2004, the’Shanghai Art Hospital’ was established in Shanghai. This hospital entered the bypass through the establishment of a Special Purpose Company (SPC), which is a different method from’SK Aikang Hospital’, but the legal establishment of the hospital was an internally funded hospital.
In December of the same year,’Shanghai Ruili Hospital’, a Chinese-foreign joint hospital, was established, and in 2009,’Shanghai Wooridul Hospital’ was also established as a Chinese-foreign joint hospital.
The Chinese-foreign joint venture hospital established at this time entered the market through preparation for about 2-3 years, and meets the objective permission conditions of a minimum capital of 20 million yuan (the stake of a Chinese joint venture partner must be at least 30%) prescribed by Chinese law. The initial capital investment in Weihai was large. Nevertheless, successful hospitals in Korea saw the advancement of SK Aikang Hospital and appreciated the marketability, and entered the local market through a Chinese-foreign joint venture.
In addition, a number of relatively small medical institutions have entered the market, but most of them have established and operated in-house hospitals under the name of Chinese people, or in the in-hospital method, which is operated by borrowing a part of Chinese hospitals. A small-scale Korean medical institution with a hospitalization method was established for the purpose of medical treatment for Koreans and Korean-Chinese Koreans. Dalian (Liaoning Province, Heilongjiang Province, Jilin Province) in the three northeastern provinces where many Koreans and Koreans live ( It opened mainly in large-scale areas such as Beijing, Shenyang, Yanji, Shandong Province, Qingdao, Weihai, Yantai, and large-scale Korean populations, such as Beijing and Shanghai. .
Most of their treatment subjects were dentistry, internal medicine, pediatrics, plastic surgery, and dermatology, and the doctors who were the subjects of treatment were doctors with a Korean doctor’s license, Korean doctors with a doctor’s license in China, and the Philippines, South Africa, and Uruguay. They were acquired Korean doctors.
Over time, the number of hospitals has increased, and the practice of doctors with Chinese or foreign licenses has become dominant. Amid the quantitative expansion of small medical institutions, the rapid rise in exchange rate due to the US subprime mortgage crisis in 2008 led to the withdrawal of Korean companies and the return of international students. The decline in Korean residents caused the management of local hospitals to deteriorate.
At this time, large-scale investments and large-scale Chinese-foreign joint hospitals were unable to receive support as Korean main offices suffered a financial crisis due to the financial crisis, which led to conflicts between shareholders of the hospital and discord with Chinese cooperation partners. In spite of the continued withdrawal of Korean companies and hospitals, medical institutions in China continued to provide medical treatment in China through the in-hospital hospitalization method performed at the individual level or under the name of Chinese. This is because it was small in size and had a Chinese doctor’s license that could not be treated in Korea.
#2010 ~ 2014 2nd period = The global financial crisis, which started with the US subprime mortgage crisis in 2008, led to corporate restructuring and bankruptcy. Each company was the first to reduce or withdraw the size of its overseas subsidiaries, and hospitals were also giving up from overseas hospitals. From 2009 to 2012, both existing Korean-affiliated hospitals and Korean hospitals of similar size were sold to Chinese medical companies.
On the other hand, during this period, the medical industry in China will break away from the existing simple disease treatment center and achieve epoch-making growth. With the booming economic growth of 13% to 15%, the standard of living of the Chinese people has risen and demand for consumption that has been suppressed as a production base has begun to emerge, and the demand for places that provide high-quality medical services has begun to increase.
At that time, the leader in the development of the Chinese medical industry was Futian Group, the largest private medical group in China. Based on the operation of private medical institutions in China, which has been monopolized for more than 40 years, Futian Group invests huge capital, grouping hospitals, diversifies subjects, and provides high-quality medical services by selecting medical institutions by city. I succeeded in commercialization.
From that time on, several groups have entered the medical franchise business and medical specialty business. The rise of the middle class, which is a major consumer, played a role in the success. These are the beneficiaries of rapid urbanization, who received compensation for land or housing through large-scale real estate development, and succeeded in various investments such as a surge in real estate prices and high apartment rental profits due to economic growth.
At this time, the Korean medical community showed interest in the overseas medical tourism market targeting foreigners visiting Korea rather than going abroad. It can be said that the role of Hallyu dramas was quite large. ‘Dae Jang Geum’, which aired in 2003, was the first Hallyu drama to gain sensational popularity in China, but before the Chinese economy and consumption of the Chinese people grew explosively, it was not a market with a large demand for Korean products and services. The role of the enterprise as a production base was greater.
Later, in 2013, the popularity of’Heirs’ and’My Love from the Star’ among Korean dramas influenced various consumer industries. Sales of many restaurants run by Korean residents in China increased, and Chinese people enjoying Korean chicken and beer increased. The influence of the Korean Wave and the high renminbi exchange rate through the drama led Chinese tourists to Korea, and various government efforts such as the Jeju Island visa were combined, leading many yokers to lead the consumption of some industries. The medical tourism market was one of them.
Even at this time, the Korean medical community was prevalent in the idea that hospital business was difficult in China due to the sale and withdrawal of large hospitals that had entered the first phase, and the need for overseas expansion was not greatly felt to meet the influx of Chinese patients. In addition, the privatization of public hospitals accelerated in China at this time, and the privatized hospitals required advanced medical technology and know-how in services, so they tried to overcome this problem through Korean doctors.
Therefore, business trips to China were activated in certain subjects, and no direct investment was required for overseas expansion of medical care. In many cases, Korean doctors’ medical treatment in China was for the purpose of publicity to attract Chinese patients to Korean hospitals in the case of plastic surgery. In addition, advertisements for Korean plastic surgeons were popular in many large cities in China. In the case of dentistry, the’Deposit Clinic,’ which established and operated the’Shanghai Medical Center’, tried to re-enter through a multifaceted approach. ‘Deposit Clinic’ mainly conducted consulting and business trip treatments with relatively low risk and not large investments based on the experience of operating hospitals in China. At that time, only about 30 dentists attended business trips.
#2015 ~ 2019 3rd term advancement period = From 2015, medical tourism of Chinese people, which has been growing so far, will rapidly decrease due to various political problems such as the deployment of THAAD in Korea. Among the general hospitals that used to do overseas medical tourism, some hospitals established overseas business departments and studied data on Chinese patients accumulated so far, and promoted and sold Korean hospitals in China. As the number of VIP customers among Chinese patients increased, some of them made proposals for joint medical services or sought investors.
In addition, it is also the time when the attempts to enter specialized hospitals such as general hospitals, rehabilitation hospitals, spine hospitals, obstetrics and gynecology hospitals, and health examination centers began to break away from previous advances in plastic surgery and dermatology. Yonsei University Severance Hospital has conducted a general hospital project in Qingdao, and SK Hynix announced that it will start a large hospital business by investing 500 billion won in Wuxi, Zhejiang Province.
During this period, there were many advances in plastic surgery, but the advancement of dentistry and other treatment subjects also increased. [아래 도표 참조]
When looking at the status of the medical treatment subjects that were reported according to the overseas medical institution entry notification system from 2016 to 2019, plastic surgery was the largest with 21 cases. The following was followed by dermatology 18 cases, dentistry 15 cases, general surgery and anesthesia and pain medicine 8 cases each. According to the surveyed 22 advances, various medical subjects by country were entered, and in ASEAN regions such as China and Vietnam, the proportion of dermatology, plastic surgery, and dentistry was high.
During this period, the privatization of public hospitals, the expansion of the medical business of large private companies, and the advancement of the medical business of real estate companies were active in China. It is practically not easy for Chinese doctors, who have been guaranteed a stable life as public servants, to learn medical technology from famous professor-level doctors in public hospitals, to go to private hospitals only for a high salary in the short term.
In the medical industry in China, there were many cases where companies with no experience in hospital business started medical business in anticipation of future development, or were forced to take over by the government’s poor pressure to take over public hospitals. They found differentiation in order to compete with large public hospitals and large-capital private hospital groups with a high market share, and actively cooperated with foreign medical institutions to solve the shortage of doctors with advanced medical technology, which is the core of medical care. It was a time to promote it.
Considering this situation, China is still an attractive medical market for skilled Korean doctors, but even in this case, efforts to reduce risk through sufficient market analysis are essential.
Promising medical department in China
The report cited a total of eight subjects as promising treatment subjects for Korean hospitals to enter China.
#1, Radiation diagnosis ability = Korean medical technology in this field is world-class, and in China, radiologists from vocational colleges dominate, and the reading ability is much lower.
#Second, Clinical Pathology Center = The Chinese government has been encouraging the privatization of clinical pathology centers since 2017. With the rapid economic growth and aging population, many patients are rushing to public hospitals, and public hospitals that have been providing clinical pathology for small private hospitals are already saturated. Therefore, the demand for clinical pathology tests in private hospitals has increased very much.
#Third, obstetrics and gynecology and infertility = The Chinese government is easing the birth control policy in preparation for a population decline. Thus, the age of multi-children has passed since the age of one child, but the obstetrics and gynecology department has been mainly authorized by public hospitals, so hospitals have not been able to supply them. It has been pushed for more than a year.
#Fourth, rehabilitation medicine = The marketability of the rehabilitation field is expanding significantly. In public hospitals, technology for major surgery has been accumulated, but the know-how of rehabilitation after surgery is insufficient. Recently, Chinese hospitals are advancing into the rehabilitation field, and Korea is emerging as a highly competitive field.
#Fifth, dentistry = In China, there are 220,000 dentists, with 8,000 patients per doctor. This is about four times the number of 2,200 patients per dentist in Korea, and there is a shortage of dentists. In addition, Chinese dentists graduate from high school and vocational colleges and use a contractor system that allows them to become doctors, so the technological competitiveness of Korean doctors is even higher.
#6th, medical technology based on the 4th industry = The medical field is also using AI and big data, and the telemedicine market is rapidly growing in accordance with the untact era that has come a long way due to Corona 19. In particular, unlike Korea, for-profit hospitals are operated in China, and due to its wide territory, the difference in quality of medical care between cities and rural areas is large, and high-quality medical personnel are also concentrated in large cities. In addition, telemedicine is encouraged by policy. In China, medical services incorporating IT technology and medical services utilizing the gaps between cities are promising as the system of doctors who visit doctors is active. However, it is difficult for the Korean medical system to develop and apply these technologies, so the active entry of related industries is lagging behind China.
#7th, open hospital system = Chinese doctors who have to take care of a large number of patients compared to a small number of doctors also have difficulties opening the hospital. For-profit hospitals are promoting large-scale facilities, facilities, and manpower. Because of this, individual physicians without capital are being pushed out of the competition. Accordingly, the Chinese government has introduced an open hospital system for each base city to reduce the burden of doctors opening hospitals, and is promoting policies in the direction of contacting local residents to see treatment.
As a result, Alibaba built a hospital in Hangzhou, a province of Zhejiang Province, from 2014 to 2015 with the goal of becoming an open hospital, but it is not used as an open hospital because the legal system has not yet been established, but is operated by leasing to several hospitals. However, since there is a possibility that an open hospital system will be introduced sooner or later, it is necessary to watch carefully.
When this system is introduced, Korean medical institutions do not have to invest large amounts of capital to advance. Since the open hospital system can be used to recruit patients, follow-up management, and marketing, it is expected that only Korean doctors will be able to create synergy such as entering a hospital.
Medical Institutions Enter China Now is the Right Time
The report said, “We analyzed the laws that apply when Korean medical institutions enter China, maintain legal stability when entering, and conducted this investigation to help manage hospitals in an equal relationship with cooperative partners.” Emphasized.
For example, China is more legally managing foreign medical institutions and foreign doctors within the framework of the law than any other Southeast Asian country or CIS country, and has consistently implemented policies to encourage them, and is politically stable, so the stability and continuity of the business are more stable than other countries. high. In addition, compared to Southeast Asian countries and CIS countries, China has implemented an open policy for a long period of time, and has a relatively high degree of transparency in administrative procedures and procedures based on international standards for foreign-affiliated companies and capital, and a relatively high affinity for foreign cultures.
The report said, “China is a country with more than 20 years of entry into Korea’s medical institutions, and has accumulated the most success and failure cases and actual experiences.” “In light of the historical and economic conditions, the time to enter China is not too late, It can be seen in the right time.”
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