Tara Bannow October 28, 2019
UPMC and a partner broke ground
Monday on the first of at least five private hospitals they will operate in
China, in what UPMC calls the largest presence of American academic medicine
outside of the U.S.
The Pittsburgh-based academic
medical center is partnering with the Chinese conglomerate Wanda Group to open
at least five hospitals in five major Chinese cities. The first, in Chengdu, is
expected to open in 2022; dates for the others haven't been set.
"No one has actually been
successful in importing a truly American or Western style of medicine into
China at the scale in which we are proposing here or planning to go forward
with," said Chuck Bogosta, president of UPMC International.
UPMC won't pay for any of the
construction. The Wanda Group is funding both the hospitals' capital and
operating costs. UPMC will manage the facilities under an agreement with Wanda,
for which Wanda will pay the health system "significant" management
fees, Bogosta said. He added Wanda will also play a management role.
A handful of U.S. health systems
and other types of U.S. firms have tried developing private hospitals in China,
with varying degrees of success. The country's public hospitals are struggling
to keep up with demand, and its government has encouraged the development of
private hospitals to ease the pressure. In 2014, the government announced it
would allow wholly foreign-owned hospitals, up from a maximum of 70% foreign
ownership previously.
But foreign operators still face a
number of barriers. It's a highly regulated area, and developing private
hospitals in China takes a long time.
For one, several Chinese government
ministries are involved in getting hospitals up and running, said Lawton Robert
Burns, a healthcare management professor at the University of Pennsylvania's
Wharton School.
"It's so byzantine, and they
don't necessarily work together," he said.
Jeff Bernstein, senior vice
president of UPMC International and its country manager for China, said the
approval process for getting hospitals built in China is not unlike what
happens in the U.S. In any case, Wanda Group will oversee regulatory approvals,
he said.
Boston-based Partners HealthCare
announced in 2014 it was in preliminary talks with two Chinese partners to
build a 500- to 1,000-bed facility. It declined to share an update on that
project. ProMedica in Toledo, Ohio, has also worked aggressively to expand its
business in China, and is currently advising on three healthcare projects
there. Cleveland Clinic last year announced an
advising relationship on a hospital in Shanghai.
More importantly, it's tough to
convince physicians to leave prominent posts at public hospitals to work in
private ones. And once they do, it's hard to go back.
"It's kind of a chicken and
egg," Bernstein said. "If there aren't enough patients in the private
hospital, the public hospital doctor does not want to leave his or her position
at the risk of losing patient volume, losing the prestige of a professorship
and then a lot of these private hospitals aren't surviving."
Bogosta and Bernstein said they
don't think UPMC will suffer the same fate because it will place its own
specialists in the hospitals it's developing. The doctors UPMC recruits to work
in the hospitals can come from outside the organization, too.
"The ideal profile would be a
physician who has come to the U.S. or come to another country with a Western
style of medicine and wants to go back," Bogosta said. "There's a lot
of physicians that fit that profile."
UPMC plans to recruit through
professional associations like the Chinese Association of Orthopaedic Surgeons.
Private hospital operators also
struggle with the fact that Chinese patients don't trust their facilities and
still largely view public hospitals, especially tertiary hospitals, as
delivering the highest quality care, Burns said.
"They eschew the smaller
hospitals and the private hospitals because they don't trust them as
much," he said. "That's a huge hurdle."
The vast majority of people in
China have public insurance, but there's also a growing commercial insurance
market and large middle- and upper-class populations who view private insurance
as a way to see doctors faster and in cleaner environments, Bernstein said.
The average doctor visit at a
public hospital in China lasts less than five minutes, he said. They will be
much longer at UPMC and Wanda's hospitals, which will have roughly 400 to 500
beds, compared with roughly 1,500 beds at the typical public hospital.
The first hospital under the
agreement will be called the Chengdu Wanda-UPMC International Hospital. UPMC
will be in charge of hiring the hospital's administrative team and clinical
leaders. It will also train the staff. The other hospitals will be in
"first-tier" cities like Beijing and Shanghai, Wanda Group wrote in a news release.
The company, which did not return a request for comment, characterized those
hospitals as the "first batch."
The acute-care hospitals will be
highly specialized in areas like oncology, heart and vascular, neurology and
orthopedics, Bernstein said.
This is the Wanda Group's first
foray into healthcare, Bogosta said. Most of its business is in real estate,
film, children's entertainment, sports and travel. The company generated the
equivalent of $30.3 billion in 2018, according to its website.
UPMC has been working in China for
about eight years now, Bogosta said. Last year, the health system announced a five-year contract to help plan
and operate a cancer center at a private hospital in Beijing. The health system
signed its first medical services agreement in China in 2011, when it agreed to
provide second-opinion pathology consultations to a diagnostic laboratory. UPMC
also helped create an international medical
center in Changsha and partnered with a women's hospital to raise
its standards of care.
UPMC is among the country's largest
health systems, having drawn $18.8 billion in operating
revenue in 2018. But like other health systems, it has struggled in
recent years with a slim operating margin and has focused on building up its
non-hospital businesses, like its enterprise arm. Bogosta said UPMC wouldn't be
in the Wanda partnership if it didn't think it could generate margins to help
offset the declining U.S. reimbursement market.
But Burns, of the Wharton School,
said he's seen many U.S. health systems announce international hospital operations
over the decades—not just in China—and it's not clear that any have been
successful.
"I've seen this stuff come and
go repeatedly," he said. "I'm not sure people get the message."
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