Challenges Mount for China’s Dialysis Providers Despite Growing Demand

The number of people with kidney failure in China is increasing, resulting in a demand for dialysis that exceeds existing supply. Despite this growing need, the dialysis industry faces significant challenges. Competition among providers has led to aggressive cost-cutting practices, including providing free dialysis and even compensating patients for participation. This highly competitive environment has been exacerbated since 2016, when regulations were relaxed to allow independent dialysis centers, prompting a surge in private investment. By 2017, over 50 independent private centers were approved, and now more than 1,000 exist, 98% of which were established between 2017 and 2018. However, industry profitability has been eroded in recent years due to tighter insurance controls, government-driven bulk procurement, lower service prices, and intensified competition from public hospitals. [para. 1][para. 2][para. 3][para. 4][para. 5]

A Caixin investigation revealed that Weigao Group’s dialysis centers in Suining, Sichuan, engaged in practices like offering free treatment and transportation to attract patients, then exploiting insurance by prescribing and acquiring more medication than required, which was sold to middlemen. These illicit profits were shared among patients and staff. The centers have a history of insurance fraud, with one such center in Suining flagged in 2022 for irregular drug procurement, inflated charges, unauthorized treatments, and other violations, leading to a repayment of 1.32 million yuan ($184,000) and a fine twice that amount. These centers are linked to the publicly listed Shandong Weigao Blood Purification Products Co. Ltd., indicating overlapping ownership and management. [para. 6][para. 7][para. 8][para. 9]

Weigao Blood Purification, founded in 2004, focuses on hemodialysis and peritoneal dialysis products, and commands over 30% of China’s dialyzer and tubing market. Similar insurance violations have occurred at Weigao centers in Chengdu and other cities, including duplicate and unauthorized billing. Weigao Group, a conglomerate valued at 78 billion yuan, owns various medical subsidiaries. Four Suining centers are wholly owned by Shanghai Baoshu Medical Technology Co., which controls stakes in over 30 related centers and hospitals, several of which faced regulatory penalties. Baoshu, significantly influenced by Weigao (which owns a 7.6% stake), has close ties including shared leadership, and is also a major customer and supplier partner of Weigao Blood Purification. Baoshu contributed 1-2% of Weigao Blood Purification’s revenue from 2022–2024, while Weigao Group accounted for about 10–12% annually over that period. [para. 10][para. 11][para. 12][para. 13][para. 14][para. 15][para. 16]

Weigao Blood Purification has integrated product manufacturing and service delivery, creating a self-contained supply and sales loop: it manufactures dialysis equipment and consumables and sells them to its own and affiliated centers. Four Suining dialysis centers are among its largest customers. Although revenue growth slowed between 2022 and 2024, net profits rose from 310 million yuan to 449 million yuan. In contrast, other listed dialysis companies have struggled, with poor profitability and financial losses across multiple centers. [para. 17][para. 18][para. 19][para. 20]

The sector is facing increased compliance scrutiny. In 2024, the Shanghai Stock Exchange questioned Weigao’s related-party transactions and business independence, to which the company responded that these relationships and sales were normal and market-based. Since 2023, Weigao has aimed to standardize and reduce such transactions. However, as profit margins shrink, compliance issues like double billing, overtreatment, and false charges have also become more visible. The regulatory challenges are compounded by the complexity, frequency, and variability of dialysis care, making oversight difficult despite high reimbursement rates and a large patient population. [para. 21][para. 22][para. 23][para. 24][para. 25]