Commentary: China’s New Foreign Hospitals Need a Fresh Playbook

Last November, four key government bodies—the National Health Commission, Ministry of Commerce, National Administration of Traditional Chinese Medicine, and National Administration of Disease Control and Prevention—jointly released the “Work Plan for Expanding the Opening-up Pilot in the Field of Wholly Foreign-Owned Hospitals.” This policy milestone redefined the categorization of foreign-invested hospitals, introducing a new category separate from traditional private hospitals. Now, foreign-invested hospitals established before this plan are called “old foreign hospitals,” while those formed after are referred to as “new foreign hospitals.” [para. 1]

The announcement of the Work Plan prompted swift action from nine designated pilot cities, each eager to attract foreign investment and develop high-quality industries such as medical tourism. Cities like Guangzhou and Tianjin quickly signed framework agreements with Singaporean institutions for wholly foreign-owned hospital projects and established service coordination bodies. Shanghai, aiming to foster a robust medical services and biotechnology sector, incorporated the majority of foreign-invested hospitals (e.g., Raffles Hospital, Xiehua Brain Hospital) into the second batch of its differentiated medical insurance providers at the year's start. [para. 2]

Significantly, the environment for new foreign hospitals differs greatly from what old ones encountered. The demographic boom driven by urbanization and high birth rates—which old foreign hospitals benefited from—has ended. Previously, such demographics created demand in areas with insufficient medical resources, allowing hospitals to offer services with relatively low barriers to entry. Now, public Grade-A and “super” Grade-A Tertiary hospitals have dramatically improved in both service quality and efficiency, also investing in VIP and international departments. Consequently, the business environment is more competitive, and new foreign hospitals cannot rely on the earlier strategies that helped previous entrants. [para. 3]

From a strategic perspective, the journey for new foreign hospitals (from inception to sustainable self-development, or point B2) is distinct from that of the established ones (whose destination is B1). Old foreign hospitals already enjoy established market shares and customer bases, while new ones must achieve sustainability in a far more competitive and saturated market, focusing on “second-tier traffic, high conversion rates, high retention rates, and optimal operations.” [para. 4]

Given their exclusion from the earlier demographic and urbanization windfalls and faced with tough competition, new foreign hospitals should not expect high patient volumes. Their combined patient traffic (for outpatient, emergency, and check-ups) will likely top out at just 15% of a leading public hospital’s numbers. Success now depends on making the most out of this “fractional traffic,” making it crucial to build a viable business model on lower but more valuable patient traffic. [para. 5]

In pilot cities, where medical resources are abundant and patients are choosy, a new foreign hospital needs both a high rate of converting first-time visitors into long-term (or even lifelong) customers and a mechanism for continuous patient engagement (“out of the hospital but not out of care”). Hospitals situated at transportation hubs like high-speed rail stations can expand their catchment area significantly, from a radius of 60 km to up to 300 km, thereby multiplying their potential customer base. [para. 6]

The business logic is quantitative: a 50,000-square-meter hospital in a major city requires a “customer pool” of about 50,000 people, each contributing an annual fee of no less than 400 yuan. These customers are obtained via differentiated offerings for around 40–80 key diseases, targeting core patient groups per specialty. Where market demand is insufficient, expanding the geographic catchment is necessary—hence the strategic importance of transportation-accessible locations. [para. 7]

A successful example of this approach is Shanghai’s new Hongqiao medical district, anchored by the Hongqiao transportation hub and Huashan Hospital’s west campus. This model, which efficiently channels patients from across eastern China via high-speed rail and airport connections, is regarded as a best practice worth emulating. [para. 8]

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