Seize Digital Health Trend of Reform Opportunity in 2022
It is the time to reform of Digital Healthcare now.
1. Build an HMO system of Digital Health Trend Reform
To build an HMO system, it is necessary to form a closed loop of capabilities of “Hospital, medicine, insurance, and digital”, in order to finally form a closed loop of full-cycle services centered on health. We can this is the best digital health reform.
2022 will be the year of accelerated attack by Chinese Health Management Organizations (HMOs).
The “Health Maintenance Organization Act” nearly 50 years ago led to the rapid rise of HMOs in the United States, and gave birth to the medical and health industry giants represented by UnitedHealth.
In October last year, the State Council Medical Reform Leading Group issued the “Implementation Opinions on Further Promoting the Experience of Sanming City, Fujian Province and Deepening the Reform of the Medical and Health System” (National Medical Reform  No. 2), we shall neme it as No. 2 document later, high frequency The mention of “promoting the construction of medical consortium” is regarded by the industry as a sign that China is deepening the reconstruction of the medical supply system and promoting the establishment of a Chinese version of the health care organization driven by the payment of digital health reform reform.
At present, led by the “super payer” medical insurance department, China is comprehensively promoting the transformation from “treatment-centered” to “healthcare-centered”, and digitalization has become the engine for the upgrading of China’s medical service system. Starting from Sanming, Fujian, Tianjin, Tai’an, Shandong and other regions are starting with payment reform and driven by digitalization, and are building a close medical alliance to build a new era of health management organizations.
As the world’s largest unified market and the most populous country, the construction of this new type of HMO will show a trend of lighter investment and faster development than the United States United Health driven by digitalization. An important opportunity for overtaking in the medical and health industry.
2. How does the Digital Health Trend as Chinese HMO overtake in a corner?
The birth of HMOs is closely related to the United States trying to control the rapidly skyrocketing unreasonable medical costs. In 1973, the U.S. Congress passed the Health Maintenance Organization Act to encourage the rapid development of health maintenance organizations (HMOs), the most mainstream form of managed care. This act directly promoted the rapid development of managed care in the United States, and UnitedHealth, which was established in 1974, is the representative of this model.
The core change behind HMO is that medical payers cooperate with medical service providers to participate in the balance of medical services through health risk management, service utilization management and medical quality management, so as to optimize the cost and effect of medical services.
United Health’s business model has grown rapidly in this background. By combining medical service providers with insurance institutions, both parties have become a community of interests and jointly provide relevant services for policyholders, opening up the “insurance + service” model. Tianfeng Securities Research Report believes that, on the one hand, its health insurance business focuses on managed medical care, gathers medical resources, builds a huge medical network, quickly attracts precipitation members and users, and provides a stable source of customers for the health service business;
On the other hand , the professional capabilities of the health service business in the fields of health management, information technology services and drug benefit management have further strengthened the moat of the health insurance business, and assisted insurance companies to strengthen the monitoring of medical behavior, effectively reduce costs, and achieve risk control. “Medical insurance” business closed loop.
Different from the commercial insurance-based medical payment situation in the United States, in the context of China’s realization of universal medical insurance, Chinese-style HMO should be the result of the comprehensive effect of policies, medical infrastructure, market demand, payment methods, and technology. engineering. In this context, how does the “insurance + service” model take root? Under China’s policy and market environment, whether or when will the “Chinese version of United Health” be born? It has always been a topic of considerable concern and debate in the industry.
It is worth noting that the “No. 2 document” mentioned the “construction of medical complexes” 16 times, and called for strengthening the performance appraisal of medical complexes centered on people’s health, and exploring the implementation of total medical insurance funds for close county medical complexes. Pay, encourage the province as a unit or establish an inter-provincial alliance to implement centralized procurement of medicines and consumables with large consumption and high purchase amount other than the centralized procurement of national organizations.
The above analysis points out that the document aims to build a health maintenance system centered on people’s health by promoting the reform of hierarchical diagnosis and treatment, so as to achieve more effective and efficient national health management and protection. The gradual clarification of the top-level design has accelerated the landing of Chinese-style HMOs.
UnitedHealth has developed rapidly in an environment that encourages managed care in the United States. Similarly, at the moment when China is promoting “health-centered, building a health management organization”, with the driving force of digitalization, it is also promoting the growth of the Chinese version of “United Health”. Zhan Jifu, a “trader” of Sanming medical reform and director of the Standing Committee of the Sanming Municipal People’s Congress in Fujian Province, once said: “It is an important task to realize health-centered management and build a health management and care organization system.”
3. “Payment + Supply” Drives the Accelerated Growth for Digital Health Trend as Chinese-style HMOs
Analyzing UnitedHealth’s business model, we can see two clear business structures, one is the United Healthcare platform centered on health insurance (payment system), and the other is the Optum platform (supply system) centered on health services, The combination of the four capabilities of the two platforms has opened up the two most important elements of the medical service system, the payer and the medical service provider.
The Optum platform, which focuses on health services, has an existing medical and health service platform that can provide health, psychological and other medical services to more than 90 million people.
There is also the Optum Insight platform, which focuses on areas such as data analysis and information technology, which can use digital technology to improve the quality and efficiency of medical services.
On the pharmaceutical side, OptumRx provides a full range of pharmacy care services to 56 million people in the U.S. through capabilities such as its more than 67,000 retail pharmacies. By connecting “medicine + medicine + insurance + digitalization”, UnitedHealth has undoubtedly built a closed-loop service model for the entire life cycle.
In view of the differences in “policy and market” between China and the United States, China has created paths and cases that are different from UnitedHealth’s in the practice of promoting the establishment of health care organizations.
The development of commercial health insurance in the United States is based on the insufficient social security system. The state governments entrust the operation of public medical insurance to insurance institutions. Therefore, UnitedHealth’s customers mainly come from government departments and corporate group customers.
On the other hand, in China, the government has established a universal medical insurance system. The most influential payer is undoubtedly the medical insurance department. How to leverage the medical insurance fund from “paying for medical services” to “paying for people’s health” is the key.
At the first Asian Medical and Health Summit Forum held in Hong Kong at the end of 2021, Liao Jieyuan, chairman of WeDoctor, said that China’s medical insurance funds are gradually starting to implement “per capita” and “per-time pay” from the past “per-occurrence” and “per-time payment”.
“Diseases” and other health responsibility system that pays for results, this is a huge change. “In the past, drugs, inspections, etc. were used as medical income items, but now they have become cost items. At this time, higher-quality and lower-cost medical services , technology and medicines will have a broader market in China, and the ‘production relationship’ of the medical service system may also change as a result.”
It can be seen from UnitedHealth’s model that the construction of HMO requires both the payment side and the supply side of medical services to form a closed loop.
Considering China’s national conditions, Sanming medical reform is undoubtedly a case that can be used for reference in the exploration of the existing HMO model. After going through the 1.0 stage of “governing chaos and blocking waste” and the 2.0 stage of “establishing regulations and systems”, it has now entered the 3.0 stage: establishing a “health management and protection organization”, and realizing the transition from “treatment-centered” to “health care organization”. Health is at the center”.
In September last year, Sanming issued the “Sanming City’s Action Plan for Implementing the “Six Major Projects” to Promote Medical Reform and Starting Again,” and the “Implementation of the National Health Management System Improvement Project” became the first of the six major projects.
The plan proposes to form a reasonable order of hierarchical diagnosis and treatment, improve the health management and protection system, and improve the health management and protection system. At the same time, it is clarified that the balance of the medical insurance fund package payment can be included in the medical service income and used for health management and protection, chronic disease management, and health promotion.
With the help of the digital medical platform, Sanming is accelerating its transformation to “health-centered”, and a digital health care organization is being formed.
The “Sanming Model” is dominated by the government. In the context of China’s extensive coverage of the government’s medical insurance system, what can companies do in HMO construction? The exploration of the digital medical platform WeDoctor, which also focuses on the construction of the “payment + supply” system, can be used as a window to peek into the formation of the Chinese version of UnitedHealth.
In January 2020, the Tianjin Municipal Government and WeDoctor signed the “Digital Health Strategic Cooperation Agreement” to reach cooperation such as the joint construction of a digital health community. Tianjin has become the first provincial-level administrative region in the country to fully launch digital health construction.
By improving the linkage level and operation efficiency of the “three medical care” of medical treatment, medicine and medical insurance, a health maintenance system that runs through the “full life cycle and the whole process of health” of residents will be established, so as to effectively improve the health indicators of residents and reduce the increase in medical insurance expenditure.
Tianjin grassroots digital health community is led by Tianjin WeDoctor Internet Hospital, and cooperates with 267 grassroots medical and health institutions in Tianjin to form a close Internet medical alliance. While providing residents with full-process medical care and health maintenance services, it has begun to explore medical insurance.
Payment methods such as “overall packaged payment” and “packaged payment by disease/capital”, and based on the results of the medical and health management quality assessment, implement the incentive and restraint mechanism of “retaining the balance and not making up for overspending”, and build a new health responsibility mechanism. A digital health management system has been formed.
From the perspective of medical insurance payment reform, the “Tianjin Model” is the first at the provincial level to realize the cost determined by the medical insurance payer to pay for the health outcomes of the people, and implement “cloud management”, “cloud service”, “cloud pharmacy” and “cloud inspection”. ”
The four platforms empower the grassroots with digitalization. Statistics show that after more than a year of development, the standardized management rate of diabetes patients in the pilot grassroots medical institutions of Jiankong Group has reached 76.68%; the analysis of the samples of patients who have been managed for more than 3 months shows that the blood sugar compliance rate has increased by 21.58%. ;
The medical insurance balance rate of grassroots medical institutions that have implemented per-capita payment has reached 16%-31%. With the improvement of primary medical service capacity and the convenience of people seeking medical treatment, the outpatient volume of pilot primary hospitals in Jiantong has increased by 120%.
Zhan Jifu affirmed Tianjin’s practice. In an interview with the media, he said: “The digital health community under construction in Tianjin will be led by Internet hospitals to form a close medical alliance, and establish a ‘health responsibility system’ with family doctor signing as the core and chronic disease management as the starting point. ‘. This is actually the goal of Sanming Medical Reform 3.0. The relevant practical experience has a good demonstration effect, and the effect deserves attention.”
From the medical reform exploration in Sanming and Tianjin and the business paradigm of United Health, it is not difficult to find that the construction of an HMO system must form a closed-loop capability of “medicine, medicine, insurance, and data”, in order to finally form a closed-loop model of the whole life cycle around health management.
4. Will Digital Health Trend of HMO be a new opportunity for this industry?
Different from traditional HMOs, digital-backed HMOs can more efficiently integrate and configure various elements in the medical industry chain, and make full use of limited medical resources to cover a larger user group. In this way, medical expenses and waste of medical resources can be reduced, and at the same time, the mode of each link of medical service can be opened up, and a closed loop of the whole process of medical service can be truly formed.
This is the advantage of digital medical services over traditional medical services. In this regard, Dr. Hu Zuliu, founder, chairman and CEO of Primavera Capital Group, said that “digital technology has the potential to improve the distribution of medical resources” and has made “the Asian region the most advanced, efficient, resilient, and most advanced in the world.” Equal medical and health market.” Liao Jieyuan believes that the biggest challenge of China’s medical system is the uneven distribution of medical resources.
The value of digital medical care lies in that it can not only “send” medical service capabilities to the grassroots; more importantly, in the context of total packaged payment and medical alliances as the main path of medical reform, digital medical care will become the driving force for the construction of medical alliances , to help achieve the goal of “health-centered”.
Looking at UnitedHealth’s profit model, it can be found that its health service revenue is rapidly catching up with the traditional health insurance business revenue.
Judging from UnitedHealth’s financial report data in recent years, the growth rate of health insurance business has slowed down significantly, and the growth of overseas insurance business has been weak, mainly relying on the growth of employers and personal divisions, federal health insurance and retirees divisions.
Therefore, the use of technology to carry out more effective health management and control of health insurance claims will be the development direction of the health insurance business as always.
The overall growth rate of the health service business is significantly higher than that of the health insurance business. In 2020, the revenue ratio of its medical service business and health insurance business is close to 4:6, and the gap is further narrowed, which also means that its medical service business has been recognized by the market and has considerable income. In particular, its OptumHealth and OptumRx businesses will become the main engines driving the growth of UnitedHealth Group in the future.
It can be seen that the digitalization of medical services is also the development direction of the entire medical service industry in the future. The data shows that from 2018 to 2020, UnitedHealth’s revenue and net profit continued to grow, with a compound growth rate of 6.6% in revenue and an average net profit margin of 13.4%.
In 2020, UnitedHealth’s operating income exceeded US$257.1 billion, a year-on-year increase of 6.19%. The net profit attributable to ordinary shareholders in that year exceeded US$15.4 billion, a year-on-year increase of 11.3%. This can explain the revenue capability of the company after getting through “hosptial + medicine + insurance + digitalization”.
On the other hand, in China, Ou Guansheng, executive director and group chief executive of the Hong Kong Stock Exchange, once said that China’s medical market has huge business opportunities. At present, China’s total medical expenditure is about 1 trillion US dollars, accounting for 10% of the global market, and it is still in a stage of rapid growth. He predicts that in the next 10 years, the scale of China’s medical expenditure will reach 3 trillion US dollars. Liao Jieyuan said, ”
China’s 1.4 billion people are shifting from ‘treatment-centered’ to ‘health-centered’, and a new huge market is booming.” Under the dual cycle, the booming domestic medical and health market is The rise of the Chinese version of “UnitedHealth” provides opportunities.
According to previous media reports, during this period of major opportunities for the development of the industry, MicroHosptial has also carried out strategic and organizational upgrades to its business sectors—integrating its various business units, capability modules and regional businesses, forming a “hosptial, medical, insurance, digital”.
The four business bases with core competencies of “digital”, and the four profit centers at the front desk are more focused in business, more refined in organization, and synergize with each other to improve efficiency.
From the perspective of “payment + supply”, on the payment side, that is, “insurance”, MicroHosptial currently has 18 Internet hospitals that have opened up medical insurance payment, and has achieved total medical insurance management in many places and by disease/capital At the same time, the “Qilu Insurance” and other integrated medical insurance and commercial insurance products, as well as commercial health insurance such as anti-cancer insurance, were promoted.
On the supply side, in terms of “hosptial”, MicroHosptial has more than 30 Internet hospitals across China. In addition to helping Sanming become the “starting place” for the national medical reform, MicroHosptial has also implemented “digital health community” in Tianjin, Shandong and other places to form A digital health care organization;
In terms of ‘medcine”, MicroHosptial has platforms such as the Haixi Medicine Trading Center serving the Sanming Medical Reform, and links with the supply side and payment side of medical services to form a drug supply system; and “digital” is MicroHosptial s digital medical platform has formed a digital product system that integrates software and hardware, including Internet hospital construction, medical insurance intelligent monitoring, digital chronic disease management system, and intelligent terminals.
It is foreseeable that the barriers between the payment side and the supply side formed on the basis of consolidating the four capabilities enable it to choose third-party partners for joint operation according to local conditions when HMOs are implemented in various medical insurance planning areas. This relatively light investment approach will allow the “healthy community” model that has been implemented in Shandong, Tianjin and other places to be quickly replicated in more regions.
For the “partnership” expansion of mature business models, there are many successful cases in the medical service industry. The most representative one is Aier Ophthalmology. Its chain expansion through “in vitro incubation” has allowed it to grow from its IPO at the end of 2009. The market value has increased 30 times in ten years after digital health reform.
5. How to Seize the reform of opportunity for the 2022 digital health?
According to public information, MicroHosptial ‘s revenue from 2018 to 2020 was 255 million yuan, 506 million yuan and 1.832 billion yuan respectively, with a compound growth rate of 168%. Among them, the medical service income in 2020 is 706 million yuan, accounting for 38.6%; the health maintenance service income is 1.125 billion yuan, accounting for 61.4%. This growth rate also reflects the general law of digital companies undergoing industrial transformation. The scale of infrastructure investment in the early stage is large, the investment cycle is long, and the growth rate in the later stage is high.
It is worth noting that in the capability model of “hosptial + medicine + insurance + digital”, “hostpital” has the strongest barrier. From the development history of UnitedHealth Group, it can be seen that at the beginning of its establishment, the company actively acquired HMOs and health plans, rapidly expanded its service network, and accumulated high-barrier medical resources. After that, it was logical to attract a large number of customers to join the service system and become “members” to realize the market.
The rapid expansion of the company, and then increase the acquisition of health insurance companies, vigorously develop the group insurance business, and improve the payer business layout. As the largest digital medical platform in China, MicroHosptial also focuses on serious medical care, providing medical services and health maintenance services, rather than “pharmaceutical e-commerce”.
By the end of 2021, WeDoctor has connected more than 7,900 hospitals, covering more than 80% of tertiary hospitals and 95% of tertiary hospitals in the country; among the 300,000 connected doctors, 57% are deputy chief doctors and above, and attending doctors and above accounted for 86%. This is also the reason why digital medical platforms that link medical resources for a long time have a leading edge over insurance companies and are the first to break through the model.
Through the observation of cutting-edge exploration practices at home and abroad, it can be seen that digital HMO not only comprehensively improves the accessibility, effectiveness and affordability of medical services, but also explores the direction for the high-quality development of the entire medical and health industry. Starting from the “No. 2 document”, in the context of the new era of accelerated medical service payment + supply system reform, the opening of the first year of China’s HMO is also bringing more room for growth to the industry.