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Can ehealth solve China's Healthcare challenges (McKinsey presentation)


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Can ehealth solve China's Healthcare challenges (McKinsey presentation)

  1. 1. CHIC, Shanghai April 2nd, 2015 Can eHealth solve China’s Healthcare challenges?
  2. 2. | 1 Impact on the Healthcare value chain Today’s discussion Context for eHealth in China Implications for industry participants
  3. 3. | 2 What is….the Context for eHealth emergence in China?
  4. 4. | 3 Potential for disruption – Some context Many issues in China HC system… …while a fertile ground for ehealth market Conflicts between doctors and patients Significant mark-up in distribution channel Poor quality of supply Lack of access in rural areas Inefficient hospital operations Heavy burden of chronic diseases Huge adoption of mobile platforms Government support for e-Health Access to capital Largest e-Retail market Large and creative IT community Giants and hopeful start-ups piling in
  5. 5. | 4 Average 3 hours spent on smart phone everyday Mass adoption of mobile platform - infrastructure supports the rapid growth of mobile health sector in China SOURCE: McKinsey Global Institute (MGI); MIIT; Enfodesk; GBI; CMPMA 700 million active smart devices in 2014 477 million 3G users in 2014 Market size RMB in 2014 3.0 billion 12.5 billion Forecasted to reach RMB By 2017 Growth rate 27% YOY 2,000 Over healthcare related smartphone apps in the market
  6. 6. | 5 Number of mobile phone internet users GMV breakdown for Alibaba on Singles Day of internet users are mobile phone internet users SOURCE: China Internet Network information Center 34rd Statistical report released July 2014 525 500 420 356 300 201413201220112010 Huge adoption of mobile platforms - almost everyone is a mobile internet user in China 1 Data mentioned in January 2014 report only, not in July 2014 report Millions Percentage of sales 57 Mobile43 83%
  7. 7. | 6 Total investment (mn USD) No. of deals Access to capital – money started to flow in with 80+ deals closed in China eHealth industry in 2014, for a total amount of $1.7b SOURCE: Literature search, team analysis 10 189 1 104 258 23 73 75 99 204 621 Social media apps Physician tools Others Health apps Online community Health monitoring Web-based portals Hospital information system Drug e-sales Remote consultation / scheduling Mobile devices 9 8 2 1 1 9 3 5 10 13 20
  8. 8. | 7 April 2009 November 2011 August 2014 SOURCE: Literature search; Team analysis Government support - The Chinese government started to support development of eHealth services a few years ago 2 3 4 5 61 August 2012 May 2014 January 2015 A USD 9.8 billion budget plan to standardizing the IT system in major hospitals, building a public EMR system and regional medical information platform – MOH “Strategic Report on Healthy China 2020” Plans to enable sales of selected Rx drugs through online channels – Draft version of Internet supervision and management of food and drug Telemedicine pilot schemes in 5 provinces: Ningxia, Yunnan, Inner Mongolia, Guizhou and Tibet – NDRC Approval notice “To support informatization and IT integration in healthcare” – NDRC & MOII “IT industry restructuring and revitalization plan” “The latest technologies in informatization, internet, and cloud will be the key for elec- tronics healthcare development” – MOC “12th five-Year (2011 - 2015) plan on medical equipment industry” Allows online service providers to offer medical suggestion & only healthcare institutions can provide remote medical treatment – NHFPC “Guideline for Remote medical service”
  9. 9. | 8 iCloud system Develop "iCloud system" to improve healthcare management High-tech facilities Take advantage of Internet, IOT, cloud computing, wearable devices, tele-medicine to promote healthcare service Big Data Promote the application of big data in healthcare system Personal healthcare information system Establish digital databases for EHR and patient information, target to cover almost the entire population by 2020 Healthcare information network Build robust health information platforms in four levels (national, provincial, city-level and county-level) and achieve integration Government support – Most recently, the State Council announced a five-year roadmap for healthcare service development, with e-health listed as one key area of focus SOURCE: Literature search, McKinsey analysis Wide adoption of eHealth
  10. 10. | 9 Customer Value proposition Care value chain Technology Payor SOURCE: McKinsey analysis As in the broader digital space, China’s uniqueness is already evident in the eHealth arena Why? ▪ Inefficient healthcare system with patient’s access as the biggest pain point Most offerings are “patient centric” Offerings to physicians, hospitals, and patients ▪ Different healthcare system and priorities ▪ Limitations in big data driven by hospital IT systems and technical capabilities in China Focus on building “platforms” to improve access and efficiency Increasing focus on big data-enabled solutions to improve quality of care ▪ High barriers to integrate core healthcare services provided by fragmented and government- owned hospitals in China Each solution covers a small part in healthcare value chain End-to-end integration, e.g. from diagnosis to follow-up ▪ As seen in other sectors, China is still largely at the “imitation” stage Mostly leverage existing technology Leading innovation in technology ▪ Un-sophisticated public payors and underdeveloped private insurance in China Individual users pay for services for most solutions Insurance companies and corporates are important payors
  11. 11. | 10 … the impact on China’s healthcare value chain? What is …
  12. 12. | 11 eHealth has started to shape China’s healthcare landscape on 5 dimensions 5 Empowering PERSONAL healthcare 3 Offering online DISTRIBUTION options 4 Transforming physician & patient COMMUNITIES 1 Solving ACCESS challenges 2 Enhancing healthcare DELIVERY
  13. 13. | 12 Delivery Personal care Accessibility Distribution Community On each dimension, new solutions appearing to address key needs in provision of China’s healthcare New solutionsKey HC system needs ▪ EMR ▪ Integrated registration, pay- ment and e-report platforms ▪ Enhance experience in hospitals ▪ Enhance diagnosis and treat- ment capability and efficiency ▪ Healthcare knowledge & disease management ▪ Wearable devices ▪ Body function and life style ▪ Increase in awareness of disease on large scale ▪ Better management of personal health ▪ Online scheduling ▪ Remote consultation (Platform/family doctor) ▪ Improve access to quality healthcare services ▪ Eliminate inefficiencies in hospital operations ▪ Drug sales O2O ▪ Online Consumer Health/OTC platforms ▪ Purchase drugs with more convenience and at lower cost ▪ Physician & patient networks ▪ Complied knowledge / database ▪ Social media ▪ More knowledge sharing and support among physicians and patient communities
  14. 14. | 13 Delivery Personal care Accessibility Distribution Community Many players – both small and large – are actively ridding the trends Launch of “Jiangkangyun” Example of players Digital giants Healthcare ITEntrepreneurs
  15. 15. | 14 5 Empowering PERSONAL healthcare 3 Offering online DISTRIBUTION options 4 Transforming physician & patient COMMUNITIES 1 Solving ACCESS challenges 2 Enhancing healthcare DELIVERY
  16. 16. | 15 Chunyu is the largest remote physician consultation platform in China SOURCE: Interviews; literature search; McKinsey analysis ▪ Free consultation services for vast majority of users ▪ Paid members can consult specified doctors (RMB 10- 100 per inquiry) via “Air Hospitals” ▪ Response time is 3-30 minutes ▪ Most physicians are from Class 2 hospitals ▪ For “free consultation” services, physicians are paid by Chunyu RMB 1.5 per inquiry ▪ For services delivered via “Air Hospitals”, physicians will be get paid by patients (transferred by Chunyu) ACCESSIBILITY – REMOTE CARE # of active users: 30M # of daily inquiries: 50K Pay for partial services Subsidize and transfer payment Consultation, appointment services Physicians Patients # of physicians: 40K
  17. 17. | 16 Public institutions have also started to test the remote care models, with active support from the government SOURCE: GBI, press search ACCESSIBILITY – REMOTE CARE China’s 1st online hospital approved by NHFPC (Feb 2015) ▪ Patients to gain medical advice from doctors in the Guangdong No. 2 Hospital (3A) via online video conferencing access points in community and village healthcare centers, pharmacies or other designated sites Telemedicine pilot schemes approved by NDRC (Jan 2015) ▪ 5 participating provinces: Ningxia, Guizhou, Tibet, Inner Mongolia and Yunnan ▪ 3 participating hospitals from Beijing make medical resources available for remote care China's rare disease diagnosis platform adopted in Shenzhen 2nd People's hospital (Jan 2015) ▪ Patients to upload imaging data to the site ▪ Access to over 200 leading imaging experts around the country ▪ Expert consultations guaranteed within 48 hours
  18. 18. | 17 Established in 2010, Guahao has connected 900+ hospitals in 23 provinces, has 30M registered members and 100k affiliated physicians Basic functions Online appointment (core) Hospital information inquiry (new) Online consultation (new) Guahao (Weiyi) is the largest online appointment platform in China SOURCE: Interviews; literature search; McKinsey analysis 692 900 20141312 100 2011 8 Number of hospitals covered 72 100 28 201413122011 7 Number of appointments Million patients/times ACCESSIBILITY – ONLINE SCHEDULING
  19. 19. | 18 5 Empowering PERSONAL healthcare 3 Offering online DISTRIBUTION options 4 Transforming physician & patient COMMUNITIES 1 Solving ACCESS challenges 2 Enhancing healthcare DELIVERY
  20. 20. | 19 ▪ Covers ~20% of Chinese physicians at this stage ▪ Hopes to start making profits after achieving 50% coverage ▪ Most revenue is from advertising today, but expected to tap into big data business through EHR resources in the future SOURCE: Literature research; McKinsey analysis Xingshulin: Empower physicians with clinical tools Clinical tools ▪ EHR Pile: Enable physicians to record, manage and share EHR conveniently by photos or audios ▪ Medical pocket: Contents include frequently-used clinical guidelines, labs handbook, pharmacopeia, etc. ▪ Medical literature: Bilingual medical literature library containing 300+ first-class journals for 70+ subjects Xingshulin Pharmacos Physicians Marketing service Service fee Clinical tools DELIVERY – PATIENT CARE
  21. 21. | 20 ▪ As part of hospital information system, mobile nurse station is offered by various IT service providers ▪ Mobile nurse station is currently a pure 2B business, in which hospitals pay for software development and mobile terminal purchasing, with potential to eventually evolve into a big data business in the future ▪ High cost is the major barrier for wider adoption of mobile nurse station SOURCE: Literature research; McKinsey analysis Mobile nurse station: Making patient care by nurses more efficient Identify patients via exclusive QR code Record vital signs via PDA at wards Consult doctors in real time (IM, IV, labs, etc.) Physician terminal Hospitals adopting mobile nurse stations for multiple reasons: ▪ Reduce medical accidents caused by patient misidentification ▪ Store and share patient data more efficiently ▪ Better execute doctor’s advice in shorter time ▪ Evaluate nurses’ performance based on reaction time documented by mobile nurse station DELIVERY – PATIENT CARE
  22. 22. | 21 ▪ 47 hospitals in 10+ provinces have enrolled in “future hospital” plan as of January 2015, and 300k+ patients have used this platform ▪ 100+ hospitals are expected to join the plan by the end of 2015 ▪ Alibaba hopes to link “future hospital” to online Rx drug sales, and establishes big data platform based on that Alibaba “future hospital”: Improve hospital operation efficiency and move hospitalizing activities online SOURCE: literature research; McKinsey analysis “Future hospital” officially released in May 2014, with aim to improve the efficiency of hospital operations and move offline hospitalizing activities online ▪ Alibaba makes its Alipay payment system and mobile platform available to healthcare providers, and helps them establish an online hospital platform ▪ After following hospitals’ official service accounts on Alipay, patients can use online appointment, payment, labs results checking, online settlement of medical insurance and other functions of their hospitals Future hospital IT service Hospitals Patients Depute Alibaba to operate online services Online services DELIVERY – OPERATION
  23. 23. | 22 5 Empowering PERSONAL healthcare 3 Offering online DISTRIBUTION options 4 Transforming physician & patient COMMUNITIES 1 Solving ACCESS challenges 2 Enhancing healthcare DELIVERY
  24. 24. | 23 China’s online retail market is growing very fast 1,130 436 285 204 120 7444 2018E201420132012201120102009 As % of total retail SOURCE: iResearch; McKinsey Insights China database; McKinsey Global Institute analysis; iConsumer 2015 China; Team analysis China’s online retail market already the largest in the world 1 Based on 2011 terms, 1USD=6.46RMB NOTE: Numbers may not sum due to rounding. 2 iConsumer 2015 China 2.1 3.4 4.7 6.2 10.6 Reached US 2002 size Reached US 2004 size Reached US 2008 size Reached US 2011 size DISTRIBUTION Chinese consumers are comfortable with e-commerce Percentage of online shopper2 Percent of digital respondents Never 33 Online shopper 67 China’s e-tailing market size, 2009–18 USD, $ billion, in 2011 USD1 7.9 18.3 Exceeded US 2013 size
  25. 25. | 24 ▪ CITIC 21 CN, now renamed as Alijiankang, mainly engages in services for drug authentication, tracking and logistics, which can help to lead safer drug supply – Coded all the medicines listed in the national basic medicine categories as well as imported medicines – Got approval and qualified to sell medicine on a third-party website ▪ Alibaba plans to develop a pharmaceutical product information platform and get access to online drug market, aiming to greatly improve medical industry Alibaba plan to help fund a pharmaceutical information platform being developed by CITIC 21CN Alibaba and Yunfeng bought control of CITIC 21CN Co. for $171 million to enter the drug-data industry in 2014 ▪ Alibaba and Yunfeng together hold 54.3% of CITIC 21 CN on completion of the deal ▪ Alibaba aims at developing a pharmaceutical product information platform by leveraging CITIC 21CN’s vast pool of pharmaceutical product data and combining this with Alibaba’s e-commerce, cloud computing and big data capabilities SOURCE: Literature search, Mckinsey Analysis DISTRIBUTION
  26. 26. | 25 Drug electronic administration code inquiry Scripts synchronization Drug purchasing Ali-Health replicates the “bidding” model of the taxi market Ali-Health spearheads the O2O prescription drug sales model SOURCE: Interviews; literature search; McKinsey analysis Pilot started in Shijiazhuang and Hangzhou in Nov 2014 200k downloads, 60k registered members in a month in Shijiazhuang Ali-Health plans to expand to Beijing, Shanghai, Guangzhou in 2015 Basic functions ▪ Scan drug electronic administration code to acquire drug information ▪ Check and download scripts from partner hospitals of Ali Health ▪ O2O sales: Customers send requests by uploading picture of scripts, and choose pharmacies among those who bid for their orders. Selected pharmacy will deliver drugs and settle payments offline ▪ Direct purchase from Tmall drugstore DISTRIBUTION – O2O
  27. 27. | 26 took over, an online pharmacy platform Jointown officially launched Qumaiyao and Ehaoyao apps, its (O2O) drug purchase platforms GSK China opened an official shop on Tmall received type A online drug transaction certification from the China Food and Drug Administration Shanghai Pharma will form an online drug distribution JV with Zhongxie Pharma Yihaodian, a subsidiary of Ping An, received type A online drug transaction certification from the CFDA Other players are rushing into this space as well DISTRIBUTION – O2O SOURCE: Literature search, McKinsey Analysis
  28. 28. | 27 5 Empowering PERSONAL healthcare 3 Offering online DISTRIBUTION options 4 Transforming physician & patient COMMUNITIES 1 Solving ACCESS challenges 2 Enhancing healthcare DELIVERY
  29. 29. | 28 With Tencent’s backing, DXY now has the resources to accelerate its development SOURCE: Interviews; literature search; McKinsey analysis Biomedicine trade platform Recruiting Job hunting Medical information Survey platform Doctor and hospital information, drug guide Physicians Hospitals General public Survey platform Data services Pharmacos/marke ting research companies Main audience DX doctor Social media Academic journals Medical record Medication assistant BBS SNS Blog Medical knowledge COMMUNITY – PHYSICIAN ▪ Established in 2000 ▪ 4 million registered members with average daily page view of 1.8 million in 2014 ▪ Helped over 700 pharmacos, life science companies and marketing research firms to reach Chinese physicians and scientists in the past five years ▪ Received a $70 million investment by Tencent in 2014
  30. 30. | 29 Entrepreneurs set to tackle the deep “trust issue” between physicians and patients COMMUNITY – CONNECTING PHYSICIANS AND PATIENTS Descrip- tion Target users Key features ▪ Mobile platform that connects doctors and patients for follow-up consultation and drug refills via the app ▪ A mobile medical guide that is based on patient peer reviews and recommendations on medical services ▪ Launched in 2015 as the first clinical evaluation of mobile intervention in China with focus on chronic and post acute care ▪ Doctors and patients ▪ Patients ▪ Doctors and patients ▪ Registration ▪ Remote consultation (via Phone / message) ▪ Drug refill ▪ Patient management (for doctors) ▪ Registration ▪ Off-line consultation ▪ Payment ▪ Drug fill ▪ Review & recommendations ▪ HCP & care giver monitoring ▪ Personalized care plans ▪ Open source clinical protocols ▪ Hospital to clinic care coordination SOURCE: Literature research; company annual report; McKinsey analysis
  31. 31. | 30 5 Empowering PERSONAL healthcare 3 Offering online DISTRIBUTION options 4 Transforming physician & patient COMMUNITIES 1 Solving ACCESS challenges 2 Enhancing healthcare DELIVERY
  32. 32. | 31 ▪ Baidu announced the establishment of a standalone mobile health division in 2015 – Plan to collaborate with top domestic hospitals to provide registration services – Aim to integrate various mobile health and medical businesses ▪ Baidu partners with 301 hospital for online medical platform – Will work to establish a mobile phone app and website – Provide services including registration, e-payments, and telemedicine Internet services giant Baidu has taken steps into the medical field Baidu raised its mHealth activities during 2014,including providing wearable health device, establishing the Beijing Health Cloud for patient data, and launching doctor appointment app, and will compete with Alibaba and Tencent in this area Product PicturesDescription PERSONAL CARE SOURCE: Literature research; McKinsey analysis Dulife ▪ Baidu’s first wearable health device ▪ Provide cloud computing to analyze users’ physiological indexes Beijing health cloud ▪ Partnered with the Beijing municipal government ▪ Use big data technology to offer pre-diagnosis assessments for users Baidu Doctor APP ▪ An APP for patients to access to physicians and make online appointment ▪ Available to check patients’ ratings and provide feedback
  33. 33. | 32 ▪ ~500 apps for diabetes management in China market, most of which have stopped ▪ Mainstream diabetes apps include Boyibang/Wellt ang, D Nurse, Control Diabetes SOURCE: Press search, McKinsey A large number of Diabetes Management apps already on market Monitor Docu ment Reminder Educa- tion Consul- tation Description    ▪ “Hardware + supporting app“ business model ▪ It is estimated that Diabetes Nurse sold ~9K glucose monitors and ~15K boxes of test paper from its launch at the beginning of 2014 to August 2014 D Nurse     ▪ Control Diabetes offers an end-to-end solution ▪ Has ~200 physicians in total, including some CHC GPsControl Diabetes ▪ Welltang reached ~3M downloads from Android markets since launch ▪ However, accessible physicians are still very few on this platform – 4 “in-house” physicians and dietitians – 42 affiliated physicians from public hospitals     Boyibang/ Welltang   ▪ Diabetes Space is a very simple app for diabetes knowledge education and reminders D Space PERSONAL CARE – CHRONIC DISEASE MANAGEMENT SOURCE: Press search, McKinsey
  34. 34. | 33 iHealth, a leader in mobile medical devices, received an investment by Xiaomi in 2014 SOURCE: Literature research; company annual report; McKinsey analysis iHealth, a wholly-owned subsidiary of Andon with branches in the US, HK and Europe, started to manufacture branded smart remote medical devices in 2011 iHealth received USD25 million investment from Xiaomi in 2014 iHealth has 5 categories and 10+ products today 1 Currently glucose monitor and SpO2 tracker not available in mainland China mainland Basic functions Monitor1 ▪ Monitor activities and life signs, e.g., BP, SpO2, glucose, weight, steps, sleeping Document & visualize ▪ Document historical data and visualize the results on smart devices (smartphones/ tablets) Sharing & reminding ▪ Automatic share monitoring results with family members remotely, also available for sharing on SNS PERSONAL CARE – MOBILE DEVICES
  35. 35. | 34 … the implications for industry participants? What are …
  36. 36. | 35 Fragmented public hospital sector Regulatory uncertainty Lack of insurance coverage of drugs in retail/on-line channels Scarce talent base SOURCE: McKinsey analysis Challenges and uncertainties for sustainable growth of eHealth ▪ Customized interface required with each hospital due to fragmented hospital sector with isolated HIS. This creates barrier to scaling up solutions targeting hospitals as users ▪ Lack of motivation of many public hospitals creates additional constraints ▪ No clear regulation on remote physician consultation ▪ Significant uncertainty around government posture due to lack of effective control mechanisms ▪ Restricted Rx online sales. Little clarity as to when and how much online channels will open up ▪ Government insurance has little coverage for retail pharmacy channels, constraining the shift of prescription fulfillment from hospitals to retail / on-line pharmacies ▪ Scarce mHealth talent with interdisciplinary knowledge, e.g., knowledge in disease, healthcare system, hospital operation, and patient behaviors
  37. 37. | 36 Investment community Insurance companies Pharma and MedTech companies Providers (private hospitals, etc.) Implications for industry participants SOURCE: McKinsey Analysis ▪ Stay competitive by digitalizing the full value chain, from sales to distribution to product design and analytics ▪ Develop ecommerce and mobile facility, which can provide an opportunity to solve the ongoing costly problem of distribution ▪ Requires a multifaceted approach to understand the underlying drivers in healthcare sector – sources of growth, pools of profit ▪ Seek more ways to monetize the service, either with direct revenue from service or indirect revenue through analytics and ability to reach a stable user base ▪ Develop a better and real time understanding of patient/consumers’ demand through better segmentation with big data ▪ Explore and scale digitalized methods to better promote products ▪ Form e-Health partnering team to explore disruptive models ▪ Figure out a strategy to make better clinical decisions with more robust clinical decision support system based on real time data ▪ Adapt a people intensive operating model to a more digitized workplace, and try to improve productivity and efficiency
  38. 38. | 37 Looking forward, eHealth players also need answers to … ▪ How to utilize big data to enhance design, positioning and targeting of my offering? ▪ How to offer an integrated end-to-end solution, or to be part of the integration? ▪ How to transform from a one-time sale of a great idea to a long-term partnership with the customers? ▪ How to organize my company to adapt to rapid changes in the eHealth market environment?
  39. 39. | 38 Industry insights Collaboration with CPA iTunes Store – “McKinsey on China” Our China healthcare leadership team (Partners and Associate Partners) For more on China healthcare … ▪ Data driven periodic reports ▪ TA specific deep-dive (e.g., oncology, immunology) ▪ Next issue coming up in Q2 ▪ How sick is China's pharmaceutical market? ▪ Will market forces revolutionize Chinese healthcare? ▪ What healthcare system can China afford? ▪ Will the next medical equipment champion come from China? ▪ Obesity – How big will China get? 1 2 3 4 5 2014 2013 2012