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China’s 850 billion yuan medical reforms have prompted mixed views on how big a boost it will provide for the IT industry.
While most expect the scheme to translate into orders for billions of dollars of hard and software, some are cautioning that it will generate far less than earlier estimates.
There is also uncertainty about how the money will be allocated.
The shake-up was designed to ensure fair and affordable care for China’s entire 1.3 billion people. The country has more than 300,000 hospitals.
“The reforms will unleash huge market demand because the level of computerization in China’s medical system is lower than that in most other industries,” said Wang Jun, a sales director at Lenovo — originally known as Legend — which rose from a small start-up to become the leading PC company in China and then a global company.
Wang said Lenovo plans to increase its sales in China’s healthcare industry by 35 percent this year, a far bigger rise than the 3 percent growth rate for China’s overall personal computer market predicted for 2009 by research firm IDC, which describes itself as the premier global provider of market intelligence for information technology markets.
Wang said there would be an inevitable demand for PCs from hospitals, rural clinics, drugstores and insurance companies. He expected growth to continue rapidly for at least the next three years, making the reforms one of the most important market generators at a time companies were cutting back on IT spending because of the economic slump.
Matt Wang, vice-president of IBM’s China Development Lab, also anticipates the reforms will create big market opportunities. He expects at least 1,000 Chinese hospitals to invest a minimum of $1.5 million each to establish electronic patient records. That in turn could generate more than $1.5 billion in new spending on software from hospitals and clinics in the countryside, he added.
“The government’s involvement in the healthcare sector reform is expected to create huge market opportunities because it makes possible a nationwide and unified network that connects together the highly scattered Chinese hospitals,” he said.
Xiao Hongliang of IDC estimated the 850 billion yuan boost would generate orders of 1.2 to 1.5 billion yuan a year for IT facilities over the next three years, adding this was far less than earlier estimates.
He said the bulk of the new spending would be on the construction of the national medical insurance and drug distribution networks, while some funds would be used to raise standards at rural hospitals.
Liu Fan, assistant president at Peking University People’s Hospital, said he did not think his establishment would benefit much from the government investment. He said his hospital had no plans to increase IT investments in the foreseeable future because it already had a comprehensive system and network.
“The investment will mostly go to rural areas,” he said. “I don’t think hospitals like us would get anything.”
Sekiguchi Mitsuo, general manager of Canon’s medical equipment business in China, said multinational firms would not find it easy to penetrate the rural markets, where budgets are limited. Canon expects most of its growth in China’s healthcare market over the next few years will come from big hospitals in urban areas.
There is certainly scope for increased sales to China’s healthcare industry.
According to the China Hospital Information Management Association (CHIMA), 13 percent of the nation’s healthcare budget is invested in IT, compared with a world average of 58.9 percent.
“With many of the hospitals in urban areas planning to fast track their computerization programs, the demand for IT solutions will also grow from the traditional desktops and networks to high quality computing, storage and virtualization,” said Richard Lee, vice-president of Dell, China, who added his company would focus on providing simplified IT service, hardware and software in China.
Under the reform scheme, China plans to spend one third of the 850 billion yuan on building new hospitals and upgrading existing facilities.
The plan is also to expand China’s medical insurance coverage and establish an electronic network of patients’ records, enabling details to be shared between hospitals.
China implemented a semi-private healthcare system in the early 1990s and encouraged hospitals to become less reliant on the State for financial aid. This resulted in many hospitals investing more in cash-generating medical equipment than IT. Some feel that trend will now be reversed.
There are still complex technical hurdles to overcome before the reforms can be implemented.
Zhang Jingsen is the dean of a hospital in Lucheng, a city in southern Shanxi province. His hospital is a subsidiary of the Tianji Coal Chemical Industry Group Co (Tianji Group), a State-owned enterprise. It currently receives around 3.5 million yuan every year from the parent firm, nearly half its operating costs. But with the Tianji Group planning a restructuring late this year and an initial public offering, Zhang has to face the risk that he may no longer get the funds.
“The new board of directors (after the restructuring) may not continue the funding,” he said. “The reform plan is also not clear on whether the government will take us over.” He says the uncertainty is making him cautious about allocating large sums to new projects.
