JD Health, the healthcare arm of e-commerce firm JD.com, is reported to be on the verge of filing a Hong Kong IPO that could be worth $1 billion. Tencent-backed Wedoctor is rumored to be coming next year. There’s no question that telemedicine is hot.
A pandemic that kept people at home for months is, of course, one big reason. The convenience and safety of remotely ordering medicine or texting a doctor appealed to many patients. Boosted by a Covid-driven influx of users, the user volume for online healthcare is expected to surpass 60 million this year, with a market volume exceeding RMB 700 billion (about $103 billion). But will this unique year prove to be a high water mark for the industry, or are doctor apps here to stay?
Bottom line: China’s telehealth industry got a big boost this year, offering vital medical services that would have otherwise been unreachable to many patients. But it’s too soon to say whether the surge in patients caused by lockdowns has lasted, or whether healthtech apps will be able to turn a profit. Achieving broader change in China’s healthcare system will require new regulations and industry standards, not just consultation apps.
The Covid rush
The shock: The coronavirus exposed shortages in resources and inequalities between urban and rural hospitals, but it also revealed the potential of tech in solving some of China’s healthcare woes.
- Health insurance covers 95% of China’s population, but qualified doctors and specialized facilities are concentrated in urban areas.
- Covid shut down some facilities and overwhelmed others, leading many patients to try mobile healthcare platforms for the first time.
- “Covid has crushed confidence in institution-based medicine,” Wei Siang Yu, Chairman of Borderless Healthcare Group, told TechNode. “This is a very good transition from institution-centric to consumer-centric healthcare.”
The surge: As you’d expect, doctor apps saw surging use during the Covid period.
- Telemedicine platform Ping An Good Doctor reported 831,000 average daily online consultations in the first half of 2020; JD Health saw 150,000 patients per day use their consultation services. Online consultation orders increased nearly fourfold on Tencent-backed Wedoctor.
- During the Covid-19 outbreak, 78% of doctors from tier 1 to tier 4 cities accessed digital channels, the most popular of which were mini programs and apps like Wedoctor, according to data from the China Pharmaceutical Market Research Association. After the experience, 73% of doctors surveyed said they would use telehealth services in the future.
And then? So far, we don’t know how much of the Covid surge lasted after re-opening.
- No user numbers are available after April.
- The online penetration rate of the internet medicine industry is expected (in Chinese) to rise to 8.2% this year from 6.6% in 2019, according to Qianzhan Industry Research Institute.
- JD Health’s IPO plans mean more data will be available soon—and probably suggest that they’re confident in what the data will show.
- But Koh Hau-Tek, Deputy Chief Medical Officer at Jiahui Health, did not see a permanent shift to remote consultations at the Shanghai-based private healthcare network. While many patients used the network’s private platform during lockdown, he told TechNode that demand fell off quickly as patients returned to face to face doctor visits as soon as they could.
Who are the healthcare players?
Covid-19 made existing online healthcare services more popular and pushed traditional medical companies to move online. As of Mar. 6, 2020, China had a total of 2,330 internet medical projects, according to data from 36kr. Existing startups and tech firms expanded their markets and services, offering products from virtual consultations to medical encyclopedias.
Consultations and telemedicine: A key service offered by many platforms is online consultations with doctors straight from your phone—often for free. Another common offering is medicine delivery.
- Miaoshou Doctor offers pharmaceutical and consultation services, with some consultations as expensive as 399 RMB. It reached unicorn status after an $85 million Series C funding round in June 2020.
- Chunyu Doctor, founded in 2011, facilitates communication between doctors and patients by allowing customers to schedule appointments and send their medical history to doctors. It expanded its service overseas in March.
- Alibaba entered health care true to its e-commerce roots by selling pharmaceuticals, a business it’s run since 2011. In response to the pandemic, the flagship Ali Health app started offering free medical consultation to users from mainland China in January, and to overseas Chinese nationals in March. Ali Health raised $1.3 billion in an August secondary sale in Hong Kong.
- Ping An Insurance’s offerings range beyond online consultation. Its popular “Good Doctor” healthcare platform, the largest in China, also offers digital prescriptions and medicine delivery. In 2019, it partnered with 94,000 pharmacies to deliver prescription drugs to patients. Backed by China’s most prominent insurance provider, Good Doctor helps users navigate healthcare insurance.
- JD.com entered the fray in February with the launch of its JD Health app, which will reportedly soon IPO in Hong Kong. The platform facilitates both online consultations and offline appointments. Its “Family Doctor” service allows up to eight family members to save their records to the platform if only one member registers.
- Tencent launched the Tencent Health mini program on Wechat in March 2019. Users can search a database of doctors across China and pay for text or video consultations, as well as digitally schedule appointments in-person at hospitals.
- Dingxiang Doctor began as a health information app, and won praise for helping bust rumors during the Covid-19 outbreak. It also provides consultation services: one million as of Feb. 20.
- Therapists and mental health services are going mobile with popular startups like My Therapist, a platform that allows users to book and pay for consultations with mental health professionals from around the world.
Everything else: Outside of virtual consultations and prescription management, big tech companies are diversifying their focus to include health education or investment in new technologies.
- Baidu drew from its position as top search engine in China to develop a medical information platform. It launched Baidu Health in March as a mini-program combining its encyclopedia of medical terms with an “ask a doctor” function. The platform hosted doctors from third-party platforms like Chunyu Doctor and Ping An Good Doctor. Baidu is also promoting medical innovation: Its AI solutions for healthcare and diagnosis have been adopted by nearly 2,000 hospitals as of Q2 2020.
- Tencent has a broad presence in health. A “medipedia” provides health information through a partnership with WebMD, and a number of innovations such as a digital “health ID card” that records medical records from different hospitals and its own health code are grouped under the so-called “Smart Hospital” initiative. The tech giant also has three research labs focusing on medical applications of AI, and has invested in multiple healthtech startups like Wedoctor and Haodafu Online.
Is it profitable? The general consensus among observers is that telehealth apps have yet to demonstrate a viable business model. The healthtech market is big, but there has been “no proof of sustainable revenue,” Wei said. Different platforms are experimenting with different pricing models, seeking a balance between offering affordable services, paying doctors, and earning a profit. Even Ping An Good Doctor has difficulty breaking even.
- Good Doctor’s “Private Doctor” service offers both free services and family packages for an annual fee of RMB 1,099 to RMB 7,999 for unlimited access to their services and discounts.
- But the proportion of paying users is low: 3 million monthly paying users out of 67.3 million total monthly active users.
- The company reported a net loss of $30.8 million in the first half of 2020, despite a ten-fold increase in customer traffic.
- Other firms also struggle to turn a profit and demonstrate the viability of their business models. Even as Wedoctor plans a Hong Kong IPO, doubts remain about the stability of the money-losing company.
- TechNode saw widely varying prices for consultations on Tencent Health’s Wechat mini program, ranging from RMB 1 to RMB 200. There seemed to be no fees besides these consultation fees, which themselves appear too low to be profitable.
- Medicine delivery seems a far more profitable angle. 2018 regulations allowed drug companies to go from selling to hospitals to selling directly on e-commerce platforms, boosting tech firms like Alibaba that were already in the game. Drug delivery also accounts for more than half the revenue of Ping An Good Doctor.
Shot in the arm from regulations: A favorable policy environment is another major factor driving growth. Chinese regulators loosened restrictions on healthcare provision in response to Covid-19. The national health insurance system has allowed online medical services to be covered by healthcare payment plans since late 2019.
- During 2020’s “Two Sessions” meetings of the National People’s Congress and Chinese People’s Political Consultative Conference, 54 total proposals about healthcare were received. VC investors, CEOs, and other business leaders emphasized big data solutions to medical problems and integrated healthcare platforms.
- If you have any doubt about how policy-driven this sector is, check out the Chairman’s letter at the head of Ping An Good Doctor’s last annual report—he names five policy documents before his own company.
Privacy issues: The privacy of sensitive medical data will be a major concern for both companies and regulators. A data leak in October led to the exposure of 24 million patient records from Sichuan Lianhao Technologies and the medical department of Beijing’s Tsinghua University.
- Data security in China is managed by several different laws and policies. Medical data is regulated under several different guidelines and rules, like the 2017 Cybersecurity Law and guidelines from the China Food and Drug Administration.
Healthcare beyond apps
The coronavirus gave telehealth firms a publicity boost and added government goodwill, but mobile apps alone are just one part of the equation. Patients still need face-to-face consultations to avoid missed diagnoses.
Lack of doctors: China struggles with a shortage of trained and qualified doctors, and apps have struggled to ensure quality.
- “Whatever you see at the back of these mobile apps, the level of qualifications will be very different than the rest of the world,” Wei said.
The limits: Despite user numbers spiking during the pandemic, Wei argues that the mobile telehealth model has limits: “They’re good for someone in fifth or sixth tier cities that doesn’t have the resources or connections and wants to talk to somebody with a bit of medical background, but is he or she able to go into the clinic?”
- Virtual consultations are only so effective. Koh told TechNode that they work best for screening and triage, but most patients who need medical care will still need to go in person. There’s no way to virtualize many diagnoses, procedures, or care for complex health issues, which requires the physical presence of hospitals and qualified doctors.
- Mobile apps haven’t evolved beyond thinking about healthcare “as a digital business rather than an experiential business,” Wei said. With the right moves, telehealth might end up becoming an integral part of medical care, he said, but “at the moment it’s not very sticky.”
Big (medical) data: “Something good that will come out of this thing will be a certain level of big data,” Wei said.
- Chinese Premier Li Keqiang stressed the importance of developing healthcare and medicine alongside technology as “drivers of growth” during an April speech.
- Healthcare apps and existing “smart hospital” ideas have laid a foundation of tech in healthcare and are poised to further develop and standardize.
- But monetization of medical data will take some time, Wei said. “We need to watch the space of some of these mobile app players, how they go into other Southeast Asian countries.”
Now that China has lifted most Covid restrictions, telehealth companies are at an important junction. The first half of 2020 brought them new users and tacit government support, but the rest of the year will challenge firms working to maintain growth and make a profit.
The upcoming IPOs will provide insight into the profitability of these firms and the prospects of the industry.