Investment, M&A boost tipped for healthcare

Author:Cindy Hu, Guo Da


The outbreak of COVID-19 in the beginning of 2020 has been recognized as the largest public health emergency since Severe Acute Respiratory Syndrome (SARS). The pandemic has aroused the concern of the public health sector in the context of globalization. It will certainly intensify the development and reform of the healthcare and pharmaceutical industry, which will become a field of interest for the investment and M&A market.

Co-operation between social capital and public hospitals

The Law on the Promotion of Basic Medical and Healthcare in China prohibits “healthcare institutions founded by governments to invest in and establish healthcare institutions of non-independent legal person status with other organizations, or to co-operate with social capital in running profit-oriented healthcare institutions”. This new provision may retard, or bring adjustment to, the co-operation between social capital and hospitals founded by governments in running hospitals by the modes of “a hospital within a hospital”, “one hospital two systems”, and “entrusted management”.

Reform of SOE-run hospitals

These hospitals will remain a hot spot for investment by social capital, especially leading enterprises of industries. Separation of state-owned enterprise-run (SOE) hospitals from SOEs is an important part of deepening reform of state-owned enterprises.

In August 2017, the State-owned Assets Supervision and Administration Commission (SASAC) of the State Council, plus another five ministries and commissions, jointly issued the Guiding Opinions on Deepening the Reform of Schools and Hospitals Founded by State-owned Enterprises, which requires separation of SOE-run hospitals from SOEs by the end of 2018. If some hospitals run by central enterprises encounter problems in reforming, they are permitted to accomplish reforms during a transition period from 2019 to 2021.

As SOE-run hospitals approach the year-end deadline for their reforms, SOE-run hospitals and local governments have quickened their steps. As the reform of SOE-run hospitals has now entered a “deep-water zone”, all parties concerned must face up to the difficulties and challenges they face.

Six central enterprises designated by the SASAC – namely, China Resources, Sinopharm, China Chengtong, China General Technology, State Development & Investment Corp, and China Reform Holdings – will serve as a platform of entrusted management to run the SOE-run hospitals that fail to reach the deadline for accomplishing reform. These six central enterprises, and leading enterprises of other industries, will be confronted with new opportunities and challenges. In 2020, investment and M&A of SOE-run hospitals will remain a hot spot for social capital.

Private hospitals

In June 2019, the National Health Commission and nine other ministries and commissions jointly issued the Opinions on Promoting Sustainable, Healthy and Standard Development of Private Hospitals. They put forward 22 policies and measures in six areas, and proposed more government support and other supportive measures for private investment in the medical sector.

Following the opinions, the Law on the Promotion of Basic Medical and Healthcare in China was enacted to set a key tone for private hospitals. According to the law, “the state will take a variety of measures to encourage and guide private investment in the medical and healthcare sector”. The law also provides that private hospitals are entitled to the same rights as public hospitals in multiple aspects.

In 2020, boosted by these preferential policies, the development of private hospitals is expected to accelerate steadily. Private hospitals will adopt more advanced technologies, grow in scale, transform to collectivized management, and seek chain development. Accordingly, more investment and M&A will be seen this year.

Online healthcare services

There have been 269 internet hospitals nationwide, and 121 in progress as of October 2019. Internet hospitals have become a new form for healthcare institutions. Pushed by promulgation of preferential policies and the outbreak of COVID-19, it has become a common and imperative option for healthcare institutions to establish internet hospitals.

It is also foreseeable that internet hospitals and related industries will greet their development opportunities, and industries relating to internet hospitals will experience a new wave of investment and M&A in 2020.

Rise and integration of high-end healthcare service and medical groups

In 2019, four internet powerhouses – Baidu, Alibaba, Tencent, and JD – increased their investment in the medical and healthcare sector, and have constantly been grouping scattered enterprises. In the meantime, the Law on the Promotion of Basic Medical and Healthcare in China has restricted the services of public hospitals to “basic healthcare” and left space for social capital to develop in the high-end healthcare market.

Pertinent legislation, together with the latest revised Measures for the Administration of Health Insurance, will actively encourage and support social capital to invest in high-end healthcare. Thanks to the support that the law grants to telemedicine and online healthcare services, and the high salary and flexible practising environment of private hospitals, medical groups are expected to rise rapidly and trigger a re-allocation of healthcare talent and resources. The resulting industrial integration may boost investment and M&A in this sector.


In October 2019, led by the National Health Commission, several ministries and commissions jointly issued the Several Opinions on Deepening Development of Healthcare-Nursing Combined Industry, which aims to promote a combination of healthcare and nursing, and further perfect home-based healthcare combined with an elderly care service system that relies on communities and is supplemented by hospitals.

In December 2019, the National Health Commission issued the Guide for Services of Healthcare-nursing Combined Institutions (Trial), which sets out the requirements and specific instructions for healthcare-nursing combined institutions in terms of institutional organization, service contents, and procedures. With the compliance support of this guide, investment and M&A in the healthcare-nursing combined industry may reach a new height in 2020.


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