Online healthcare still gains ground despite hiccups

Updated: 2016-08-24 08:58

By Zhou Mo in Shenzhen(HK Edition)

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Internet-based medical care is fast catching on with patients on the Chinese mainland who have been plagued by the headache of having to rely on doctors in prestigious hospitals.

By integrating internet technology with traditional medical care services, the emerging industry has now enabled medical treatment to be done online.

However, having experienced a round of rapid growth, the sector is entering a cooling-off period, with a number of companies having been forced to scale down their operations or trim their headcount due to a critical shortage of funds.

A typical example involves Jiuyi160 - a Shenzhen-based online medical service platform offering online registration, medical diagnosis, payment, health consulting and a slew of other services - that has been hit by a massive layoff.

Online healthcare still gains ground despite hiccups

Seen as a leading player in the medical sector, Jiuyi160 reportedly fired 300 employees earlier this month, just a few weeks after saying it had secured a new round of funding of 74 million yuan ($11.1 million).

The company said the move, affecting about one-third of its staff, was aimed at "optimizing its organizational structure and partly its business teams, with the shift of the company's core business".

Chief Executive Officer Luo Ning told a seminar in July that the company's revenue, hopefully, would exceed 100 million yuan this year.

Another pioneer O2O (online-to-offline) enterprise in the sector - - which offered instant medicine delivery services, suspended its business in May after failing to secure B-round financing.

"Investors have become more cautious in investing in online medical care enterprises since early this year," Jiang Xinwei, an industrial analyst from Beijing-based consultancy Analysys International, told China Daily.

"Investment in the industry has cooled down compared with last year. Instead of enthusiastically looking for projects, investors now tend to assess their value more cautiously."

According to VCBeat Research, an industry research organization, 169 companies in the internet-based medical care industry successfully obtained funding last year, with total investment reaching $1.8 billion, growing 28.6 percent year-on-year. But the environment has become much more different from that of last year.

Online healthcare still gains ground despite hiccups

Industry insiders explained that as more and more market players join in, many of them are providing identical services and are unable to seek out a feasible business model. Some even warn that the widely-considered promising industry will experience a "chilling winter" following a boom.

Yang Hongqiao, president of Sinldo Information Technology, which offers mobile medical care, said many apps providing online medical services are just playing the role of a connector between doctors and patients and cannot offer other value-added services.

Therefore, it's difficult for those enterprises to receive further investment after A-round and B-round financing because investors would only pour money into one or two leaders in the sector.

Moreover, services provided by those enterprises don't have core medical value, which means they are not able to develop a good business model, he added.

Despite shrinking capital, there's still a promising market for the internet-based medical care industry.

According to a survey by international consultancy Accenture published in May, more than 70 percent of over 20,000 respondents in China said they had once used the internet to get healthcare services, and 98 percent said they were interested in internet-based medical care.

A report by market research firm IDC shows that China's online medical care is growing faster than ever before since this year, with dozens of internet medical organizations already making diagnosis online. Patients' trust in online medical services and their quality supervision system have thus strengthened.

The organization estimates that revenue generated from internet-based medical diagnosis services would hit 110 million yuan this year and rise to 16.7 billion yuan by 2020.

"Internet technology provides a convenient and safe environment for the development of internet-based medical services," said Leon Xiao, senior research manager of vertical industry research and consulting at IDC China.

"In addition, the support from local health authorities has helped solve concrete problems in the process. Insurance companies and healthcare enterprises are making an effort to integrate into the system. These will help internet-based medical care to develop in a clearer direction and make it an important innovation in medical care services."

Jiang said the internet-based medical care industry is developing at an early stage, but the main problem is that the Chinese mainland's social security system, which covers most patients' medical bills, does not apply largely to the online healthcare sector.

Nevertheless, he's optimistic about the industry's future.

"The long-standing problem of 'difficult to see a doctor and expensive to receive medical treatment' cannot be solved with the traditional healthcare system. As the government becomes more open to private medical care institutions, its attitude toward the new industry will change in coming years. With a more open social security system and supplementary commercial health insurance, the industry is expected to see strong growth," Jiang said.

 Online healthcare still gains ground despite hiccups

A nurse registers patients for online diagnosis services at a hospital in Hangzhou, Zhejiang province. Experts say that as more and more market players join in the online medical care industry in China, many of them are providing identical services and are unable to seek out a feasible business model. provided to china daily

(HK Edition 08/24/2016 page9)