Medical sector a lure for foreign players

The Chinese government is considering allowing overseas investors to fully own medical facilities in multiple locations in China, which will certainly increase the interest of overseas investors and facilitate foreign capital's entry into the country's healthcare sector. But there are problems that could have a restrictive impact on overseas investment in China's healthcare sector.

The multiple policies, procedures, rules and regulations that each overseas investor will eventually encounter while applying for necessary licenses and permits to operate a healthcare facility in China are part of such problems. The myriad, unfamiliar requirements could be overwhelming and devastating to uninitiated foreign executives. Besides, fulfilling these requirements is a time-consuming affair and requires considerable effort and capital. For instance, in the period between applying and getting approval, which could be more than one year, an investor has to pay huge amounts of money to pay the rent for a space that at best is unused.

Indeed, the government has to verify and analyze the antecedents of investors that want to enter the country's healthcare system. It has to ensure that the investors not only have the necessary capital, but also the knowledge and experience to operate medical facilities in such a manner that will deliver efficient, high-quality healthcare services.

But, apart from the complexity of the policies, the myriads of agencies that have to be dealt with to get a project approved is extremely difficult for the uninitiated, inexperienced foreigner. The multi-layered approval system of the government is almost impossible to navigate without some local assistance.

Therefore the government needs to appoint a healthcare ombudsman for each city whose sole role would be to assist foreign investors on how to comply with all of the regulations. This would maintain the current protective nature of the regulations and, at the same time, be of great help to overseas healthcare executives.

The healthcare sector is one of the last untapped frontiers in China. The transformation of China's healthcare sector from a State-planned system to a market-driven system is a once-in-a-lifetime opportunity for investors. China's recent healthcare reforms are fostering a competitive, for-profit sector in the healthcare industry. Reforms have laid the framework for a "market-driven concept" to provide special or superior quality services that State hospitals may not provide.

China's middle class is continuing to demand better healthcare services and is willing to pay a premium for them. The foreign capital to be invested in China's healthcare sector can help make that possible. Foreign investors will get specialist physicians and surgeons, and high-quality professionals to staff their facilities, whose expertise will help lift medical services truly to top level.

Perhaps some additional measures should also be taken to improve market access for foreign capital. For example, the government could allow private medical facilities to apply to be part of the country's medical insurance system, offer financial support to private institutions that are providing unique or high-value services, and grant tax holidays to foreign companies for the first few years of their operations.

The government should be applauded for its efforts to increase foreign investment in the healthcare sector. And it could add to its laudatory move by appointing a thoughtful ombudsman with extensive experience in the regulatory vagaries of healthcare regulations in each city.

The author Dwight W. Clark is CEO and medical director of US-Sino HeartCare.