Deal focus: GA targets mass-market healthcare

The members of China’s middle classes are aging no more slowly than their richer countrymen, but most healthcare investors have set their sights on the premium end of the market. General Atlantic (GA) is bucking this trend, however, by investing $150 million into Hong Kong Asia Medical Holdings, a privately-owned cardiology hospital operator that caters to the needs of the ordinary people.

“The group at the top end of the society has its top-end needs, while the mid-market has its own needs, which are the focus for Hong Kong Asia Medical,” says Lefei Sun, a principal and head of China healthcare at General Atlantic. “A lot of patients still think the company’s hospitals are public ones because they have a down-to-earth vibe as well as a good reputation.”

Founded in 1999, Asia Medical has heart hospitals Wuhan and Urumqi and co-manages a further four heart centers. It also opened a co-managed heart center in Hong Kong and completed an acquisition of a similar business in Japan this year. A second hospital in Wuhan, Wuhan Asia General Hospital, will commence operations in November 2018.

Both the Wuhan and Urumqi hospitals can be used by patients who pay through China’s national health insurance system, which was rolled out to all urban residents from 2010. This is unusual. Few private hospitals in China can accept payment for their services from the system, and this has been one important factor in limiting the sector’s growth in recent years. Sun believes it gives the group “a major edge” and helps it to cover a broad range of patients, including those from the middle classes and below. 

China’s healthcare services sector is expected to be worth RMB16 trillion ($2.3 billion) by 2030 – up from RMB8 trillion in 2017 – and the government has rolled out policies with a view to attracting more private operators and reducing its own financial burden. Private hospitals have already surpassed the public hospital network by number of facilities, but they still account for only around 13% of the total visits by patients, according to the country’s National Health Commission.

While difficulties such as the health insurance issue and recruiting high-quality doctors in a market where they are in short supply restrain the development of the private sector, the holdup is unlikely to be permanent. This is because the need is so great. As the population ages, the number of patients suffering from chronic conditions such as heart disease and diabetes is rising. More than three million people die prematurely each year due to chronic non-communicable diseases in China.

Sun expects the likes of Asia Medical to benefit from these trends in the long run. Several PE investors have made hospital investments as part of consolidation plays, and General Atlantic is no exception. Sun notes that the GP is ready and willing to assist Asia Medical on M&A as the company looks to build out its network.
 

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• Topics
• Greater China
• Healthcare
• Expansion
• China
• General Atlantic
• Growth capital