Trends in Integrated Elderly Care and Medical Services in China Exploring

Trends in integrated elderly care and medical services in China Exploring "the last mile" of healthy aging Private elderly care sector is taking shape yet requiring a focus on the 2 deﬁciency of medical elements Institutional elderly care products are dominated by real estate 2 Home and community elderly care services are reliant on homemaking 3 helpers

Integrating medical and elderly care services is one priority in China's 6 elderly care industry

Imperative integration of medical and elderly care services 6

Difficulties in integrating medical and elderly care services 7 Policy support for integrating medical and elderly care services 9 Integrated medical and elderly care services drive changes in China's 12 elderly care business formats

Institutions providing integrated medical and elderly care services focus on 12 cross-industry entry and cooperation

Resources integration and services capability upgrading are key to home 13 and community based care services for the elderly

Public-private partnership underpins the development of integrated 14 medical and elderly care services Medical and elderly care services integration drives the 15 development of ecosystem supporting industries

Foreign practices on integrated medical and elderly care 18 All-inclusive community care for the elderly in the U.S. 18 Japan's three-tier system of integrated medical and elderly 19 care services

Implications for market players in the context of integrating medical 21 and elderly care services

Focus on policy changes and reap benefits from policies 21

Elderly care service providers should define market positioning and 21 design products based on national conditions

Service side should focus on tapping and matching demands 22 The combination of multi-sited practices of professional healthcare workers 22 with elderly care is worth exploring

Tier two level hospitals can actively transform into a medical and health 23 care organizations

Capture market opportunities using digital technologies 24 Integrate supply chains to build an ecosystem 24

Acknowledgements 26

Deloitte China LSHC team 27 Trends in integrated elderly care and medical services in China | Introduction

Introduction

China's population is aging more Though a growing number of The ultimate goal of the integration rapidly. In 2017, the number of people new organizations and home and of elderly care and medical services aged over 60 in China reached 188 community elderly care products is to deal with "the last mile" problem million, and it is expected to exceed are springing up in the market, most of the elderly care services. Actively 350 million by 2030, according to the of them have an issue of lacking the solve the existing shortcomings of the Population Division of the United medical elements while which are elderly care model, so that the health Nations. China aging population as significant for seniors suffering from needs of the elderly not only rely on a percentage grows much faster chronic diseases, disabilities and the hospital, but also strive to be able than the world's average. Moreover, semi disabilities. Since 2013, the State to enjoy quality medical services in inﬂuenced by the one-child policy Council and various departments nursing homes and even at home. effective from the 1980s, most aging have released several documents people are facing the family structure and guiding principles to develop Currently, Chinese integrated medical of "four seniors, one young couple and integrated elderly care and medical and elderly care sector is still in its one child". With increasing dependency services. In a report delivered at the early stage and transitioning from top- ratio, traditional family-supported 19 th CPC National Congress in 2017, it level design to model exploration. In a elderly care can no longer satisfy their was mentioned a section on carrying global context, Japan and the United needs. As a result, the government out the Healthy China 2030 initiative States went through a few decades has proposed the plan of developing that, "As we respond proactively to of development before they became the elderly care industry since the 11th population aging, we will adopt policies leaders in the integrated elderly care Five-Year Plan period and introduced a and foster a social environment in and medical services market. To series of policies to encourage private which senior citizens are respected, facilitate the future development of capital to engage in during 12th Five- cared for, and live happily in their integrated elderly care and medical Year Plan period. As estimated by the later years. We will provide integrated services, China can refer to or draw White Paper on China's Elderly Care elderly care and medical services, on foreign models which are more Industry Development released by and accelerate the development of sophisticated and market tested, Chinese Academy of Social Sciences old-age programs and industries." and integrate with Chinese cultural in 2016, China's elderly care industry The integration of medical service traditions and actual needs to develop will reach RMB13 trillion by 2030. The and elderly care service is a clear the integrated services and improve huge market potential is attracting development priority for the elderly the system. more market players from various care sector in China. sectors including real estate, insurance, pharmacy and elderly care service.

Yvonne Wu Zheng Qun Leader Leader Deloitte China Life Sciences and Deloitte China Healthcare Sector Healthcare Industry Tel:＋86 10 8520 7161 Tel: ＋86 21 6141 1570 E-mail: [email protected] E-mail: [email protected]

Trends in integrated elderly care and medical services in China | Private elderly care sector is taking shape yet requiring a focus on the deficiency of medical elements

Private elderly care sector is taking shape yet requiring a focus on the deficiency of medical elements

With almost a decade of development, There are three main charging models in the outer suburbs. Another kind of China private elderly care sector's applied by non-sales institutions for products involve lands exclusive for business model is now beginning the elderly. The most popular "rental & elderly care and tourism, which can to take shape to be home-based, deposit" model involves paying certain only be sold for the using right rather community-dependent and institution- deposits when residing in the institution than property right. Moreover, the supported. Institutional elderly care and paying rentals by month with "joint property rights" sales model has developed well in both speed deposits returned upon the expiration. starts to emerge that houses are and scale and has attracted market This model is used by most institutions jointly owned by institutions and house players from various sectors. While now, but the huge amount of deposits owners. Gonghe Senior Living launched home and community elderly care grow becomes a growing concern for in December 2017 is the first pilot slowly due to difficulties in profitability regulators who may impose limitations program of the old-age service facility and market penetration. Though the on the amount of such deposits. The with joint property rights. The program industry model has taken shape, a second model is "membership card & defines the model of 50-year property common issue has arisen – the lack management fee" that is increasingly rights allocated by companies and of the medical elements to these applied by several high-end institutions consumers at the ratio of 5 percent services – which makes meeting the for the elderly. Customers buy and 95 percent. A certain percentage daily needs of partly incapacitated and membership cards to secure the right of property rights held by institutions incapacitated older people a challenge. to live in, of which membership cards can reduce senior citizens' purchasing can be redefined as financial products costs and help maintain institution' Institutional elderly care products that can be traded in the market. The attribution of elderly care services are dominated by real estate third "insurance bundled" model used for a long term. However, it remains Currently, China's institutional elderly by insurance companies involves clients to be seen whether such programs care market players mainly include purchasing certain amounts of old-age can be widely promoted as they are real estate developers, insurers and insurance and be returned benefits per much dependent on government professional elderly care services month to cover the expenses for living endorsement. providers. Extensive development in the senior care institutions. experience and abundant capital ﬂows Besides, some institutional elderly care enable real estate developers and Sales type elderly-care institution's products involve "rented and sold" insurers to lead the market. The profit sales approach is primarily determined model, i.e. programs include dwelling models of mainstream institutional by land attribution. Programs involving houses as well as elderly apartments. elderly care programs fall into three general property rights or commercial Houses are sold for capital recovery categories: "non-sales", "sales" and land property rights are directly sold and provide support for the hold type "rent along with sales". for property rights. Due to difficulties properties while elderly apartments are in obtaining lands and higher prices, embedded in ordinary communities for these programs are usually located leasing.

2 Trends in integrated elderly care and medical services in China | Private elderly care sector is taking shape yet requiring a focus on the deficiency of medical elements

Table 1: Charge models of commercial institutions for the aged

Strategy Charge model Feature Case Non-sales Deposit + rental • Most common model SHOUKAI Cuncao Xuezhiyuan • Regulators start to restrict high deposits Membership card + • Membership card model is applied in many Cherish-Yearn management fee high-end products • Membership cards are defined as financial products to be traded Bundled with insurance • Return the dwelling rights to users as long-term Taikang Community pension insurance benefits Sales Property rights sales • High costs for lands Greentown Wuzhenyayuan • Mostly located in distant suburbs or commercial properties Using rights sales • Land properties are mostly separated for sales Vanke Dignified Life • It is unable to obtain property rights which is inconsistent with Chinese consumption views Joint property rights • Realize low sales prices as governments Beijing Gongheyuan sales permanently reserve certain property rights • Highly dependent on government endorsement Rent + Sales Property rights sales + • Drain funds from property rights selling and Vanke Xingfuhui rental then gain sustainable profits from management fees and rents of rented properties

Source: Deloitte Research

The majority of existing institutional Home and community elderly care service providers to operate home elderly care products focus much care services are reliant on elderly care service stations and take more on the property of real estate homemaking helpers charge of management and operation and consumers mostly look for the Enormous demands on home elderly after establishment to offer home investment value on property rights, care deriving from family structure elderly care services for senior citizens memberships and insurances rather and Chinese traditional views make it within the community. B2C business than elderly care services. Therefore, an important focus in the long-term refers to serving senior citizens directly this kind of products tend to consider development of the elderly care paid by individuals or commercial elderly care services as a selling industry. Also in China, home elderly insurances. point instead of the core value. Many care and community elderly care are products cannot maintain the quality of closely connected. At present, home At present, most home and community elderly care services. Medical services and community elderly care service elderly care services providers capture and standards of cares cannot meet providers in China are primarily the market shares and expand their the living needs of the disabled and small and medium-sized enterprises, presence through B2B model. Once semi disabled elderly. Moreover, the including 2mao.com and E-Care Home, covering certain communities, they medical services for lively seniors are with B2B and B2C as their business start to develop B2C businesses within mainly dependent on surrounding models. Payers of B2B model are the region to seek for new customers hospitals, which is apparently primarily governments who fund to or provide added values apart from inconvenient to some degree. entrust or subsidize professional elderly government purchased services for

3 Trends in integrated elderly care and medical services in China | Private elderly care sector is taking shape yet requiring a focus on the deficiency of medical elements

seniors already served. Over the next elderly care services includes daily care, three to five years, payers for home entrusted care, mental consolation and community elderly care services and cultural services that are not much are expected to still be governments. different from homemaking services B2C business will remain in the stage which can be provided by traditional of exploring and demand mining with a homemaking helpers. As a result, such relatively low share. Therefore, market service providers are less recognized players should focus on fostering by individual payers. Many traditional individuals' habits for paying. Chinese families, even with the disabled and semi-disabled elderly, still choose Despite huge market potential, home to employ housekeepers through elderly care services are facing the traditional channels to take care of issue of being excessively "homemaking seniors instead of elderly care service based". Currently home and community institutions.

Figure 1: Business models of home and community elderly care service providers

Provide elderly care services Government procurement procured by governments for seniors at communities B2B

Provide lands to build Expand business elderly care service sites at presence communities

Provide additional elderly care services for seniors at communities covered

Service Periodical By types of seniors Active, semi disable, and disable (dementia) elderly B2C model payment (by By types of Live-in and non-live-in caregivers month/day) caregivers Fee-for-service Bath assistance, diagnosis and treatment, cleaning and cooking, etc.

Source: Deloitte Research

4 5 Trends in integrated elderly care and medical services in China | Integrating medical and elderly care services is one priority in China's elderly care industry

Integrating medical and elderly care services is one priority in China's elderly care industry

Imperative integration of medical China National Working Commission Figure 2: Prediction on China's and elderly care services on Ageing (CNWCA) estimates that elderly population structure in Integration of elderly care and by 2020 China will have more than 2020 medical services refers to the organic 42 million disabled seniors and over combination of medical and elderly 29 million aged over 80, together care resources that draw together accounting for 30 percent of the total daily care and rehabilitation. As shown aging population. How to ensure the by the present state of China's elderly aged living with dignity by improving the care industry outlined above, one medical service capabilities is the next common issue facing by both real priority of China's elderly care industry. estate based institutional elderly care Accordingly, integrating medical and and homemaking based home and elderly care services will be a top community elderly care services is of priority in the industry for some times lacking quality medical services. Though ahead whilst providing opportunities some elderly care products and for market players to stand out in the services are designed for the disabled market. According to National Health and semi disabled elderly, they are Commission, as of July 2017, there were not able to meet the needs of large 5,814 institutions providing integrated Empty nesters 49% amounts of Chinese seniors without elderly care and medical services in self-care ability in terms of number and China, accounting for only about 4% Disabled elderly 17% of the total number of elderly care quality. Additionally, many elderly care Venerable age elderly 12% institutions adopt model of separating institutions. The insufficient number medical facilities from elderly care of institutions providing integrated Others 22% services, which means that they have elderly care and medical services Source: CNWCA, Deloitte Research medical facilities but with a certain means there is ample space for market distance from houses for the aged. development. As the majority of the elderly suffer from symptoms requiring repeated treatments such as chronic diseases, it is extremely inconvenient for them to go back and forth to elderly care institutions and medical institutions.

6 Trends in integrated elderly care and medical services in China | Integrating medical and elderly care services is one priority in China's elderly care industry

Diﬃculties in integrating medical Poor medical insurance coverage Besides, it is out of balance in China's and elderly care services is another important reason. In elderly care personnel, especially The slow development of integrated addition to some elderly care service with talent shortage in caregivers and medical and elderly care services is a institutions in cooperation with and nursing staff. As shown in the 2017 result of multiple factors. are close to public hospitals, it is hard Report on Training of Elderly Care for the majority of applications for Service Staff in China released by Firstly, it is about multiple regulators. medical supporting facilities owned by China Philanthropy Research Institute Medical service and elderly care elderly care service institutions to be of Beijing Normal University, there industries are relatively separated and included in the medical insurance. The are less than 500,000 service staff in follow two different sets of regulatory application for inclusion in the medical various elderly care service facilities systems. Competent authorities on insurance should meet the hardware and organizations, and less than traditional elderly care institutions are standards of medical infrastructures 20,000 personnel with qualification civil affairs departments while those equipped with a certain ratio of certificates of old-age care. 14 million on medical institutions are health medical staff which cannot be met by caregivers are required as calculated and family planning departments of many elderly care service institutions. by one professional caregiver for three all levels. The entry and regulation on Meanwhile, China's medical insurance disabled seniors. Such a huge talent integrated medical and elderly care fund spending grows at high speed and gap gives rise to the situation that service institutions are under the faster than revenue growth. Combined frontline caregivers have varying levels charge of these two departments. with a plunging proportion of labor of skills. Many caregivers are at older Besides, matters involving expense population, the stress on medical age on average and poor educated reimbursement is under the charge of insurance fund is expected to continue without systematic medical service human resources and social security to increase. It is unlikely that integrated training. Moreover, the demand on departments. Market players face many medical and elderly care services will general practitioners to promote the difficulties in integrating medical and benefit for all people through the full integrated medical and elderly care elderly care services due to multiple coverage of medical insurance alone. services is also huge. Imbalanced regulators. The overlapping functions It also requires to improve commercial education, limited career development of competent authorities and unclear insurances in terms of scale and and low incomes result in a substantial responsibilities lead to troubles for category to build a complete and gap in the number of general the practice of integrating medical and reliable elderly care payment system. practitioners in China. NHFPC data elderly care services. However, since indicate that only 6 percent of Chinese the end of 2017, the process of setting medical practitioners are general up medical institutions in pension practitioners, well below the average institutions has been simplified to a of western countries, placing barriers certain extent. It is believed that in the to develop the integrated medical and future, the efficiency of regulation in elderly care in China to some extent. this field will continue to improve.

7 Trends in integrated elderly care and medical services in China | Integrating medical and elderly care services is one priority in China's elderly care industry

Figure 3: General practitioners as a percentage of total practitioners

50% 47% 45% 42% 40% 29% 30%

20% 12% 10% 6%

0% Canada Australia Germany U.K. U.S. China

Source: OECD, NHFPC, Deloitte Research

Finally, it is not easy to make profits put various market players off this from integrated medical and elderly market, especially of private capitals, care services, as it is essentially to invest much time and capital. public welfare implemented by the Therefore, the profit model of government with narrow margins. integrated medical and elderly care Existing commercial elderly care services still needs to be explored. products are less profitable in services and most earnings derive from real Given all that, integrating medical estate financial products primarily and elderly care services cannot be targeting at few high net worth achieved overnight but requires joint individuals other than ordinary seniors. efforts in terms of regulation on entry, Despite a promising future on the talent development, funding support demand side, difficulties in managing and business model innovation to and operating medical institutions seek the most suitable direction for along with poor profitability integrated medical and elderly care services in China.

Figure 4: Difficulties in integrating medical and elderly care services in China

Mutiple regulators

Medical Talent insurance Difficulties imbalance coverage

Operation with narrow margins

Source: Deloitte Research 8 Trends in integrated elderly care and medical services in China | Integrating medical and elderly care services is one priority in China's elderly care industry

Policy support for integrating medical and elderly care services In order to better expand the integrated medical and elderly care services, various departments have introduced a range of polices to offer support since the concept of integrated medical and elderly care services officially proposed in the Opinions on Accelerating the Development of Elderly Care Service Industry published by the State Council in 2013.

Table 2: Summary of integrated medical and elderly care services related policies

Time Department Document Content Sept. State Council Opinions on Accelerating the Promote the development of integrated medical and 2013 Development of Elderly Care elderly care services and explore new cooperation models Service Industry between medical institutions and elderly care service organizations Sept. State Council Opinions on Promoting the Strengthen the cooperation between medical institutions and 2013 Development of Health Service elderly care service organizations Industry Sept. National Development Circular on Accelerating the Accelerate the building of integrated medical and elderly care 2014 and Reform Construction of Projects Relating services facility projects Commission (NDRC) to Healthcare and Elderly Care Services Feb. Ministry of Civil Affairs Implementing Opinions on Support elderly care institutions with mature conditions to set 2015 (MCA) Encouraging the Participation of up internal medical institutions or enter into agreements with Private Capital in the Development medical institutions and be included in the medical insurance of the Elderly Care Service Industry Mar. State Council Planning Outlines for National Support medical institutions with mature conditions to set 2015 Healthcare Services System (2015- up beds for the aged; support elderly care institutions with 2020) mature conditions to set up internal medical institutions May State Council Development Plan for Traditional Promote the integration of traditional Chinese medicine with 2015 Chinese Medicine-Related Health elderly care services and support elderly care institutions to Services (2015-2020) develop health management services featured with traditional Chinese medicine Nov. NHFPC Guiding Opinions Promoting the Support elderly care institutions to develop medical services; 2015 Integration of Healthcare and encourage private capitals to build integrated medical and Elderly Care Services elderly care service institutions; encourage healthcare organizations to integrate with elderly care services Apr. NHFPC, MCA Circular on Licensing Work for Civil affairs department and health and family planning 2016 Integrated Medical and Elderly Care departments shall put a high premium on licensing for Service Institutions integrated medical and elderly care services institutions and strengthening communication and cooperation Jun. MCA, NHFPC Circular on Determining the First Designate 50 cities (districts) including Dongcheng District, 2016 Batch of National Pilot Units for Beijing to be the first batch of national pilot units for integrated Integrated Medical and Elderly Care medical and elderly care services; at least one provincial pilot Services per province shall be launched by the end of 2016 Jul. Ministry of Human Guiding Opinions on Developing Actively encourage and support the building of long-term 2016 Resources and Social Pilot Programs for Long-term Care care services organizations and platforms and advance the Security (MOHRSS) Insurance System development of the long-term care services industry

9 Trends in integrated elderly care and medical services in China | Integrating medical and elderly care services is one priority in China's elderly care industry

Time Department Document Content Jul. MCA 13 th Five-Year Plan for Civil Affairs Highlight the integration of medical and elderly care 2016 Development services as the priority during the 13th Five-Year Plan period Sept. NHFPC Circular on Determining the Second Batch Designate 40 cities (districts) including Chaoyang District, 2016 of National Pilot Units for Integrated Medical Beijing to be the second batch of national pilot units for and Elderly Care Services integrated medical and elderly care services Oct. State Council Outline of the Healthy China 2030 Plan Reiterate the strategic importance of integrated medical and 2016 elderly care services

Dec. State Council Opinions on Fully Liberalizing the Elderly Establish green channels for approving elderly care service 2016 Care Services Market and Improving the institutions to establish elderly hospitals, rehabilitation Quality of Elderly Care Services homes, clinics and other medical and health institutions Oct. NHFPC Basic Standards for Medical Rehabilitation Encourage private capitals to set up medical rehabilitation 2017 Centers, Basic Standards for Nursing Centers centers and nursing centers. "Connect the last mile for professional medical rehabilitation services, clinical nursing services extended to community and home based rehabilitation and nursing" Nov. NHFPC Circular on Division of Priorities of Healthy Determine the integrated medical and elderly care services 2017 Ageing Plan during the 13th Five-Year Plan pilot projects to be led by the NHFPC with the cooperation of Period the MCA and NDRC Nov. NHFPC Circular on Cancelling the Administrative Cancel administrative approval and implement record-filing 2017 Approval and Implementing Record-filing management for elderly care service institutions to establish Management for Elderly Care Service clinics, health centers (rooms), infirmaries, nursing stations Institutions to Establish Internal Medical Institutions Nov. State Council Report presented to the 19th National Reiterate the integration of the medical and elderly care 2017 Congress of the Communist Party of China services is an integral part of the Healthy China Strategy

Source: Deloitte Research

The policy tide on integrated medical Policies and regulatory responsibilities on health check healthcare and elderly care services falls into three as well as responsibilities of infrastructure. phases. Firstly, the top-level design departments for integrating medical • In terms of talent shortage in led by the State Council from 2013 to and elderly care services will be further integrating medical and elderly 2015 mainly defines the importance refined and determined in the future. care services, professionals such and general policies on integrating Policies are expected to focus on the as doctors and nurses will be medical and elderly care services. following aspects: encouraged to practice at multiple Secondly, the task planning led by the sites. Qualification assessment and MCA and NHFPC from 2015 to 2016 • Further ease and simplify the registration management on doctors identifies regulatory responsibilities approval process for institutions for and nurses of institutions for the aged and specific directions. Thirdly, the the aged to establish internal medical will be optimized to provide more rule implementation led by the NHFPC infrastructure and offer convenience talents that are qualified. since 2017 proposes clear missions for existing institutions for the aged for implementation and pilot work to establish healthcare infrastructure • Follow up on the outcomes and on integrating medical and elderly including geriatric hospitals, progress of existing pilot programs care services. Additionally, in order to rehabilitation hospitals, caregivers, of integrated medical and elderly relieve the pressure of social security traditional Chinese medicine hospitals care services and expand the pilot fund, China Insurance Regulatory and hospices. scope. Build demonstration bases Commission (CIRC) also introduces a for integrated medical and elderly • In addition to management standards series of documents as efforts into the care services and set up assessment and requirements on above growth of commercial health and old- mechanisms. healthcare infrastructure, it is likely to age insurance. impose standards and requirements

10 11 Trends in integrated elderly care and medical services in China | Integrated medical and elderly care services drive changes in China's elderly care business formats

Integrated medical and elderly care services drive changes in China's elderly care business formats

Currently, China is still seeking for the Cuncaochunhui Home for the Aged, senior care institutions are responsible business model of integrated medical Chaoyang District, Beijing, set up one for nursing services during the and elderly care services, and different medical room with full-time licensed rehabilitation and recovery process types of market players have stepped in doctors and registered nurses as after treatment. Since 2015, the intending to actively explore the model well as multi-sited practicing doctors. Second Hospital of Beijing has sent that can be tailored to Chinese market. Medical institutions established in the doctors every week to Beijing Golden senior care institutions ensure seniors Tide Homes for Elderly, Bejing's Institutions providing integrated to gain immediate medical diagnosis largest chain pension institution, medical and elderly care services and treatment with qualified services to practice at multiple sites. In this focus on cross-industry entry and when needed. NHFPC releases the model, senior care institutions can cooperation circular on cancelling administrative leverage existing resources to serve In terms of institutional elderly care, approval and implementing record- the elderly. However, in the context of varying operating entities are seeking filing management for senior care unmature telemedicine technologies for the models of integrated medical institutions to establish internal and applications, these institutions still and elderly care services through cross- medical institutions in November 2017, have to send seniors in need of deep industry entry and cooperation. lowering policy barriers and providing treatment and nursing to hospitals, convenience. But establishing medical which causing problems of untimely The most popular model of integrated institutions requires more time, services and limited service categories. medical and elderly care services manpower and capital costs for senior in China is establishing medical care institutions and not all of such institutions such as geriatric hospitals, medical institutions can be included rehabilitation hospitals, medical rooms as medical insurance designated and nursing homes in the institutions institutions. Therefore, there are still for the aged with professional certain obstacles when it comes to medical teams deployed to operate. practice. The demand of institutions for the aged on in-house medical services Besides, the traditional cooperation has gone beyond the demand on by signing contract is another popular improving the quality of traditional model starting early in the market, elderly care services. Below are i.e. senior care institutions and some examples. Beijing No.1 Social medical institutions sign cooperation Welfare House, founded by Beijing agreements under which medical Municipal Government, established institutions regularly send medical one A second-tier geriatric hospital staff to visit senior care institutions approved by health departments. and provide medical services while

12 Trends in integrated elderly care and medical services in China | Integrated medical and elderly care services drive changes in China's elderly care business formats

Newly built elderly care and medical Resources integration and services case-specific requirements. While the service integrated institution is one capability upgrading are key to professional is performing his/her job, emerging model, such as INTECH home and community based care the platform monitors the quality of Rehabilitation Complex in Balizhuang, services for the elderly the services. Youhuwanjia, for instance, Beijing, and Shuangjing Gongheyuan. Elevating the capabilities of health is a company that offers multifaceted Planning, building and operation of services by integrating medical training in medical services and elderly senior care institutions and medical resources is key to integrate home and care, operates geriatric care centers institutions at the same time can community elderly care. To date, three and provides in-home services. 80 deliver various kinds of comprehensive models have emerged. percent of Youhuwanjia's medical care services for the elderly, however, resources come from grade-A tertiary problems of high costs and risks and The first model incorporates elderly hospitals in Beijing. Other companies difficulties in multiple regulations care into community services. Similar that provide integrated medical and should not be overlooked. to institutional elderly care, it combines elderly care services include Baihuiji the functions performed by community and Ci'aijia, who offer home and Moreover, a few hospitals set up beds care center and health service community based integrated medical for the aged. A typical case is the center and makes full advantage of and elderly services as well as training. Qinggang model in Chongqing. The senior daycare beds by coordinating Zhenxiang Nursing Home in Qinggang operational management. The second County opened at the end of 2014. It is paradigm is on-demand homecare. the first experimental unit of combining Some senior care institutions are medical care with senior care in collaborating with nearby medical Qinggang. The predecessor of the institutions to acquire professionals nursing home was Zhenxiang Branch of that can administer medication, Qinggang County Hospital of Traditional provide rehabilitation training guidance Chinese Medicine, which was later and perform medical examinations transformed into a nursing home for for seniors. In addition, some other the aged with emphasis on medical institutions are dedicated to training attributes. However, in general, the personnel who provide both caregiving number of such products is relatively and medical services. Some commercial small. The main reason is medical homecare providers combine these institutions have no impetus to provide three models and utilize internet elderly care services, together with and telemedicine technologies to potential risks resulted from undefined enhance the quality and capability natures of these beds. Therefore, some of medical services, deliver efficiency medical institutions, especially private and convenience, turning specialized providers, have stayed on the sidelines. homecare into reality. One example is the virtual nursing home, a local elderly care cloud platform powered by information and telemedicine technologies. Elderly people can contact the cloud platform via telephone or internet, and the platform will assign a caregiver that meets

13 Trends in integrated elderly care and medical services in China | Integrated medical and elderly care services drive changes in China's elderly care business formats

Public-private partnership PPP projects have begun to emerge in underpins the development of large numbers since 2015. Statistics integrated medical and elderly published on Project Database of the care services National PPP Integrated Information Another paradigm of integrated Platform as of August 2017 suggests medical and elderly care services 307 senior care PPP projects were is based on PPP (Public-Private made public. The proportion of Partnership) and operated through projects that integrate medical and BOO (Build-Own-Operate) and BOT elderly care has risen year-on-year, (Build-Operate-Transfer). In a BOT reaching 42.1 percent in 2017. This model, the government provides the upward trend speaks volumes of the land and the private organization acts government's agenda to buttress as the developer and operator until integrated medical and elderly care it returns the land to the government services. upon expiration of the contract. A contract of this kind generally expires The implementation of the PPP in thirty years. BOO is also known projects nevertheless faces some as the "government subsidized, challenges, the first of which is privately run" model, which means a geographical disparity. The daunting nursing home is funded, established land costs in tier-1 and tier-2 cities and owned by private investors. have caused PPP projects to be The government provides the land largely concentrated in tier-3 and and grants favorable policies to the tier-4 cities. Moreover, private investor. BOO originated from BOT investors may find themselves having but differs from the latter in that weak bargaining power against the the private investor and the project government, who initiates over 90 company are owners of the BOO percent of the projects. project.

14 Trends in integrated elderly care and medical services in China | Integrated medical and elderly care services drive changes in China's elderly care business formats

Medical and elderly care The second league of companies, services integration drives the such as Legrand, Ankangtong and development of ecosystem e-ling, capitalize on intelligent supporting industries technologies. They can install Apart from upgrading service offering, intelligent monitoring systems in the integration of medical and the home or neighborhood of the elderly care services have spawned customer, provide GPS elderly investment opportunities in other trackers and emergency alarm industries within the ecosystem, systems that are synced with mobile attracting an increasing number devices to deliver family members of enterprises and investors to tap and caregivers the real-time into the markets of senior friendly information. renovation and rehabilitation equipment. Generally, the market of senior friendly renovation is similar to that To better cater to the needs of the of home and community based elders with mobility issues, especially senior care services in the sense those suffering from disability and that the government pays for home semi-disability, community care and community renovations and, in centers and families have stepped some cases, senior care institutions up with efforts to make the physical would purchase services in a whole environment more friendly for the batch. Activities on the "To C" end are elderly. The market potential is rare and diffuse as many customers remarkable considering that quality prefer to hire small 'construction amenities for the elders are lacking team' or even do the renovation in most communities and homes. by themselves. As a result, market Currently there are two types of penetration can be challenging for market participants in China. The businesses. first league consists of services providers that specialize in senior friendly renovations as well as the conventional remodeling contractors. Companies in this category include eoefe and Shunxinjia, whose services mainly include installation of hand railings, non-slip and shock absorption solutions and accessible bathroom facilities to help the elders navigate their surroundings more safely and conveniently.

15 Trends in integrated elderly care and medical services in China | Integrated medical and elderly care services drive changes in China's elderly care business formats

Another area of opportunities chair, electronic muscle stimulator, chain, is mainly engaged in selling is the market of therapy and multifunctional parallel bars, electric rehabilitation equipment and senior rehabilitation equipment as senior adjustable traction bed, multi- friendly products to elderly care care institutions are setting up parameter vital signals monitor institutions, communities and homes. hospitals and rehabilitation centers equipment and orthopedic shockwave Apart from a supplier for Poly Group's to extend their services. According therapy machine, etc. Market elderly care projects, Baolihepin to a list of integrated medical and participants in this area include is also a partner of multiple other elderly services projects that call for specialized rehabilitation equipment property enterprises, senior care biding, issued by the government, providers and emerging cross- services providers, publicly funded products in demand include nursing border investors such as Baolihepin. sanatoriums and welfare centers. beds, comprehensive experience Established in 2015 as an affiliate of This is a sign that pioneers in the machine, training stairs for walking Poly Group, Baolihepin, as a link on industry are increasing margins by rehabilitation, cervical traction Polygroup's entire senior care value compressing the value chain.

Figure 5: Numbers and proportions of elderly care PPP projects and PPP projects for integrated elderly care and medical services

80 45.0% No. of PPP projects with integrated elderly care and 60 154 40.0% medical services 42.1% 40 32.7% 35.0% No. of Elderly care PPP projects 20 30.0% 25.0% 25.3% 104 00 25.0%

80 20.0% Proportions of integrated projects 60 15.0% 39 34 40 28 10.0% 19 20 7 8 5.0% 0 0.0% 2014 2015 2016 Jan.-Aug. 2017

Source: Project Database of the National PPP Integrated Information Platform, Deloitte Research

16 15 Trends in integrated elderly care and medical services in China | Foreign practices on integrated medical and elderly care

Foreign practices on integrated medical and elderly care

Integrating medical and elderly care According to the statistics of U.S. individual or commercial insurance services cannot happen overnight. National PACE Association, as of payments given their purchasing Countries that have more mature February 2018, there were 250 PACE power. Therefore, under China's integrated medical and elderly care Centers in the U.S. sponsored by 123 current environment, market players systems have gone through years or organizations, providing comprehensive seeking to explore PACE model should even decades of exploration. Their care services for over 45,000 elderly focus on reducing costs methods such development models and proven people. These people, with an average as via outsourcing, resource sharing, practices are good references and age of 76, all need home nursing-level etc. and develop midrange products guidance for China to develop its own care, and 46 percent of them are affordable to most disabled elders integrated medical and elderly care diagnosed with dementia. Though to gain a better position to serve system in the future. most elderly people PACE serves are market needs. In addition, PACE has frail and incapacitated, 95 percent of high requirements for basic facilities All-inclusive community care for them are still able to live safely in the in community, which are yet to be the elderly in the U.S. community, and only 5 percent need available in most communities in China. The Program of All-inclusive Care for to reside in a nursing home. Therefore, Lastly, PACE also has specific criteria to the Elderly (“PACE”) in the U.S. is a the PACE model is a good integrated select qualified elders for its programs, good example of integrated medical health and care approach that enables aiming at older people who highly need and elderly care model. PACE was older people with disabilities to live with nursing home-level care but are also introduced in 1971. After about dignity. able to live safely in the community. 20 years of improvements, it was However, China has not yet developed finalized in the 1990s and became However, many issues remain for sound criteria to define levels of an extensively recognized exemplary China to explore its own model similar disabilities for elders. It would place model for comprehensive care. PACE is to PACE. First of all is the payment both program operators and payers at designed for aged individuals who need problem. In the U.S., funding for PACE risk if older people qualified for PACE home-level nursing care and are able to programs mainly come from Medicare could not be properly selected. live safely in the community. The core and Medicaid, the top two U.S. public of the model is to provide packaged health insurance programs. However, health management, medical care and in China, due to its growing population social services combining short-term of disabled elderlies and increasing medical treatment and long-term care, pressures of medical insurance deficit, with day care centers as the main it is hardly possible for China to achieve service carriers. PACE communities a full coverage of medical insurance. usually employ a comprehensive range Moreover, as a comprehensive of health care professionals, including premium integrated health and elderly physicians, pharmacists, physical care model, PACE is hardly affordable therapists, dieticians, nurses, etc. by most elders in China through

18 Trends in integrated elderly care and medical services in China | Foreign practices on integrated medical and elderly care

Japan's three-tier system of In addition to service models, to solve integrated medical and elderly care the urgent old-age healthcare problems, services Japan has implemented a national long- As one of countries with the largest aging term care insurance act since 2000 to population, Japan has similar cultural raise funds from the group aged over 40 traditions with China, therefore Japan's and make clearly specified regulations integrated medical and elderly care on the elderly who can enjoy nursing service model, formed by three tiers of services: people aged over 65, people organizations, is particularly instructive who require care such as for bathing, for China. bodily waste elimination, meals, etc., and require the functional training, nursing, Elderly health and welfare centers management of medical treatment, at community as the first tier mainly and other medical care to maintain provide services such as health check, dignity and an independent daily life healthcare and health management routine according to each person's own for those seniors living independently level of abilities. For groups requiring within communities, aiming at health nursing services, the government has management and disease prevention. departments and doctors in place to Day care centers as the second tier assess and rate them. 90 percent of target on seniors living independently expenses are covered by the long- yet in need of nursing services including term care insurance and the rest by some semi disabled elderly and those in individuals, and also the excess part are need of rehabilitation training. Day care entirely borne by individuals. The long- centers are responsible for transporting term care insurance has partly driven the elderly in the morning and afternoon the development of quality community and deploy professionals for caregiving integration of medical and elderly and rehabilitation training. Special care services and partially overcome nursing homes as the third tier are the difficulty in the growth due to low equipped with professionals including purchasing power of the elderly. nurses and caregivers to take care of the disabled elderly, the handicapped and the elderly with dementia.

Figure 6: Integrated medical and elderly care structure in Japan

Special nursing home

Day care center For the elderly with disability, handicap or Elderly health and dementia welfare center For semi disabled elderly and seniors with chronic diseases and in need of rehabilitation For healthy elderly services

Source: Deloitte Research

19 18 Trends in integrated elderly care and medical services in China | Implications for market players in the context of integrating medical and elderly care services

Implications for market players in the context of integrating medical and elderly care services

Focus on policy changes and reap Elderly care service providers Given all that, what China lacks most beneﬁts from policies should deﬁne market positioning are affordable middle-end senior The government will continue to and design products based on care institutions and nursing homes specify policies regarding integrated national conditions that can enable the elderly live with medical and elderly care which is Despite steadily high economic dignity so as to satisfy the increasingly an important part of the Outline of growth China has sustained, the large group of the middle class. As the the Healthy China 2030 Plan and overall purchasing power has been integrated medical and elderly care provide preferential policies in land, enhanced slowly. Especially the Chinese services expand, market players with tax and subsidy while simplifying entry old people have formed the habit the intention to build new institutions processes. Meanwhile, the elderly care of thrift for a long time, they have for integrated medical and elderly care service industry is highly policy driven not strong willingness to pay for the services or renovate existing facilities and the development, implementation high-end pension consumption which should take this chance to review their and benefit of many projects, both the total amount of the payment is market positioning, design optimal institutions for the aged and home difficult to predict. Therefore, it is not products and accurately capture and community care for the elderly, practicable to apply the model of high- market needs based on location are heavily dependent on government end maternal and child care service and the purchasing power of the endorsement and procurement. centers to the elderly care service surrounding groups. industry. Most of existing high-end Accordingly, existing market players and senior care institutions and houses for potential investors should actively focus the elderly with high occupancy are on policy changes and keep up-to-date mainly products with property rights on policy trends to reap the benefits sales based on real estate. Users pay from policies and improve profitability for these products primarily for the and market competitiveness while investment value of property rights offering quality products. Additionally, instead of the service value. As a result, researches on local policies are high-end senior care institutions that required for selecting regional markets are not for sales see a relatively low as detailed preferential and subsidy occupancy rate. Besides, despite low rules are often specified by local costs of many public institutions such governments. as homes for the elderly and nursing houses, they have so poor conditions that cannot satisfy the demands of living with dignity but only meet the basic living needs of the elderly.

21 Trends in integrated elderly care and medical services in China | Implications for market players in the context of integrating medical and elderly care services

Service side should focus on The combination of multi- tapping and matching demands sited practices of professional At present, home and community healthcare workers with elderly elderly care services in China remain care is worth of exploring less diversified. Data from the 2014 As mentioned above, a major obstacle Chinese Longitudinal Healthy Longevity for integrated medical and elderly Survey by Peking University show that care in China is the lack of specialized healthcare is in the highest demand talents, with shortage of professional within people who need home and elderly care workers as well as limited community elderly care, followed by resources of medical service personnel emotional support, and then daily care, available to nursing homes and home which is relatively low in demand for care service providers. It is hard to elderly care services. However, most of attract experienced physicians whether the providers of home and community through cooperation with hospitals elderly care services in China have from the surroundings or through self- failed to match such demands built hospitals. In addition, given the and focused on daily care instead, complexity of health conditions among with lacking of segmentation and elderly people, and the fact that nursing differentiation in healthcare services. homes or home care services are usually not supported by equipment as Thus, future participants in home and good as in hospitals and plus the higher community elderly care market should requirements for physicians, the elderly focus on tapping and matching specific care services and effects are hardly demands of the elderly group, and satisfied. offer different services and products based on the age, health condition and financial situation of elderly people. However, there are also risks for service providers and payers as China still lacks a relatively mature classification system in terms of elderly people's capacity status as well as policy and legal support in defining different types of elders. Therefore, it requires joint efforts from multiple parties to improve home and community elderly care services. 22 Trends in integrated elderly care and medical services in China | Implications for market players in the context of integrating medical and elderly care services

To address this issue, an approach Tier two level hospitals can Generally, the beds of tertiary hospitals worth exploring is to work with actively transform into a medical are tight, so the willingness of them organizations of physicians and nurses and health care organizations to add elderly services is not strong, to make nursing home or community At present, the China state is while the medical service capacity one of the sites for the multi-sited vigorously promoting the development of primary medical institutions is practices of medical and care workers, of hierarchical diagnosis and tier relatively inadequate. The tier two finally improving the quality of treatment as well as the construction level hospitals can make use of their integrated medical and elderly care of the "medical conjoined body". Under existing resources to transform into services through increased utilization this big framework, primary medical the old age rehabilitation orientation. of talents. Undeniably, such model institutions and tertiary hospitals On the one hand, they should continue would also give rise to a series of new occupy a more important position, strengthen the service ability in chronic issues including higher costs. Thus, while the positioning of secondary diseases, geriatric management and medical groups, nursing homes and hospitals has become relatively postoperative rehabilitation, on the policymakers need to work together vague. Therefore, in order not to be other hand, add value-added services and further explore how such model eliminated by the market, secondary such as health care for the elderly. can be implemented. hospitals should seek a new path of Only in this way, can secondary transformation as soon as possible. hospitals get differentiated competitive The promotion of the integration of advantage and enhance their position medical and elderly care services in the market. provides a good opportunity for the transformation of secondary hospitals.

23 Trends in integrated elderly care and medical services in China | Implications for market players in the context of integrating medical and elderly care services

Capture market opportunities For institutional operators, it is of Integrate supply chains to build an using digital technologies vital importance to upgrade the ecosystem Players with systemic investments in elderly care information system, and Due to its inextricable characteristic of the elderly care sector may leverage connect and integrate it with the serving the public good, elderly care digital technologies to innovate their medical information system. Apart service is a sector of small profits. products and services to improve from current elderly care information Thus, its profit margins would be added-value and profitability. system, integrated medical and elderly further diluted with every new layer care service institutions should also added to its industry chain. As a result, At present, there are several major incorporate information system that certain powerful corporations should applications of digital technologies provides functions for electronic health leverage their existing resources and in China's elderly care sector. For records management, medical checkup advantages to integrate the supply community and home elderly care, the management, pharmacy management, chain and increase profit margins. core application would be the building physiotherapy management and Specifically, the supply chain model of regional health information network clinical workstation management, of a private medical group previously and the implementation of personal etc., in order to offer better integrated mentioned may be of reference. health records for the elderly. In the medical and elderly care services, Under such model, intra-group drug future, with the accumulation of data instead of isolated services for the and equipment suppliers make and improvements in analytics, home elders. direct supplies to hospitals affiliated and community elderly care service to the group, thus reducing supply providers may define and classify their In addition, the application of chain costs while shifting points of clients, offering targeted services and telemedicine and telecare technologies profitability upstream. products to elderly people based on is also of great importance, whether their health conditions, service needs, to institutional operators or home/ As mentioned above, Poly Group are financial situations and individual community elderly care service vigorously building its ecosystem of preferences. providers. As chronic diseases are elderly care industries. From the setup commonly seen among most elders, of strategic platform to the integration there are significant demands for of supply chain links, and then to chronic disease management and the design and operation of specific long-term care, thus it is of great products, Poly seeks to establish an significance to leverage the application overall integrated medical and elderly of IoT, picture communications, care industry chain. wearables, pre-bed care and other technologies to realize remote health monitoring, remote diagnosis and telecare for elderly people.

24 Trends in integrated elderly care and medical services in China | Implications for market players in the context of integrating medical and elderly care services

Figure 7: Building ecosystem of integrated medical and elderly care industries (Poly as example)

Research center for Elderly care industries Strategic platform Real estate unit elderly care industries fund building

Institutionmanagement Medical and elderly Elderly care-oriented property Supply chain and operation company care products company management company

Institutional elderly care Community and home based products elderly care products

Elderly care products

Integrated medical and Apartments for travelling "Shanju elderly care " Community elderly care elderly care institutions and migratory seniors home services and healthy living centers

Intervention of external Healthcare Informalization Media Training resources

Conduct in-depth cooperation with hospitals, information technology enterprises, media and nursing training institutions to obtain technical and expert support, or convert them into their own resources in the supply chain through investment and M&A.

Source: Deloitte Research

25 Trends in integrated elderly care and medical services in China | Acknowledgements

Contacts

Yvonne Wu Zheng Qun Leader Leader Deloitte China Life Sciences and Deloitte China Healthcare Sector Healthcare Industry Tel: +86 10 8520 7161 Tel: +86 21 6141 1570 Email: [email protected] Email: [email protected]

Researchers and authors

Xu Sitao Lydia Chen Liu Keyu Partner Director Manager/ LSHC Researcher Deloitte Research Deloitte Research Deloitte Research Tel: +86 10 8512 5601 Tel: + 86 21 6141 2778 Tel: + 86 21 6141 1312 Email: [email protected] Email: [email protected] Email: [email protected]

Acknowledgements

Special thanks to the following colleagues for their strong support in the report.

Yvonne Wu Zheng Qun Leader Leader Deloitte China Life Sciences and Deloitte China Healthcare Industry Healthcare Industry

Lydia Chen Liu Keyu Director Manager/ LSHC Researcher Deloitte Research Deloitte Research

Jill Zhu Emily Fan Senior Manager Senior Specialist Deloitte China Life Sciences and Deloitte China Life Sciences and Healthcare Industry Healthcare Industry

26 Trends in integrated elderly care and medical services in China | Deloitte China LSHC team

Deloitte China LSHC team

Yvonne Wu Alan Hu James Zhao Partner Partner Partner Risk Advisory Audit & Assurance Tax & Legal Deloitte China Life Sciences and Deloitte China Life Sciences and Deloitte China Life Sciences and Healthcare Industry Healthcare Industry Healthcare Industry Tel: +86 21 6141 1570 Tel: +86 21 6141 1809 Tel: +86 21 6141 1198 Email: [email protected] Email: [email protected] Email: [email protected]

Carrie Chen Andrew Yu Partner Partner Financial Advisory Consulting Deloitte China Life Sciences and Deloitte China Life Sciences and Healthcare Industry Healthcare Industry Tel: +86 10 8520 7801 Tel: +86 21 2316 6913 Email: [email protected] Email: [email protected]

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