Reformed Putian hospitals to lock horns with multinationals

In 2003, when Lin Yuming, a seller of medical equipment in Putian, Fujian province, watched expectant mothers in endless queues and delays at China's overburdened public hospitals, he spotted a business opportunity. He launched Harmonicare Medical Holdings, a chain of women's hospitals complete with pink decor and pianos in the foyer.

In July, now Beijing-based Harmonicare Medical was listed in a HK$1.6 billion ($206 million) public offering in Hong Kong and is ramping up its expansion.

Its 2014 revenue was 936 million yuan ($146 million).

About 15 other companies running private hospitals from Putian are in early stages of considering initial public offerings, says the Putian Health Industry Association, a group representing local businesses.

Baijia International, a women and children's hospital business that Morgan Stanley's Asia private equity business has invested in, "is planning IPO matters but it's inconvenient to reveal specific timetable and details", it said in an e-mailed response to questions.

Once known primarily for making knock-off Adidas and Nike sneakers, Putian has emerged as home to one of China's most influential groups of private investors. Beijing encourages private investments to curb surging healthcare costs.

Putian had a strong tradition of folk medicine, often practiced by traveling doctors. In the 1980s, doctors in and around Putian earned their livelihood treating conditions like sexually transmitted diseases and skin infections that were neglected by public hospitals, said Eric Chong, a former deputy secretary-general of the Chinese Hospital Association.

Some had limited training, Chong said, but patients kept trickling in. Over time, despite ordinary ethics and sub-optimal practices, the local businesses became national and grew into accredited hospitals offering everything from plastic surgery to cancer care.

According to one estimate, over 60,000 people from Putian are in the health sector and they run over 8,000 hospitals nationwide. By that measure, they would have control of more than 70 percent of the country's private hospitals.

In a sign of the region's clout, shares of US-listed Baidu Inc fell in April after the association of Putian hospitals announced a boycott on advertising on the Chinese search engine.

Baidu at the time said the boycott was triggered by a crackdown on what it described as false medical advertising on its site by some Putian hospitals.

But such issues are minor against the backdrop of surging incidences of diabetes, cancer and heart disease in China, which are creating demand for healthcare.

In June hospitals.

But such issues are minor against the backdrop of surging incidences of diabetes, cancer and heart disease in China, which are creating demand for healthcare.

In June, the government said it would provide support for share listings and bond sales for private hospitals to lure investors.

Frost & Sullivan estimates that total revenue from China's private hospital industry will triple to $90 billion by 2019. Even international players such as Harvard-affiliated Brigham and Women's Hospital are eyeing opportunities in China.

To compete with international chains, Putian hospitals will need to build trust with patients, said Alexander Ng, an associate principal at McKinsey & Co.

The younger generation of Putian businessmen are better educated and want to reform the healthcare sector, said Steven Wang, founder of HighLight Capital, a private equity fund focused on healthcare.

Before the 2003 SARS outbreak, private healthcare was not very organized as regulations were lax, but there are standardized operations and branded franchises, said Wu Xidong, a spokesman for the Putian association, in a text message.