Hospital Priorities 2022 (China Edition): Implications for Medtech Firms
As hospitals in China shift their focus to improving the quality of care they provide, they are increasingly investing in digital capabilities. Indeed, some 40% of hospitals in China are currently using digital solutions in their telemedicine and clinical decision support systems, an adoption rate roughly 10% higher than the rest of APAC.
That’s according to the annual analysis of APAC hospital priorities that L.E.K. Consulting sponsored for 2022, which engaged 120 hospital executives across public and private providers in China.
The analysis was focused on four key themes: priorities and preferences; volume-based procurement (VBP) and DRG (diagnosis-related group) payment methods; localization; and digitalization and innovation.
Up to 80% of hospitals in China see improving clinical outcomes as their top strategic priority, the analysis found. To facilitate that improvement, up to 55% of hospitals in the country expect to increase the investments they make in physician support systems, especially as public hospitals have made spending on medical consumables a lower priority.
VBP tenders — both regional and national — will continue to roll out in medtech. Meanwhile, the number of DRG and diagnosis-intervention packet (DIP) payment methods, which has already risen since 2020, is expected to rise further going forward. Approximately 95% of hospitals have already implemented or are currently testing DRG in select service lines, and double the number of hospitals expect their DRG usage to increase in 2022 than did in 2021.
Notably, six months following the issuance of Order 551 in May of 2021, which requires specific proportion of medical equipment procurement of hospitals in China to those made in the country, an estimated 30% of hospitals there were found to restrict the use of imported medical equipment “where possible.” Order 551 is expected to have a higher impact on public L3 hospitals, which are the traditional users of imported devices, than on L2 public hospitals.
And when it comes to expanding their capabilities, dental and radiotherapy are some of the key specialties hospitals are currently focusing on. That’s after expanding, in prior years, into interventional radiology, geriatrics, and diagnostic imaging.
As hospitals in China continue their adoption of digital capabilities, new data-focused legislation has put a spotlight on patient privacy in addition to existing concerns around digital talent shortages and systems interoperability. At the end of the day, most hospitals in China are no longer adopting digital health solutions in order to address medical errors, but to provide patients with better care — and ultimately increase patients’ level of satisfaction with such care.
The findings should leave medtech companies with the following questions:
How do we optimize our products and services in ways that enable hospitals to enhance the quality of care they provide?
Do we have the diversity and differentiation in our product portfolio needed to compete and win in VBP?
How do we optimize our operations and re-configure our channel setup to deliver a lower cost of goods sold/cost-to-serve option so as to not just survive but thrive despite any VBP/DRG-enhanced price pressure?
Does our portfolio need localization to succeed?
How do we accelerate the development of our capabilities beyond commercialization in China to tackle market access challenges?
How can we deliver new digital capabilities in a way that maximizes our competitiveness?
Are we taking advantage of the development in China’s digital ecosystem to expand our commercial footprint and operations?
To learn more about the priorities of hospitals in China in 2022 and the strategic implications for medtech companies, please download our analysis.
Calvin Wijaya, Principal
Andrew Fa, Senior Manager
Mei Young, Senior Manager