Hospital executives in China are more willing to invest in medical technology than they have been since the onset of the COVID-19 pandemic, but the wide implementation of Order 551, known as the Buy China policy, is making it harder for medtech manufacturers that rely on imported products to access the market. Meanwhile, hospital executives foresee an increase in volume-based procurement (VBP) of medtech products this year and more case-based payments, such as diagnosis-related group (DRG) payments, over the next three years. Indeed, digital tools to facilitate hospital process management are already widely used in China, whereas solutions to support clinical decisions and the long-term management of patients still have room to grow.

That’s according to an analysis of hospital priorities in Asia-Pacific that was sponsored by L.E.K. Consulting in April and May, which engaged 100 hospital executives across public and private providers in China.

Based on elective surgery volumes, as of May, operations across hospitals had experienced a considerable rebound since the height of the COVID-19 pandemic. And public hospitals are forecasting a more positive budget outlook for the next three years, resulting in an increased willingness by hospitals to invest in medtech compared to that of the COVID-19 period.

Meanwhile, the implementation of Order 551, which had already been creating challenges for import-only medtech companies in public hospitals, has now been extended to include products beyond those listed in the order and to private hospitals as well, making the market for imports significantly more limited. The result is that the number of hospitals restricting the use of imported medtech “where possible” has increased 13-fold since Order 551 was issued in May 2021. 

Hospital executives agree that VBP will continue to be implemented extensively both nationally and provincially this year. Notably, 45% of private and public hospital executives foresee more products going through national tenders this year — more than twice as many as in 2022 — though that number skews higher for executive public hospital survey respondents, at around 50%. And in the wake of the National Healthcare Security Administration’s three-year action plan for DRG/diagnosis-intervention packet (DIP) payment reform, which requires nationwide DRG and DIP implementation by 2025, more hospitals than last year expect the use of case-based payments to rise in that time frame.

In the meantime, digital engagement with medical device suppliers can be found across all types of hospitals, although it is especially high with Level 3 (L3) hospitals. But while digital tools to facilitate hospital process management are widely used — online appointment booking is available for some 60% of hospitals, across all three types — those that support clinical decision-making and long-term patient management still have room to grow. Increased concerns about patient privacy, a shortage of talent needed to develop and implement digital health solutions, and the incompatibility of different digital health solutions also remain unresolved for most of China’s hospitals.

When it comes to the types of digital solutions that hospitals in China need most, the optimization of workflow is a top priority for all of them, while L3 hospitals are focused on care efficiency and Level 2 hospitals are prioritizing physician capability. Improving physician capabilities and operational efficiency is where all types of hospitals are most willing to invest. 

Broadly speaking, all three types of hospitals view digital health solutions as tools that can improve staff efficiency and capacity, enable staff to provide better patient care, and, in the process, increase patient satisfaction.

For more information, please contact


Andrew Fa, Principal

Jiawei QinJiawei Qin, Manager

L.E.K. Consulting is a registered trademark of L.E.K. Consulting LLC. All other products and brands mentioned in this document are properties of their respective owners. © 2023 L.E.K. Consulting LLC 

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