Hospitals in China are still paying attention to COVID pandemic response in 2023 as one of their priorities, while planning for key future strategic themes like workflow efficiency and care management to achieve long-term capability improvements. Broadly, public hospital financials remain similar to 2020 but worse than 2021, with optimism about the post-COVID future; private hospital financial situations remain unchanged since 2020. Sector trends include improving market access for National Reimbursement Drug List (NRDL)-listed products, increasing prescription flow to retail pharmacies, and the continued adoption of digital tools. 

These insights come from L.E.K.’s annual survey of hospital priorities in APAC, which engaged 100 hospital executives in China across public and private providers. The results of this survey can inform pharmaceutical companies seeking to improve hospital relationships throughout China, providing considerations on go-to-market strategies, digital interaction tools, and innovative therapy offerings. 

Hospital priorities and preferences

Chinese hospitals are seeking to increase spending to improve physician capabilities and operation efficiency, with the greatest spending interests being in physician education tools and programs, physician support systems like clinical decision support, expanding physician pools, and the expansion and improvement of existing facilities. Other strategic priorities include workflow optimization, IT infrastructure, bed turnover, care management, digitalization, and ongoing pandemic response. The investment willingness increase across all spending categories averages +11ppt compared to 2022. 

When adding drugs to the formulary list, the most important criteria hospitals consider is whether it is included in the national or international treatment guideline, whether it is the most cutting-edge and advanced treatment available, and whether the drug is on the NRDL. Notably, this last factor of inclusion in the reimbursement list has been steadily increasing in importance, posing challenges to drugs that are not NRDL-included. 

Reimbursement through NRDL 

Due to the National Healthcare Security Administration’s (NHSA) strong endorsement of hospital listing acceleration, negotiated NRDL drugs are increasingly being automatically listed in public hospitals. Similarly to last year, half of hospitals continue to face prescription limits for NRDL-negotiated drugs. 

The trend of increasing prescription outflow to retail pharmacies can be attributed to the consequent outflow for drugs lost in volume-based procurement (VBP) and the roll-out of dual channel policies for expensive drugs, calling for adjusted go-to-market approaches. A key strategy pharmaceutical companies should investigate is to adjust the direction of sales and marketing by the type of drug, pursuing a dual-channel policy for NRDL drugs and emphasizing retail and OOP channels for originator drugs. 

Digitalization tools 

Across all types of hospitals, acceptance is growing for digital engagement, with a notably higher level of acceptance in public L3 hospitals. The most widely used digital tool in China’s healthcare sector is online registration, followed by patient-accessible health records, personalized information pushed to the patient, and remote consultations. Digital tools that were widely used in response to the COVID pandemic are still being heavily used by hospitals, and online appointment booking has reached 60% penetration. Hospitals are perceiving digital health solutions as aids to improve staff efficiency and capacity, provide better patient care, and increase satisfaction. 

These digitalization trends also carry challenges; leading concerns from previous years remain unresolved for most hospitals. The most prevalent of these are patient privacy concerns, shortage of talent to develop and implement digital solutions, and incompatibility of different digital health tools.  

Financial outlooks 

For public hospitals, the current financial landscape is similar to 2020 and worse than in 2021, while private hospital profitability remains unchanged since 2020. Both private and public hospitals are optimistic about their performance in the next three years. Specifically, 65-70% of hospitals see their business as sustainable long-term, while the rest believe post-COVID patient confidence, cost reduction, and alleviation of COVID constraints will improve sustainability. 

To learn more about the operational priorities of public and private hospitals in China, please download our analysis.   

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