Is the answer to falling hospital profits overseas?


As anyone who reads FierceHealthFinance knows, it ain't easy being a hospital executive. In fact, every time the industry says, "Whew, we made it through that one," government or health plans or Wall Street throws another curve ball. Meanwhile, new competitive forces emerge almost daily, and uncompensated care levels rise far too quickly. Looked at one way, in fact, it's amazing anyone's making money in the hospital biz these days.

But perhaps there's hope--thousands of miles outside of the U.S. That, at least, is what HCA co-founder Dr. Thomas Frist Jr. seems to think. Frist is investing in China Healthcare Corp., which will kick off its operations by building and operating a 500- to 600-bed hospital in Shanghai. The startup is run by Dr. Frist's son-in-law, Chuck Elcan, a former executive with a real estate investment trust focused on medical properties.

The Shanghai-based general acute care hospital plans to serve private-pay patients and patients whose healthcare costs are paid for by the Chinese government. To fund growth, China Healthcare is banking on the Chinese government's planned expansion of state-run insurance programs for residents. For what it's worth, the government of Ningbo will own 30 percent of the venture, which may help execs know what's next in the expansion pipeline.

To be certain, Elcan will have his hands full in meeting China Healthcare's goal--which is to bring Western hospital management style and culture to the Asian country. On the other hand, he might actually be paid at rates more in line with what the hospital actually charges.

All told, given the stresses U.S. hospitals face, I'm surprised more U.S. investors and hospitals aren't sketching out similar deals of their own, not only in China, but also in other emerging economies. Realistically, even markets that don't have U.S. constraints in place may develop them over time, and eventually, problems may develop that are unique to those countries. But for the time being, hospital operators that dig in have quite an advantage. At least for a while, margins will be high and restrictions relatively few. Now's the time to open up that world map and start planning. - Anne 

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