In what appears to be the first public-private hospital partnership between a U.S. provider and the Chinese government, Nashville-based China Healthcare Corp. recently announced it has received approval to build and operate a 500-bed, acute-care hospital in Cixi City, China.
Building in China
Nashville-based firm backed by Frist strikes deal with Chinese government
The agreement comes just five months after China's central government announced it would invest about $124 billion over three years to overhaul the country's healthcare system. The plan in part calls for partnering with private investors to help update services and expanding healthcare coverage to all of China's estimated 1.3 billion citizens.
The arrangement between China Healthcare—launched last year by HCA co-founder Thomas Frist Jr. and his son-in-law Chuck Elcan—and the Chinese government calls for the company to hold a 70% ownership stake and the Cixi City government to hold a 30% stake in the new hospital. But even with the joint-venture terms spelled out, the deal could still face challenges, said some sources familiar with China's healthcare system.
“I think China remains ambivalent about the role of private healthcare in the country,” said Robert Crone, a managing director with Huron Consulting Group's healthcare practice. “The political will may be gathering some momentum, but it will, I think, take much more time before the first major project is completed.”
For certain, the Nashville-based company is not the only U.S.-based provider to attempt to partner on a hospital venture in China. In September 2008, Dallas-based China Health Care Corp. (no relation to the Nashville company) announced it was negotiating a deal to acquire a 70% interest in a Beijing-based hospital. Though the company manages several maternity and gynecologic centers in various areas of China, it has made little progress on the deal, which was expected to close by the end of 2008. Since announcing the deal, China Health Care Corp. has gone through several management changes, and company officials were unreachable at deadline to discuss the status of their efforts.
Elcan, CEO of China Healthcare Holdings, the parent company of China Healthcare Corp., said his company's project is nonetheless under way. But he acknowledged that executing the agreement has been tough. The company had to reach agreement with five levels of government—local, district, provincial, the Ministry of Health and the Ministry of Commerce—in order to receive approval for the hospital, which will serve roughly 2 million greater-Cixi City residents.
“We're just now going through the design process, and that will take another eight to 10 months before we break ground and another 18 months to build it,” Elcan said.
That process, Crone said, is often ripe with governmental red tape in China. “I'm involved with several projects that began six or seven years ago, and we haven't gotten the first spade into the ground,” said Crone of his client's work in China. “You think you have all the approvals you need and find you don't.”
But Asia healthcare policy expert Tsung-Mei Cheng, executive editor of the International Forum at Princeton University's Davis International Center, said that such difficulties may not be the result of resistance to privatizing some parts of China's healthcare system. More likely, she said, it's the result of there being no blueprint for what services the central government will cover under a new public-private partnership model and how much it will pay for what it does cover. “Much is unknown,” Cheng said. “Many of the decisions, the Chinese government still might not know what they will look like.”
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