Interview: Charles Wang, Group CEO, Luye Medical Group
Healthcare Nova, 25 January 2018
Formed as recently as 2015, Singapore-based Luye Medical Group has become one of the major contenders in health care services across China, Australia and SE Asia. It is part of the Luye Life Sciences Group which owns Luye Pharma Group, one of the largest pharmaceutical companies in China and separately listed on the Hong Kong Stock Exchange. Luye Medical Group acquired Healthe Care, the third largest Australian for-profit hospital operators in 2016. It has since expanded its business rapidly adding healthcare operations such as oncology (Singapore), inpatient, outpatient and community based health care services (Australia) and rehabilitation and maternity hospitals (China). The aim, says Wang, is mainly to provide a value-based healthcare experience to meet the needs of the middle class and patients with private insurance coverage across SE Asia, Australia and China. Here we talk to him about Luye Medical Group’s plans and how it views the Chinese market. Wang is a speaker at HBI 2018, the global health care service event in London from April 10 to 11.
“Luye Medical Group is in a unique position as a healthcare services provider. With Chinese roots and a strong pharmaceutical background of our sister company Luye Pharma Group, we have an established network with the medical professionals and policymakers in China. This gives us a competitive edge to enter the Chinese market when the time is right. Our operations in the developed markets such as Australia and Singapore will serve as the centres of excellence for Luye Medical Group to replicate and deliver a consistent quality of care in all our healthcare facilities across the region.”
A former CFO, Wang comes across as engagingly modest. He says that in 2015, Luye Group looked at M&A opportunities across Asia, Australia and North America, that led to the acquisition of Healthe Care in Australia. Working with consultancy firm BCG, Luye Medical Group, he says, now has a clear strategic plan going forward.
In the short-term, he says the aim is to create an integrated healthcare services group across SE Asia. “Singapore and Australia are hubs and we are getting a growing stream of patients from Malaysia, Vietnam and Indonesia. We want to move into these countries with referral units rather than relying on concierge services and agencies as we do now.” Meanwhile, it is full steam ahead with Healthe Care, with facility number rising from 17 hospitals in early 2016 to 29 hospitals and 6 day surgery centres. Its other acquisition, Oncocare in Singapore, has also increased from four centres to six.
Longer-term, the big opportunity is China. “We want to address the 300 million Chinese who will be middle class in 10 years’ time. That is a huge market.” Wang says that Luye Medical Group will soon unveil a “significant hospital” in Shanghai in partnership with an established U.S. hospital brand which is not yet in Asia. The company currently operates two maternity hospitals, a rehabilitation hospital and several outpatient clinics in China.
Luye Medical Group, he says, wants to focus on delivering specialty care: “We don’t want to focus just on primary, corporate outpatient or diagnostics. We see these as volume businesses, where margins may drop. We want to be the people who deliver good secondary and tertiary care, based on real value. That could be in hospitals but also, increasingly, in outpatient or ambulatory settings.” He adds: “We would like to set ourselves apart from the first wave of private hospitals in China who just targeted expats or the very wealthy locals.”
Wang is a value-based healthcare enthusiast and is not afraid to say that overtreatment occurs often across the region. For Wang, delivering value means “no unnecessary and expensive treatments” for patients; “value for money” for the insurer and “high-quality healthcare at a fair price” for policymakers. He is spending time working on how to persuade doctors to accept comparisons of outcome of their work amongst their peers.
Luye Medical Group is taking a long-term approach in China which reflects the reality today in China. “Chinese people still think that big public hospitals deliver better quality than private hospitals and they are prepared to wait for an inordinate amount of time to get it.” The public sector has big problems with patients swarming into the well-established hospitals in tier one cities, leaving many regional hospitals under-occupied and primary care almost non-existent.
Private medical insurance, whilst growing, remains limited and outside of the very rich who will head to the U.S. for treatment, many Chinese cannot afford to pay out-of-pocket for serious conditions. “You need the public to truly believe that by buying private insurance they will get access to better care. That isn’t the case today which is why private healthcare of quality is still rather limited in China.”
But he sees plenty of demand and growth opportunities. New laws mean that public-sector doctors are no longer forbidden from also practicing privately. While he acknowledges that the pace of change may still be uncertain at the moment he adds: “There are instances where change can happen fast in China.”
In China, Luye Medical Group is more inclined to look at greenfield projects. “We have searched for acquisitions but it has been hard to find targets of the right quality.” He is not keen on privatising underperforming state hospitals, a strategy that was being followed by some other healthcare companies, as it is challenging to drive efficiency improvement in these hospitals. It is a refrain that Healthcare Nova has heard around the world.
Looking at the longer term, Wang clearly has his eyes on oncology and cardiology. Oncology is a particular focus, as Luye Pharma Group owns the largest chemo drug, namely Lipusu, in Mainland China. He reckons that you can set up outpatient chemotherapy clinics in a cost-efficient way. “Specialised clinics for cancer patients make sense. Why would you want them to go into a ten-floor hospital with all the complications and risks that that entails?”
He says it is also clear that Chinese policymakers, as in Australia, want the public system to focus on acute episodes and on those who cannot afford to pay. The state, he says, wants to see the wealthier classes use private care. It seems that, with Luye Medical Group’s connections and expertise, the company is pushing against an open door.