Far East Horizon - A New Star in China's Healthcare Market

HONG KONG, Dec 20, 2017 - (ACN Newswire) - In today's China, it seems that every few years, a group of dazzling enterprises will turn out to be the ones bringing about a series of changes in the national economy and the people's livelihood, encompassing all areas including clothing, food, shelter and transportation.

Such a revolution is also currently underway in the healthcare field.

In just four years' time, a company called Far East Horizon, the hospital group of which has discreetly secured a position in the forefront of social capital investments in healthcare.

First, let us take a look at a set of data:
In terms of size, as of early December 2017, Far East Horizon Investment Holdings had as many as 30 hospitals with more than 12,000 beds, forming a nationwide hospital operating network covering all the major regions in China and ranking first in China in terms of the number of for-profit hospital beds.

In terms of operating results, in the first half of 2017, Far East Horizon's hospitals generated an operating income of RMB590 million and a gross profit of RMB180 million, representing a year-on-year increase of 150% and of 166% respectively. Their operational efficiency is also commendable among first-tier hospital groups.

In the words of Wu Zhijun, Vice President of Far East Horizon and General Manager of Far East Horizon Healthcare Group: "Our hospitals are no less favourable to any professional medical group as far as the status of development is concerned."

01 Unbalanced development in healthcare has given birth to a century lasting industrial window

Theoretically, some great companies should have long been created in China's healthcare field.

China is the world's most populous country with a population of 1.4 billion, accounting for one-fourth of the global population and four times that of the United States ranking third. In addition, the country is gradually becoming an aging society and therefore has more pressing medical needs than any other country in the West. The market size of China's health industry is as high as RMB8 trillion and is seen to reach RMB16 trillion by 2030. On the other hand, there are only 4.2 hospital beds for every 1,000 Chinese citizens, a level well below that of developed countries.

The report of the 19th National Congress of the Communist Party of China has clearly put forward the "healthy China" strategy with the aim of supporting social investments in healthcare and developing the health industry. It has been further pointed out in the "Outline of the Plan for a Healthy China in 2030" that we should optimise the landscape for diverse healthcare investments, hence spawning new healthcare industries, forms and models so as to continuously enhance market vitality in the healthcare field. The "13th Five-Year Plan for Sanitation and Health" has also been proposing that the goal of "treating serious diseases at county-level hospitals" shall be basically achieved by 2020.

All of these have outlined a grand blueprint for private and social healthcare investments to play a role in the development of China's healthcare industry.

In contrast, China's healthcare market is extremely dispersed at present and there is no leading local hospital group brand whether in the public or private system. As far as hospital groups listed on a standalone basis are concerned, the annual operating income for listed groups in the United States exceeds RMB60 billion on average while that in Asia is RMB6.2 billion on average, comparing to an average of only RMB600 million in China.

Who will lead this industry trend? Who will be the leader of this competition? It may be too early to come to a conclusion at this point but for Far Eastern Horizon quietly ploughing in the local healthcare field for nearly two decades, its strategic intent to ride the wave and its outline to disrupt the industrial landscape have emerged.

02 Far East Horizon's unique advantages in terms of hospital operation

Hospitals of Far East Group quickly advancing to the top in China in terms of the number of beds are a demonstration of Far East' profundity in the healthcare industry and its pursuit of an ambitious vision over the past decade.

As we all know, Far East Horizon has traditionally engaged in financial leasing and other innovative financial services, but its strategic goals are far more than that. Back in 2003 when HealthcareBusiness Division, its first business division, was established, Far East had proposed a "three-step" healthcare development strategy determined to fulfil the mission of creating a foothold in and serving the healthcare industry, and extending its business from purely financial services to hybrid operations and, when the time is ripe, entering into industrial investments to become a key member of the industry.

Over the past two decades, Far East Horizon was only able to develop its "new assets" in the hospital operation business in as short as a few years by adhering to its established strategy and capitalising its accumulation of know-how.

Far East's long-term commitment has resulted in competitive advantages that are hard to imitate:

1. Strong capital strength. With its assets of over RMB200 billion and billions of profits each year, Far East Horizon is capable of providing continuous support to hospital investments and operations.

2. A profound understanding of the healthcare industry. Hospitals are a typical capital-, intelligence- and technology-intensive industry. Far East Horizon has settled in this field for nearly 20 years, having been in contact with over 10,000 healthcare clients and nearly 3,000 partner clients covering all the major hospitals in China. In addition to the financial business, in recent years, Far East Horizon has continuously developed businesses including medical consulting, operations management and engineering services. In other words, being a senior integrated service provider and a significant participant in China's healthcare industry, Far Eastern Horizon has won wide recognition in the industry on its system-wise expertise.

3. Pattern-based advantages arising from the leadership in scale. For any industry, scale, the key variable in winning out, refers to the ability of absorbing resources as well as the spillover effect and the degree of empowerment which are the basic preconditions for a company to gain its industry status, create the Matthew effect and establish strongholds. On this track of business logic, Far East is currently surpassing and taking the lead.

4. The original "Three Ones" model. On the basis of its accumulation and understanding over the years, Far East spends great efforts in the operation of hospitals upon investment and allocates professional operation teams to enhance the operational efficiency of each hospital. In this process, it has put forward the original "Three Ones" business model featuring "one system, one network and one hospital" aiming at establishing a standardised and intensified operation network, enhancing standards of hospital operation and thus forming a differentiated operational pattern.

03 Differentiated investment strategies and innovative business models

Healthcare investment is a highly value-oriented industry. How to attend simultaneously to the profit seeking nature of capital and the public welfare nature of healthcare service is an ordeal for business operators. In this regard, Far East Horizon has initially achieved a good balance in practice. This balance is primarily reflected in the creativeness of investment strategies and business models.

In addition, Far East Horizon has clearly formulated its long-term development strategy.

First, it adheres to the differentiated "encircling cities from the countryside" layout. At present, most of the major industry participants are focused on non-profit hospitals in the first- and second-tier cities in their strategising while Far East Horizon has taken the initiative to make up its plan in the second-, third- and fourth-tier cities. While having a population accounting for more than 60% of the total, these regions are extremely short of quality healthcare resources resulting in the most unbalanced supply and demand of healthcare services. Starting from these regions will be fully compliant with the national strategy of "treating serious diseases at county-level hospitals" as well as a reasonable strategy to hit the tender point in China's healthcare industry.

Second, it goes for "specialised and highly integrated" for-profit hospitals. All of the thirty hospitals under Far East Horizon are for-profit hospitals, hence forming a significant difference with peers. In addition, Far East Horizon insists on primarily investing in hospitals specialising in orthopaedics, oncology, obstetrics and gynaecology and nephrology as well as general hospitals with the features of a specialised hospital. These hospitals which are relatively complete in terms of function, discipline and system are conducive to professional integration and improvement.

Third, it has unique reachability to quality resources and targets. The long-term accumulation and widespread recognition of Far East Horizon in the healthcare industry has given it the ability to reach out for quality healthcare resources and target assets that is unattainable by any competitor, in addition to the availability of more choices. Far East Horizon will give priority to hospitals established by registered medical practitioners to ensure professionalism. Priority will be given to hospitals ranking among the top three at the municipal and county levels having competitive advantages in their locality in terms of word-of-mouth reputation and competence. Priority will also be given to those with consistent requirements in their pursuits and developments to ensure that there is room for integrating resources and tapping potentials for development going forward.

On the business front, Far East Horizon has also created a new model.

Leveraging creative post-investment integration and operational capabilities, it spares no effort in building the innovative "Three Ones" model.

Different from general hospital groups in the market which are characterised by loose management of affiliates as well as low correlation and little interaction among hospitals, Far East Horizon conducts a systematic management of its hospitals upon its investment in order to enhance their overall operational efficiency and medical skills. All of these are based on the "Three Ones" business model developed by Far East:

One system: standardisation
In response to the lack of unified standards for the current Chinese healthcare system, Far East Horizon will strive to resolve the problem of consistency in medical standards so that its hospitals can operate under "one system". Take discipline building for example. Going forward it may be refined to how many people are needed in each discipline office. Healthcare services may also be refined to how much gauze bandage is needed in each step. In addition, the hierarchical classification of pathogenic diseases as well as the distinction between simple and complex medical work will make greater use of superb medical skills.

One network: cloud hospital
Far East Horizon is committed to building an integrated and intelligent "cloud hospital" through the use and integration of scientific and technological means such as the Internet, cloud computing and AI, bringing together standardised data from all member hospitals nationwide to a common data centre. Currently, the data centre is set to be built in Shanghai's Pudong. In the future, hospitals under Far East Horizon will base on an advanced information system for major diseases and disciplines so that a vertically-penetrating system of longitudinal professionalism will be formed and expert resources of various professional consultation centres will be more widely used. It is likely for Far East Horizon's experts to simultaneously guide multiple surgeries in different regions without the need of attending the surgery in person.

This is not only a network for operation and management but also a network of immense big data. The accumulation and extraction of these big data will derive great marginal value, which can be of service to the medical services of Far East Horizon and accordingly to the community and even the national health industry.

One hospital: integration
Going forward, hospitals under Far East Horizon Group will be physically located all over the country but they will be combined into a highly-integrated "medical body" from operation to management, from medical skills to resources allocation and the like. Consequently, the Group's superior medical resources and technologies will be shared among all member hospitals in a balanced manner and that talent, technology and other elements will be put into orderly circulation. One hospital group will be operated as a standalone hospital and the effectiveness of the system will ensure the maximum utilisation of resources, hence bringing the best services to patients.

04 Building an ultra-large health service ecosystem ahead

According to the plan, in the upcoming 2018, hospitals under Far Eastern Horizon will increase the number of hospital beds to 20,000. In the next 5-10 years, Far East Horizon will quicken its pace to achieve the goal of over 100 hospitals and 100,000 hospital beds. Upon reaching this goal, Far East Horizon is expected to rank among the largest hospital conglomerates in the world, providing quality healthcare services to at least 50 million people, equivalent to serving the whole population of South Korea or Spain.

On such basis, it is likely for Far East Horizon to continue adding on more operational concepts of greater ambition.

For example, financial value will be generated through intensive group purchasing. Far East Horizon is now one of the largest domestic buyers of medical equipment. By establishing a logistics support department at the headquarters and relying on Far East's strong resource integration capabilities, an intensive procurement of medical equipment, medicines and supplies will be adopted to effectively reduce procurement costs, thereby generating great financial value in the process.

For example, Far East is currently building a top-class industry expert team across disciplines including obstetrics and gynaecology, orthopaedics and oncology and will continue to enhance the level of medical skills among its hospitals as well as in the society. Relying on expert groups and through professional training, it will continue to improve performance of its doctors to attract more medical professionals to join. On this basis, hospitals in remote regions will also be able to benefit from the high-standard healthcare conditions and thus greater contribution will be made to serving the national strategy of "treating serious diseases at county-level hospitals" in the true sense.

In addition, on the basis of the 100,000 hospital beds it possesses, Far East will add on a variety of business forms covering finance, insurance, drug research and development, pathology centres, big data platforms, healthcare education and the like. The efficiency released as a result of such variety is expected to allow the value of every single bed in the hospitals under Far East Horizon to be continuously magnified so that more products and services of great potential and value will be generated, creating a huge network platform effect and making it likely for predictable capital value to grow at an exponential rate.

These are the thoughts and feelings of Far East Horizon about healthcare, conforming to the national healthcare policy directions and industry development trends, never forgetting the very beginning purpose of creating an innovative healthcare group boasting medical safety, service quality and leading management. This healthcare group will provide services to a large population through their life cycle from birth to old age, becoming a major force for boosting national health beyond the public healthcare system.



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