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#2: An overview of public and private elderly care institutions in China

Our second blog post in the series about the Chinese rehabilitation and assistive devices sector features an interview with Jules Falzado from the management consulting firm SmithStreet China. In this article we will take a deeper look into the public and private elderly care sector and how that is influencing the rehabilitation equipment market in China.

Currently there are about 42.000 elderly care facilities most of which are in rural areas. However as the rural regions still are heavily influenced by the concept of filial piety (孝, xiào: meaning children must pay respect to their parents and ancestors i.e. take care of their parents themselves), the major demand for long-term elderly care stems from more developed regions, resulting in an imbalanced demand and supply. Another market mismatch can be witnessed in the type of facilities offered; although there is not shortage of low-end care facilities, current demand asks for more premium mid-market facilities.

In addition to the above-mentioned care facilities there are approximately 21.000 hospitals in China. However, the main purpose of these hospitals is to treat patients with acute (rehabilitation) problems and they are not meant for continuous care.

In an effort to decrease waiting times at public elderly care facilities, the government is now pushing the private sector as well as encouraging foreign elderly care companies to set up care facilities in China. The favorable investment conditions are attracting both foreign and domestic nursery home developers to enter or expand their operations in the market.

However, as is often the case in China, it is important to take these numbers with a grain of salt. Anti land-speculation rules and favorable investment conditions in the elderly care sector have spurred the development of many “ghost facilities” in order to purchase land on favorable terms. This in turn makes it challenging to estimate the exact number of elderly care and rehabilitation facilities in China.

We asked Jules Falzado, Engagement Manager at SmithStreet, about the trends he is witnessing in the market. Falzado specializes in China healthcare strategies through business analytics and quantitative modeling. His insights into the China market have been featured in mainstream media such as The Wall Street Journal.

A quick overview of the market.

There are various private and public institutions that provide care for the elderly and people with disabilities e.g. senior care homes, nursery clinics, hospitals and rehabilitation clinics. The majority of such facilities are Chinese-owned, but due to the loosening of FDI regulations more and more foreign-owned institutions are now being developed throughout the country.

Aside from hospitals, the number of independent institutions in the elderly care sector is booming. As mentioned before the current number is approximately 42.000 facilities. According to Falzado, “74% of the total senior care facilities are in rural areas, and are mostly low-end public care providers”. Premium public facilities offer acceptable care and are good alternatives to the more expensive private facilities. They are in high demand, resulting in long waiting lists, while the majority of beds in low-end public facilities are unoccupied.

Private elderly-care facilities are situated within large cities or in nearby suburban areas (often where the children live) and can be compared to small communities where elderly needs are easily accessible. At the moment, key development in the private sector is dominated by high-end, expensive nursing home concepts that are only accessible to limited end-users. Falzado expects that more mid-range private facilities will emerge in the future to address a larger middle-income market.

Key trends in the elderly care and rehabilitation sector in China.

A growing demand for premium care. Public hospitals are mainly aimed at providing rehabilitation care and temporarily housing elderly patients with acute conditions. However there is an increasing demand for continuous retirement care as China’s population is ageing. Falzado noted that “low-end public elderly care facilities are in low demand because the children would not want to ‘lose face’ by enrolling their parents or grandparents in these facilities”. Premium public care facilities offer better care and are therefore in high demand, causing the aforementioned waiting lines. The better quality of care can be seen in premium public facilities’ equipment as they are more likely to invest in or receive funding for high-quality equipment.

The private segment shows strong potential now and even more so in the near future. The government’s push to increase the number of private facilities and fill the demand-supply gap (caused by an imbalanced regional demand) is spurring the growth of the private sector. Because of the growing number of mid-range and premium private facilities and less complex purchasing processes, Falzado believes this sector will provide the most potential for foreign rehabilitation and assistive equipment manufacturers in the future.

Large public facilities are more prone to purchasing foreign advanced equipment. Because tier 2 and 3 hospitals are more technologically advanced and have access to larger budgets they are more prone to buying high-end foreign equipment. But in order to target public hospitals you need to enter into a public tendering process, which is a time-consuming and costly process.

This article is part of a series on the elderly care and rehabilitation devices market in China. Stay tuned the coming weeks to learn more about how to sell in the Chinese elderly care and rehabilitation market and subscribe to our newsletter to receive our free sector report coming out in November.

Duco van Breemen

Duco van Breemen

Duco is project & marketing manager at Launch Factory 88. He has lived in China since 2008 and has worked with both state-owned and private Chinese and foreign enterprises.
Duco van Breemen