The crux of internet healthcare lies in who will pay the doctors

A cup of coffee costs twenty to thirty yuan, and I have at least one every day; a "registration" fee of fifty yuan at a top-three hospital, yet I find it expensive when I occasionally need to go.

The "registration fee" we often say verbally is accurately called the medical service fee. If you compare the Price of daily consumption with the Price of medical service consultation fees, you will find that in China, "seeing a doctor" is actually not expensive.

Zhang Wenhong, director of the Infectious Disease Department of Huashan Hospital Affiliated to Fudan University, once said in an interview: "I spent 13 years just studying medicine, while ordinary people go to university for four years and then go to work to make money, and the extra 9 years I have spent are basically spent studying, earning a very low student salary."

Yes, medical students spend at least 8 years studying before they can Enter hospitals to make money through professional knowledge, judgment, and diagnostic and therapeutic services, and the fees we pay for such professional services are far lower than the Price of examinations and medication, and various instruments and consumables used in surgery.

People's Daily once published a commentary article titled "Let the Price of Medical Services Return to Their Proper Position", which stated: "Infusion costs 2 yuan, and providing first-level nursing care to inpatients costs 9 yuan; more than ten people perform one operation, and the total is only 800 yuan...However, it is not uncommon for medication fees to be hundreds or thousands of yuan, and examination fees to be thousands of yuan."

So, the question is:If medical practices are moved to the internet, would you be willing to pay for the diagnostic and therapeutic services themselves? Would you be willing to pay a higher Price to purchase the doctor's knowledge and services?

Behind this question is actually the commercialization problem currently faced by internet medicine. Going left, how can we achieve large-scale profitability from C-end user payments? Going right, does the B-end really have the possibility of realizing a "medical, pharmaceutical, and insurance" commercial closed loop?

Going left 2C, how to get users to pay for services?

The offline medical market entities, namely public hospitals, have three sources of income—government funding, medical insurance payments, and patient out-of-pocket payments. Among them, the medical insurance fund is the main payer, accounting for more than half.

Online, internet medicine has not yet connected to large-scale medical insurance, and patient out-of-pocket payments have become the only source of income. So,How to get users to pay for services is the key.

Following the consistent approach of internet development, first seize the market, and once traffic increases, commercialization will not be a problem.

The 2020 epidemic brought a sudden "traffic frenzy" to internet medicine. According to the official statistics of the National Health Commission, the number of diagnostic and consultation inquiries on third-party internet service platforms increased by more than 20 times year-on-year.

During this period, in order to establish their Brand and quickly occupy users' minds, various platforms launched free consultations to attract users, and did indeed help patients who could not go to offline clinics at that time to solve their problems.

However, after the epidemic subsided, offline medical channels gradually became unblocked, and the previous prosperity gradually faded. Looking back, we found that even though the epidemic brought a more than 20-fold increase in users, it still failed to complete the most important market education—paying for medical services.

A social observation is that the two most exposed "celebrity doctors" during the epidemic, Academician Zhong Nanshan and Dr. Zhang Wenhong, have both been at the forefront of public opinion due to income issues. The former was questioned for the "1200 yuan sky-high registration fee", while the latter was also exposed to a "million-yuan annual salary" and was widely debated. This public opinion actually reflects a relatively common social psychology, that is, doctors = angels in white = selfless dedication as a public welfare profession, and obtaining a high level of remuneration is not easily accepted.

It can be seen that in the top three public hospitals in Beijing, a medical service fee is 50 yuan, and 80% can be reimbursed, with only 10 yuan actually paid out of pocket. In the wider cities of the third, fourth, and fifth tiers, this fee is even rarer.

The lack of a user payment environment is the real bottleneck for the current monetization of internet medical services from the C-end.

If the business of the internet market is subdivided according to Price and frequency, then four quadrants will be obtained:High-frequency high-Price, high-frequency low-Price, low-frequency high-Price, and low-frequency low-Price.Obviously, the last one is the most difficult and laborious business.

Internet medicine belongs to this type of business.

To this end, various companies have made various attempts in C-end payment. For example, Haodf.com, one of the earliest established companies in the industry, began to pilot membership services at the end of 2020 to expand its user base and expand from patients to healthy people; JD Health simply uses the pharmaceutical sector as its main focus, relying on JD Group's logistics and supply chain advantages to attempt to expand to offline retail pharmacies, thus integrating online and offline to "win it all."

According to the latest publicly available information from these two companies, JD Health's revenue from pharmaceuticals and health products in the first half of 2021 reached 11.8 billion yuan, and its revenue scale has far exceeded that of any chain pharmacy such as Lao Bai Xing Da Yaofang and Yifeng Yaofang, becoming a leading domestic pharmaceutical retail giant; while Wang Hang, the founder of Haodf.com, frankly admitted in a recent media interview that after 15 years of establishment, the company is still in a state of loss, and is relatively cautious about the trial of the membership model, with not many orders.

In contrast, internet medicine faces a soul-searching question—If it doesn't rely on selling medicine to survive, when will it be able to achieve large-scale profitability from the C-end market?

Going right 2B, a new triangular commercial closed loop?

No one has yet answered the above question. Perhaps this is essentially a challenge faced by the entire medical system, and it will not automatically disappear just because it is transferred from offline to online.

But if we turn our attention to another direction, we may find a different landscape.

In the United States, commercial insurance companies are the main payers for medical services. Users purchase health insurance, and the medical expenses are reimbursed by commercial insurance companies, forming a new triangular closed loop of hospital-patient-insurance company.

In this closed loop, insurance companies have the right to designate hospitals and choose more high-quality and low-Price service providers in the medical market, so as to save costs and obtain profits. In order to obtain cooperation with insurance companies, hospitals will also move in this direction, so patients do not need to worry about excessive examinations or medication fees.

This model is called HMO (health maintenance organization), pioneered by Kaiser Permanente, the largest integrated medical service system and non-academic research institution in the United States, and is highly evaluated and recognized internationally.

The HMO model is not a new concept in the internet medical field, but its implementation is not easy.

Among the top internet medical companies, several are still exploring this model, and Ping An Good Doctor is the most likely to succeed.

Its 2021 semi-annual report shows that as of June 30, 2021, the company's revenue was 3.818 billion yuan, an increase of 39.02% year-on-year.The development of medical services, online shopping malls, and consumer medical care sectors was balanced. Among them, medical service revenue reached 1 billion yuan, accounting for nearly 1/3 of the total revenue.

What does 1 billion yuan mean? It is equivalent to the annual revenue of the largest private hospital in China (Huaxi Hospital Shangjin Branch in Sichuan Province, which has become the largest private hospital in China due to its high demand, with an annual revenue of 1 billion yuan).

The significant growth in medical service revenue, achieved despite the basic control of the domestic epidemic, is due to multiple factors including resources, strategy, and execution.

Ping An Good Doctor has unparalleled resources.Ping An Group has over 200 million financial customers, nearly 65 million life insurance users in commercial insurance, and ranks first domestically in health insurance premium scale. By integrating internal insurance resources and channels, Ping An Good Doctor can monetize through B-end corporate clients and F-end insurance clients.

Although many companies have previously called for the integration of "medical treatment + medicine + insurance" closed-loop, Ping An Good Doctor was among the first to actually implement products for F-end and B-end clients. As early as 2018, Ping An Good Doctor launched the "Medical Treatment 360" product for Ping An Life Insurance's critical illness insurance customers, covering 1 million members that year and contributing approximately 200 million yuan in revenue.

Last year,Ping An Good Doctor proposed a strategic upgrade focusing on channels, services, and capabilities, with channel upgrades focusing on insurance customers and corporate clients.At this year's mid-term Achievements release conference, its chairman and CEO Fang Weihua reiterated that "we will focus on the conversion of high-value users from financial channels and corporate client channels, and in the future, we will further extend from Ping An Life Insurance and Ping An Pension Insurance to comprehensive financial channels such as Ping An Bank and Ping An Puhui." The deeper meaning behind this is,It has shifted from developing products around users to developing products around payers, that is, from 2C to 2B.

Another characteristic of Ping An Good Doctor is that it established its own medical team very early on. Currently, it has a self-owned medical team of approximately 2,000 people, more than 30,000 external expert physicians, and an AI-assisted diagnosis and treatment system. The self-owned medical team has higher compliance and better control over service quality, allowing for focused service provision.

This year, Ping An Good Doctor further launched a commercial insurance direct payment function. Users who have purchased related insurance products can not only use the Ping An Good Doctor APP for consultation and purchase medicine but also enjoy zero-settlement convenience—the in-scope consultation services and medicine fees are directly settled by the platform and the insurance company, realizing "seamless" commercial insurance direct compensation. This also means that users can complete a series of operations such as consultation, purchasing medicine, and reimbursement without leaving home, significantly shortening the previously cumbersome settlement process.

A company's resource endowment is like a person's innate genes, largely determining its future path. Along the way, Ping An Good Doctor has steadily developed around the three pillars of medical treatment, medicine, and insurance, which is why it is said that Ping An Good Doctor has the most potential to realize the HMO model in China in the future.

This is also in line with the ambition of Ping An Group behind it to build a "Ping An Medical Ecosystem." According to the latest financial report, Ping An Good Doctor has 400 million registered users, making it a powerful internet medical traffic entry point and a medical service network platform that coordinates resources from commercial insurance, government, and medical insurance, which can continue to play a positive role.

Every internet medical practitioner actually hopes that the story of the "Chinese version of HMO" that everyone dreams of can come true; they hope that with sufficiently refined operation and polishing, someone can run through the stable triangular commercial closed-loop of insurance company-internet medical provider-user.

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