Ping An Business Case 2022

A new model of healthcare services in China

How China’s largest commercial insurer is evolving into a ‘health maintenance organisation’ to meet the rising demands of its more than 200mn customers.

Healthcare is a key challenge facing Chinese society. While Deloitte reports that something like 95 per cent of China’s people have some basic medical coverage, an ageing population — coupled with urbanisation and rising affluence — has given rise to greater demand for healthcare in the country.

This is the story of how one of the largest insurance companies in the world is transforming itself into a “health maintenance organisation” (HMO) to meet China’s rising social demand.

The rise of health services

With health increasingly being prioritised in China, consumers are not merely insuring themselves against disease, but also securing their health for the future. Driven both by policies and market demands, China’s commercial health insurance market has seen rapid growth. With regulatory authorities aiming to develop the commercial health insurance market to over Rmb2tn ($300bn) by 2025, the sector is seeing unprecedented growth opportunities.

To meet rising demand, last year Ping An released an upgraded health plan called Ping An Zhenxiang RUN for customers of critical illness insurance. In addition to family doctor services and health records, the plan provides customers with health management plans covering four major areas: health, sub-health, chronic disease and disease. By the end of 2021, the plan covered more than 20mn critical illness policyholders.

Building an ecosystem

By integrating insurance, hospitals, health checks, rehabilitation, elderly care and medicine, insurance companies can establish a one-stop health ecosystem of “insurance + health services + health management”.

In this ecosystem, policyholders insure themselves not only against disease, but also with the intention of securing their health for the future. Insurance companies can thus not only effectively improve customer stickiness, but also promptly intervene in customer health while controlling incurred medical expenses.

HMO-managed care

Committed to developing its health ecosystem, Ping An aims to build an HMO-managed care model in China. Managed care, the mainstream business model of commercial health insurance in the United States, accounts for more than 90 per cent of the American market, with UnitedHealth leading the sector.

In managed care, insurance agencies and health service providers establish a mechanism of shared benefits and risks. Under joint management of health services, they optimise cost-effectiveness by controlling expenses through the rational use of medical resources.

The HMO model, which is a form of managed care, connects insurance companies, hospitals, doctors and health service institutions to create a closed-loop business of “insurance + health services”. The insured are entitled to medical resources such as treatments within the network.

Drawing on years of operation and management in “insurance + health services”, Ping An has introduced a managed-care model featuring “HMO + family doctor + O2O”. The Ping An Good Doctor health platform connects online doctors and offline medical institutions through its “family doctor membership” to provide daily health management and services before, during and after diagnosis.

A broad customer base meets deep resources

The keys to the success of HMO-managed care are a huge customer base and the ability to leverage medical resources to effectively control service quality and costs. Ping An’s confidence in implementing its health ecosystem strategy stems from its large customer base and leading medical resources.

Ping An has been working toward two major goals in the Chinese health industry: firstly, to provide one-stop health services, mobilising the 227mn customers in the main financial business and the 423mn users of Ping An Good Doctor to build the largest online health platform; and secondly, to access medical resources by closely cooperating with hospitals and medical institutions to integrate resources across the country through Ping An’s health technology.

By linking high-quality offline medical resources, Ping An has gained a competitive edge in integrated online and offline health services. By the end of 2021 it had achieved this by collaborating with more than 40,000 in-house doctors and contracted external doctors in China, and forming partnerships with over 10,000 hospitals (including 99 per cent of Tier 1 hospitals and all China’s top 100 hospitals), about 96,000 healthcare management institutions and 202,000 pharmacies (around a third of all pharmacies in the country).

In 2021, Ping An invested approximately Rmb48.2bn in the New Founder Group to strengthen its offline health ecosystem. The medical sector of Peking University under the New Founder Group is leading the industry in terms of offline industry scale (including the world-class Peking University International Hospital).

Integrated finance + health services

Ma Mingzhe, chairman of Ping An, says that while finance is central to Ping An’s prospects today, healthcare services will determine the group’s future.

The health ecosystem strategy is closely integrated with Ping An’s main financial business, achieving synergistic effects. In 2021, nearly 63 per cent of Ping An’s more than 227mn individual customers chose the services provided by the health ecosystem, with 3.3 contracts per customer and Rmb40,000 in assets under management per customer — figures that are 1.6 times and three times higher, respectively, than those of the customers who did not use health ecosystem services.

Capturing strong consumer demand in finance and health care, Ping An is actively building an “integrated finance + health services” business model in China. As its HMO model of providing health services takes shape, this strategic implementation is gradually being transformed into greater investment value.