The urgent need for the digitalisation of healthcare in China
Ten years ago, Ruijin Hospital, a renowned hospital in downtown Shanghai, used to be a place where there was chaos, overcrowdedness, burnt-out doctors, long waiting times, and unhappy patients waiting in corridors. Since then, Ruijin Hospital has been making efforts to digitalise.
Now, Ruijin Hospital is quite a different place.
The entire patient journey has been streamlined, from appointment scheduling to payment to in-hospital flow to continuity of care across different hospitals. From the perspective of hospital doctors, data is now shared across departments and facilities and can support them in making clinical decisions. This dramatically improves efficiency by reducing repeated exams and tests.
Ruijin Hospital is just one example of the wave of digital transformation sweeping healthcare facilities in China. The Chinese government has implemented a raft of measures to drive the digital transformation of the Chinese health system.
These important measures address the following challenges:
Rapidly growing medical demands
An ageing population, increasing prevalence of chronic diseases, and higher expectations for medical care are driving the growth of demand for medical services. Recently, demand for medical care has been growing at a pace that has been difficult to meet. The Chinese population is continuing to age, so the health system in China will continue to face major challenges. Digital technology enables the health system to improve operational efficiency and clinical outcomes.
Fast-increasing health expenditure
Government health expenditure grew quickly at a CAGR of 10% between 2014 and 2019. This represents a major problem in terms of financial sustainability. Thus, controlling the cost of government health expenditure is a major challenge.
The uneven use of different types of medical facilities
In China, the central government sets the prices that hospitals charge. This can lead to disparities in supply and demand. Currently, people tend to prefer to use hospitals that are centers of excellence (Tier 3 hospitals), rather than hospitals that are cheaper but lower end.
Currently, many top-tier hospitals face an excess of demand, while low-level hospitals and medical facilities are underutilised. The multitiered healthcare model is designed to address this problem.
Under multitiered healthcare models, a medical consortium is set up to integrate the health service among the various levels of medical facilities. Providers within the consortium share patient data and medical resources, referring patients upward or downward. This system requires electronic health data sharing and interoperability across medical facilities.
The Chinese government has been vigorously driving the digital transformation of its health system. Since 2017, dozens of policies have been issued to facilitate the digitalisation of medical institutions’ information systems. This is known as the “medical digitalisation” initiative.
These policies included the following:
In 2017, the National Health Commission (NHC) issued a document that laid out the concept of electronic medical records and guidelines for their implementation. After that, in 2018, the NHC urged hospitals to build electronic medical records and kicked off the construction of China’s health information system.
Later in 2018, the NHC defined the criteria used for measuring the adoption of electronic medical records in hospitals. The criteria used a nine-grade model, going from 0 to 8, with 8 meaning excellent adoption and 0 meaning poor adoption.
The NHC set targets requiring all Tier 2 and Tier 3 hospitals to achieve Grade 3 (data sharing across clinical departments) and Grade 4 (data sharing across the organisation) by the end of 2022 (NB, hospitals in China are categorised into three tiers based on their quality of care, equipment, and technology. Tier 1 hospitals are the least advanced, while Tier 3 hospitals are the most advanced).
The “smart hospital” initiative was launched in 2019. “Smart hospitals” are measured in three ways:
- The adoption level of electronic medical records
- The adoption of digital technology for healthcare
- Hospital management
All public hospitals were required to transform themselves into smart hospitals per a timetable by 2025. Policies have been issued to promote telemedicine to integrate online and offline medical services.
In 2021, the National Health Security Administration (NHSA) launched a Three-Year Action Plan for Payment Reform. This plan will roll out diagnosis-related groups (DRG) and Diagnosis-Intervention Packet (DIP) payment systems among hospitals under state health insurance coverage by 2025 to control medical costs.
DRG is a payment management system to categorise patients with similar clinical diagnoses and determine payor reimbursement rates. DIP is a payment management model using big data to fine-tune the categorisation of diagnoses already established in the DRG system.
The adoption of DRG and DIP systems will help control medical costs. The implementation of DRG and DIP systems requires health data sharing and interoperability among patients, hospitals, and state insurance administrators.
Impact and progress
Driven by government-led initiatives, the digitalisation of the information system in China’s hospitals has been greatly accelerated. By 2020, the average grading of electronic medical records reached 3.46 in Tier 3 hospitals and 2.03 in Tier 2 hospitals.
In 2021, the National Medical Insurance Service Platform was launched and put into use. This platform is designed to implement DRG and DIP systems to connect medical financial data among patients, hospitals, and state insurance administrators. By 2021, more than 100 cities started to implement the DRG and DIP payment systems as a pilot run. The effect of DRG and DIP implementation on medical cost saving will play out in the coming years.
The “smart hospital” initiative has greatly promoted digitalised services and improved operational efficiency. The appointments scheduled via digital tools (e.g., smartphone applications and websites) accounted for nearly 50 per cent of the total appointments in Tier 3 hospitals, an increase from 32 per cent in 2015.
Trend and forecast
The implementation of the “medical digitalisation” initiative has significantly stimulated the health IT market in China. Omdia estimates the China health IT market reached Y80bn ($12bn) in 2021.
Looking forward, with the rollout of the “medical digitalisation” initiative alongside the number of hospitals increasing by 1,200 every year and the ongoing expansion of existing hospitals (see China Healthcare Market Update – July 2021: What is happening in the China healthcare sector?), Omdia estimates the health IT investment in China will accelerate in the coming years.
By 2025, hospitals will have to upgrade their IT systems to adapt to DRG and DIP payment systems and to achieve a higher level of digital technology adoption.
Omdia projects China’s health IT market will demonstrate strong growth with a CAGR of 15 per cent into 2025 when this market reaches Y140bn ($20bn). China’s health system is still in its early stages of digital transformation. There are strong expectations for China’s health system to continue advancing quickly in terms of the adoption of digital technologies.
Sally Ye is the Healthcare Technology Analyst at Omdia.