Members of Nashville's Frist family, which helped start the for-profit hospital chain HCA Inc., are launching a company to take the U.S. system of managing and operating hospitals to China.
China Healthcare Corp., which will be based in Nashville, said it has an initial agreement with a city southeast of Shanghai to build and operate a hospital that would replace an existing location.
The startup would own a 70 percent stake in the joint venture, while the government of Ningbo would own the remaining 30 percent. It's unclear at this early stage how much the company would invest in the deal.
The agreement requires approval from the Chinese ministries of health and commerce, a process that, on average, takes up to nine months, said Chuck Elcan, president of China Healthcare and son-in-law of HCA co-founder Dr. Thomas F. Frist Jr. Frist is an adviser to China Healthcare and a co-investor in the venture, which is separate from HCA, the nation's largest private operator of hospitals.
"We see an opportunity to manage hospitals like they are here in the U.S.," Elcan said. "But we may get into this and decide it's too big a risk. If it works, we'll see if there's opportunities to grow through building or acquiring more hospitals."
China Healthcare is launching as the Asian nation expands its state-run insurance programs for residents and makes improvements to health-care services whose quality and availability can vary widely between rural and urban areas.
"The government will allow private sector participation where it is appropriate," said Tsung-Mei Cheng, a health policy analyst based in Princeton, N.J.
Project faces obstaclesElcan, who spent the past five years as an executive vice president with HCP Inc., running the California-based health-care real estate investment trust'smedical office division out of Nashville, said the general acute care hospital planned for China would serve private-pay patients and people whose health-care costs are paid for by the Chinese government.
He acknowledges obstacles, including a language barrier and a heavily regulated Chinese health-care system. China Healthcare has a Chinese partner that would be involved in operations there if the deal to build the 500- to 600-bed hospital that would replace the current 150-bed facility were approved, he said. Profits or losses would be shared with the company's government partner.
Hamed Khorsand, an analyst with research firm BWS Financial in Los Angeles, said companies such as China Healthcare would have to make gradual changes to the way a hospital would be operated to minimize conflicts with Chinese culture.
China Healthcare would not be the first U.S. health-care operator to enter the Chinese market.
Julie Chen, an analyst at CRT Capital in Stamford, Conn., said that other companies have been able to secure approval for such ventures from Chinese authorities in large part because of the relationships they worked to develop inside the country.
Chen cited how executives of Bethesda, Md.-based Chindex International were able to obtain approval for its network of hospitals and clinics, which target diplomats, expatriates and wealthy Chinese, by gaining an understanding of Chinese business culture and practices after doing business there for more than 20 years.
"It's going to be an interesting business model," she said, adding that the success of China Healthcare would depend in part on how well the company differentiates its hospital from other Chinese public hospitals.
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