Disruptive Innovation through Digital Transformation: Multi-Sided Platforms of E-Health in China [1st ed.] 9789811539435, 9789811539442

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Xue Han Yuanyuan Wu Jie Zheng

Disruptive Innovation through Digital Transformation Multi-Sided Platforms of E-Health in China

Disruptive Innovation through Digital Transformation

Xue Han Yuanyuan Wu Jie Zheng •

•

Disruptive Innovation through Digital Transformation Multi-Sided Platforms of E-Health in China

123

Xue Han Chinese Association for Science of Science and S&T Policy Beijing, China

Yuanyuan Wu Lakehead University Orillia, ON, Canada

Lakehead University Orillia, ON, Canada Jie Zheng Shulan Medical Group Hangzhou, Zhejiang, China

ISBN 978-981-15-3943-5 ISBN 978-981-15-3944-2 https://doi.org/10.1007/978-981-15-3944-2

(eBook)

Jointly published with Shanghai Jiao Tong University Press The print edition is not for sale in China Mainland. Customers from China Mainland please order the print book from: Shanghai Jiao Tong University Press. © Shanghai Jiao Tong University Press and Springer Nature Singapore Pte Ltd. 2020 This work is subject to copyright. All rights are reserved by the Publishers, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. The publishers, the authors, and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the publishers nor the authors or the editors give a warranty, express or implied, with respect to the material contained herein or for any errors or omissions that may have been made. The publishers remain neutral with regard to jurisdictional claims in published maps and institutional affiliations. This Springer imprint is published by the registered company Springer Nature Singapore Pte Ltd. The registered company address is: 152 Beach Road, #21-01/04 Gateway East, Singapore 189721, Singapore

Acknowledgements

We want to express our deepest gratitude to Fonds de Recherche du Québec— Société et Culture (FRQSC), for continuously supports the studies on MSP on e-Health.

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About This Book

Digital transformation brings about disruption, in which the multi-sided platform (MSP) rises as a new business model, transforming many industries. This book first provides an overview of the managerial and economical characteristics of the MSP drawing on the past research and, then, establishes an analytical framework on disruption driven by the multi-sided platforms. The book then highlights the distinctive characteristics of the Chinese medical sector and its evolution along the regulatory reforms in the past decades. Under this backdrop, our comparative analysis of the selected Chinese and American multi-sided medical service platforms against the industry value chain allows for an in-depth understanding of how the disruption has unfolded. Our research set out by defining the customer’s demands on e-Health, followed by a demonstration of the evolutionary path through which emerging multi-sided platforms address the demands, solve problems, and better serve the customers and patients in the Chinese healthcare market. Patient engagement, as a specific key component fundamentally changed by the digital tools, is also discussed. We provide a multi-facet account of the Chinese healthcare digital transformation, which not only illustrates the important role MSPs play in the disruption, but also elaborates the possible impacts digital transformation has on a sector’s competitiveness, especially in emerging economies.

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Contents

1 Demands for Healthcare Industry Changes Provide the Soil for Digital Transformation . . . . . . . . . . . . . . . . . . . . . . 1.1 Problems in the Healthcare Industry and the Impact of Digital Transformation . . . . . . . . . . . . . . . . . . . . . . . . . . 1.2 The Transformation Scenario in E-Health . . . . . . . . . . . . . . . 1.3 Distinctive Chinese Healthcare Evolution Surpassing Typical Digital Transformation Developments . . . . . . . . . . . . . . . . . 1.4 Overview of the Book . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.4.1 Starting Point . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.4.2 Theoretical Approach . . . . . . . . . . . . . . . . . . . . . . . . 1.4.3 Research Methodologies . . . . . . . . . . . . . . . . . . . . . . 1.4.4 Research Route . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.5 Structure of the Book . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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2 Digital Transformation, Multi-sided Platforms, and Analytical Framework . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1 Transformation by Business Model Innovation . . . . . . . . . . . . 2.1.1 Disruption in Initially Serving the New Market: The Ignored Low-End Market or Non-existing Market . 2.1.2 Disruption in Serving Complementary Markets . . . . . . 2.1.3 Disruption in Integrating and Serving the Whole Value Chain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2 Multi-sided Platforms (MSPs) . . . . . . . . . . . . . . . . . . . . . . . . 2.2.1 Characteristics of MSPs . . . . . . . . . . . . . . . . . . . . . . . 2.2.2 The Importance of MSP Governance . . . . . . . . . . . . . 2.2.3 Two-Stage Management of MSPs . . . . . . . . . . . . . . . . 2.2.4 Solving Chicken-and-Egg Problems . . . . . . . . . . . . . . 2.3 Analysis Model Suggested . . . . . . . . . . . . . . . . . . . . . . . . . .

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3 Distinctive Characteristics of the Chinese Healthcare Industry . 3.1 Ongoing Reforms in the Chinese Healthcare System . . . . . . 3.2 The Current E-Health Ecosystem in China . . . . . . . . . . . . . . 3.2.1 Key Players in the Chinese E-Health Ecosystem . . . . 3.2.2 Dominant Players in the Chinese E-Health Ecosystem 3.2.3 Interactions Between Players in the E-Health Ecosystem . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.3 Distinctive Characteristics of the Chinese Healthcare System 3.3.1 The Huge Medical Demands and Significant Imbalances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.3.2 The Improving Medical Insurance System and Higher Percentage of Out-of-Pocket Payment . . . . . . . . . . . . 3.3.3 High Concentration of Visits in Comprehensive Hospitals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.3.4 Ongoing Reform on the Multi-site License of Certified Physicians . . . . . . . . . . . . . . . . . . . . . . . 3.3.5 Pressures of Career Advancement for Physicians . . . . 3.4 Great Opportunities for E-Health and MSP to Disrupt the Traditional Chinese Healthcare Market . . . . . . . . . . . . . . 4 Emerging E-Health MSPs in China . . . . . . . . . . . . . . . . . . 4.1 www.chunyuyisheng.com . . . . . . . . . . . . . . . . . . . . . . . 4.1.1 The Involved Sides . . . . . . . . . . . . . . . . . . . . . . 4.1.2 Services and Advantages . . . . . . . . . . . . . . . . . . 4.1.3 The Chicken-Egg Solution . . . . . . . . . . . . . . . . . 4.1.4 Cooperation-Competition with Other Practitioners 4.2 www.dxy.cn . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.2.1 The Involved Sides . . . . . . . . . . . . . . . . . . . . . . 4.2.2 Services and Advantages . . . . . . . . . . . . . . . . . . 4.2.3 The Chicken-Egg Solution . . . . . . . . . . . . . . . . . 4.2.4 Cooperation-Competition with Other Practitioners 4.3 www.xingren.com . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3.1 The Involved Sides . . . . . . . . . . . . . . . . . . . . . . 4.3.2 Services and Advantages . . . . . . . . . . . . . . . . . . 4.3.3 The Chicken-Egg Solution . . . . . . . . . . . . . . . . . 4.3.4 Cooperation-Competition with Other Practitioners 4.4 www.guahao.com . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.4.1 The Involved Sides . . . . . . . . . . . . . . . . . . . . . . 4.4.2 Services and Advantages . . . . . . . . . . . . . . . . . . 4.4.3 The Chicken-Egg Solution . . . . . . . . . . . . . . . . . 4.4.4 Cooperation-Competition with Other Practitioners 4.5 www.manyoubang.com (Manyoubang) . . . . . . . . . . . . . 4.5.1 The Involved Sides . . . . . . . . . . . . . . . . . . . . . . 4.5.2 Services and Advantages . . . . . . . . . . . . . . . . . .

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4.5.3 The Chicken-Egg Solution . . . . . . . . . . . . . . . . . 4.5.4 Cooperation-Competition with Other Practitioners 4.6 www.wesure.cn . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.6.1 The Involved Sides . . . . . . . . . . . . . . . . . . . . . . 4.6.2 Services and Advantages . . . . . . . . . . . . . . . . . . 4.6.3 The Chicken-Egg Solution . . . . . . . . . . . . . . . . . 4.6.4 Cooperation-Competition with Other Practitioners 4.7 Disruptive Modelling . . . . . . . . . . . . . . . . . . . . . . . . . .

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5 Pair Comparison Between Chinese MSPs and American MSPs 5.1 Rationale of the Comparison . . . . . . . . . . . . . . . . . . . . . . . . 5.2 Selected MSPs in the U.S. . . . . . . . . . . . . . . . . . . . . . . . . . 5.2.1 www.onemedical.com (One Medical) . . . . . . . . . . . . 5.2.2 Doximity.Com (Doximity) . . . . . . . . . . . . . . . . . . . . 5.2.3 www.dlife.com (DLife) . . . . . . . . . . . . . . . . . . . . . . 5.2.4 www.patientslikeme.com (Patientslikeme) . . . . . . . . . 5.3 Comparison by Functions . . . . . . . . . . . . . . . . . . . . . . . . . . 5.3.1 Quality Care in the Primary Care Market . . . . . . . . . 5.3.2 The Network of Clinic Offices . . . . . . . . . . . . . . . . . 5.3.3 Chronic Disease Patient Communities . . . . . . . . . . . . 5.3.4 Integrating Physicians to Online Communities . . . . . .

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6 Patient Engagement in Healthcare Industry Transformation . . . . . . . . . . . . . . . . . . . . . . 6.1 Facilitation of the Digital Technology . . 6.2 Patient Info-Seeking and Exchanging . . . 6.2.1 Hypothesis Development . . . . . . 6.2.2 Methodology . . . . . . . . . . . . . . . 6.2.3 Data Analysis . . . . . . . . . . . . . . 6.2.4 Conclusions . . . . . . . . . . . . . . . . 6.3 Value-Based Care . . . . . . . . . . . . . . . . .

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7 Conclusions and Future Research . . . . . . . . . . . . . . . . . . . . . . . . . . .

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References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103

List of Figures

Fig. 1.1 Fig. 2.1 Fig. 3.1 Fig. 3.2 Fig. 3.3 Fig. 3.4 Fig. 3.5

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Fig. 3.8 Fig. 6.1 Fig. 6.2 Fig. 6.3 Fig. 6.4

Research route of the study . . . . . . . . . . . . . . . . . . . . . . . . . . . . Analysis model for MSPs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Alibaba corporate-owned e-Health platforms (Available at: http://www.ebrun.com/20180419/273213.shtml) . . . . . . . . . . Corporate-owned medical platforms by Tencent (Available at: http://www.ebrun.com/20180419/273213.shtml) . . . . . . . . . . The ecosystem of Chinese e-Health . . . . . . . . . . . . . . . . . . . . . The percentage of population aged 65 and older in China. Data source: Chinese National Statistic Report, 2017 . . . . . . . . Big gap between the demand and supply of the practicing physicians. Data source: Chinese National Statistic Report, 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Payment distribution of the medical expenditures. Data source: Chinese National Statistic Report, 2017 . . . . . . . . . . . . . . . . . . Medical visits in different medical service providers (in 100 million). Data source: Chinese National Statistical Report, 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Percentage of the medical visits in different service providers. Data source: Chinese National Statistical Report, 2017 . . . . . . . Search results in Google on May 10, 2016 . . . . . . . . . . . . . . . . Baidu search results for “soft tissue sarcoma” before the Wei event . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The verification and advertisement indications on Baidu . . . . . The four kinds of patients and their health and disease literary positions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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List of Tables

Table Table Table Table Table Table

2.1 2.2 3.1 3.2 3.3 3.4

Table 3.5 Table 4.1 Table 5.1 Table 5.2 Table 5.3 Table 5.4 Table 5.5 Table 6.1 Table 6.2 Table 6.3

Papers on MSPs in different databases . . . . . . . . . . . . . . . . . . Original definitions of MSPs . . . . . . . . . . . . . . . . . . . . . . . . . Projects invested by Alibaba as of April, 2018 . . . . . . . . . . . The e-Health related projects invested by Tencent . . . . . . . . . The main indicators of the four countries . . . . . . . . . . . . . . . The imbalance of medical resources in urban and rural areas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The different medical organizations in China . . . . . . . . . . . . . Disruptions brought by the emerging platforms . . . . . . . . . . . Function comparison between Chinese and American MSPs of e-Health . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Comparison of One Medical and Guahao in quality primary care . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Comparison of the offline network of clinics . . . . . . . . . . . . . Comparison of the chronical disease patients platforms . . . . . Comparison in integrating physicians to online physician communities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The role of patients in the six selected Chinese platforms of this study . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Differences across the four patient groups in e-Health . . . . . . The comparison between Google and Baidu . . . . . . . . . . . . .

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Chapter 1

Demands for Healthcare Industry Changes Provide the Soil for Digital Transformation

The ongoing digital transformation disrupts all industrial and social sectors. For example, with the merger of Internet technology and renewable energy described as the “Third Industrial Revolution” (Rifkin 2011), and the “sharing economy” of Uber and Airbnb restructuring their industries, more disruptions wait in the wings (Kane et al. 2015). Although there is no consensus about the definition of digitalization and digital transformation, one can still conclude that its extent is becoming wider and wider, touching nearly all aspects of industry and society. The definition of digital transformation has evolved from its application to an enterprise in the early stage to the application to the whole society, now referring to the use of technology to radically improve performance or reach of enterprises (Westerman et al. 2011), the shifts in society and organizations due to the increasing use of digital technologies (Fitzgerald et al. 2013; Seeger and Bick 2013), and the global megatrend that fundamentally changes existing value chains across private and public sectors (Collin et al. 2015). The total and overall societal effect of digitalization (Khan 2016) and the combined effects of several digital innovations bring about novel actors (and actor constellations), structures, practices, values, and beliefs that change, threaten, replace or complement existing rules of the game within organizations and fields (Hinings et al. 2018). By speeding up and illuminating extant and ongoing horizontal and global processes of change in society (Khan 2016), the extensive digital transformation highlights the process of transformation, which differentiats itself from the digitalization focusing on the results of digitalization but not process, changing producerconsumer relationships (Piccinini et al. 2015). It is also formulating new ways of organizing human interactions (Olleros and Zhegu 2016) and bringing more and more disruptive innovations.

© Shanghai Jiao Tong University Press and Springer Nature Singapore Pte Ltd. 2020 X. Han et al., Disruptive Innovation through Digital Transformation, https://doi.org/10.1007/978-981-15-3944-2_1

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1 Demands for Healthcare Industry Changes Provide the Soil …

1.1 Problems in the Healthcare Industry and the Impact of Digital Transformation It is not an overstatement to assert that poverty and climate change are among the most pressing problems confronting nations today. The health and well-being of populations is of central importance and consumes significant national resources (Agarwal et al. 2010). Enormous amounts of money have been invested to make the healthcare system workable, yet healthcare industry problems persist. The burden of infectious and chronic diseases among the world’s poorest people is enduring and unmanageable, and profound disparities in health and life expectancy between rich and poor are resistant to change (Gostin et al. 2009). Domestically, a picture of fragmentation, inefficiency, dysfunction, and epidemic hazards has emerged: profit margins are concentrated among industry producers instead of among all players, and clinical outcomes are of low quality, and medical resources are misused nationwide (DeNavas-Walt et al, 2013; Caldwell 2013; Vitalari 2016). Porter and Teisberg (2004) identified a number of business and economic problems that contribute to the ineffectiveness of the US healthcare system. They pointed out that the industry is fragmented and characterized by little or no competition. Other problems include a concentration of margins among industry producers (pharmaceuticals, biotech, and medical devices), low quality clinical outcomes (DeNavas-Walt et al. 2013), and a misuse of emergency care departments for diagnosing and treating a wide spectrum of conditions (Caldwell 2013). Atluri et al. in McKinsey (2016) highlighted six common causes of consumer dissatisfaction: suboptimal utilization, price dispersion, information asymmetry, accessibility, treatment noncompliance, and transactional friction. Porter and Lee (2013) concluded that the industry must shift into the prevention, diagnosis and treatment of individual health conditions or co-occurring conditions. In other words, the healthcare industry must move to a structure in which all industry segments promote health outcomes, employ standardized practices organized around disease types, and focus on patient-centered, valueadjusted clinical outcomes. The healthcare industry is on the edge of transformative changes. Elton and O’Riordan (2016) argued that the healthcare industry evolves from an input-based approach (inputs being patients seen, or drugs and devices sold) to an output-based approach (outputs being patients’ best possible health outcomes). Prioritizing individual patients with a specific disease or health condition can drive real value creation through therapies (drugs and combinations), interventions, and services. With healthcare is pivoting to the patient, the industry is evolving into a value-based system. New business models are emerging, breaking old boundaries. Strong demands for change in the healthcare industry have provided an ideal trial space for a vibrant digital transformation. According to Agarwal (2010), there is substantial consensus that the digital transformation of Heath Information Technology (HIT) across the healthcare ecosystem, in conjunction with other complementary changes, can reduce costs and improve quality. According to Vitalari (2016), among the four critical forces that will drive the US healthcare industry for at least the

1.1 Problems in the Healthcare Industry and the Impact of Digital …

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next two decades are advances in digital, information, computerization, and network technologies. Technological advances have led to an unexpected but now dominant model. This has enabled entire new levels of ad hoc and structured collaboration. Furthermore, the rapid expansion of digital data has opened new horizons for virtually every segment of the industry. There is a vast global network of digital business platforms that serves interconnected business ecosystems of established industry players, start-ups, and individuals with greater collaboration among them. This has increased the transparency of industry transactions and care outcomes. According to Atluri et al. (2016), the healthcare industry is already shifting toward increased consumer control, while new digital/mobile health technologies are likely to accelerate this trend. Technology companies—many of which are new entrants to the healthcare sector—are fostering the shift by offering consumers a growing array of healthrelated applications, programs, monitors, and devices. Although these technologies currently pose little risk to incumbents, they could create considerable disruption in the not-too-distant future. We believe the time for incumbent service providers and insurers is now, because many of their current sources of advantage (e.g., local presence, information asymmetry) may disappear very soon. The impact of engaged, tech-enabled healthcare consumers may not be imperative for five to ten years, but by then it may be too late.

1.2 The Transformation Scenario in E-Health Eysenbach and Consort (2001) defined e-Health as health services and information delivered or enhanced through the Internet and related technologies. How eHealth is transforming the healthcare industry has attracted wide attention. Vitalari (2016) predicted that there are three stages for the healthcare industry to be digitally transformed: • The current state of the industry (Stage I) is best characterized as flux and uncertainty. Transformation occurs simultaneously at the consumer level, enterprise level, and industry level, involving five sets of stakeholders: consumers, care providers, insurers, producers and innovators, and regulators. • In Stage II, there is an uneven period of adjustment and resolution that will result in a “directed care” delivery model. • Stage III will commence with proven, very low cost, and high throughput genetic sequencing that will enable the mass consumption of genomics-related interventions and treatments. This will move the industry to a system and biological model of care, driven by massive and personally collected bio-sensed data, machine cognition and analytics, and a radically different approach to wellness. Besides the widely adopted EHR (Electronic Health Record) application, current digital transformation patterns in healthcare sectors can be categorized as follows.

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1 Demands for Healthcare Industry Changes Provide the Soil …

• More medical services are being digitalized: companies are using the Internet to deliver health programs to their employees, many insurance companies provide web-based health portals for their customers, and healthcare providers are experimenting with delivering services remotely via the Internet (Agarwal et al. 2011a). • Increased patient engagement in healthcare decision-making: the Internet has become a major resource for consumers searching for health information, with 61% of adults searching online for health information in 2009 (Fox and Jone 2009). The more patients are informed, the more patient engagement is promoted. Health researchers engage patients and the public through information sharing, opinion eliciting, and interactive participation to identify needs and ways of changing (Abelson 2015), and e-Health adoption performance and issues of the patients are studied (Agarwal et al. 2011a); • Booming online health communities and social networks: with the emergence of online health communities, direct interaction between patients and service, medicine, and equipment providers has been greatly promoted (Agarwal et al. 2011b; Vitalari 2016). Among the typical cases, Novartis employees collaborate with patient groups in online communities to develop new drugs, and PatientsLikeMe allows pharmaceutical companies to recruit clinical trial participants directly on its platform. Private investments and capital transitions for healthcare technologies reached approximately US $3.3 billion in 2014. Most of the money was spent in three categories: administrative tools, care planning and data exchange, and remote monitoring. Furthermore, investments are increased rapidly for technologies that enable remote medical consultations, assist quality-oriented and cost effective medical decisions, and improve clinical effectiveness, and reduce clinical risk. Earlier evidence suggests that these technologies can improve the quality of care delivered and affect the individuals’ quality of life (Carter et al. 2016).

1.3 Distinctive Chinese Healthcare Evolution Surpassing Typical Digital Transformation Developments Disrupted by digital transformation, the already distinctive Chinese healthcare industry is becoming even more distinguished. Firstly, the huge medical demand confronting China’s highly concentrated resource aggregation in top-level comprehensive hospitals represents an urgent call for new, alternative medical services formats. Secondly, the higher out-of-pocket payment percentage, corresponding with the high autonomy of Chinese patients, opens wide room for new healthcare startup companies and continuous medical industry reforms regulating hospital management and physicians. As a result, new entrants and new formats of medical providers are rapidly emerging in China.

1.3 Distinctive Chinese Healthcare Evolution Surpassing …

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Advanced information technologies foster the emergence of a new competitive landscape of disruptive challenges in the medical industry. While incumbent hospitals starts to engage in the digitalization of medical services, newcomers emerg from various fields. Private hospitals are launching and developing quickly to compensate for scarce providers of specialized services. Major online medical service providers such as Ali, Tencent, and Baidu are engaged in offering both traditional and new medical services by leveraging their large-scale medical resources. Many multisided platforms startups with the access to the medical practitioners are gaining market shares rapidly by filling service gaps in existing medical markets. While medical insurance companies develop their online presence, new startups—in some cases backed by existing online giants—are attracting more and more clients with attractive insurance packages while simultaneously incurring lower operational costs with online platforms or mobile apps. While the problematic medical market is being disrupted by the rapid development of digital transformation, the industry is facing major changes. New medical providers, insurance providers, and digitalized medical services have broken the monopoly of the public hospitals, and a diversified healthcare market is emerging. It is difficult to say at this time whether the changes occurring in the Chinese healthcare market will extend worldwide. Notwithstanding, this study of disruptive innovation in the Chinese medical market at the advent of digital transformation will delineate changes occurring at the present time and provide new insights for speculating on future developments.

1.4 Overview of the Book The book aims to explore the avenues that digital transformation disrupts the Chinese medical industry and identify some general rules on how an e-Health multi-sided platform (MSP) operates.

1.4.1 Starting Point Multi-sided platforms for e-Health are relatively new. When we began research for this book in May 2014, a keyword search for “two-sided platform” in combination with “health” in the Scopus database yielded only two results. In August 2016, the same keyword search yielded eight results, six of which were relevant, and the other two were conference introductions without author names. We decided to focus on the management of multi-sided platforms, and then apply the rules of multi-sided platforms to health.

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1 Demands for Healthcare Industry Changes Provide the Soil …

1.4.2 Theoretical Approach This study integrates theories from three different streams: MSP theories, healthcare industry value chain theories, and patient engagement theories. Given that research on MSPs is so new that no definitions of MSPs are yet widely accepted, we began with a search of definitions for MSPs. After reviewing the literature, we extracted a reasonable definition that we used in this study. On this basis, we articulated the managerial and economic characteristics of MSPs, followed by a thorough analysis of MSP governance influenced by these characteristics, and the analytical framework is suggested for the case studies. Next, employing the medical industry value chain, we analyzed how digital transformation has penetrated every aspect of the sector, and we identified the components in the value chain that have not been influenced. MSPs engaged at different stages of the value chain were selected and studied in the analytical framework drawn from the literature review. By analyzing these existing innovative platforms with respect to the whole medical industry value chain, we were able to identify how initially unmet demands were satisfied by innovative MSPs. Lastly, since patient engagement is an essential factor that differentiates MSPs from other forms of e-Health, theories of patient engagement (including health literacy and e-Health literacy) were employed to explore the antecedents and outcomes of patient engagement in the medical process through an MSP. The research literature of six databases including Elsevier, Emerald, ACE, IEEE, Science-direct, and Google Scholar were collected to formulate the basis of our analysis.

1.4.3 Research Methodologies The research for this study draws on quantitative and qualitative methods applied to a broad range of primary and secondary data. The main part of this study includes detailed case studies of ten selected platforms, including six Chinese platforms and four American platforms. The data for each case was collected mainly from the platforms themselves. This data was then analyzed, using both qualitative and quantitative methods, within the theoretical framework of MSPs extracted from the literature review. The platform data consisted of information regarding four sided-member groups: • Group I consisted of medical service providers, including hospitals and district medical service agencies; • Group II consisted of medical product suppliers, including drug and equipment suppliers, drug stores ; • Group III consisted of other third parties, such as health insurance providers; • Group IV consisted of e-Health related government agencies.

1.4 Overview of the Book

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Complementary to the case studies are surveys, which were designed to collect primary data on nuanced aspects of patient engagement, such as special events participated in, special information of interest to patients, and rationales. In this study, we surveyed some 100 heavy Internet users with experience searching for medical information on Baidu and Google.

1.4.4 Research Route The theoretical and methodological approaches adopted in this study are outlined in the following research route (Fig. 1.1). After obtaining a thorough understanding of the Chinese healthcare industry, this study identifies a match between e-Health demands and currently available platforms, which allows us to propose a general governance framework for MSPs fostering patient participation.

1.5 Structure of the Book This chapter introduces the healthcare market problems, the impact of digital transformation, and the transformation scenario in e-Health in China. Six chapters are organized as the following. Chapter 2 provides a literature review of digital transformation and MSPs, which suggests the analytical framework used in this book for the e-Health sector. Chapter 3 presents a detailed analysis of the Chinese health sector and its distinctive characteristics that contribute to the emergence of e-Health platforms. Chapter 4 presents six case studies of selected Chinese MSPs in correspondence to the proposed analytical frameworks. The case studies involve the analysis of the user groups, services and advantages, the solution to the chicken-egg problems, and cooperation-competition with other practitioners. Chapter 5 analyzes four selected American e-Health MSPs and compares them with the Chinese platforms on MSP functions, which helps identify the distinctiveness of the Chinese e-Health sector. Chapter 6 explores ways that patients can be engaged in MSPs. Our MSP case studies show that patient engagement is essential for digital transformation in healthcare. However, due to the limitations in health-literacy and disease-literacy, patients are greatly restricted from a high involvement in the medical service delivery processes. A preliminary study on how value-based care can promote patient engagement is also presented in this chapter. Chapter 7 presents our conclusions and some discussions about future research directions. We summarize the contributions of this book and call for more indepth case studies of medical MSPs as well as further research on patient engagement.

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Literature review of digital transformation, disruptive innovation and MSP Analytical framework of disruption and MSP governance

Literature review of Chinese e-health sector

Explore methodologies

Collect data and information

Surveys

Case studies

Match the demand and supply

Making draw conclusion

Further future research Fig. 1.1 Research route of the study

Chapter 2

Digital Transformation, Multi-sided Platforms, and Analytical Framework

Signs of the world going through an era of unprecedented technological and societal changes are all around us today. Many new ideas have moved swiftly from futuristic dream to solid reality (Olleros and Zhegu 2016). Popular digital brands such as Amazon, Apple, and Google have penetrated into day-to-day life with tailored and convenient products (Westerman et al. 2011), and everyone is being deeply affected by this irresistible trend. The application of digital technologies has brought with it new ways of living, which has affected production in all its aspects, leading scholars to describe the phenomenon as a “digital transformation” (Coyle 2006; Housewright and Schonfeld 2008; Westerman et al. 2011; Berman 2012; Chew 2013; Bounfour 2016; Olleros and Zhegu 2016; Khan 2016; Davies et al. 2017).

2.1 Transformation by Business Model Innovation A significant characteristic of digital transformation is that it changes the world through disruptive innovation. Disruptive innovation was first defined and analyzed by the Harvard Business School professor Clayton Christensen (Bower and Christensen 1995; Christensen 1997). Derived from the term “disruptive technology”, disruptive innovation was used initially by Christensen when he recognized that technologies are rarely either intrinsically disruptive or sustaining; instead, it is the business model enabled by a technology that creates disruptive impacts (Christensen 2003; Johnson et al. 2008). Other scholars have argued likewise. Business model innovation, essentially driven by digital technologies, has enabled new ways of creating and capturing value. It has also fostered new exchange mechanisms, new transaction architectures, and new boundary-spanning organizational forms (Al Debei and Avison 2010; Gordijn and Akkermans 2001; Lindgardt et al. 2009).

© Shanghai Jiao Tong University Press and Springer Nature Singapore Pte Ltd. 2020 X. Han et al., Disruptive Innovation through Digital Transformation, https://doi.org/10.1007/978-981-15-3944-2_2

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Disruptions that have impacted incumbents have occurred in three specific ways: • disruption in serving a new market; • disruption in serving a complementary market; • disruption in integrating and serving the whole value chain.

2.1.1 Disruption in Initially Serving the New Market: The Ignored Low-End Market or Non-existing Market Twenty years after initiating and developing his disruptive innovation theories, Christensen (2015) further articulated his ideas about disruptive innovation: disrupters start by appealing to low-end or unserved consumers and then migrate to the mainstream market. Low-end footholds exist because incumbents typically try to provide their most profitable and demanding customers with ever-improving products and services, while paying less attention to less-demanding customers. This opens the door to a disrupter who focuses on providing low-end customers with a “good enough” product at first and, then, migrates to improve the product to satisfy the high-end customers without the adequate consciousness of the incumbents. Disrupters can get success either by creating a market that never existed before or breaking resetting marketing rules. The emergence of the new personal photocopier market that broke the dominance of Xerox in 1970s is a good example of this disruption (Christensen, 2015).

2.1.2 Disruption in Serving Complementary Markets New markets can be complementary markets to a mainstream market. Westerman et al. (2011) describe companies digitally modifying the businesses by integrating digital or service wrappers around traditional products, introducing digital products that complement traditional products to create new digital businesses. When a firm uses digital technologies to support new ways of doing business, which supplements existing activities and processes, a complementary market is created that extends the existing market. When new ways of doing business replace traditional ways, the existing complementary needs are served simultaneously by the new ways (Lindgardt et al. 2009; Massa and Tucci 2013; Li 2018). Extensions are based on complementary elements while replacement indicates transformation to new businesses.

2.1 Transformation by Business Model Innovation

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2.1.3 Disruption in Integrating and Serving the Whole Value Chain Besides targeting low-ends or new markets, another form of disruption is defined as Coherent Value Network by Clayton Christensen (christenseninstitute.org). This refers to a network where suppliers, partners, distributors, and customers are all better off when the disruptive technology prospers. Currently, one of the most significant functions of digital transformation is to engage customers in the value creation process. Due to the increased interconnectedness (Berman and Marshall 2014; Chew 2013; Westerman et al. 2014; Nachira et al. 2007; Bounfour 2016; Piccinini et al. 2015; Berman 2012), diminishing time lag, and abundance of information (Berman 2012; Chew 2013; Westerman et al. 2014; Rogers 2016; Korhonen 2015; Piccinini et al. 2015; Bounfour 2016), the rise of financially accountable, technology-enabled consumers could deeply influence today’s healthcare value chain (Atluri et al. 2016). The following changes affecting healthcare customers are occurring. • Customer value propositions are being reshaped, which changes the customers’ willingness to pay and the purchasing decisions (Clemons et al. 2017; Kauffman et al. 2010; Berman 2012). • Consumers are becoming clinical data integrators. As such, they are increasingly owning and managing their clinical data, allowing them to make more autonomous decisions about who can access what data and when in clinical, transactional, and administrative settings. Consumers are also producing various reviewing comments about organizations, which results in significant power shifts in market channels and disintermediation. This change has disrupted traditional organizations and created a fundamentally new source of value (Lucas et al. 2013; Piccinini et al. 2015). The value could materialize when consumers select and utilize providers they view as more accessible, convenient, and lower cost (Atluri et al. 2016). • User-engaged product innovation is emerging. Informed consumers are optimizing their choices and, based on that, organizations are optimizing their decisions about product offering. This hyper-differentiation of products is also enabling organizations to address the niche markets that appreciate being different and making consumers in these niche markets more loyal to the organizations (Piccinini et al. 2015). • Greater customer-producer-community interaction and collaboration. Supported by interactive tools, consumers are becoming experts on product and service offerings and possess merits as they decide who to trust, where to make their purchases, and what to buy. In the process of product co-creation, producers are enabling closer and more engaged interactions with consumers, expecting consumers to write positive product reviews or create digital word-of-mouth about certain producers (Berman 2012; Piccinini et al. 2015). Emerging digital tools are assisting customers in interacting across every phase of the business activity—not just in sales, marketing, and service, but also in product design,

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supply chain management, human resources, IT, and finance. Going beyond traditional partnerships with developers and suppliers, some companies are making their designers and engineers available to customers. Customer interaction in these areas is increasingly leading to open collaboration that is accelerating innovation through online communities. Companies are creating their own virtual communities, or using groups that are already organized by customers (Owen et al. 2007; Berman 2012). In order to generate new customer value propositions, businesses are tailoring or transforming their operating models to develop a new portfolio of capabilities for flexibility and responsiveness for fast-changing customer requirements. At the same time, as an efficient way of integrating stakeholders into an industry’s value chain, the MSP model has gained momentum through successful cases in various sectors. Industry players will need to transform their business and operational models to navigate the upcoming disruption. They will also have to place a premium on strategic audacity and organizational agility, for which some actions will be required.

2.2 Multi-sided Platforms (MSPs) Among all the emerging business models, multi-sided platforms (MSPs) featured with multiple sides of members and intensive direct interactions among the user groups are attracting increasing attention from scholars. MSPs currently represent a dominant business model in a variety of industries, including software, dating, credit card, media, music-sharing, horse-racing, health insurance, retailing and even graduate business school. Successful MSPs have proven to be highly profitable, especially in high-tech businesses driven by information technology such as Microsoft, Apple, Google, Intel, Cisco, ARM, Qualcomm, and EMC. MSPs have not only brought innovation and businesses into a new paradigm, triggering the enthusiasm of academic researchers, but also emerge as one of the most active areas of research in economics and strategy. However, no consensus yet exists on how to properly define the MSP. Hagiu and Wright (2011), for instance, highlight issues of over-inclusiveness or underinclusiveness in existing definitions; instead, they note that MSPs should enable direct interactions between multiple groups of affiliated users. We consulted six databases (ACM, IEEE, ScienceDirect, Emerald, Springer Link, and Google Scholar) to arrive at a robust working definition for MSPs to guide our study. We used the keywords “multi-sided platform” and “two-sided platform” to identify studies for analysis. Before early 2015, search results yielded 470 research papers (Table 2.1), among which 23 papers provide an original definition of MSP (Table 2.2). Table 2.1 Papers on MSPs in different databases Database

ACM

IEEE

Science direct

Emerald

Springer link

Google scholar

Total

25

46

93

31

43

233

2.2 Multi-sided Platforms (MSPs)

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Table 2.2 Original definitions of MSPs Authors (year)

Definitions

Armstrong and Wright (2007)

A multi-sided platform enables interactions between two distinct groups of users, each of whom cares about the attributes of users of the other type on the same platform which they characterize as cross-group network effects

Armstrong and Wright (2007)

If a member of group 1 exerts a large positive externality on each member of group 2, then group 1 will be targeted aggressively by platform

Armstrong (2006)

A multi-sided platform involves two groups of agents who interact via platforms, where one group’s benefit from joining a platform depends on the size of the other group that joins the platform

Caillaud and Jullien (2003)

A multi-sided platform involves the presence of some indirect network externality across distinct groups of intermediaries’ customers.

Choi (2010)

A multi-sided platform involves indirect network effects or inter-group network externalities that arise through improved opportunities to trade with the other side of the market

Evans and Schmalensee (2005)

A multi-sided platform caters to two or more distinct groups of customers. Members of one customer group need members of the other group for a variety of reasons that we will explore. The platform helps these customers get together in many ways and thereby creates value for these customers that they could not readily obtain without the coordination provided by the platform

Evans (2003)

A multi-sided platform involves (1) distinct groups of customers; (2) a member of one group benefiting from having their demands coordinated with one or more members of another group; and (3) an intermediary that can facilitate coordination more efficiently than bi-lateral relationships between the members of the group

Gallaugher and Wang (2002)

A two-sided market is defined as an economic network that has two distinct user groups that provide each other with network benefits

Hagiu and Wright (2011)

A multi-sided platform is an organization that creates value primarily by enabling direct interactions between two (or more) distinct types of affiliated customers

Hagiu and Yoffie (2009)

A multi-sided platform is both a platform and an intermediary. MSPs can insert themselves between you and your customers, though they do not take ownership of the goods and services whose sale they facilitate. MSPs support players that are interdependent, which creates indirect network effects (continued)

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Table 2.2 (continued) Authors (year)

Definitions

Hagiu (2006)

A business is based on a multi-sided platform if it serves two or more distinct types of customers who depend on each other in some important way, and whose joint engagement makes the platform valuable to each other

Hagiu (2007)

A multi-sided platform provides support that facilitates interactions (or transactions) among the two or more constituents (sides) that it serves, such that members of one side are more likely to get on board the MSP when more members of another side do so

Kärrberg(2010)

A multi-sided platform is a relatively new concept whereby one or several platforms facilitate interactions between users on two different sides of a market

Lescop and Isckia (2010)

Multi-sidedness can be created artificially by a group of players in order to capture the whole value of the market or to raise barriers to entry (protecting a core technology from disruption, a proprietary standard, to reinforce the dependency of developers, etc.)

Parker and Van Alstyne (2005)

A multi-sided platform models what they call “two-sided network externality”

Rochet and Tirole (2004)

A multi-sided platform involves one or several platforms that enable interactions between end-users, and try to get the two (or multiple) sides “on board” by appropriately charging each side. That is, platforms court each side while attempting to make, or at least not lose, money overall

Rochet and Tirole (2003)

Many if not most markets with network externalities are characterized by the presence of two distinct sides whose ultimate benefit stems from interacting through a common platform

Roson (2005)

Multi-sided markets are defined as markets in which special services are sold, allowing the interaction of two (or more) parties on a platform, managed by a third entity

Rysman (2009)

Indeed, in a technical sense, the literature on two-sided markets could be seen as a subset of the literature on network effects

Rysman (2009)

(1) two sets of agents interact through an intermediary or platform, and (2) the decisions of each set of agents affects the outcomes of the other set of agents, typically through an externality

Schmalensee and Evans (2007, 2010)

A multi-sided platform is a business in which “pricing and other strategies are strongly affected by the indirect network effects between the two sides of the platform

Wright (2004)

A two-sided market involves two distinct types of users, each of whom obtains value from interacting with users of the opposite type. In these markets, platforms cater to both types of users in a way that allows them to influence the extent to which cross-user externalities are internalized (continued)

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Table 2.2 (continued) Authors (year)

Definitions

Weyl (2010)

Multi-sided platforms tend to emphasize three features: (1) Multi-product firm, where a platform provides a distinct service to two sides of the market, which can be explicitly charged different prices. (2) Cross network effects, where the benefit of users from engagement depends on user engagement on the other side of the market, which varies with market conditions. (3) Bilateral market power, where platforms are price setters (monopolistic or oligopolistic) on both sides of the market and typically set uniform prices

These twenty-three definitions are extracted from articles published between 2006 and 2011. The literature review shows that the most frequently cited definitions are the ones proposed by Rochet and Tirole (2004), Evans (2003), and Hagiu (2006, 2007, 2011). Studies on MSPs mainly come from two domains: (1) the economics theory domain, where the multi-sided market literature focuses on addressing “chicken-andegg problems” through relative prices and antitrust policies, and (2) the management domain, where the literature on technological platforms and business ecosystems focuses on platform architecture and governance, as well as issues of modularity, openness, scalability, and evolvability of the platform. These two streams show signs of convergence after 2011. Hagiu (2014), a key author in the management domain, defines MSPs as technologies, products, or services that create value by enabling direct interactions between two or more customers or participant groups. Evans (2012), representing the economics domain, regards MSPs as value-creation vehicles that operate by bringing two or more different types of economic agents together and facilitating interactions among them that make all agents better off. With different focuses, the two domains have reached a consensus on the three following key elements in defining a multi-sided platform: • the customers of MSPs consist of two or more sided groups; • facilitating direct interactions; • value creation. Combining these three elements, we use the following definition in our study: An MSP is a business model that facilitates the direct interaction of related parties to co-create and co-capture the value of innovation. The literature review also reveals different categorizations of MSPs. MSPs can be classified into different categories along three dimensions: public versus private MSPs (Evans 2012), collaborative communities versus competitive markets (Boudreau and Lakhani 2009), open versus proprietary platforms (CasadesusMasanell and Llanes 2015). Evans (2012) argues that private control is likely to be more efficient than moral control in dealing with negative externalities in platform communities.

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2.2.1 Characteristics of MSPs 2.2.1.1

Significant Network Effects

A platform is a carrier of a network of different groups of agents. Like any network, an MSP has significant network effects, which means the value of a product or service for its users is dependent on the number of other users of the network (Varian and Shapiro 1999). The presence of important direct and indirect network effects between the two or more customer groups participating on the platform makes value addition possible for the MSP (Caillaud and Jullien 2003; Rochet and Tirole 2003; Parker and Van Alstyne 2005; Armstrong 2006, 2007; Schmalensee and Evans 2007; Armstrong and Wright 2007; Hagiu 2009b; Rysman 2009; Choi 2010). Network effects become significant after a certain number of subscriptions (a socalled critical mass) has been achieved in the MSP. Determining what group can be most easily on boarded and developing an effective way of attracting members of the opposite group onboard to reach a critical mass is the biggest challenge for MSP owners. Generally, extrinsic motivations, such as a payment, a fee waiver, or a request for friends to sign up are appliable for early adopters. Then, as the number of users increases, the platform becomes more valuable and capable of attracting a wider user base. With increasing engagement of different user groups on the platform, increased indirect network effects can be managed to formulate distinct forms of competitiveness of the platform. Hagiu and Wright (2011) point out that the existence of indirect network effects makes the supply side harder to be substituted and increases entry barriers for new suppliers; moreover, it produces demand-side economies of scale that may lead to monopolies.

2.2.1.2

Multiple Groups of Customers

Instead of serving the needs of each user group separately, an MSP has to serve several groups simultaneously, which presents significant challenges for MSP owners. An MSP has to balance the interests of all sides at the same time while each side has its own individualized demands. In such a situation, the MSP risks conflicts of interest among the multiple sides or between the “customers” and the MSP (Hagiu 2014). To function effectively, an MSP should act as a demand regulator instead of a product or service supplier, and it should manage the different demands of different sides using different governance mechanisms (Boudreau and Hagiu 2008). In order to balance the costs and benefits of different parties, long-term instead of short-term interests should be considered (Hagiu 2014). Such considerations indicate more to an approach of strategic management. Facing multiple groups of “customers”, an MSP should identify the differences among the multiple groups to setup the platform design. Customers have to be served differently based on their preferences of particular features or quality (Evans 2008a).

2.2 Multi-sided Platforms (MSPs)

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Hagiu (2014) argues that enabling direct interactions among the sides is another distinctive characteristic of a multi-sided platform, which differentiates MSPs from resellers as resellers do not provide any direct interactions among the sides. Therefore, demand interdependencies among the sides of groups driven by their interactions define a more important economic relationship than the individual customer relationship.

2.2.1.3

Interdependent Price Elasticity

According to Roson (2005), when a platform is managed by several entities who act in a coordinated way, price policies may deviate from either profit-maximizing or welfare-maximizing conditions. In this case, discriminative prices are charged for members of different sides to meet the dual needs of welfare and profit. Furthermore, members of different sides on an MSP are interdependent, which has an important impact on the pricing. According to Evans (2008b), profit-maximizing prices for two-sided platforms depend on the price elasticity of demand by customers on both sides, the nature and magnitude of the indirect network effects between the two groups of customers, and marginal costs for both sides. When the elasticity of members on different sides is considered, there is a feedback loop between the two sides, and the elasticity measures the strengths of the externalities connecting the two groups, so that a platform can find the prices that maximize its profits by taking this interdependent elasticity into consideration (Evans and Noel 2005). Some basic pricing rules are changed in this case; for example, it is incorrect to conclude that deviations of a price against the marginal cost on one side provide any indications of pricing strategies aimed at exploiting the market power or driving out competition. Given the indirect network externalities and the interdependence between the demands of different sides, a proper price structure involving each side should be adopted to balance membership and usage to maximize the platform value. The price charged should not only reflect the transaction cost compensated through the MSP and the value gained for boarding and using the MSP, but it should also reflect market failures that prevent the MSP ecosystem from functioning properly. The price structure, instead of the price per se, plays the most important role for MSP operations.

2.2.1.4

Complicated Competition

Competition among MSPs can be much more complex. Both inter-platform (between two or more MSPs) and intra-platform (between two or more sides within one MSP) competition exist for MSPs, and this can influence the competitive performance of the MSP as a whole. All members of different sides are customers of the MSP, and their needs should be met and satisfied in the MSP. Any different treatment compared to other MSPs can lead to differentiation or lower substitutability, which in turn, drives possible advantages or disadvantages for MSP owners.

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The competitions become multi-dimensional, which indicates a much wider scope of competitors. Evans and Schmalensee (2005) articulate three dimensions of competition that require attention for a two-sided platform: (1) competition from other two-sided platforms that serve the same customer groups (e.g., the newspapers in a city); (2) competition from single-sided businesses that provide competitive services to one side only (e.g., billboards; (3) competition from other two-sided platforms that provide a product that competes mainly with one side but not the other (e.g., advertising-supported television). In MSPs dealing with more than two sides, the dimensions of competition increase exponentially. The unexpected behaviors of members on different sides can present difficulties in formulating competitive strategies in an MSP. Rochet and Tirole (2003) define the phenomenon of “multi-homing,” which refers to the situation that customers find features of competing platforms attractive and end up joining and using several platforms at the same time. Hagiu (2014) states that low switching costs among the different platforms and the ease of participating in more than one MSP leave the door open for many MSP to compete. In addition, it can be very difficult to control the traffic of members of different sides in the MSP, which can risk congestion and, in turn, the performance of the MSP, leading to the dissatisfaction of members (Evans 2008a). Compared with the question of “who you compete with”, it is even more difficult to define what an MSP is competing for. Evans (2013a) has recently shifted his research focus to the MSP rivalry of attention and argues that all MSPs compete for the scarce attention of users instead of for products or services. Along the same idea, the ways to run the MSPs can be completely different in competition identification, strategy making, antitrust laws, and so on.

2.2.2 The Importance of MSP Governance Three potential sources of market failure call for active governance in an MSP: • First, when there is insufficient information or transparency in the market with respect to the quality of goods and services exchanged through the MSP, a “lemons market failure” can occur, in which low-quality suppliers drive out high-quality ones and the market breaks down. • Second, concerns about too much competition on one side of an MSP can reduce the incentive to invest in developing high-quality products or services on that side. • Third, an absence of strict governance by an MSP can lead to constituents failing to take actions or failing to invest in critical steps that would otherwise generate positive spillover effects for the MSP and its other constituents. Once one or more of these three potential sources of market failure are present, the MSP is well-advised to consider enforcing governance rules that target the source of the specific market failure or failures in question.

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MSP governance involves a wide range of strategic instruments well beyond price setting in regulating economic activities of platform participants (Boudrea and Haigu 2008). These instruments often involve nuanced combinations of legal, technological, informational and other instruments, along with price setting, to approach desired outcomes. De Reuver et al. (2011, 2012) classify governance mechanisms into three not-mutually exclusive categories: authority-based mechanisms, contractbased mechanisms, and trust-based mechanisms. Manner et al. (2013) define the control mechanisms into four categories: input control mechanisms, output control mechanism, behavior control mechanisms, and social control mechanisms.

2.2.3 Two-Stage Management of MSPs Evans et al. (2013c) divide the development of a platform into two phases: an “initiation” phase in which a platform develops a critical mass of users, and a “growth” phase in which a platform relies on network effects to drive growth for a long-run equilibrium. The equilibrium is determined by the profit-maximizing size of the platform given the state of competition and product differentiation in the industry. Critical mass is the boundary between the initiation and growth phases, where a sufficient number of members of different sides have joined the platform to create enough value to attract more potential members. The critical mass is not involved with the production of economies of scale or covering fixed costs, but with the nature of network effects linking the platform’s multiple user groups, the distribution of tastes among potential new users, and the nature of disequilibrium dynamics. In the initiation phase, the main target of a new MSP is to deal with chickenand-egg problems and handle critical mass constraints for survival (Evans and Schmalensee 2010, 2013). Effective market positioning and complementary integration can help an emerging platform reach a critical mass quickly. In the growth phase, the main target is to create greater value for the members of different sides and to keep them on board. In this process, tools such as vertical constraints and user ratings can be employed to maintain the good operation of the MSP. Pricing is a critical tool in both stages: an access fee is used mainly for joining the platform and a usage fee mainly for using the products or services of the MSP. Although these prices are interdependent, the access fees mainly affect how many members would join the platform, and the usage fees mainly affect the volume of interactions among members of the platform (Evans and Noel 2005). In addition, Evans (2008a) has found that the impact of access fees versus usage fees on an MSP’s profit depends on many factors, including the difficulty of monitoring usage and the nature of the externality between the different sides. In the initiation stage, where demand on one side can vanish if there is no demand on the other, regardless of price, one way to deal with the issue is to obtain a critical mass of users on one side of the market first and fast by giving them the service for free or even paying them to take it. This below-marginal-cost price, however, is not a predatory price for monopoly; the price should be adapted to the crucial target of on boarding new members.

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In the growth stage, once a critical mass has been achieved, MSPs still need to devise and maintain an optimal pricing structure to maximize the total benefits of the members of different sides. As we see in most multi-sided markets, companies seem to settle on pricing structures that are heavily skewed towards one side of the market in the sense that the margin (price less marginal cost as a percent of price) is far lower on one side than on the other.

2.2.4 Solving Chicken-and-Egg Problems MSPs face two market factors in developing a coherent strategy: first, the intention of user groups on boarding in only one platform (single-home) or multiple platforms (multi-home), which influences the interactions through a series of alternative channels (Roson 2005); and second, market structure, meaning the industry being coincident, intersecting, or monopolistic, which determines the intensity and type of competition between MSPs (Evans 2003). In an existing market, individual companies should deploy appropriate positioning strategies to influence the depth and breadth of the business (Hagiu 2009a; Cennamo and Santalo 2013). Depth creates more value for existing constituents and intensifies indirect network effects by making transactions more efficient or more frequent or both, which makes the existing sides stickier and less likely to be drawn to other platforms. The breadth of an MSP is driven by the quest for unlocking new sources of value and creating new indirect network effects with the addition of new sides to the MSP, sometimes simply for the sake of survival. However, financial constraints, human resource constraints, and other company-specific constraints can limit MSP breadth. For example, Galeotti et al. (2009) argued that an increase in the number of retailers increases the amount of variety in the platform, while at the same time increasing the competition among retailers, which may cause the platform to lower engagement fees and raise consumer use charges to remain competitive. In contrast, an increase in the degree of product differentiation (i.e., depth) can increase the value of the platform for the consumers while weakening the competition. After setting up a suitable positioning strategy, cooperation and competition between the focal MSP and other MSPs should be balanced. Rysman (2009) has argued that an MPS should consider its relationship with competing platforms and ascertain whether there is room for compatibility or some sort of integration. By opening a platform to complementary elements and creating economic incentives (such as free or low licensing fees or financial subsidies) for related firms to join the same “ecosystem” and adopt the platform technology, an MSP can promote its technologies to develop an industry-wide platform. The more external adopters joining the ecosystem and creating or using the complementary innovation, the more valuable the platform (and its complements) can become. The dynamics, driven by direct and indirect network effects, can encourage more users to adopt the platform, more complementary elements to enter the ecosystem, and more users to adopt the platform and complements (Cusumano 2010). However, adding complementary

2.2 Multi-sided Platforms (MSPs)

21

elements can have contradictory effects (Boudreau 2007). Evidence has shown that both market-expanding network effects and market-splitting competition effects can co-exist, which in turn can stimulate complementary element providers to exert a “high effort” in developing further innovations. As a platform matures and grows to a threshold, the platform owner may wish to switch from a strategy of attracting complementary elements to build a “critical mass,” to one that aims at more carefully regulating the number of complementary elements. The contradictory effects created by increased complementary elements further suggest that platform owners should carefully evaluate the composition of the pool of complementary elements participating in a platform. Furthermore, awareness should be given to two questions that members of different sides must answer before deciding which MSP to use: (1) How can an MSP help differentiate a potential sided member from competitors that are conducting business on that platform; (2) how can an MSP reduce or mitigate the risk of a holdup once the potential member decides to join (Hagiu 2009a). There are three kinds of holdups that members can face in the development of an MSP: (1) price increases imposed by the MSP once it becomes successful; (2) new interface rules dictated by the MSP to control the engagement of users (such as vertical restraints in terms of exclusive-dealing contracts, tying and bundling, conditional rebates, competition clauses, and so on, according to Evans 2013b); (3) weakening the relationship of members with their customers either by gradually taking control over end customers or by inviting other players to compete in the product category of members on a given side. Hagiu (2009a) argues that if a company wields substantial power in a market, or teams up with enough other players to gain an upper hand, building a new platform by itself or with others may be a good move. Thus, only MSPs armed with welldesigned governance mechanisms can make the user groups feel safe and would like to keep onboard of MSP. The strategies for service design have to start at a point that differentiates the subsidy side from the money side among members of different sides. A subsidy side refers to a group of users whose number is crucial for developing strong network effects and who therefore should be charged much lower prices than the level charged for an independent market. The money side, on the contrary, refers to users who pay higher than the level the platform would charge for an independent market (Eisenmann et al. 2006; Claussen et al. 2013). Once the potential platform groups are differentiated, a “divide and conquer” strategy (i.e., separate the members of different sides into different groups, and provide different strategies for different groups) could then be utilized (Cortade 2006). Rochet and Tirole (2004) and Cortade (2006) have demonstrated that an MSP’s price strategy is affected by such factors as the market power of the MSP as well as the elasticity and category of members on different sides. Therefore, different groups are commonly treated with asymmetric pricing (Caillaud and Jullien 2001; Evans et al. 2005; Jullien 2005; Cortade 2006; Rysman 2009). Boudreau and Hagiu (2008) have

22

2 Digital Transformation, Multi-sided Platforms, and Analytical …

found that friction can exist in the process of MSP development between existing members and new members joining the platform. Therefore, platforms need to be cognizant of the multi-sidedness of their markets and consider all sides holistically when designing optimal strategies.

2.3 Analysis Model Suggested The preceding literature review on digital transformation and MSPs allows us to establish the model of analysis that will be used in this book. This model consists of an analysis of the three aspects below (Fig. 2.1): • Sides (user groups) and solutions to chicken and egg problems. The competitions within and among the user groups and within the user will be studied under this aspect. • Platform services and cooperative-competitive advantages. By reviewing and comparing the services provided by different medical MSPs, the core and complementary capabilities of the MSPs are defined. An MSP’s competitive and cooperative advantages based on these capabilities are analyzed to allow understanding how the MSP operates. • Value addition. What kind of value does the focal MSP create relative to the current value chain? Answering this question will lead to an understanding of the disruption that the platform presents for the traditional healthcare industry.

Involved sides &

Side member 1

Side member 2

Side member 3

chicken-egg soluƟons

Services & CooperaƟvecompeƟƟve advantages

Core capabiliƟes

Complementary capabiliƟes

Value-added

DisrupƟve model

Fig. 2.1 Analysis model for MSPs

Side member N

2.3 Analysis Model Suggested

23

The selected MSPs in this book will be analyzed against this framework. Using the healthcare value chain to position the selected MSPs, our analysis will identify the variations and commonalities across platforms.

Chapter 3

Distinctive Characteristics of the Chinese Healthcare Industry

At least three types of medical systems models exist in the world. The first model is the national turnkey model, adopted by United Kingdom and Hong Kong SAR of China, in which 95% of the hospitals are state-owned, publicly subsidized but privately managed. Physicians are civil servants in this model, and the public goes directly to hospitals for their medical needs. This model has disadvantages in incentivizing physicians and hospitals, but it has advantages in central-planning the public resources to maximize the utilization efficiency for the society. The second model is the market transition model implemented in Canada, which is composed of public and private clinics, primary healthcare centers, community medical centers, and home-based healthcare; the system is therefore run simultaneously by the state and society as whole. The system is mainly supported by public funds, compensated by the private sector funds and individual payments; this not only alleviates the pressure on public hospitals and their physicians, but it also strengthens the economic foundations of the healthcare system. The third model is the complete market model implemented by the United States, in which 80% of the services are entirely market-based, and the government accounts for less than 20%, generally for the elderly and the poor. The personal cost of medical care in the United States is very high, estimated at more than 5000 US dollars per year per capita. Since the 1980s, many developed and developing countries have tried to introduce competition into their medical services markets by reducing or even eliminating entry barriers for private service providers and non-for-profit organizations, by government procurement with various external medical service providers, by authorizing consumers with monitoring rights for service quality, and so on. These pro-competition changes of the medical service market are expected to affect the behaviors of service providers, which in turn foster improvements in medical service quality and supply efficiency (Walshe 2003).

© Shanghai Jiao Tong University Press and Springer Nature Singapore Pte Ltd. 2020 X. Han et al., Disruptive Innovation through Digital Transformation, https://doi.org/10.1007/978-981-15-3944-2_3

25

26

3 Distinctive Characteristics of the Chinese Healthcare Industry

Yet more than 20 years later, the outcomes of experiments with market-oriented reforms can only be described as “unfruitful”. The first country to implement quasimarket reforms, the UK, has not achieved their expected objectives in terms of improved quality, efficiency, or fairness in medical services. China is currently adopting a model that is between the second and third models mentioned above. In this model, the functional boundaries between the market and the government have yet to be clarified. In adopting market-oriented reforms, the Chinese government has moved so fast that the necessary supervision and payment functions are not yet in place; this has led to a series of problems.1

3.1 Ongoing Reforms in the Chinese Healthcare System Since the launch of the national Reform and Openness Policy in 1978, the Chinese healthcare system has been subject to a series of reforms that have taken place across six different stages. Stage I took place between 1978 and 1984 and started with the idea of “managing healthcare services as a business (not as social welfare)” initiated by Qian Xinzhong, the former Minister of Health. In 1979, the government issued a “Notice on Strengthening the Pilot Work of Managing the Hospital as Business,” followed by a series of regulations on hospital management, including the introduction of the financial indicators in assessing the performance of the hospitals, setting up the financial targets and the monetary incentive scheme based on the number of beds and hospital workers. In 1980, the State Council approved the “Report on the Request for Allowing Individuals to Practice in multi-sites,” opening the door for medical practitioners to work in different hospitals and laying the foundation for the transformation of the state-owned medical system toward a diversified ownership medical system. Stage II reforms took place between 1985 and 1992 and signaled an official launch of the reforms with the enacting of “Several Policy Issues Concerning the Reform of Health System” in August 1984. The document stated that the development of the healthcare industry has to be done through the reforms such as simplifying the policies, decentralizing the power, and raising the funds from multiple channels. This stage emphasized the principle of “providing policies not pecuniary subsidies,” and it promoted two model cases nationwide: one was the “Xiehe experience,” which exemplified the transformation of a tightly state-controlled hospital administration into an independent, self-sustaining administration; the other one was the “Kunming experience,” which exemplified the market-oriented reforms of logistic services in hospitals. However, a number of problems occurred, including the unregistered multisite practicing of physicians and the over-demand prescriptions (for example, adding the home appliances such as the rice-cooker in the prescription to take the advantages of the medical expenses compensation policy). In 1989, the Ministry of Health 1 From report by Institute of Economic System and Management, National Development and Reform

Commission.

3.1 Ongoing Reforms in the Chinese Healthcare System

27

published its “Opinions on Several Issues related to Expanding Medical and Healthcare Services”. Although being approved by the State Council, the new problems were keeping on emerging. In such a disputive context, the medical reform was continuing in the dispute. Stage III lasted from 1992 to 2000 and highlighted the market-oriented reforms of the Chinese medical system. The State Council published its “Opinions on Deepening Health Reform” in September of 1992, and special services such as appointing-thephysician-to-perform-the-surgery, extra care and special wards began to be offered widely in hospitals. Given the insufficient state investment, the policies were setup to encourage the entry of the private funds into the healthcare industry, resulting in a fast growing number of healthcare affiliations in China from 180,000 in 1980 to 320,000 in 2000. Stage IV took place from 2000 to 2005 and featured the market-oriented reforms of the hospitals. In February 2000, the State Council published the “Guideline on the reform of urban healthcare system,” which started deregulating several aspects of hospitals. This encouraged the cooperation and merger of medical institutions, established profitable medical institutions and groups, and granted pricing autonomy to medical providers. These policies triggered market-oriented hospital reforms in several cities; the medical industry changed significantly in a short time. For example, in Suqian, a medium-sized city in the Jiangsu province, 133 out of 135 public hospitals were auctioned within five years. According to the municipal government of Suqian, “government capital has completely withdrawn from the medical services,” which was reported as greatly alleviating the financial burden of the local government. However, the 2003 outbreak of Severe Acute Respiratory Syndrome (SARS), a serious form of pneumonia, forced China to address the loopholes in the public health system, and it began to review the entire reform direction of the healthcare industry. In Stage V, which began in 2005 and lasted until 2012, healthcare system reforms were reconsidered. In the beginning of May 2005, the deputy Minister of Health at the time, Xiaohua Ma, in his public speech severely criticized the tendency of excessive profit-seeking and dilution of public welfare in the ongoing healthcare system reforms. The idea that “market-oriented reforms are not the right direction of medical reform” started to raise the widespread concerns in the society. Phenomenon of not only being expensive but also difficult to see a physician prevailed in Chinese medical service system, which reflected social inequity of the whole system, while the low efficiency of medical resources allocation was deemed as evidence of “unsuccessful medical system reform” according to the report of Development Research Center of the State Council (Ge et al. 2005). The reasons were claimed to be the lack of government coordination and public funding. At the end of 2007, Zhu Chen, Minister of Health at that time, set the new directions of the medical system reform for the next decades and submitted to the national congress, mainly addressing the extensive coverage of the healthcare services across the country and the difficulties in accessing medical care by certain low-income groups and less-developed regions. The goal was to establish government-led, public welfare and insurance systems.

28

3 Distinctive Characteristics of the Chinese Healthcare Industry

Stage VI started in June 2012 when e-Health emerged and was promoted in the industry. The Ministry of Health published the “Guiding Opinions on Strengthening Digital Health” on June 15, 2012, which required digital health initiatives to be implemented as one of eight measures to ensure the effective operations of the medical and health system. Resources were integrated to build a medical and health information system, enabling the digitalization of medical care, medical insurance, pharmaceutical companies, and financial supervision. New regulations on information standardization were also established to make the system efficient and interconnected. Digitalization was regarded as an essential way of improving the quality, efficiency, and equity of medical and health services in China. On July 10, 2018, the National Health Committee and the State Administration of Traditional Chinese Medicine jointly published an administrative document on the further development of “Internet+ Medical Health.” Following the publication of this national policy, provincial health agencies also enacted corresponding promotion policies. For example, the Shanghai Health and Planning Commission issued the “Shanghai e-Health Three-Year Action Plan (2013–2015)”. After nearly 40 years of reform, the Chinese healthcare system has entered into the e-health age. A complicated ecosystem with five groups of key players and two categories of dominant e-Health players is forming.

3.2 The Current E-Health Ecosystem in China 3.2.1 Key Players in the Chinese E-Health Ecosystem Five groups of key players constitute the current e-Health industry landscape in China. 1. Government. The Ministry of Health regulates the healthcare industry nationwide, and provincial health administrations are responsible for regulation enforcement and operation supervision. 2. Medical insurance providers. There are three categories of medical insurance companies: the national social security system, commercial medical insurance (e.g., Ping’an Insurance and Taikang Insurance), and online medical insurance companies (e.g., Wesure.com of Tencent and Baidu Insurance of Baidu) whose parent companies are large Internet companies. There emerges a new phenomenon recently that some private hospitals are trying to provide the medical dispute insurance directly to patients for control the risks of medical disputes onsite in the hospitals. An example is Shulan Health, a health group that owns the largest private 3A hospital in China. 3. Large medical groups. These groups can be divided into four categories: traditional public hospitals, private hospitals formed by state-owned institutions (e.g., Sinopharm, Peking University, China Aviation, CITIC’s hospital),

3.2 The Current E-Health Ecosystem in China

29

private hospitals (e.g., Putian-series Hospitals focusing on cosmetics and gynecology), and other publicly listed hospitals in special medical areas such as Aier Ophthalmology, Ma Yinglong, Fosunpharma, and so on. 4. Internet companies focused on medical digitalization. This group includes the three Chinese Internet giants, Alibaba, Tencent, and Baidu, as well as other online medical platforms, such as Dxy.cn, Chunyuyisheng.com, and Guahao.com. 5. Third-party groups. These players provide complementary products or services for the above four groups; they include pharmaceutical companies, medical equipment manufacturers, drug stores, specialized medical test providers, third-party image companies, and other related companies.

3.2.2 Dominant Players in the Chinese E-Health Ecosystem Among the five key players, two categories of players dominate and drive the eHealth development in China. One consists of large medical groups represented by the public hospitals, and the other consists of online platforms led by Internet giants such as Alibaba and Tencent. Both parties have their respective advantages, and competition between them is becoming fiercer when their activities get more intertwined.

3.2.2.1

Public Hospitals Are Forming Medical Consortiums

Following the issuing of the State Council’s “Guiding Opinions on Promoting the Establishment and Development of a Medical Consortium” (the “Opinions”) in 2017, public hospitals have accelerated the pace of forming medical consortiums. A consortium is a close partnership among top-tier hospitals and grassroots medical service providers in the close geographic areas that aims to offer more accessible quality medical care to all urban and rural residents, especially those in less-developed regions. The above-said opinions set the target for the first stage that all 3A and 3B hospitals should initiate their own medical consortia before the end of 2017; for the second stage that at least one comprehensive consortium has to be established in each city by 2020. Establishing the consortiums involves a number of steps, including articulating responsibilities among partner hospitals and service providers, allocating medical resources among partners from top to bottom, as well as building a shared platform for drug bidding, procurement, and management, prescription circulation, and drug distribution within the medical consortium. After integrating more healthcare resources, the medical consortiums gain more bargaining power when negotiating with IT service providers for launching their e-Health strategies.

30

3.2.2.2

3 Distinctive Characteristics of the Chinese Healthcare Industry

Online Platforms Are Integrating the Value Chain Vertically

Among Chinese Internet companies which have entered into the e-Health market, Alibaba and Tencent are the two giants that bring disrupive driving forces to the e-Health development. Alibaba has five corporate-owned e-Health platforms: Ali Health, Antfin, Alibabacloud, Taobao and YFC funding (Fig. 3.1). Each platform has several specialized functional units. In its medicine unit, Ali Health aims to upgarde the medicine supply chain in three ways: launching a proprietary channel to sell medicines online, integrating the Tianmao medicine channel (the B2C marketplace platform for branded merchants) and initiating the first alliance of O2O medicine platform in China. In the medical AI unit, Ali not only offers online consultations with famous physicians and recommendations for hospitals, but it also provides artificial intelligence solutions for physicians as well as online health management for individual patients. In healthcare product qualitytracing unit, Ali offers tracing services for the quality of medicines, nutrition and foods. In the insurance unit, Ali Health has acquired several specific health insurance companies, although it is still in an early stage. Online medicine Medical AI Ali Health

Product tracing Medical Insurance Medical appointment

Antfin

Medical Insurance and information Social security insurance /find the medicines all over the world Online marketing of drug stores Medical AI

Alibaba

Online hospital Alibabacloud

Taobao

HIS/PSCA/HRP Medical cloud solution Bio-genetic big-data solution Online medicine platform Medical consultation with the famous physicians Adult vaccine Medical cosmetics Medicine tracing/ o2o distribution Health management

YFC

Investment/ integrating the resources

Fig. 3.1 Alibaba corporate-owned e-Health platforms (Available at: http://www.ebrun.com/201 80419/273213.shtml)

3.2 The Current E-Health Ecosystem in China

31

In addition to corporate-owned platforms, Alibaba has invested in 27 e-Health related projects according to data of April, 2018 (Table 3.1). Tencent, another giant, has also established its own e-health empire. This empire is composed of seven corporate-owned platforms (Fig. 3.2) and has invested more than 4 billion USD in 41 projects as of April 2018 (Table 3.2). The moves of these Internet giants have seriously disrupted the traditional market structure. With e-Health tools becoming increasingly powerful, more specialized online healthcare platforms are fast emerging.

3.2.3 Interactions Between Players in the E-Health Ecosystem The two dominant categories of players, large public hospitals and Internet giants’ health platforms, interact with other companies in the e-Health ecosystem in three notable ways. 1. Digitalization of hospital functions Exampled by Electronic Health Record (EHR), Electronic Medical Record (EMR), Picture Archiving and Communication System (PACS), Hospital Information System (HIS) and so on, digital solutions used in the two dominant categories of players have gradually transformed the hospital functions. Medical consortiums, covering huge amount of patients and the top-level physicians, have the best foundation for digital transformation. Nearly all medical consortiums have their own Internet portals designed to digitalize almost all the steps in the patient visit process, including online appointments, physician selection, online consultation, medical records tracking, personal health management, patient management, artificial intelligence supported diagnosis, medicine and other medical recommendations, remote physician consultations, and so on. Digitalized medical consortiums not only greatly improve the efficiency of internal management, but also help patients to find the most convenient ways of consulting physicians and accessing inpatient services. With more hospitals integrated into a growing consortium, the bargaining power of the consortiums against medical IT solution providers increases.

32

3 Distinctive Characteristics of the Chinese Healthcare Industry

Table 3.1 Projects invested by Alibaba as of April, 2018

Alibaba Investing

YFC Funding

Investees

Investing dates

Round

Financing amount (in million USD, USD: RMB = 1:7)

Leading investing

Ledongli.cn

04/03/2018

N/A

N/A

Yes

Prenetics

18/10/2018

B

6

Yes

Magic leap

17/10/2017

D

72

No

Yao.com

15/06/2017

N/A

3

No

Goodwillcis.com

22/05/2017

C

47

No

Wuqiannianyiyao

07/07/2016

N/A

2.4

No

Wlycloud.com

29/03/2016

A

32

No

Magic leap

02/02/2016

C

113

No

Pepper

18/06/2015

Strategic investment

N/A

No

Alihealth

01/01/2014

Strategic investment

24

No

Bioblue.cn

15/12/2016

Seeding

0.42

No

LivaNova

20/02/2018

N/A

27

Yes

Yiyikangyun

15/01/2018

A

N/A

Yes

Wuxinextcode

07/09/2017

B

34

No

Yao123.cn

05/07/2017

A

17

No

Yitutech

15/05/2017

C

54

No

Wuxinextcode

02/05/2017

B

11

No

Oriengene

09/11/2016

A

N/A

No

Yitutech

03/06/2016

B

N/A

Yes

Genosaber

13/01/2016

N/A

N/A

No

Medlinker

07/09/2015

B

5.8

No

Genomics

23/06/2015

PreIPO

262

No

Hk515

28/04/2015

B

29

No

Am-sino

09/06/2014

A

N/A

No

Alihealth

01/01/2014

Strategic investment

24

No

Genomics

01/12/2012

Shares trading

200

No

xywy

01/09/2011

Strategic investment

N/A

No

Available online at: http://www.ebrun.com/20180419/273213.shtml

3.2 The Current E-Health Ecosystem in China

Wechat

33

Intelligent drug-store Intelligent hospital

Wesure

Miying.qq

Tencent

Baike.qq

Cloud.tencnen

Commercial medical Insurance AI graphing AI supported diagnosis Popularization of medical sciences Medical science platform Medical digitalization solutions Bio-genetic solution Brands of physicians

Physician.qq

Tdf.qq

Brand management of medical organization Electronical Blood glucose Diabetes patient community

Fig. 3.2 Corporate-owned medical platforms by Tencent (Available at: http://www.ebrun.com/201 80419/273213.shtml)

Large online companies including Ali and Tencent are meanwhile constantly developing new, feasible digital transformation solutions through investing in new companies. Zhuojianchina.com, a Tencent investee, provides intelligent total solutions for hospitals. By the end of 2017, Zhuojianchina.com had developed a client base including more than 400 top 3A hospitals and over 60 hospital consortium platforms in 25 provinces across China, as well as some 2500 hospitals and 35 international cooperation agencies across the world. Medlinker, an Alibaba investee, leverages its pool of 430,000 real-name certified physicians,2 and allows the physicians to connect with peers, facilitate referrals, and share medical records. For patients, Medlinker allows hosting discussions, sharing news stories, playing medicine-themed games, as well as services such as booking medical appointments and submiting questions for the medical community to answer. Medlinker provides comprehensive solutions for integrating physicians, medical consumable suppliers and medical consortiums. 2 https://www.mobihealthnews.com/content/chinese-social-network-physicians-medlinker-pul

ls-60m.

34

3 Distinctive Characteristics of the Chinese Healthcare Industry

Table 3.2 The e-Health related projects invested by Tencent Investees

Investing dates Round

Financing amount Leading investor? (in million USD)

Atowise

08/03/2018

A

6.4

Jingtai

24/01/2018

B

2.1

No

Medlinker

06/12/2017

C

57.1

No

Voxelcloud

28/09/2017

A+

14.3

No

Shuidihuzhu

30/08/2017

A

22.9

Yes

Karius

14/08/2017

A

7.1

No

No

Locus biosciences 18/07/2017

Debting financing 0.71

Yes

Haodf

29/03/2017

D

28.6

Yes

Grail

02/03/2017

B

128.6

No

Practo

17/01/2017

D

7.9

Yes

Clear labs

14/12/2016

B

1.9

No

Keep

16/08/2016

C+

N/A

Yes

Igengmei

02/08/2016

C

49.2

No

Physician robin

22/07/2016

Angel

N/A

No

Physician work

19/07/2016

Angel

N/A

No

Medbanks

03/06/2016

B

N/A

No

Shuidihuzhu

09/05/2016

Angel

7.1

No

Soyoung

11/03/2016

C

7.1

No

Icarbonx.com

18/01/2016

A

143

No

Linjiahaoyi

01/01/2016

Angel

N/A

No

Jingtai

15/12/2015

A

3.4

No

CircleMedical

23/11/2015

Angel

0.41

No

ClinicCloud

25/09/2015

Seeding

0.71

No

CloudMex

10/09/2015

Seeding

0.94

No

Medlinker

07/09/2015

B

5.7

Yes

51yund

25/08/2015

A

7.1

No

Sos919

21/08/2015

A

N/A

No

Practo

06/08/2015

C

12.8

No

Miaoshou

04/08/2015

A

N/A

No

Homehero

01/07/2015

A

2.8

No

TuteGenomics

16/06/2015

A+

0.56

No

Hotbody

21/05/2015

A

8.6

No

TissueAnalytics

18/05/2015

Seeding

0.1

No

ScnaduScout

29/04/2015

B

5

No

Leanfitness

01/04/2015

Angel

0.7

No (continued)

3.2 The Current E-Health Ecosystem in China

35

Table 3.2 (continued) Investees

Investing dates Round

Financing amount Leading investor? (in million USD)

Zhuojianchina

30/01/2015

B

22

No

Guahao

15/10/2014

C

15

Yes

Dxy

02/09/2014

C

10

No

Youmi

13/06/2014

B

3

No

Miaoshou

02/04/2014

C

70

Yes

Mama

01/06/2011

A

7

No

Available online at: http://www.ebrun.com/20180419/273213.shtml

2. Medicine supply chain Most e-Health players are engaged in the medicine supply chain. Alibaba integrates brick and mortar stores into online platforms to develop a powerful medicine supply chain. In addition to launching the self-managing online drug store like Liangxinyao.com, Alibaba initiated the B2C channels to attract the other drugstore onboard. Since 2012, the large drugstore chains3 could open their online stores on Tmall.com, the brand-seller platform of Alibaba. Furthermore, Alibaba also provides O2O support services to drug store chains; so far more than 20 store chains have been provided with services such as personalized discounts, mobile payments, and refilling for the customers of these drugstore chains. By providing the more convenient services to their existing customers, the drugstore also get the extra benefit from customer information sharing, new customer acquisition both online and in their brick and mortar stores. In July 2014, Alibaba acquired Citic 21cn.com, a Hong Kong based publicly listed company, and started to offer the unique medicine PIATS (Product Identification Authentication and Tracking System) in China. The quality-tracing tools and the more convenient purchase channels have changed the consumption pattern in the integrated online and offline medicine supply chain. Under the new government policies of separating medicine prescription from medical services after 2009, hospitals have been incentivized to release prescription information to drug stores, which has driven the growth of the online medicine retailing business. The Chinese Academy of Social Sciences predicts that the Chinese medicine retail market will reach 700 billion USD in 2020, and the large Internet companies are ready to compete for this huge market. 3. Online physician communities and multi-licensing offline outpatient centers Physicians are the most valuable resources in the healthcare sector. Only the platforms which can attract and maintain the physicians on their platforms can formulate the most competitive advantages. Different from the traditional hospitals the physicians, the large Internet companies acquire the physician resources by empowering the 3 Including

large drugstore chains such as Shenzhen Haiwangxingcheng, Shanghai Fumei, Beijing Jinxiang, Hanghzou Jiuzhou.

36

3 Distinctive Characteristics of the Chinese Healthcare Industry

physicians in the compensational way, e.g. online physician consultations, physician appointment setting-up services, online academic exchange, extensive professional development and training services, and etc. Notice on multi-site practice of physicians of Ministry of Health in 2009 has allowed that physicians can have the multi-licensing operations. Besides working for the other incumbent medical service prodivders like hospitals, some physicians would like to have their own clinics. In order to catch the chance to have the physicians as the partners, Chunyuyisheng, one of the top online physician platforms has begun to develop the partnership with physicians to expand their brick and mortar clinic networks. Putting the above three aspects together, the whole ecosystem of Chinese e-Health is presented below in Fig. 3.3.

Hospitals & hospital consortium:3A, 3B, 2A, 2B, Patients: chronical

community & rural physicians

& one-time

Pharmaceutics and devices providers

Insurance company: social security, commercial, online insurance

Internet giants and emerging eheath stakeholders: Alibaba, Tencent, other e-health platforms and service and solution providers

Fig. 3.3 The ecosystem of Chinese e-Health

Other third parties: testing, graphing

3.3 Distinctive Characteristics of the Chinese Healthcare System

37

3.3 Distinctive Characteristics of the Chinese Healthcare System Chinese healthcare system, which was previously publicly owned and centrally administered, now has gradually introduced some private-owned providers. Disparities between the central-planning system and the ongoing-privatization system have produced the distinctive features in the Chinese healthcare system. In this section, we compare the Chinese model with three other different governance models respectively in three countries, namely the UK and its turnkey model where all medical organizations are publicly owned, Canada and its market-transition model, and the US with its complete marketization model. The comparison of the four countries by main indicators is presented in Table 3.3.

3.3.1 The Huge Medical Demands and Significant Imbalances China has the largest population in the world, at approximately 40 times that of Canada, 20 times that of the UK, and 4 times that of the US. Although China has the lowest percentage of population aged 65 or older right now, the growth of that Table 3.3 The main indicators of the four countries United Kingdom

Canada

United States

China

Population (million) 2016

64.88

35.85

321.19

1360.72

Percentage of population Age 65 and older, 2014 (%)

17.40

15.70

14.50

9.60

Percentage of GDP spent on healthcare 10.20 2014 (%)

10.50

17.20

5.60

Healthcare expenditure per capita (USD)

4094

4728

9364

420

Out-of-pocket healthcare expenditure per capita (USD)

586

644

1034

130

Percentage of out-of-pocket healthcare spending from the total healthcare spending per capita (%)

14.3

13.6

11.0

31.0

Expenditure on pharmaceuticals per capita (USD)

485

772

1112

N/A

Number of practicing physicians per 1000 population

2.8

2.5

2.6

1.9

Average annual number of physician visits per capita

N/A

7.6

4

5.6

Total curative (acute) care beds, per 1000 population

2.3

2.1

2.5

4.9

Data source: from OECD 2016 and Chinese National Statistic Report, 2017

38

3 Distinctive Characteristics of the Chinese Healthcare Industry

5.00% 4.00% 3.00% 2.00% 1.00% 0.00% 2008

2009

2010

2011

growth of populaƟon aged 65 or older

2012

2013

2014

2015

growth of total populaƟon

Fig. 3.4 The percentage of population aged 65 and older in China. Data source: Chinese National Statistic Report, 2017

age group is about 6.9 times faster than the whole population growth, which means that the Chinese, as a whole, are becoming older very fast (see Fig. 3.4), and this can rapidly increase the burden on the healthcare system. With a rapidly aging population, the Chinese are also critically threatened by the chronic diseases. A population of more than 300 million are diagnosed with chronic diseases in China: the total number of hypertensive patients exceeds 200 million people with an annual addition of 10 million and one in ten Chinese has the diabetes. Each year chronic diseases such as cardiovascular disease, cancer, diabetes and respiratory system diseases accounts for about 86.6% of total deaths, which amounts to 38 million people. About 45 billion USD is spent on the treatment of cardiovascular and cerebrovascular diseases every year, and the spending on the treatment of all chronic diseases has accounted for 70% of total medical expenditures.4 China’s massive population also presents major challenges on healthcare resources and capabilities. Although the total amount of the medical organizations and practitioners are huge, the resources per capita are typically much less than that in the other countries. In China, the total number of practicing physicians in 2013 was 2,794,800, but the number of practicing physicians per 1000 people is just 2.0, compared with 2.8 in the UK (2015), 2.5 in Canada (2015) and 2.6 in the US (2013). Thus there is a big gap between the supply and demand of practicing physicians (see Fig. 3.5). New methods of delivering healthcare services are in urgent demand in China. In 2014, China had the lowest percentage of GDP expenditure on healthcare and the lowest healthcare expenditure per capita among the four countries. Considering that service and medicine prices in most Chinese healthcare organizations are much lower than in the other three countries, the healthcare expenditure per capita comparison may be less indicative. A more significant indicator is the much higher out-of-pocket percentage of the healthcare expenditure per capita, which is about two to three times that of the other three countries, meaning that Chinese have to pay 4 The

data is from National Conference on Chronic Disease Prevention and Control, September 22–23, 2017, Xiamen, Fujian.

3.3 Distinctive Characteristics of the Chinese Healthcare System

2008

2009

2010

2011

2012

total visits (in 10 million)

2013

2014

39

2015

900

900

800

800

700

700

600

600

500

500

400

400

300

300

200

200

100

100

0

0

2016

total number of physicians (in 10000)

Fig. 3.5 Big gap between the demand and supply of the practicing physicians. Data source: Chinese National Statistic Report, 2017

much more for their healthcare using their own money. Out-of-pocket percentage is decreasing in recent years (Fig. 3.6), which can be attributed to the ongoing reforms that are leading the privatized Chinese medical system back to a government-led public welfare system. High out-of-pocket payments have produced two opposite effects on the Chinese healthcare market. On one hand, more autonomy in medical spending can reward the patients more bargaining power against healthcare service providers, which creates important opportunities for new entrants to offer high-quality services to consumers. On the other hand, high out-of-pocket payments make it more challenging for reforms geared toward government-led public welfare. In addition to the scarcity of medical resources, the distribution of resources between urban and rural areas is significantly imbalanced. In 2016, the number of practicing physicians per 1000 people in urban areas was 3.9, while the number in rural areas was 1.9. Similarly, the number of practicing nurses was 4.8 per 1000 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 2008

2009

2010

2011

government %

2012 Social %

2013

2014

2015

2016

Out-of-pocket %

Fig. 3.6 Payment distribution of the medical expenditures. Data source: Chinese National Statistic Report, 2017

40

3 Distinctive Characteristics of the Chinese Healthcare Industry

people in urban areas versus 1.5 in rural areas, and the number of care beds was 8.4 versus 3.9 (See Table 3.4). Imbalances also exist across different social groups. In 2003, the Ministry of Finance issued its “Regulations on the subsidizing fund and special accounts for the medical expenses of the public servants and retired governmental officers”, which differentiated the two groups, public servants and retired governmental officers, from the general public. These two groups and some of their families and relatives are offered special medical subsidies, which accounts for 80% of societal medical resources according to a speech of Dakui Yin, the Deputy Minister of Health, in 2006 in the 2nd Healthcare Industry Summit. Furthermore, physician-patient relationships has been deteriorating in recent decades. The Chinese Hospital Management Association reported that cases of pateints or their relatives committing violence against medical personnel had increased by 23% yearly between 2002 and 2012, Chinese hospitals have reported an average of twenty-seven attacks per hospital a year. Official data from China’s Ministry of Health reports 9831 ‘grave incidents’ of medical disputes in 2006, with 5519 medical staff injured and 200 million yuan (over 29 million USD) in property damage. In September 2011, a calligrapher in Beijing became so dissatisfied with his throat-cancer treatment that he stabbed his physician seventeen times. In the Chinese city of Wenling in 2013, a patient attacked three physicians, killing one of them. In 2014, patients paralyzed a nurse in Nanjing, cut the throat of a physician in the Hebei province, and beat a physician in the Heilongjiang province to death with a lead pipe. A knife-wielding patient chased a physician down the halls of a hospital, slashing her arms and legs in Guangdong. Such reports of dissatisfied patients attacking their physicians have become increasingly common in China, which has raised significant red flags for healthcare administrators. The scarcity of resources, the imbalance of different social groups, the higher percentage of out-of-pocket payments, and deteriorating physician-patient relationships put an urgent call for new mechanisms to innovate the Chinese healthcare industry.

3.3.2 The Improving Medical Insurance System and Higher Percentage of Out-of-Pocket Payment The analysis of the respective medical expenditures paid by the government, the social sources and the individual patients in the past 40 years demonstrates that out-ofpocket payments from individual patients have followed a low-high-low track, with the highest in 2001 accounting for nearly 60% of the total expenditures, followed by a slowly moving downward trajectory. Parallelling with this trend is the highlow-high trajectory of government payments, while the percentage of social security payments keeps nearly the same. It might be fair to conjecture that the decrease in governmental expenditures has caused the increase in out-of-pocket spending from

1.6 4.9 1.5 8.4 3.9

The number of practicing nurses in urban areas per 1000 population

The number of practicing nurses in rural areas per 1000 population

The number of care beds in urban area per 1000 population

The number of care beds in rural area per 1000 population

Source Chinese National Statistic Report, 2017

3.9

The number of practicing physicians in rural areas per 1000 population

2016

The number of practicing physicians in urban areas per 1000 population

Table 3.4 The imbalance of medical resources in urban and rural areas

3.7

8.3

1.4

4.6

1.6

3.7

2015

3.5

7.8

1.3

4.3

1.5

3.5

2014

3.4

7.4

1.2

4.0

1.5

3.4

2013

3.1

6.9

1.1

3.6

1.4

3.2

2012

2.8

6.2

1.0

3.3

1.3

3.0

2011

2.6

5.9

0.9

3.1

1.3

3.0

2010

2.4

5.5

0.8

2.8

1.3

2.8

2009

2.2

5.2

0.8

2.5

1.3

2.7

2008

2.0

4.9

0.7

2.4

1.2

2.6

2007

3.3 Distinctive Characteristics of the Chinese Healthcare System 41

42

3 Distinctive Characteristics of the Chinese Healthcare Industry

individual patients. This spending structure evolution reflects the ongoing healthcare payment system reforms. Since the founding of the People’s Republic of China in 1949, the healthcare payment system reform has gone through the following five stages:5 • Stage 1 (1952–1978). There existed a free national healthcare security system in cities: employees of state-owned organizations received free healthcare services, and their families received half-priced services. In rural areas, the medical organizations are funded by the combination of Rural Cooperative contributions and the farmers’ fixed payments, and medical services are offered to farmers for free. • Stage 2 (1978–1985). Pilot healthcare payment reforms were undertaken. Individual patients had to pay a small amount for medical expenses, varying between 10% and 20%. • Stage 3 (1985–1998). This stage can be divided to two phases. The first phase was from 1985 to 1992, when the medical insurance was introduced to the society, and the illness insurance fund, raising from the regional and stateowned organizations, was established to subsidize their employees to pay the insurance premiums. Public servants did not need to buy medical insuarnce and could get medical services in certain appointed hospitals, in which the costs were compensated by the government. The second stage was from 1992 to 1998, when the pilot reform of the ubiquitous urban workers’ medical insurance system was introduced first in Shenzhen, and subsequently in several other cities following the issuing of “Pilot Opinions on the Reform of Employee Medical Systems” by State Council in 1994. In rural areas, however, medical services became wrose with the disintegration of the Rural Cooperatives, even though the existing medical system were still running as before. • Stage 4 (1998–2005). This is the period when the national medical insurance system was established. On December 14, 1998, the State Council issued the “Decision on Establishing the Basic Medical Insurance System for Urban Employees”, which clarified the objectives, tasks, basic principles, and policy framework for the medical insurance system reform. The document formulated a basic medical insurance system covering all urban employees in the nationwide. At the same time, the rural medical insurance system is in the formation. • Stage 5 (2005-ongoing). This stage has been devoted to establishing a basic medical insurance system. As the “Opinions of the CPC Central Committee and State Council on Deepening the Medical and Health System Reform” released on March 17, 2009 stated, everyone has the right to access the basic medical and health services as public welfare. The national government-led medical insurance system is taking shape. On August 24, 2012, “Opinions on the Implementing the Critical Illness Insurance for Urban and Rural Residents” was issued, which aimed to ensure that no less than 50% of medical payments for critical illnesses are reimbursed. Critical illnesses often create huge financial burdens on a family. Among the 70 million people living below 5 Available

from: http://www.spicezee.com/guandian/67764.html.

3.3 Distinctive Characteristics of the Chinese Healthcare System

43

Table 3.5 The different medical organizations in China Hospitals

Primary care organizations

Special function medical organization Different organizations

Amount of different organizations in 2016

Different organizations

Amount of different organizations in 2016

Different organizations

Comprehensive hospital

18,020

Community 34,327 medical service center

Disease prevention and control center

3481

Traditional Chinese hospitals

3462

County medical station

36,795

Special diseases prevention center

1213

Special functioning hospitals

6642

Village medical station

638,763

Woman and children care center

3063

Outpatient center

216,187

Healthcare supervisory center

2986

Others

446

Others

14,123

Others

1016

Amount of different organizations in 2016

Source Chinese National Statistic Report, 2017

the poverty line in China, nearly 30 million have become impoverished due to the critical disease.6 Major diseases have become the biggest roadblock in solving the poverty problem. The introduction of the critical illness insurance constitutes a great step for completing the comprehensive medical insurance system for Chinese.

3.3.3 High Concentration of Visits in Comprehensive Hospitals The medical system in China is composed of three categories of organizations: hospitals, primary care organizations (including community and county hospitals), and special public medical service organizations (Table 3.5). These healthcare organizations have received very uneven visits by Chinese patients.

6 Hospitals

in China are rated by the National Hospital Classification Management Standards, the nationwide unique criteria standard regardless of hospital background and ownership. A hospital is assessed by its functions, facilities, and technical strengths into three grades, each of which is divided into A, B, and C levels; as such Grade 3 is the best in grades and Level A is the best in levels. In Grade 3, there is still an Excellent level above A, B, and C, whin in total makes three grades and ten levels.

44

3 Distinctive Characteristics of the Chinese Healthcare Industry

medical visits in different medical services providers ( in 100 million) 50 45 40 35 30 25 20 15 10 5 0 2008

2009 in hopitals

2010

2011

2012

In primary care ogranizaƟon

2013

2014

2015

2016

in special public medical insƟtutes

Fig. 3.7 Medical visits in different medical service providers (in 100 million). Data source: Chinese National Statistical Report, 2017

In western countries, people generally go to their primary care doctors when they feel sick. According to the National Ambulatory Medical Care Survey (2015) of the United States, of a total of 990,808,000 visits in 2015, visits for primary care accounted for 51% (505,522,000), while visits for specialized medical and surgical care accounted respectively for 28.5% (281,430,000) and 20.4% (203,856,000). This means that more than half of all medical problems are solved in the primary care stage. China, however, faces a serious shortage of general practitioners or family doctors. Data shows that so far there are 209,000 general practitioners in China, about 1.5 general practitioners per 10,000 residents. The State Council requires that this number grow to 5 by 2030, which means that a further 500,000 general practitioners are in demand.7 Under such a circumstance, when Chinese people have health problems, especially in urban areas, they have to go to a hospital first instead of visiting a primary care provider. Figure 3.7 presents that 41% of visits are in hospitals, among which 30% are in the comprehensive hospitals. Figure 3.8 presents the percentage of medical visits in the hospitals, which has a higher rate of increase than of the total medical visits. The data indicates the aggravating pressure on the hospitals, which calls for feasible visit-flow regulations. The high number of hospital visits at comprehensive hospitals is due to the concentration of better resources there. Not only do comprehensive hospitals house 51.76% of total care beds in China, they also hire more top physicians. Compared with the average 50% bachelor’s degree holders in the whole pool of active physicians in 7 Available

pdf.

from: https://www.cdc.gov/nchs/data/ahcd/namcs_summary/2015_namcs_web_tables.

3.3 Distinctive Characteristics of the Chinese Healthcare System

45 70.00% 60.00% 50.00% 40.00% 30.00% 20.00% 10.00% 0.00%

2009

2010 in hopitals %

2011

2012

2013

In primary care ogranizaƟon %

2014

2015

2016

in special public medical insƟtuƟons %

Fig. 3.8 Percentage of the medical visits in different service providers. Data source: Chinese National Statistical Report, 2017

China, 93% of active physicians in 3A hospitals have a bachelor’s degree or above, and in 3B hospitals the number is 89%.8 These high-ranked hospitals with superior resources therefore attract more patients in these high-ranked hospitals. It is very common for patients to begin queueing at 4am or even earlier in the morning to get an appointment for the day. There is also the phenomenon of individuals reselling appointment slips at a price of ten or more times that of the hospital counter price, a price that some people are willing to pay to avoid the long lineups. These situations, again, call for better solutions that may become available through the new, online medical service models.

3.3.4 Ongoing Reform on the Multi-site License of Certified Physicians In China, public hospitals traditionally dominate the healthcare sector, and most experienced and talented physicians are employed by large-scale public hospitals. An earlier policy of the Chinese government required physicians to practice only with registered employers stated in their practice certificates. As a result, it was very difficult for other medical institutions, such as private hospitals or small-scale public medical institutes, to hire high-quality physicians, which was another serious imbalance in the healthcare market in China. As part of efforts to encourage private investment in the healthcare sector and to develop primary care clinics at a grass-roots level, the Chinese government has implemented various policy changes to gradually allow Chinese physicians to practice at multiple sites. The “Twelfth Five-Year Plan” identified multi-site physician practice as an important problem area to address in the health sector. The Ministry of 8 Annual

Healthcare Statistics Report, 2015.

46

3 Distinctive Characteristics of the Chinese Healthcare Industry

Health released several notices between 2009 and 2011 to regulate physician practice at multiple sites. According to the National Health and Family Planning Commission (NHFPC) 41,000 physicians have been effectively registered with multi-site licenses. However, compared with the overall two million licensed physicians in China, this is still a very small proportion.9 On November 5, 2014, the NHFPC, along with the National Development and Reform Commission and three additional ministries, jointly issued “Opinions on Encouragement and Regulation of Multi-Sited Practices of Physicians” to further promote physicians practicing at multiple sites. Two points in this policy provide strong incentives for the multi-site licensing of physicians:10 1. The consent requirement from the primary employer is relaxed, and the health authorities are required to simplify the registration procedures for physicians. Physicians do not need to identify any specific justification for practicing at another site; this facilitates the intra-group sharing of physician resources and encourages cooperation among hospitals at different levels. 2. Relationships and the allocation of liabilities among physicians and multiple medical institutions are clarified. Physicians must sign a labor contract respectively with their primary practice site and with other practice sites by clearly indicating practice terms, work hours, workloads, medical liability, compensation, and relevant insurance correspondingly. If a malpractice occurs, the liability will rest with the site and practicing physician in question; other sites where the physician is allowed to practice are not responsible for such liability. This ongoing reform to the multi-site licensing of certified physicians offers great opportunities to private hospitals (including foreign-invested hospitals) in accessing valuable local physician resources, which also nurtures the development of MSPs in integrating these physician resources online.

3.3.5 Pressures of Career Advancement for Physicians Physicians in China are classed according to five levels from the lowest to highest: residents, physicians, physicians in charge, deputy chief physicians, and chief physicians. To promote physicians are appraised on academic degrees, theses and papers in addition to clinical practice performance. In China, more than 90% of physicians work eight hours or more every day on various activities including outpatient clinics, rounds of inspections, and communication with patients and other physicians. In 2016, there was an average of 34 patient visits per physician per day, with 18% of physicians seeing over 60 patients per day. The heavy workload makes it difficult for physicians to provide quality 9 http://www.thelancet.com/journals/lancet/article/PIIS0140-6736(14)61434-3/fulltext. 10 Available

from: https://www.mwe.com/en/thought-leadership/publications/2015/01/chinese-gov ernment-further-encourages-regulates.

3.3 Distinctive Characteristics of the Chinese Healthcare System

47

care to all patients, and the deterioration of the physician-patient relationship seems to be an inevitable consequence. On top of this arduous clinical workload, physicians also have to do research and publish in quality journals listed in the Science Citation Index, which generates considerable career pressure on these physicians.11 Since the compensation for physicians is linked with their title publications are the prerequisites to get promoted to the higher level, physicians have to put a lot of efforts into publishing papers continuously. Physicians’ behaviors of better exploiting resources in hand to achieve the promotion has driven the emergence of several online physician community platforms.

3.4 Great Opportunities for E-Health and MSP to Disrupt the Traditional Chinese Healthcare Market The current situation in the Chinese healthcare sector provides great timing for eHealth and MSPs to develop themselves. Significant unmet healthcare demands call for the widening of service delivery channels. Some solutions to this include online appointment-making as well as online and remote consultations. In recent years, a number of online healthcare platforms have emerged with a view to satisfying demands from different angles, gradually disrupting the healthcare sector. In the next chapters, we focus on six platforms and explore their various disruptions. • Chunyuyisheng.com focuses on helping patients find the best physicians; • Dxy.cn. is selected as a representative of large physician community platforms. Diligent Chinese physicians in need of professional support are seeking convenient ways to obtain knowledge and skill upgrades, where the physician MSP community can play an indispensable role; • Xingren.com is selected for its rapidly expanding brick and mortar clinic networks. More convenient inpatient and out-patient organizations are needed to address the over-concentration of hospital visits; multi-site licensing policies defreeze the restriction on the best physician and extend their expertise to benefit more patients. Some of the released physicians begin to setup their own clinics, which creates the opportunities for the e-Health platform to partner with these physicians, and provide the complementory medical services to the patients;Xingren.com is selected for its rapidly expanding brick and mortar clinic networks. More convenient inpatient and out-patient organizations are needed to address the overconcentration of hospital visits; multi-site licensing policies defreeze the restriction on the best physician and extend their expertise to benefit more patients. Some of

11 Available

fulltext.

from: https://www.thelancet.com/journals/lancet/article/PIIS0140-6736(17)31593-3/

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3 Distinctive Characteristics of the Chinese Healthcare Industry

the released physicians begin to setup their own clinics, which creates the opportunities for the e-health platform to partner with these physicians, and provide the compensating medical services to the patients; • Guahao.com focuses on making patient/caregiver appointments easier; • Manyoubang.com is an online community platform for patients with chronic diseases; • Wesure.com is selected due to its focus on integrating and innovating the most attractive critical illness insurance products. With the higher out-of-pocket payment and less dependence on the medical insurance, Chinese patients have more freedom to select the insurance providers. This creates the good opportunity for the new insurance providers to introduce the more attractive insurance solutions to the market;

Chapter 4

Emerging E-Health MSPs in China

Digital transformation penetrates the healthcare industry as in other industries recent years. Early in 2002, Burns and other five co-authors wrote in the book “The healthcare value chain: producers, purchasers and providers”: the rise of ecommerce promised a “sea change” and “paradigm shift” in how trading partners were to transact business. Business-to-business (B2B) models using Web technology were sold as the solution to all of the industry’s problems and inefficiencies. The new technology would speed up transactions; provide visibility of products and information along the entire chain; and eliminate duplication, paperwork, and processing errors. The transformation has occurred in all stages of the healthcare delivery value chain: from the prevention to the treatment, from the emergency room to the ordinary clinical appointment, from chronical diseases to rare diseases, the healthcare value chain has been innovated towards a more patient-engaged and more efficient system. In order to understand how the innovations are facilitated, we studied six e-Health platforms including Chuanyuyisheng.com, Dxy.cn, Xingren.com, Guahao.com, Manyoubang.com, and Wesure.cn. Each platform was analyzed using the analytical framework proposed in Chap. 2.

4.1 www.chunyuyisheng.com Chunyuyisheng.com, initiated as a mobile app in November 2011, is a platform that helps the patient find suitable physicians by hospital or by disease category. As a platform providing online physician professional knowledge and consultation supported by the artificial intelligence, chuanyuyisheng is committed to helping the patients better understand their disease demands, assess their health status, access the high-quality services, and explore feasible ways to address the issue of “expensive and difficult to see a physician”.

© Shanghai Jiao Tong University Press and Springer Nature Singapore Pte Ltd. 2020 X. Han et al., Disruptive Innovation through Digital Transformation, https://doi.org/10.1007/978-981-15-3944-2_4

49

50

4 Emerging E-Health MSPs in China

Chunyuyisheng was founded by Mr. Rui Zhang and his team. Mr. Zhang has a bachelor’s degree in biology and a master’s degree in journalism. The team raised the first-round funding of USD 3 million to launch their app, and then the secondround funding of USD 8 million the next year. Their third-round funding of USD 50 million was the largest single funding in the mobile medical industry in China till the middle of 2018.

4.1.1 The Involved Sides There are four sided members integrated on the platform of Chunyuyisheng: • Patients who seek professional opinions about their diseases. China does not have specific primary care arrangements where patients can go once they have some healthy concerns, especially at the stage when the person is still doubting whether he has fallen into some health problem. Instead of direclty going to the hospitals, patients are offered an alternative channel for help in chunyuyisheng. • Physicians. Up to 2017, more than 500,000 licensed physicians from the public hospitals have reportedly registered in chunayuyisheng, and they have served more than 200 million patients online. A big part of the previous consulting records has been released anonymously, allowing the platform side members or even the general web surfers to review and get some ideas of treating the similar symptom autonomously. • The third-party medical consulting service providers. Four types of third party cooperators work with Chunyuyisheng: (1) search engines such as Baidu.com that needs to integrate the medical consulting services or records into their platforms for searching; (2) the mobile phone manufacturers including Huawei, Xiaomi and Samsung, which want to integrate the medical consulting records into their equipment for the mobile phone buyers’ convenience; (3) the woman-targeted platforms including Meiyou.com, Dayima.com and Bozhong.com, which are devoted to providing the woman-specialized medical consulting services, for example, menstruation monitoring; (4) insurance companies or semi-insurance companies such as Aviva-COFCO insurance, Sunlight Insurance, and Shuidihuzhu.com (a semi-insurance platform company running crowd-funding programs for platform members). • Other medical service related parties. In order to provide the best online-clinical experience, Chunayisheng integrates related parties such as the intelligent health monitoring equipment providers and agencies, hospital information systems, medical e-commerce platforms, and health insurance payment platforms, to facilitate the operations of online-clinics.

4.1 www.chunyuyisheng.com

51

4.1.2 Services and Advantages As a professional medical consulting provider, Chunyuyisheng provides services not only for the individual users, but also for the organization users. For individual users, the two key services are online self-diagnosis and diagnosisassisting services. Self-diagnosis integrates functions such as patient self-diagnosis, machine triage, crowd-triage, inquiry-assistant, and decision-making assistant. The main target is to help the patient to get the clear diagnosis by him or herself with the assisting tools online. Diagnosis-assisting services are conducted via third-partybased mobile terminals which provide remote-connection with physicians. For organization users, Chunyuyisheng opens the platform to those who want to integrate the professional medical consulting services into their own platforms. The users served at present come from the four medical service fields: search-engine, mobile phone manufactures, woman-targeted platforms, insurance companies. Chunyuyisheng has tailored its offerings to these organizational customers in all possible functions, including connecting interfaces, clinical synergies, the complete quality control system with whole-process data indicators, and free comprehensive technical support. Chunyuyisheng assists the third parties to quickly develop and launch the service channels online, and to provide stable and efficient customer service and supports that ensure good customer experience. Three advantages of Chunyuyisheng include: the first-mover advantage, higher customer satisfaction, and the open medical ecosystem. Chunyuyisheng is the first professional self-diagnosis platform where medical suggestions are offered to patients by a pool of 500,000+ physicians online. The online physicians, some of which are very famous, can answer the medical questions in as short as three minutes on average and provide exact solutions with medicine and triage suggestions; this helps achieve higher patient satisfaction. Chunyuyisheng has outperformed most competitiors and attracted venture capital funds very rapidly. As the first mobile medical platform which has got the record funding of USD 50 million, Chunyuyisheng has become the pioneer and benchmark in the medical business community. Quick and successful financing makes it possible for Chunyuyisheng to establish the biggest physician pools with the leading click rate by the patients. The big pool of physicians fosters the competition among them for attracting patients through high consulting quality, good patient rating, and the large follower number.1 As an open platform, Chunyuyisheng has been one of the most professional platforms that attract not only individual patients, but also the various third parties. Some third parties are even the outsiders of the traditional medical ecosystems, for example, mobile phone manufacturers and the emerging women-targeted platforms. Therefore, Chunyuyisheng gains important new driving forces for growth. Through this path, Chunyuyisheng becomes a pivot in disrupting the medical industry and innovating the new business model for medical ecosystem. 1 https://wenku.baidu.com/view/5b53789d102de2bd960588d2.html.

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4 Emerging E-Health MSPs in China

4.1.3 The Chicken-Egg Solution Chunyuyisheng solves its chicken-egg problem by recruiting the physicians first. This is achieved by their salesmen going to all different hospitals (from the public to the private, and from 1B to 3A2 ) to persuade the physicians to register onboard. The registered physicians can get stipends and commissions on every question they answer online. Famous physicians from high-level hospitals get more stipends. This model has fostered a rapid increase in the physicians’ registration, which in turn pulls patients sign-up. Due to the huge gap between the demand and supply of medical service in China, patients are always attracted by the avaliability of good physicians. Once such a physician pool is established, the patients join in spurt. The revenue of the platform comes from two sources: first, the individual patients who ask questions and get the professional answer online; second, the third party organizations that integrate the patient consultation system into their services. When the number of individual patients reaches the critical mass, the chick-egg problem gets solved.

4.1.4 Cooperation-Competition with Other Practitioners Chunyuyisheng does not directly compete with the incumbents in the medical industry, but just expands new channels for patients to get more professional advices about what their diseases are and what the basic treatment they can choose. Chunyuyisheng defines a new term “light diagnosis”, referring to the self-diagnosis based on the answers obtained from online physicians and teleconsultation, which is differentiated from the on-site face-to-face clinical diagnosis. Emerging to satisfy patients’ unmet medical demands, Chunyuyisheng complements the current medical service delivery system. As a key component of the medical service delivery system, the related practitioner parties need to be involved on the platform; meanwhile, being on board also makes the services more convenient and efficient. Related parties include companies such as health monitoring equipment providers and agencies, hospital information systems, medical e-commerce platforms, and health insurance payment platforms. It is these parties’ rational choice to join the platform to gain the benefits in serving the patients; this makes the new business model of the platform to work.

2 Hospitals in China are rated by the Hospital Classification Management Standards, the nationwide

unique criteria standard regardless of hospital background and ownership. The hospital is assessed by its functions, facilities, and technical strength into three grades, and each grade is divided into A, B, and C levels, in which Grade 3 and Level A is the best. Grade 3 also includes an “excellent” level besides A, B, C, which in total gives three grades and ten levels.

4.1 www.chunyuyisheng.com

53

It is notable that new related parties such as mobile phone manufacturers and woman-targeted platforms are involved too, especially the cross-border operations of the mobile phone manufacturers. Although it is too early to conclude how and to what extent these parties’ involvement will facilitate the development of the mobile medical market and how the competition in this market will be shaped, the trend becomes clearer that new mobile medical service developments will be triggered by new mobile phone terminals, which in turn, will influence the competition in the mobile phone manufacturing industry.

4.2 www.dxy.cn The name of Dxy.cn comes from the lilac flower, which blooms everywhere in May when Dxy.xn was established in May 2002 by Tiantian Li, a licensed physician. Li created Dxy.cn to provide an online home for Chinese healthcare professionals on information and opinion exchange. After more than 15 years of development, Dxy.cn has created a series of products such as Lilac Talent Network, Lilac Bioproducts Trading Information Platform, Lilac Physician Social Media Platform, Medication Assistant, Lilac Physician, PubMed Chinese, the survey platform, Lilac Conference, and so on. To date, more than 3.5 million medical, pharmaceutical and other healthcare professionals have been registered on Dxy.cn, which means a monthly increase of 30,000 new professionals on average. Most of them are from 3A hospitals located in large and medium-sized cities, and over 70% of the new members holding a master’s or higher degree. It is reported that Dxy.cn has gained over 90% awareness among the medical professionals under the age of 45 in the top hospitals of the country. In August 2013, Dxy.cn expanded rapidly by launching a number of medical and pharmaceutical apps for mobile phones. In early 2017, Eli Lilly China, Tencent, and Dxy.cn announced the joint launch of the Diabetes Care and Support Project, which is deemed as a significant achievement in the field of diabetes. Up to January 2018, the online physician education channel in Dxy.cn has provided more than 1 million hours of training courses to 1.5 million users. Within about 7 years after its founding, Dxy.cn has received four rounds of investment: the A round of 2 million US dollars in 2010, the B round of 15 million US dollars in 2012, the C round of 70 million in 2014 and the D round of more than USD 100 million in April 2018. These fundings have fueled the rapid expansion of the platform.

4.2.1 The Involved Sides As the largest medical professional community in China, Dxy.cn is committed to establishing a bridge linking the medical professionals with all the related parties

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and individuals involved in medical industries, offering products and quality services to satisfy its members. Five sided members are onboard: • Medical professionals: any physicians, nurses or other medical practitioners with academic or professional demands; these demands include job search, academic literature search, survey management, training course taking, conference announcement, medical research reagent purchase, multi-licensing, and so on. Professionals can find answers or solutions to their demands on Dxy.cn, and the platform acts as a social media and a communication, exchange, and trading channel for the Chinese medical professional community. • Patients: as a platform targeting at medical professionals, Dxy.cn has attracted the best physicians, who can serve the patients online. Dxy.cn has launched several special channels including Lilac Physicians to offer the online diagnosis, Lilac Clinics to book appointments for the patients with the best physicians, and the Ask-and-Answer channel to answer the patients’ questions directly. • Medical laboratory product providers: providers of experimental reagents, equipments, excipients and raw material of medicine can serve their medical professional customers on the platform. • Medical research and service contract companies: these companies can be accessed on the platform for medical experiments, patient survey, and publication management. • Other service providers: companies that provide training courses, conference organizing, job/talent search, paper publication also can provide their services as a part of the system. After integrating medical professionals and all parties related to their needs on board, Dxy.cn is now able to establish its advantages and efficiency of a multi-sided platform.

4.2.2 Services and Advantages Dxy.cn provides the most comprehensive services for medical professionals, and some of the services bring revenues: • • • • • • •

search for jobs and talents search for academic articles and journals in the medical databases search for experiment and data-analyzing contract organizations take training courses launch academic or professional conferences trade medical research reagents seek the multi-licensing operations

At least three services from the list can bring positive cash flows for Dxy.cn: job and talent search, academic database search, and research reagents and equipment trading.

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Different from the services provided for professionals, patients receive axillary and often complementary services: • search for professional medical knowledges; • get suggestions on the best physicians and hospitals for specific diseases; • make appointments with the Lilac offline clinics. Presently, Dxy.cn has become the largest and most comprehensive medical professional service platform in China. The related parties are pulled to come on board in order to access this large medical professional market. This pulling power is realized after the physician pool is created. Different from chunyuyisheng’s physician pool, which is established by monetary incentives, the physician pool in Dxy.cn is created through peer networking where professionals are brought onboard by peer introduction. The physicians in Dxy.cn normally have a higher professional ranking and position in the network.

4.2.3 The Chicken-Egg Solution Starting from literature retrieval services for medical professionals in 2000, Dxy.cn added the forum channel two years later and, then, the matching services based on analyzing members’ registration information. Satisfying these academic needs, Dxy.cn was able to acquire about one million medical professional users by 2006. Worth noting is that Dxy.cn only invested a total of USD 20,000 to reach this critical mass with its forum moderators (whose job was to maintain the forums) largely being volunteers. With one million users in 2006, Dxy.cn began the commercialization process through launching the talent recruitment service first. However, its process of achieving positive cash flow was not smooth. Despite a fairly high number of professional users in Dxy.cn, the growth of talent recruitment business was quite limited and only at a level of a few million dollars of annual revenue till 2012; this was largely due to the severe competition from the incumbent human resource recruitment giants. In 2007, Dxy.cn launched its e-commerce platform that focused on the online transactions of biological reagent consumables, which again, at an annual revenue level below 300,000 only till 2009 was not able to fly the total revenue of Dxy.cn. In 2010, Dxy.cn established its user analysis unit; the unit hired an editorial team with master’s doctoral degrees in medicine or pharmacy, whose job was to analyze the web presence behaviors of the professional users, including the reviewing records and feeds in the forum on current medical news, disease information and treatment solutions, and experimental inquires; then, the team extracted the important demands information from these users. This information was sold to pharmecueticals, medical product and service providers, who would pay for it as market intelligence. This business quickly brought tens of millions of revenue to Dxy.cn in 2011, which then triggered rapid growth in more subsequent developments.

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Later on, by successfully launching several new apps on the assisted-medicine and the medical social media, Dxy.cn turned to a viable Internet platform as of 2011. Different from other platforms which attracted patients to reach the critical mass for the platform viability, Dxy.cn focused on the medical professional markets. They solved the chicken-egg problems by providing free services that met the medical professionals’ career development needs in the first 6 years of operation. The initial free services helped accumulate adequate medical professionals on its platform and, then, other parties targeting at this medical professional market were attracted onboard. Effective interactions among the multi-sided members make Dxy.cn a dominant player in the online medical professional community.

4.2.4 Cooperation-Competition with Other Practitioners Dxy.cn differentiates itself from other emerging medical platforms by making profit mainly from medical practitioners, rather than from patients. Given the absence of the medical professional online community, Dxy.cn started up as a complementory actor, instead of a competitor to the existing medical ecosystem actors. When growing to a platform with one million users, its services start to compete with the peripheral parties such as recruiting companies and medical reagent trading companies. When Dxy.cn developes further to involve patients onboard and provide its patientoriented mobile apps, it begins to disrupt the traditional medical services delivery process by offering patients alternatives that are more convenient and more efficient, its disruption goes further by broadening the services in important cities with its own offline clinic service options. In this sense, Dxy.cn has become an disruptor of the traditional medical ecosystem.

4.3 www.xingren.com Xingren.com is founded by Martin Shen, an Australian Chinese, who was once a physician in the United Nation Peacekeeping Force and, then, a general practitioner in Australia. Mr. Shen has more than eighteen years’ experience in the medical field, including clinical, hospital management, and medical digitalization. In the process of looking for suitable treatments for his father, who was suffering from cancer, Mr. Shen found it very hard to get the information of effective treatments. To fill this gap, he quit his well-paid job and founded the Shanghai Aihaisi Information Technology Co., Ltd.; which launch Xingren.com in Septemeber 2014. Within a short span of two years, Martin Shen led the Xingren.com team to grow into the first echelon of the mobile medical industry, and successfully secured the business with the A round financing of $5 million Yuan and the B round financing of 200 million Yuan.

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4.3.1 The Involved Sides There are four sided members integrated in Xingren.com: physicians, patients, clinics, and other medical practitioners. • Physicians: within 2 years after the inception, Xingren.com has engaged about 430,000 real-name certified physicians from 23,869 medical institutions nationwide, equivalent to the numbers in some large European countries. Among the physicians engaged, about 47% (209,719 physicians) are from 3A hospitals, 5% from 3B hospitals, 21% from 2A/2B hospitals, and 27% from other hospitals. The active physicians cover different professional titles and levels, ranging from chief physicians, deputy chief physicians, resident physicians, to interns, which respectively account for 37, 15, 33, and 15% activity records. The locations where the physicians come from include first-tier cities (32%), second-tier cities (41%), and third-tier cities (27%). These physicians have a full range of expertises, including almost every department in a hospital from medicine to general surgery, as well as nearly all special disease categories. Among them, medicine, orthopedics, and Chinese medicine are the top three that generated the online consultation revenue in 2016. • Online-consultation users: attracted by the physicians onboard, the users’ main objective is to access the information of good medical resources and get quality consultation advice. The current user demographic is diverse in age (25% teenagers, 30% between 20 and 40, and the rest belongs to the group up to 60), gender (an interesting fact is that females below 60 years old pay more than the male, while females above 60 pay less than males), and location (with 12%, 51%, and 37% coming from the cities of the first, second, and third-and-below tiers). • Outpatient centers: In the form of partnership, Xingren.com supports physicians to co-launch their outpatient centers, in which Xingren.com pays all the setup costs, while the partnering physicians are only responsible for the daily operating costs. This greatly reduces the barriers to establishing the out-patient clinics by physicians themselves. In September 2016, Xingren.com launched the outpatient center construction fund, which builds a fund pool to provide capital for physicians who intend to open an outpatient clinic. Just in one month, Xingren.com raised over Renminbi 40 million. In March 2017, Xingren.com selected Shanghai, Chengdu, Shenzhen, and Guangzhou as the first group of cities to recruit the physician partners for outpatient clinics. Just within 30 days, 243 physicians had signed up to become outpatient partners, bringing the severe disruption to the existing clinic appointment systems. • Other parties in the e-cloud medical ecosystems: in order to better serve the physicians and patients, Xingren.com integrates the upstream and downstream organizations, including pharmaceutical companies, independent health examination centers, imaging centers, hospitals, surgical centers, insurance companies, and other multi-agency organizations. A comprehensive medical cloud system is therefore constructed with the support of the healthcare big-data and the clouding

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services in medical history recording, diagnostic solutions, medicine prescription, quality inspection, medical imaging, genetic diagnosis, and so on.

4.3.2 Services and Advantages Xingren offers online consultation services for patients. There are four kinds of paid online consultation services offered on Xingren.com, namely, telephone consultation, personalized consultation, monthly consultation, and photographic consultation. Photographic consultation generates 59% of the total revenue (priced between US$ 3.5 and US$ 24 per consultation), personalized consultation 21% (priced between 0 and US$ 100), telephone consultation 15% (pricing between US$ 8 and US$ 48), and monthly consultation 5% (priced between US$ 16 and US$ 160 per month). The service is on 24/7 but the most questions are asked on Fridays. As of the distribution during a day, most communication between physicians and patients happens around 11:00 am, and the high load during 6:00 am–10:00 am is considerable. Physicians can use the online consultation channels to earn money, but the key offers from Xingren.com for physicians is the outpatient center partnership. Martin, the cofounder of Xingren.com, promises that partnering physicians are the boss of the center, whereas they are offered free set-up and worry-free operational management backed up by Xingren. Xingen.com believes that establishing an offline outpatient center makes the dream of many excellent physicians come true. In the partnership, Xingren.com rents the space, decorates the space, recruits nurses and other staffs to make the clinic ready for the partnering physicians. After the clinic opens its door, Xingren.com is also responsible for the operational management by leveraging resources from their integrated medical ecosystems; this allows the physicians to concentrate on the medical services and not being distracted by the other administrative issues.

4.3.3 The Chicken-Egg Solution As a brand-new platform, Xingren.com had to solve the chicken-egg problem to survive. Similar as Chunyuyisheng in the beginning, Xingren.com hired a large business development team, working on sales commission, to introduce the platform to the physicians and ask them to register on the platform to earn stipends. This aggressive promotion enabled Xingren.com to acquire 200,000 physicians online within one year. The large pool of physicians then attracted patients to get onboard and seek for professional services from the physicians, especially the renown ones from reputable hospitals. If the patients were convinced by the suggestion from the physicians on the platform in their first try-normally subsidized, the patients would

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be more attracted to seek for the online consultation later on and be willing to pay for it. Xingren.com deployed a two stage strategy to attract the patient. In the first stage, Xingren.com initiated the online consultation service between patients and physicians who already knew each other offline. For example, when a patient went to the hospital to see a physician, who might have a real name certification on Xingren.com, the patient could ask the physician to connect on Xingren’s app on the mobile phone using the WeChat scanned QR code. With the app, the patient would not have to go to the hospital any more for minor illness or discomforts, or tolerate the hassles of queueing. Physicians also could use the app for the online follow-up, special disease management, disease control, postoperative follow-up, online refill, and other distance medical issues. In the second stage starting about 2015, Xingren.com began a marketing compaign on Dianping.com, the first well-known service rating website in China. On Dianping.com, patients would rate the physicians (by their unique QR codes) who were active on Xingren.com, so that new patients would know the physicians by the high rating and wish to connect and consult with them on Xingren. Dianping.com is a comprehensive platform with a large amount of traffic in all service categories; this indeed helped Xingren grow the patient number quickly. After the two-stage development of the patient membership, the platform of Xingren started to generate positive cash flow, which then gradually evolved into a virtuous circle of self-sustaining with more patients consulting with the physicians on the platform.

4.3.4 Cooperation-Competition with Other Practitioners In the beginning, Xingren.com was established simply to improve the information access for patients, focusing on providing extra communication channels (i.e., online consultation) between physicians and patient; this did not disrupt the traditional medical industry. After an increased number of patients started to conduct online consultation, at least the service delivery for the minor illness categories got disrupted due to the convenience of online methods. With the enforcement of the new multi-license operation policy, Xingren.com began to help the physicians to establish their own clinics, which turned to be a larger disruption to the existing hospitals. The most valuable resources of the industry, namely, the physician’s expertise, efforts and attention, would be distracted to these clinics. The traditional hospitals will be seriously disrupted by the emerging platforms and their networks of the offline clinics.

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4.4 www.guahao.com “Gua-hao” (making an appointment) in Chinese is the first step when a patient wants to see a physician in the hospital in China. Different from the situation of making an appointment with a family physician when one feels unwell in the western countries, Chinese have got used to going to the hospital directly and get the physician’s appointment of the same day in the hospital. This process of getting the hospital appointment is called “gua-hao”. Gua-hao is especially difficult in the best national or regional hospitals where many patients or caregivers have to wait in the queue from the mid-night or even earlier a day before the patient goes to see the physician. There even have been illegal agents selling the pre-obtained hospital appointment time slots at a very high price (sometimes over 10 times of the normal appointment fee charged by the hospital). “Difficult to see a physician” is a nationwide problem for Chinese. Guahao.com is a platform envisioning to solve this problem. Yuanjie Liao, the founder of Guahao.com, was deeply impressed by the severity of the problem when he took the 1-year-old niece to see doctors in different cities. As a renown IT expert, Liao believed that an IT platform should be able to solve the problem without much difficulty. The connection with Fudan University hooked Liao up with the administrators of the best hospitals in Shanghai; this made Liao to decide to create an online platform that provides free “gua-hao” service to patients. As an free alternative to the regular appointment-making method, Guahao.com gained the reputation rapidly by word of mouth, and the platform users grew dramatically nationwide. After several rounds of financing, Guahao.com had received 394 million U.S. dollars from Tencent, the China Development Bank, Fosun Pharma, and other institutional investors by 2015. The valuation of Guahao.com in the middle of 2018 was more than 3 billion U.S. dollars.

4.4.1 The Involved Sides Guahao.com has four sided members: hospitals, physicians, patients, and other parties. • Hospitals: Guahao.com integrates more than 3900 hospitals across the country, which join Guahao.com for promoting the hospital brand, expanding the alternative appointment channel, and providing the real-time patient service feedback. • Physicians: Guahao.com was able to get the most comprehensive data of 300,000 physicians from the hospital information systems nationwide. Physicians’ information is updated every day, so is the information about patients’ appointment booking and physicians’ rating received. After operating for a period of time with the constantly increasing number of physicians, Guahao.com was able to start the online consultation for the patients, and the physicians could get their compensations accordingly.

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• Patients: patients are first attracted by the free hospital appointment services, followed by the online consultation services and, then, other additional services. By the middle of 2017, the number of real-name registered patient users on Guahao.com has reached 172 million, and more than 380 million times of services has been recorded in the first half of 2017. • The other parties onboard include the other medical service providers, insurance companies, medical mass-medias, and industrial associations. These parties are exploring the big patients pool to broaden their business channels.

4.4.2 Services and Advantages Guahao.com provides services for individual patients, hospitals, and physicians. Besides the free hospital appointment making service, Guahao.com offers personalized post-consulting services to the patients too, so-called the health management service package. The package includes online lectures and counselling services by Guahao.com’s full-time physicians on how to treat specific diseases, the various options from medical service providers, insurance companies, and product manufacturers that are integrated in the platform. Another service for patients is the high-end hospital visit plan. Based on the patient’s previous records, Guahao.com arranges the full visit package including expert match, on-site consultation, air ticket booking, visit accommodations, and even a special guide throughout the whole visit prior to the patient’s arrival at the hospital. Guahao.com also provides the personalized post-consulting services including medicine prescription and other related services, such as recommendations of the best suppliers to patients. For example, one of the biggest online pharmacy groups Sinopharm cooperates with Guahao.com to distribute medicines for patients who use the platform in different cities. More lately, Guahao.com starts to offer the home medical service system, which allows the users to get three kinds of home medical services through a one-key terminal: (1) to communicate with the physicians remotely through the patientphysician synchronizing system via video; (2) to synchronize patients’ electronic medical records so that the physicians can see all the medical history in the physician’s terminal; (3) to pay the medical fees through the synchronized medical insurance system. In addition, artificial intelligence technologies are integrated in the platform, which improves physicians’ diagnostic efficacy in the family medical services. At the same time, a cloud system is created to integrate the physicians to improve the hospital planning process.

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4.4.3 The Chicken-Egg Solution Guahao.com gains the unique hospital resources since its inception due to two key factors: • Strong background of the founder. Jieyuan Liao, a renowned scientist in information technology in China and deemed as one of the pioneers in the Chinese intelligent speech recognition industry, has been serving as the director of the national intelligent computer transformation base since 1998 and founded several IT companies in the past 15 years. His personnel fame gets him easily connected with the Fudan University hospital, the most famous hospital in Shanghai, and plays a crucial role in persuading the latter’s management to outsource the hospital appointment system to him; this brings Guahao.com the critical startup resources, which is otherwise unavailable, leading to unique competitiveness. • Strong artificial intelligence (AI) technological capabilities. The cloud system is essential to carry out the critical digital functions in the operational management of the hospital, as well as in data-sharing and cooperation among physicians. It helps with recording and analyzing cases and operations, adjusting the corresponding machine algorithms, and assisting other diagnoses. The big-data of patient records and the convenient connection between patients and physicians can help replicate medical experiences through the AI and then pass on to other physicians. The outcome has shown in the diagnosis of the fundus disease, where the 99% accuracy results from the application of big data and machine learning.

4.4.4 Cooperation-Competition with Other Practitioners Distinctive resources and advantages have made Guahao.com a powerful complementary actor of the traditional hospital system since its inception. From the online hospital appointment system to the medical cloud system based on artificial intelligence, Guahao.com has alleviated the existing managerial problems in hospital management and diagnosis accuracy. Neither the hospitals nor other health service parties have been significantly impacted by the operation of Guahao.com yet; nonetheless, its potential of fundamentally disrupting the medical diagnosis process just lies around the corner.

4.5 www.manyoubang.com (Manyoubang) Manyoubang is a health social networking platform in China that helps the chronic disease patients exchange information and knowledge about disease prevention, treatment experience, medication methods, and special services. According to Big-data

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Report on Health of Chinese Families, chronic diseases account for 86.6% of all deaths in China, indicating the huge market of chronic disease.

4.5.1 The Involved Sides Three sides are involved in the platform: chronical disease patients or their caregivers, donators who would like to donate money for patients needing financial help, and healthcare practitioners.

4.5.2 Services and Advantages In addition to attracting more patients to share their experience, ideas, attitude, and methods of fighting with the diseases, the platform also attempts to maintain the community dynamics using two other functions: 1. Toolkit for patients: patients can find nearly all information they need, from the disease indicators and symptom descriptions, to possible treatments, and to the best hospitals for a disease. 2. Crowdfunding for patients with financial needs: Manyoubang has acted as the crowdfunding platform to help patients get the treatment funding. By August 2018, manyoubang has launched 236 crowdfunding projects, raised RMB 16 million from over 480,000 donators in 108 patient communities involving some 300 thousand patients in total. As one of the earliest health social networking platforms, Manyoubang has the first-mover advantages. With more patients onboard, the entry barriers are becoming more critical for other competitors to overcome.

4.5.3 The Chicken-Egg Solution The platform started with putting together the patients who wanted to get information on chronical diseases with the similar symptoms. Reviewing earlier patients’ experience shared on Manyoubang, new patients also became willing to share their experience and knowledge about certain diseases. More patients’ sharing makes the platform more valuable. When questions could not be answered by experienced patients, professional healthcare practitioners were invited to the platform to answer them. Unlike other social networking platforms which make money by charging the advertisers, there is no advertiser on Manyoubang yet. The platform company is trying to diversify the services with crowdfunding and mobile applications, and it invites investors to fund the operations. Patients are the side who gets subsidies from

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the platform supported by the investment, but where revenues come from is not clear yet.

4.5.4 Cooperation-Competition with Other Practitioners Some hospitals have their own online patient communities, which are only open to their own patients. As a comprehensive platform covering 108 kinds of diseases, Manyoubang is a strong new entrant threatening the hospital-owned patient communities. However, the hospital-owned patient communities are often not well developed, and may chose to use commercial healthcare social networks such as Manyoubang as a complementary service for better patient experience.

4.6 www.wesure.cn On November 2, 2017, Wesure.cn was initiated by Tencent, one of the largest Internet companies in China. Tencent is the parent company of the social media instant message app WeChat, which has connected about one billion users worldwide. As an insurance brokerage platform, Wesure.cn offers medical insurance and critical illness insurance programs in collaboration with Taikang Life Insurance, which brings considerable threats and challenges to the insurance incumbents.

4.6.1 The Involved Sides Wesure.cn serves two sided members: insurance companies and insurance buyers. Up until early 2018, Wesure.cn only opened the platform to several biggest, renown insurance companies. Taikang Life Insurance was the first involved medical and critical illness insurance provider, responsible for offering the insurance product package, booking appointments with medical experts at top hospitals, and following up with the insurance claims. By the end of August 2018, another four insurance companies came onboard for auto insurance, including PICC (People’s Insurance Co. of China), China Continent Insurance, Pingan Property Insurance, AXA Insurance. Metlife Insurance joined to provide travel insurance. More insurance providers are said to be integrated on Wesure.cn in the subsequent stages. Wesure.cn targets three kinds of insurance buyers: (1) those who want to avoid financial burden on their families when they are sick; (2) those who want the support for medical treatment, hospitalization, and surgery when themselves or the families suffer from a serious illness, (3) those who want to cover the expenses beyond the social security coverage. The social security coverage is quite limited in China, and given the price in Wesure.cn is lower than other similar insurance products,

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it indicates good market promises due to the affordability for potential insurance buyers. In addition, Wesure.cn attracts a great amount of attention from one billion users of WeChat3 , leading to the superior performance of the platform.

4.6.2 Services and Advantages Two categories of medical insurances are offered on the platform, namely, the Wesure medical insurance and the critial illness insurance. Both carry the similar benefits and the premiums as other existing medical insurance, but the critical illness insurance coverage expands from 25 to 100 diseases, including some types of cancer. Wesure medical insurance has four advantages compared to its competition. First, its insurance products are cheaper. Second, the associated medical services are specially offered for critical diseases, which is more convenient for patients. For instance, Wesure.cn can book appointments in five working days, arrange inpatients and operations with the expert physicians in 500 3A hospitals nationwide in 10 working days; it also can provide remote consultation with specialists. Third, Wesure.cn can provide the hospital with deposits in advance. For the first time patients, Wesure.cn would provide in advance the deposit of the hospital charges if the patient is treated in a 2B or above hospital and applies within the first 5 days hospitalized. This policy addresses the flaws of other existing medical insurance products, which require the patients to pay heavy full expenses before the insurance can be processed. Finally, Wesure.cn has a clearer health notification and underwriting process. Unlike some insurance companies which either use intelligent underwriting systems to refuse the qualified but high-risk insurance buyers, or attract buyers by hiding their health claim conditions, Wesure.cn creates a more transparent insurance system in which buyers can understand the insurance packages well. Although Wesure’s auto insurance product is similar as that provided by other insurers, its distinctive advantages lie in the special connection with WeChat. For example, the insured can conveniently renew the insurance using one button on WeChat, pay the insurance fee in the WeChat Wallet, retreive insurance documents within as short as 30 seconds, and fill up insurance claims easily and accurately online. A unique benefit is that Wesure.cn only allow the branded insurance companies to sell their products on the platform, which guarantees the service quality. Similarly, travel insurance products such as the airplane delay insurance and air accidental insurance, are offered on Wesure.cn too. Another significant advantage lies in the AI technology underlying Wesure’s products and services. Integrating the big-data capabilities of Tencent into the whole process of actuarial, underwriting, claims compensation and offline services provided by the strictly-selected insurance companies, Wesure.cn has ensured users a wide range of options of the most cost-effective insurance products with exclusive discounts and value-added services. 3 http://industry.caijing.com.cn/20180321/4422527.shtml.

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4.6.3 The Chicken-Egg Solution Launched by Tencent, owner of the largest online social network in China, the chicken-egg problems are largely exempted. Innately, Wesure.cn can enjoy the huge volume of potential users from WeChat and, at the same time and almost exclusively, use many user-friendly functions of WeChat. Strictly selecting the best insurance products with proper prices, Wesure.cn can be very optimistic about the success of its operation.

4.6.4 Cooperation-Competition with Other Practitioners Wesure.cn is now acting as an insurance brokerage company, making a good partner of the insurance companies. Looking forward, if Wesure.cn would offer its own insurance products, it could be a serious challenge for the incumbent insurance providers, especially those providing comprehensive insurance products. Comparing with traditional insurance companies, Internet insurance may present more inherent advantages, especially in some areas such as renewal ratio, customer portraits, and big data analysis. Once a closed-loop, full-fledged business model is formed, it will create disruptive changes in the health insurance industry.

4.7 Disruptive Modelling Each targeting at one specific problem in the Chinese medical delivery industry, the above six e-health platforms have shown various ways of becoming either an extender/compensator or a disruptor to the traditional medical industry. Table 4.1 summarizes the ecosystem parties that are differently affected by each platform. Our six case studies show that the disruptions begin from the most peripheral positions of the medical ecosystem, and then move from the peripheral to the core gradually. The patients are the party that all the emerging platforms attempt to capture, which is also the party who receives the biggest benefits from the disruption. Although it is predicted that the physician group can get disrupted on their professional skills, most functions of the platforms can indeed help the group. Hospitals’ traditional roles in hosting physicians and receiving outpatients will be disrupted, but hospitals’ other functions such as in-patient medical services will be kept well even in the long term. The distributing channels such as drug stores, sales agents, and trading companies, will be disrupted in the long run thanks to the more convenient online distribution system, while the illegal healthcare agents such as those in hospital appointments have been disrupted already as the connection between patients and the hospital and the physicians is becoming more transparent and efficient. From the standpoint of the medical ecosystem, the fast development of the platforms to date has stemmed from

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Table 4.1 Disruptions brought by the emerging platforms Influenced parties Short-term Complementor

Long-term Disruptor

Complementor

Disruptor

Patients

Manyoubang, Chuyuyisheng, Dxy, Xingren, Guahao, Wesure

Manyoubang, Chunyuyisheng, Dxy, Xingren, Guahao, Wesure

Physicians in the hospitals

Manyoubang, Chunyuyisheng, Dxy, Xingren, Guahao

Manyoubang, Chunyuyisheng, Xingren

Pharma companies

Manyoubang, Chunyuyisheng, Xingren, Dxy, Guahao

Manyoubang, Chunyuyisheng, Dxy, Xingren

Medical product manufacturers

Manyoubang, Chunyuyisheng, Dxy, Xingren, Guahao

Manyoubang, Chunyuyisheng, Dxy, Xingren

Hospitals

Manyoubang, Chunyuyisheng, Dxy, Xingren, Guahao

Manyoubang

Distribution channels

Manyoubang, Chunyuyisheng, Dxy, Xingren, Guahao

Manyoubang, Chunyuyisheng, Dxy, Xingren, Guahao

Insurance companies

Wesure

Wesure

Charitable donators

Manyoubang

Illegal healthcare agents for hospital appointments Medical journals

Dxy, Guahao

Chunyuyisheng, Dxy, Xingren, Guahao

Manyoubang Chunyuyisheng, Dxy, Xingren, Guahao

Dxy

Dxy

only the early stage of a transformation where new businesses start to explore the unmet needs in the market and, therefore, offer the innvative products and services with the aid of the IT technologies. In the anticipated future and when patients become more experienced and accepting to the online services due to the increased satisfaction, this new business model will very likely disrupt the medical ecosystem at an accelerated pace driven by the unstoppable trend of digital transformation.

Chapter 5

Pair Comparison Between Chinese MSPs and American MSPs

5.1 Rationale of the Comparison Although there are significant differences between the medical systems in China and those in developed countries, similar patient needs in some areas have simulated the emergence of platforms that address similar functions in the system. Comparing these functions of different platforms that adopt similar market positions can allow us to explore the general rules of operating a platform regardless of the country-specific contexts; it also can deepen our understanding of how the country-specific factors influence the platform governance. Focusing on three top hotspot problems in the Chinese medical systems, we select four U.S. platforms for comparison, each of which addresses at least one of the problems and represents one of the following three broad market needs: the needs for better service delivery (e.g., hospital appointment booking), the needs of physicians, and the needs of chronic disease patients. In both countries, MSPs are created to alleviate the problems and satisfy the unmet needs; four platforms in the U.S. are selected to conduct the pair comparison with the Chinese counterparts in four specialized functions: • • • •

The service delivery platform: www.onemedical.com The physician online community: www.domicity.com The chronic disease patient platform: www.dlife.com; The patient online community: www.patientslikeme.com

The four pair comparisons are function comparison not platform comparison. Some platforms cover more than one specialized function and, therefore, are listed in multiple comparisons in the table below (Table 5.1).

© Shanghai Jiao Tong University Press and Springer Nature Singapore Pte Ltd. 2020 X. Han et al., Disruptive Innovation through Digital Transformation, https://doi.org/10.1007/978-981-15-3944-2_5

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Table 5.1 Function comparison between Chinese and American MSPs of e-Health U.S. MSP Function

Onemedical DLife

Doximity

Quality care-making the appointment Guahao easier Network of clinic offices

Xingren

Chronical patient communities

Manyoubang.com

Integrating the physicians

Guahao.com; Dxy.cn

Online physician communities

Dxy.cn

5.2 Selected MSPs in the U.S. 5.2.1 www.onemedical.com (One Medical) Having experienced the massive inefficiency in obtaining a doctor’s appointment, internal medicine physician Tom X. Lee founded the One Medical Group in 2007. One Medical aims to establish a system of affordable and accessible quality primary care to everyone by integrating the customer-centered design, smart applications of technologies, and a team of talented primary care providers into the platform. Combining quality care with modern convenience, One Medical believes that clinical excellence, commitment to service, plus a modern approach can make truly great patient experience. Besides integrating individual members, One Medical also offers services to company users who would like to provide their employees with medical services as benefits. The platform houses a network of over 250 primary care specialists in 40 U.S. cities, enabling patients to book last-minute appointments on their phones, get certain prescriptions via the One Medical app, and access health records online. More than 1000 companies have offered One Medical’s services to their employees, and One Medical cuts the average cost of care for employers by 4.5%.1 One Medical also owns over 50 conveniently located offices around the country, making finding a physician near the patients never easier. Till April 2014, One Medical has raised $117 million of funding in total, which is mainly used in launching new clinics around the U.S. and developing its platform-enabling technologies.2

1 https://www.fastcompany.com/3067497/why-one-medical-is-one-of-the-most-innovative-com

panies-of-2017. 2 http://fortune.com/2014/04/17/primary-care-startup-one-medical-raises-40-million-plans-more-

clinics/.

5.2 Selected MSPs in the U.S.

5.2.1.1

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The Involved Sides

Four sided members of One Medical include: individuals seeking medical services for themselves, employers seeking medical services as employee benefits, primary care providers, and onsite clinics owned by One Medical. Patients pay the annual membership fee to get the quality care in a big number of areas including dermatology, flu shot, LGBT (lesbian, gay, bisexual, transgender) care, mental health, nutrition, on-site labs, primary care, same-day care, sports medicine, travel health, women’s health, and so on. Employers registered with One Medical can get better medical experiences with discount annual membership fees for their employees. Primary care providers are selected by One Medical under very strict screening criteria: they have to be experienced, board-certified professionals who can handle specific medical needs in their specialties, ranging from preventive medication to treatments of acute and chronic conditions, and from coordinated care with the best specialists in the region to personalized consecutive treatment plans. One Medical attracts top-caliber physicians who are more interested in quality care than quantity. Each provider at One Medical sees 16 patients per day, which is significantly lower than the national average of 25 patients.3 In general, providers are incentivized to drive the volume because insurance companies only compensate them on the basis of per office visit, which prevents the physicians’ service through email or virtual network, entailing a sub-optimal patient care experience. Under the business model of One Medical, physicians can use part of the subscription fee to provide additional services to their patients, including after-hour access aiming for building a closer relationship with their patients. Over a network of 50 clinics nationwide in the U.S. has been established by One Medical, which are all located in finely-decorated offices and providing shorter wait time and last-minute availability for patients.

5.2.1.2

Services and Advantages

One Medical is a concierge medical platform with a mission to achieve quality care in various aspects including highly committed, board-certified physicians; sameday appointments with multiple possible channels; longer visit with each physician and decreased visit volume each physician per day; convenient office locations; onsite lab services with no appointment required; 24/7 care via phone, app, or online, and email directly with the physician; and a broad range of insurance plans accepted, including Medicare. Services in One Medical are designed to address the current problems in the medical system such as long waiting time, short consultation time, and the lack of after-hour care. The company charges an annual membership fee between $149 and $199, which helps pay for services like email consultations and

3 https://rctom.hbs.org/submission/one-medical-the-physicians-office-reinvented/.

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mobile prescription renewals. If someone can’t afford the membership fee, the fee can be waived upon approval. In addition, One Medical focuses on leveraging technologies to solve the challenges facing patients and service providers, including helping achieve the sameday appointment online, paperwork completed online, prescription refill online, lab results online, as well as the email and virtual access to physicians 24/7.4 Technologies allow patients to deal with minor medical needs (e.g., prescriptions for standard conditions or brief questions) through email or teleconsulting, so as to leave more open slots for patients that really need to see a physician for major problems. The advantage of One Medical is its capability of serving a new niche market in which consumers are willing to pay a fee above the insurance premiums for a more pleasant and efficient medical experience. Traditional concierge medicine offerings do not accept insurance and come at hefty price tags that range from $2000 to $6000 per year. One Medical’s concierge medicine services are offered accepting most major health plans (including Medicare), charging a much lower annual subscription fee based on the patient’s location.5

5.2.1.3

The Chicken-Egg Solution

After completing his master’s program in business administration in Stanford University, Dr. Lee raised USD $3.5 million from Benchmark and established One Medical. The startup aimed to design and execute better primary care delivery modes for medical service seekers: the convenient, comfortable and efficient service modes facilitated by the stylized clinics and the technology-based tools. The top 10% highranking healthcare providers on Yelp are invited to join the platform by actually sitting in the company’s clinic offices in different cities, and some best physicians are also invited to join virtually online. Following the physicians’ participation, patients are attracted to use the platform for the services provided there. In 2015, 80,000 new individual patients and a number of enterprise clients are reported as registered users. With more patients joining, One Medical began to charge the membership fee, which makes patients the money side in One Medical. On the subsidy side, care service providers receive the money collected from the patients for their service delivery. A virtuous circle is therefore established.

5.2.1.4

Cooperation-Competition with Other Practitioners

One Medical has disrupted the healthcare service delivery process by creating and practicing the quality primary care through its innovative business model. The 24/7 concierge medical services, addressing some problems of the traditional primary 4 https://rctom.hbs.org/submission/one-medical-the-physicians-office-reinvented/. 5 https://www.forbes.com/sites/ryanmac/2013/03/27/one-medical-group-a-concierge-service-by-

another-name-and-price/#4d88f8102e16.

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care, are more promptly and efficiently delivered either online or onsite at convenient locations and in the comfortable environment. In the short term, this may not completely disrupt the medical service industry on a large scale; however, in the long run, with more individual and company customers joining the platform, experiencing the differences in services, benefiting from an increasing number of the clinics and convenient access to good physicians, the traditional medical services can be fundamentally impacted, and disruptions to the industry are very likely to occur. Under this innovative business model, One Medical generates revenues by collecting annual membership fees from the customers; the revenues will then be used to support the platform operation and better services from the clinicians, which ultimately promotes customer satisfaction. Targeting at a new market composed of customers willing to pay some premium for better medical services, One Medical has gained its popularity very rapidly.

5.2.2 Doximity.Com (Doximity) Founded in 2011, Doximity connects physicians and advanced practice clinicians in a network, promoting their productivity and career success. By February 2017, Doximity has acquired 800,000 members on board, which include: (1) 600,000 physicians, among which 70% are in the United States, (2)100,000 nurse practitioners and physician assistants, among which 40,000 are medical students −90% of them are fourth-year U.S. students—and 60,000 are other types of healthcare practitioners such as pharmacists.6 Doximity has become the largest medical network of U.S. clinicians.7 To date, the company has raised a total of 81.8 million dollars, including $17 million in the B round8 and $54 million in its recent C round in April 2014 led by T. Rowe Price and Draper Fisher Jurveston with the engagement of Morgan Stanley Investment Management.

5.2.2.1

The Involved Sides

Three side members are onboard in Doximity: • Outpatient center practitioners, including medical physicians (MD), physicians of osteopathy (PO), physician’s assistants (PA), and nurse practitioners (NP). Through Doximity, these practitioners can connect with colleagues, classmates, and co-residents; get suitable referrals at a timely manner for their patients’ 6 https://www.prnewswire.com/news-releases/doximity-reaches-70-percent-of-all-us-physicians-

more-than-800000-licensed-medical-professionals-300411509.html. 7 https://www.prnewswire.com/news-releases/doximity-reaches-70-percent-of-all-us-physicians-

more-than-800000-licensed-medical-professionals-300411509.html. 8 https://www.imedicalapps.com/2012/09/doximity-morgenthaler-ventures/.

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demands; access employment opportunities in the leading hospitals; obtain the most updated information and knowledge of their fields as well as access latest medical journals; and participate in continuing education to earn desired professional certificates. The platform also allows them to send and receive HIPAA(Health Insurance Portability and Accountability Act)-secured faxes from their mobile devices, which brings greater convenience for their communication with patients. • Hospitals and other medical organizations. The purposes of these organizations are mainly to explore better marketing positions through higher online ratings online, and to recruit good physicians. • Third-party partners. Doximity involves partners in technological support for apps (e.g., Amion, a leading provider of physician scheduling solutions), survey assistance through networking facilitators (e.g., U.S. News Best Hospital Ranking9 ), co-development of tools for hospital collaboration and patient care (e.g., the Society of Hospital Medicine and the American Society for Clinical Investigation), and so on. 5.2.2.2

Services and Advantages

Unlike other platforms which generate revenues from selling advertisement or charging fees from the physician members, Doximity.com charges the hospitals and other medical organizations for the following services it provides. • Recruitment services: with its largest medical professional user base, Doximity is able to charge recruiters who wish to explore this user base. Because physicians post information about their expertise, geographical preferences, and other factors, recruiters are able to identify physicians based on that information and match with their recruitment requirements. Hospitals and medical organizations subscribe to the recruiting service at the cost of $12,000 per seat per year, allowed to post 50 messages per month. According to Tangney (one of the Doximity.com founders), over 20,000 peer to peer messages are sent on Doximity every day, and over 92,000 job offers have been sent to Doximity members since January 2013; the company has had almost a half of the total number of American physicians registered as its member by the 2014 summer.10 Considering that the recruiting-related services are not able to generate enough revenues, Doximity is considering to leverage its powerful network to provide the other services for greater revenues.11

9 U.S.

News selects a random sample of physicians with an active Doximity profile and who are board-certified in a specialty ranked by U.S. News to vote in the “Best Hospitals” survey. 10 http://thehealthcareblog.com/blog/2014/04/29/doximity-raises-another-54m-to-pursue-linked ins-business-model-too/. 11 http://www.hbs.edu/openforum/openforum.hbs.org/goto/challenge/understand-digital-transform ation-of-business/doximity-value-capture-from-a-physician-network.html.

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• Hospital Marketing Platform: Hospitals can develop their referral networks, and market themselves by sending the Newsfeed precisely to where clinicians are already congregating.12 Besides, Doximity.com provides useful functions to keep the physician users active on its platform: • Integrative tools of communication: Doximity provides free, HIPAA-secured fax numbers to facilitate the communication between patients or caregivers and their physicians. the HIPAA-secured fax can allow physicians to fax documents right from their cell phones and sign with fingers; it also allows pharmacies to receive faxes and then complete all the workflow on the platform. Doximity Dialer is a function that allows physicians, nurse practitioners, and physician assistants to call their patients from cell phone while making sure the caller ID number showing appropriately: clinic line, hospital operator line, or wherever they need the patient to call back for the care.13 Furthermore, both HIPAA-secured fax and Doximity Dialer allow the physicians to handle all the workflow issues for the patients, such as following up with the lab report and making calls in need. For communicating with the colleagues, Doximity Forum is a useful tool to find the information needed when the physician encounters a particularly challenging clinical problem, or requires information from outside of their field of expertise. The information then allows the physicians to help set new referrals for the patients, who thus do not have to pinball around the healthcare system to find the ideal specialists. • Continuing medical education: physicians can also pursue continuing medical education with Newsfeed, the personalized, classified medical news and research updates with their professional interests and connections. Supported by artificial intelligence technologies such as machine learning algorithms, Newsfeed covers all published medical literature as well as 20,000 newspapers, magazines, and blogs, and it gets the updated entirety of medical knowledge every single day. By providing the access to Newsfeed and other types of multimedia learning sources, such as the latest conferences, lectures, slide decks, or the grand rounds at large academic hospitals far away that one typically is not able to attend in person.14 Through this function, physicians can keep up with the specialized knowledge very conveniently in a daily basis while still seeing many patients. • Career navigator: physicians can upload their CVs with 30 areas of specifications, including clinical interests, education, board certifications, and publications; physicians can also have access to the nationwide compensation benchmarking data by specialty, job listings of top healthcare organizations, and the peer networks for new opportunities.

12 https://www.prnewswire.com/news-releases/doximity-announces-hospital-marketing-platform-

300370737.html. 13 https://hitconsultant.net/2018/04/19/doximity-dialer-integration/. 14 https://www.pm360online.com/the-secret-behind-doximitys-quick-growth/.

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5 Pair Comparison Between Chinese MSPs and American MSPs

The Chicken-Egg Solution

Doximity has solved the chicken-egg problems by bringing the physicians onboard first. Instead of verifying individual physicians by their licenses or other identifiers, which is too much work for both the platform and the physicians, Doximity.com aims at physicians’ employers. It partners with U.S. News, which produces a “best hospitals” ranking every year but has been suffering from the low response rate problem in physician votes under the traditional mailed survey method. Doximity provides the electronic survey method to the U.S. News and limits voting only from “verified” physicians.15 Because hospitals take the ranking seriously as a promotional tool, they push their physicians to register on the voting platform provided by Doximity. In this way Doximity gets the most complete registration of physicians. Besides that Doximity sends daily and weekly email to physicians at various hospital systems across the country, reminding them to register on Doximity so that they could “vote their hospital up”; Doximity even sends their representatives to hospitals to help with the registration. In addition, Doximity asks the registered physicians to vote for their residency (e.g., emergency centers) to formulate the “Residency Rankings”; more physicians are therefore involved. As a result, Doximity rapidly develops its large nationwide pool of verified physicians in its early stage. Holding the physician information in hand, Doximity has been exploiting many ways of using the data, including assisting the recruitment for hospitals and medical organizations and assisting the third-party organizations to market professional products or services (e.g., continuing education and other services) to the right group of physicians.

5.2.2.4

Cooperation-Competition with Other Practitioners

Doximity has created a brand-new market of medical professionals and established more efficient ways to satisfy their needs such as the continuing education. Doximity currently aims to use its service to complement those provided by the incumbent practitioners, not to disrupt the current market. Doximity is successful in the sense of having attracted a huge number of registered medical practitioners, but it still calls for killer applications to keep the registered members active on the platform.

5.2.3 www.dlife.com (DLife) DLife was established in 2004 to meet the consumer needs for practical solutions to the 24/7 challenges of managing diabetes. It is the first integrated media network for 15 https://www.imedicalapps.com/2014/12/doximity-backdoored-way-physician-registrations-wit hout-targeting-physicians/.

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people living with diabetes, their families, and those at risk of developing diabetes; this is a big group which basically covers over 100 million Americans. DLife provides information, inspiration, and connection to others through media touch points within a user’s daily habit stream.

5.2.3.1

The Involved Sides

Three sides are attracted onboard: patients or their caregivers, the diabetes professionals, and the diabetes products and service advertisers. Anyone who are interested in diabetes can join DLife community for free and get the member benefits of 24/7 support for the diabetes self-management package. The diabetes community includes 5 categories of people: the diabetes patients, the families/friends/caregivers, the diabetes educators, the dietitians/nutritionists, other healthcare professionals. Users typically need to provide patient information including the diagnosis result (Type 1, Type 2, gestational, prediabetes, and others), diagnosis date, blood glucose testing per day (if they have some), and the medication type (insulin, other injections, oral, or pump) to get the precise solutions. All the information is kept confidential. Diabetes professionals can be regular educators, or those who start an initiative with a new professional idea that can help the diabete patients. Professionals can work as information provider, columnist-writer, video maker, and so on, for diabetesrelated themes. Their engagements provide the contents that patients and caregivers need. The advertisers are the providers of service, medicine, equipment or in any other medical related areas; they can be educators too. Advertisements in DLife can reach more than one million monthly visits from patients, educators, and professionals.

5.2.3.2

Services and Cooperative-Competitive Advantages

DLifes provides tailored services to different side members. For patients and caregivers, DLife can empower self-management via the innovative user supporting information system. The system provides information about other patients’ experience, diabetes developing paths, medicine & related products, and professional advice; this information largely promotes patient engagement and satisfies the overall patient needs, especially the emotional, motivational, and practical needs. For diabetes educators and healthcare professionals, DLife offers the most comprehensive tools and resources to drive the improved patient engagement. For advertisers, DLife provides three channels: DLife.com (the world’s largest online diabetes health resource integrator), DLife Educator (the online and offline networks of diabetes educators enabling the interaction), and DLife Retail (a DLife and Rite Aid co-branded magazine distributed via pharmacist-delivered “gift box” to new diabetes Rx customers).

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As the largest diabetes community, DLife has established the virtuous cycle with the sided members directly and actively interacting on the platform for themselves. This dynamic user community therefore could attract the diabetes-related product and service providers to market on the platform. Focusing on the diabetes, DLife has successfully formulated the basis of a platform for a specific chronical disease.

5.2.3.3

The Chicken-Egg Solutions

DLife solves the chicken-egg problem by attracting the patients first through specialized knowledge and information related to their disease. When early patients and caregivers find DLife is the most comprehensive and useful information hub for diabetes, more patients are attracted onboard. Gradually, DLife has evolved from an original crowdsourced content provider towards a more specifically market-driven content provider. Having reached the critical mass, DLife can attract advertisers as the money sides of the platform, while patient/caregivers and diabetes educators/professionals are the subsidy sides, receiving services for free.

5.2.3.4

Cooperation-Competition with Other Practitioners

DLife pioneers the diabetes market because no such offering has been available before. The platform aims to facilitate communication and information exchange in the market without implying threats to any existing parties. DLife not only reduces the information search cost for diabetes patients and caregivers, but also broadens the marketplace into a comprehensive platform, generating its long-term advantages of being the most comprehensive information integrator. From the privacy standpoint, getting a critical mass of users to share very personal health information on the platform has been a challenge.16 How to balance between privacy and experience sharing is still a big challenge for such specialized social network communities.

5.2.4 www.patientslikeme.com (Patientslikeme) Patientslikeme is a data-sharing platform for rare diseases patients to share the health data and learn about others’ authentic experience of those diseases; it also helps nonprofit research and industry partners search rare disease patients for research for new products, services and healthcare.

16 https://digit.hbs.org/submission/DLife-facilitated-network-for-diabetes-patients/.

5.2 Selected MSPs in the U.S.

5.2.4.1

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The Involved Sides

Two sides are involved: the patients and the medical researchers. Patients participate in the platform providing their personal data including age, sex, interest, condition, treatment, and symptom. Patients then will be classified into different groups to share and exchange the disease-specific information. Medical researchers on the platform are diverse; some researchers use the platform to screen qualified patients for clinical trials, others use the patient data to do research directly. The platform becomes an effective channel for medical researchers getting suitable research participants.

5.2.4.2

Services and Advantages

Patientslikeme works as an online community for rare disease patients. In this community, patients can connect with and learn from one another with similar diseases. Patients can compare treatments, symptoms, and experiences with people like themselves, and get connected to various groups for emotional and psychological support. Patientslikeme also can help patients track the health condition by charting their health data over time; this can contribute to research that advances medicine for all. As a pioneer platform of rare diseases, Patientslikeme has accumulated some good amount of sided members for its further development. With the reported 400,000 members, 2,500 medical conditions, 80 published research studies, and 35 million data points about various diseases onboard, Patientslikeme has gained considerable first-mover advantages. Being a data-sharing platform, Patientslikeme has to deal with the conflict between privacy and the sharing. Its “open philosophy” states that sharing the real-world data enables collaboration in a global scale and the development of new treatments; this has been accepted by all the sided members. This philosophy has provided an important perspective that convinces patients to share their data on such a platform.

5.2.4.3

The Chicken-Egg Solution

The platform began with the collection of patients’ real disease data. With more data sharing, more patients were attracted to the platform. However, a platform with patients only does not make it a multi-sided platform. When medical researchers seeking disease data and research participants joined on board, Patientslikeme became multi-sided where patients and medical researchers directly interact. The subsidy side is the patients, and the money side is the medical researchers and institutes.

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5.2.4.4

5 Pair Comparison Between Chinese MSPs and American MSPs

Cooperation-Competition with Other Practitioners

There has not been other platforms or organizations providing the similar functions as Patientslikeme in the healthcare delivery process before. Patientslikeme is a new facilitator establishing a bridge between patients and medical researchers, and it allows the medical research to benefit the patients as much as possible. It is not a competition, but a cooperation, of the existing practitioners.

5.3 Comparison by Functions 5.3.1 Quality Care in the Primary Care Market The problem in the U.S. primary care market is manifest in the following description: “Going to the physician’s office can be a logistical nightmare. A physician’s busy schedule doesn’t always allow you to stop in when you’re feeling worst. When you do finally get there, you wait in a fluorescent-lit, white-walled room among screaming babies and sneezing patients for what seems like an eternity.”17 On top of this unpleasant U.S. scene, Chinese patients also have to wait in the long queue in the early morning to get the doctor’s appointment of the same day. Quality primary care is in great demand in both countries. One Medical alleviates the bad situation by launching the comfortable clinic offices and applying technological tools to assist in routine and trivial issues so as to release more time of the physicians for longer consultation with patients with severe issues. Guahao solves the problems by first providing convenient tools and online channels to make the appointmentbooking easier without extra charges, and further, providing high-end services for fees during and after the consultation. Although having not brought significant disruptions to the existing medical service scenarioes yet, both One Medical in the U.S. and Guahao in China have indeed improved patients’ clinic experience. In the long-run, the anticipated better consultation services in these platforms may very likely drain a part of the patient flow from the incumbent service providers. The two platforms target at different stages of the healthcare service. Focusing on primary care, One Medical aims to solve the problems before and during the visit, whereas Guahao, having a broader target market, attempts to apply some advanced enabling technologies to further explore the post-visit problems. Accordingly, the two platforms face different competition from the existing industry players. One Medical competes with the outpatient centers, both independent ones and the hospital-owned ones; differently, Guahao integrates the platform services into the hospital functions, acting more as a complementor of the hospital services. 17 http://www.businessinsider.com/what-its-like-to-use-one-medical-group-2016-1.

5.3 Comparison by Functions

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Table 5.2 Comparison of One Medical and Guahao in quality primary care One Medical

Guahao

Solving problems before visit

Yes

Yes

Solving problems during visit

Yes

Yes

Solving problems after visit

No

Yes

Complementing/competing with current hospital services Yes

Complementing

Complementing/competing with current outpatient center Competing services

N/A

Disrupting target

Outpatient centers N/A

The comparison of One Medical and Guahao in quality care is presented in Table 5.2.

5.3.2 The Network of Clinic Offices One Medical began to establish its proprietary network of clinic offices from the beginning of its operation, while Xingren, the similar platform in China, began to establish its on-site clinic offices after having accumulated the sufficient amount of online patient users, which helped the fund-raising for the offline development. In addition, Xingren took advantage of the new policy on physicians’ multi-site licensing in China, while there was no such a policy motive for One Medical. In the U.S., the multi-site licensing policy has been in place for many years, and clinics operated by physicians or physician partnership are normal. However in China, the multi-site licensing and its impacts are just starting. Different circumstances drive distinctive paths of disruption the existing medical service providers encounter. The emerging U.S. MSP is trying to integrate the offline clinics online, while the MSP in China is to exploit the opportunities of partnering with physicians to establish the offline clinics besides integrating the physicians online. Compared with the latter, the former presents more complementarities than competition to the existing clinics. In China, when more physicians are released from the high-ranking hospitals to join or establish other service provider organizations under the multi-site licensing policy, the industrial competition landscape would become more fierce and complex, among incumbent medical organizations themselves, between incumbents and newly established organizations, and among the newly established organizations. One Medical focuses on the individual clinic management and emphasizes the environment comfortness, the prolonged consultation time, and the supports to physicians. However, Xingren’s first priority is to facilitate the physicians partners to take the opportunity of the multi-site licensing policy and build their own clinics, which is crucial in generating network effects after a large number of new clinics are built. In this situation, quality care is only a side product at the initial stage.

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Table 5.3 Comparison of the offline network of clinics One Medical

Xingren

Driving force of the network establishment

To provide the better quality care To seize the opportunity of national policy on multi-licensing of physicians

Approach to building the network of clinics

Building by the platform

Building by partnering with physicians

Services that are improved

Clinic environment, physician consultation time and quality

Convenience of the clinic

Initial customers that are targeted

Any users

Individual users already on the platform

One Medical and Xingren target different customer groups and put different priorities in the clinic network service packages. One Medical serves anyone or any organization who wants to access the quality cares, beyond its own platform users. Xingren, starting with motivating patient users to register on its platform, intends to use its clinic network to serve these users first before gradually opening to the general market. Table 5.3. presents the differences of the two platforms in terms of clinics network.

5.3.3 Chronic Disease Patient Communities Similarly targeting at the chronic disease patients, DLife and Patientslikeme both are focused on the information sharing and the creation of the sharing environment for patients. However, the two platforms’ main operational functions differ. Focusing on diabetes, Dlife.com facilitates the interactive sharing of information on the experience, education, medical products, and professional suggestions from diabetes patients. Based on the big pool of patients, Dlife.com creates its own media to provide the advertisement services given a large amount of resources and knowledge about diabetes medical products and services available on the market. By contrast, Patientslikeme is an online forum for patients of all chronic and rare diseases, in which special clinical trials and research opportunities are accessible as an extra value-added function. Leveraging a big pool of various patient groups, the Chinese chronic disease patient platform Manyoubang not only introduces the advertisement functions, but also initiates the fund-raising services for the rare, fatal, or emergency illnesses. This strategy has demonstrated a feasible way to make the platform alive (Table 5.4).

5.3 Comparison by Functions

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Table 5.4 Comparison of the chronical disease patients platforms DLife

Patientslikeme

Manyoubang

Patient forum

Yes

Yes

Yes

Medical information sharing

Yes

Yes

Yes

Advertisements

Yes

No

Yes

Special media

Yes

No

No

Clinical-trail-patient screening and recruitment

No

Yes

No

Medical fund-raising

No

No

Yes

5.3.4 Integrating Physicians to Online Communities The physicians are the determining factor for the success of the e-Health platform; however, integrating physicians to the online communities is very challenging. Given the different institutional arrangements in different countries, the ways of pulling physicians onboard differ significantly. In the U.S., hospital operations are largely market-driven, which means that hospitals can only attract patients based on reputation. Platforms that are able to improve their rating levels are more likely to get cooperation opportunites with hospitals valuing the platform’s reputation. In China, however, good hospitals are the result of the centrally-planned resource allocation and integration. Hospitals have little market pressures or no worries in attracting the pateints; the most important factor in getting cooperation opportunites with hospitals, therefore, is not reputation, but personnel relationship with hospital management, with the secondary key factors being the commercial relationship. Guahao has pulled physicians onboard more easily than other platforms have, largely due to the personal social network and superior reputation of the founder himself. The exclusive opportunity of making online appointments for a famous hospital is essential to Guahao.com as it provides the necessary data needed for kicking off the platform. Without the initial favorable conditions as Guahao.com had, Dxy.cn took longer time and more efforts in promoting itself to medical professionals, which fortunately, became the key traction for its ultimate customer acquisition. In the least favorable cases, Chunyuyisheng and Xingren had to hire salesforces to persuade physicians to come onboard using subsidies as incentives. In the US, Doximity acquires physicians by attracting their home hospitals first through a review and ranking function valued by these hospitals. Once an online physician community is eventually established with the adequate physicians onboard, platform functions such as physicians’ engagement and interactions will facilitate more physicians to register on the platform. Dxy in China and Doximity in the U.S. are very similar in the functions provided for this purpose, which include physicians interactions, continuous professional educations, and other professional services (Table 5.5). In providing the functions, the two platforms differ in which side is to be charged (the money side). Physicians are the side who gets charged on Dxy.cn because

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5 Pair Comparison Between Chinese MSPs and American MSPs

Table 5.5 Comparison in integrating physicians to online physician communities Dxy

Doximity

How physicians get integrated onboard

By making the physician appointment system online, for which physicians have to register on the platform

By engaging hospitals for the ranking system, for which physicians are encouraged to register on the platform

Parties to be charged

Individual physicians

Hospitals and other medical organizations

Online physician community activities

Professional information sharing, peer communication, professional continuous education programs

the platform offers the resources they need, for instance, continuing education products and contract research companies; these resources can help the physicians produce academic papers or research outcomes necessary for their title promotion. By contrast, Doximity does not charge physicians, but charges the suppliers of services for the physicians.

Chapter 6

Patient Engagement in Healthcare Industry Digital Transformation

A significant characteristic of the emerging e-Health MSPs in our study is patient engagement. Patients on these MSPs are closely involved in the medical service delivery process, not only as service recipients, but also as an integrative side member contributing to the value propostions to other side members as well as influencing the platform governance and workflow. Paralleling with the platform emergence, patient engagement is reconfiguring the medical ecosystem with the aid of IT tools.

6.1 Facilitation of the Digital Technology As consumer, the patient has the evolutionary power. One hundred years ago, healthcare was largely inaccessible to most people even in the wealthiest countries. Sixty years ago, public institutions were created with the mandate to ensure the general public’s basic access to certain healthcare in the United States and Europe. Over the course of the past 50–60 years, healthcare unions of private organizations, states, and countries have been established to broaden the access. Regulations and programs for reimbursement, professional credentialing and guidelines, institutional licensure, and product approvals are developed around institutions and health professionals to ensure safe and efficacious services for people. Now, it seems to be a new era in which individual patients are prioritized, and their specific disease or health conditions can drive the value creation in therapies (drugs and combinations), interventions, and services. Patients are taking more direct responsibilities for the healthcare outcomes in a new vantage point as beneficiary and active customer (Elton and O’Riordan, 2016). On the website of the U.S. National Library of Medicine, patient engagement is defined as “the involvement of the patient in the decision-making process regarding health issues”.1 At the center of patient engagement is the redefinition of patient role. While some patients would like to delegate decision making to their physicians 1 www.ncbi.nlm.nih.gov/mesh.

© Shanghai Jiao Tong University Press and Springer Nature Singapore Pte Ltd. 2020 X. Han et al., Disruptive Innovation through Digital Transformation, https://doi.org/10.1007/978-981-15-3944-2_6

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(Levinson et al. 2005), other studies find a much stronger preference of patients to participate in the process. In a study conducted in the U.S. (Little et al. 2001), among 824 patients waiting to see a general practitioner, 86% of them expressed the desire to determine the treatment choice together with their physicians. Research have identified some factors that can influence patient engagement. Thompson et al. (1993) find that respondents are significantly more desired to be involved in decisions that do not require medical expertise than in those that do. Guadagnoli and Ward (1998) point out that the readiness of patients is a key factor to predict the patient engagement, and the readiness dimensions include the acceptance of the new role as decision maker, the level of health literacy, confidence in one’s own capacities, and even the socioeconomic level of the patient. High readiness leads to high patient engagement. They also find that the illness types and the stakes of the proposed outcomes affect the type and depth of the engagement. In addition, patients tend to be more willing to be involved in the physicians’ treatment decisions when there are multiple treatment alternatives; and patients desire to participate in major rather than minor decisions (Mansell et al. 2000). Other factors such as age, sex, ethnic origin, and healthcare worker professional specialty are also brought into the picture (Longtin et al. 2010). Patients’ preference on engagement varies significantly. Younger and better-educated individuals report a higher desire for involvement, but there seems to be no sex differences in the preferences. Older patients and men tend to let the physician make decisions for their treatments, even though all patients in general, compared with nonpatients (their companions), prefer a passive role (Stiggelbout and Kiebert 1997). Arora and McHorney (2000) suggest that enhancing patient involvement needs to be flexible and accommodating to individual preferences in order to maximize the benefits of it in health outcomes. Furthermore, evidence shows that patients can substantially change the behavior of healthcare workers. In an observational study of more than 500 visits to 45 physicians, patients who requested a prescription, compared with those who did not, were almost three times more likely to be prescribed with a new medication (Kravitz et al. 2003). Similarly, those who requested a specialty referral had more than four times the odds of receiving a referral. In a randomized trial of patients with major depression, 76% of those who requested an antidepressant received a prescription compared with only 31% of those who did not. In obstetrics, 20% of physicians who believed that women could not request a caesarean section delivery if not medically required had already allowed the procedure for some patients on direct request (Bettes et al. 2007). With the rise of the Internet, online information acquisition and dissemination have become very common; health information on the Internet potentially empowers the patients and affects the medical decision making (Soldaini et al. 2016). According to reports published by the Pew Research Center, 85% of U.S. adults use the Internet (Zickuhr 2013), and 72% of them have looked for health information online in the past year (Fox and Duggan 2013). In China, there are 22.1% of Internet users using online medical services, 10.4% using online healthcare information inquiry, and 8.3% using online medical consultation (China Internet Network Information Center, CNNIC 2016). Social media now allows medical providers to communicate with patients in ways they never could before; web-based cloud applications provide

6.1 Facilitation of the Digital Technology

87

the real-time access to medical records and allow online medical information sharing; Internet has fundamentally changed how healthcare practitioners work with one another and with patients (Waxer et al. 2013). On one hand, Internet plays a vital role in increased medical information access; on the other hand, however, the unverified online information can lead to negative outcomes. With the development of e-Health, the participation of individual patients in the healthcare process has become diversified beyond online information accessing about simply where to seek help for specific diseases; other participation approaches include: experience sharing in the patient community, physician rating based on clinic visits, patient symptom data donation for research, and so on. In the selected six Chinese platforms, patients engage in the medical service delivery process either as the money side (paying for use) or as the subsidy side (use for free), indicating their different roles in the platform operation. These patient roles are presented in Table 6.1. First, patients normally have two kinds of needs: (1) the needs for medical information, and (2) the needs for medical resources. The information needs can be further classified into two different types: the needs for information seeking and the needs for information exchange. Some people only want to search for medical information they need without necessarily sharing their own experiences or opinions. Other people both seek information and share their own information. The resource needs can also be further classified into two types: resource accessing and resource optimization. The first type of resource seekers only want to access reasonable medical resources, a situation in which any accessible resource is better than no resource at all; while the second type of resource seekers want to optimize the resources available and accessible for the best medical outcomes. Patients are delineated based on their main purpose of using a platform. For patients seeking the access or optimization of resources, even though the information about the resources needs to be sought or exchanged first, we still categorize this patient role as resource seeker. Table 6.1 The role of patients in the six selected Chinese platforms of this study Platform

Positioning of patient

Money/subsidy side

Passive/active role

On-board first?

Manyoubang

Information exchanger

Subsidy

Passive

Yes

Chunyuyisheng

Medical resource seeker

Money

Active

No

Dxy

Medical resource seeker

Subsidy/money

Active

No

Xingren

Medical resource seeker

Subsidy/money

Active

No

Guahao

Medical resource seeker

Subsidy/money

Passive

No

Wesure

Insurance service seeker

Money

Active

Yes

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Second, reaching “critical mass” through subsidizing some sided members is often essential for the success of the MSP. Critical mass creates the network effects, but it also stimulates value-added innovations (Sidak 2011). The money sides and the subsidy sides are determined by resolving the critical tradeoff between the need for increasing network size and the need for adding network value. The size rule requires the increase of platform adoption while the value rule requires the increase of platform price. An MSP has to subsidize certain parties that are more price sensitive, so that the sufficient adoption of the platform creates sufficient value for the price charged to the “money side”. This situation reflects the perception of “users are the product”. Third, consumers who voluntarily get onboard attracted by the platform’s size, content, or dynamics can be regarded as “active”; by contrast, those who are prompted only by the subsidy tools are “passive”. The subsidy side is passive and the money side is active. Lastly, consumers as the first side members on board often provide essential solutions to the chicken-egg problems, representing the main strategy adopted by the platform.

6.2 Patient Info-Seeking and Exchanging Special events stimulate the deeper thinking that may lead to the change of the status quo. In May 2016, a university student Wei’s death in China was linked to his use of the “Paid for Placement (P4P)” content of Baidu Inc., the Chinese search engine giant (the “Wei Event” hereafter). When Wei searched on Baidu for alternative treatments for his disease, a rare type of cancer called synovial sarcoma, the search engine showed the paid advertisement results of an alternative “immunotherapy” at the top of the first page, and Wei viewed the top one as his chance for survival. Guided by the information from Baidu, he went to the advertising hospital to take the therapy, which was said being developed by Stanford University and having a high efficacy rate of 80–90%. However, after spending more than 200,000 yuan (US$30,810) on the therapy over several months, his condition was only deteriorating. Later, he learned that the therapy he received was only in the clinical trial stage in the U.S. and had only a record of low efficacy – the important information that did not turn up high in Baidu’s search results. Wei vented his anger at Baidu on the Internet before his death in April 2016, in a post that was widely spread among China’s 700 million Internet users within only several days. On the Chinese question-and-answer (Q&A) website Zhihu.com, the question “What do you think is the most evil part of human nature?” received thousands of answers. Wei’s answer was Baidu, saying he never should have trusted medical ads on the search engine: “I had no idea that Baidu was so evil at the time,” he wrote just before his death.2

2 http://www.bloomberg.com/news/articles/2016-05-02/chinese-watchdogs-probe-baidu-after-col

lege-student-s-death.

6.2 Patient Info-Seeking and Exchanging

89

How could a search engine support patient engagement in the medical service delivery process? How should patients effectively seek and exchange the online medical information? How do the Internet-based patient engagement behaviors affect their medical decision making? In the following section, we attempt to examine the patient info-seeking and exchanging behavioral patterns to address these questions.

6.2.1 Hypothesis Development Becoming increasingly diversified, the source of online information has to be identified very clearly as it has significant implications for people’s healthcare decision making. In some recent studies, when users are asked to report their selections among the five online sources (i.e., search engines, social Q&A sites, social networking sites (SNSs), online health communities, and crowdsourcing sites) for the three different types of health-related search tasks (factual, exploratory, and personal experiences), it is found that individuals’ health literacy and frequency of using a source are the most significant predictors of their source selections across task types, and that demographic factors, including gender, income, and health status, do not predict the selections as much (Sun and Zhang 2016; Quinn et al. 2015). In reality, even though an individual’s health literacy and e-Health literacy affect her ability to evaluate and use online health information (Quinn et al. 2015), many users do not have adequate medical vocabularies. On the contrary, most users might very likely have difficulties in understanding the authoritative and useful information because they are unfamiliar with the appropriate medical expressions for their conditions (Soldaini et al. 2016). In extreme cases, patients’ mistakes in decision making can end up being punished with the loss of their lives. In order to verify the relationship between the behavior of active online information-seeking and the result of patient engagement in the medical service delivery process, two hypotheses are proposed: Hypothesis 1: Online information enhances health literacy and e-Health literacy in patients. Hypothesis 2: Online medical information searchers prefer more patient engagement than those who do not search information online. In general, search engines, including Google, Microsoft’s Bing, and Baidu, generate revenues primarily by delivering relevant, cost-effective online advertising, which accounts for 40% of the total online advertising market. The sponsored search allows companies to bid on the place of an advertisement in the search result pages and on keywords associated with company websites. A higher bid price gives the advertiser a better position in the search results. These ads appear in an ordered list in the result pages. When Internet users search words or phrases related to a business on a search engine website, advertised search results, once clicked, can lead the users

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to the webpage of the businesses, and then the search engine gets paid based on this cost-per-click model. Nowadays, online search engines have become more and more influential to patients. As the patient is armed with the rich online information and even specialty knowledge on diseases, the doctors complain that patients are getting an increasing tendency to challenge their prescriptions and professional judgement for the disease. For some incurable diseases that patients cannot get a treatment solution from the official authorities, including renown hospitals, the only thing patients can do seems to be resorting to the online information sources.3 Therefore, how the search results are placed on a search engine really matters for the consumers’ decisions. Research has found that the order of messages influences their persuasiveness (Rhodes et al. 1973; Brunel and Nelson 2003), so that online marketing messages put in front positions would get more attention. In addition, Johnson et al. (2004) find that consumers rarely search more than two stores for a typical search session. Brynjolfsson et al. (2006) find that only 9% of users have selected offers beyond the first page. Most existing research findings show that the depth of consumer search on the Internet is low. Due to the cognitive costs associated with evaluating the alternatives, consumers often focus on a smaller set of results (Montgomery et al. 2004). Consumers may gain very little by adding additional items into their consideration set (Hauser and Wernerfelt 1990). Feng et al. (2007) find the evidence of an exponential decrease in the number of clicks for an ad with its ranking going down on the list, which can be attributed to the decay in user attention as one proceeds down. In addition, consumers with high purchase intent tend to be very focused in their search, targeting at fewer product categories compared to consumers with low purchase intent, who have broader search patterns targeting at a larger variety of products (Moe 2003). However, for the longer keyword search (indicating more of a niche market), although the click rate decreases with position going down, the conversion rate (from the click to the purchase transaction) can increase first in the next following pages before it decreases with the very late search result positions (Agarwal et al. 2011a). Based on the above literature review, we propose another two hypotheses: Hypothesis 3: Distinguishing ads in the search results is strongly associated with the patient decision making. Hypothesis 4: The online information search results strongly influence the patient decision making when the search is in a niche market related to the special type of information.

6.2.2 Methodology We use quantitative methods to examine the proposed hypotheses. One hundred Chinese frequent Internet users are sampled for the testing. These users’ daily average 3 http://www.wenxuecity.com/news/2016/05/09/5191560.html.

6.2 Patient Info-Seeking and Exchanging

91

Internet usage is more than two hours, and they have at least a bachelor’s or higher degree, and are able to read English and search information both in Google and in Baidu. A structured questionnaire is used for data collection, in which users are first asked to report their usages and attitudes regarding the online medical information. Then, several search engine screenshots of a medical information search are presented to the users, which allow the users to evaluate and generate some perceptions of the information search results in the search engines; after that, the users’ behaviours are tested. The search engines selected for the questionnaire are Google AdWords and Baidu Tuiguang. Figures 6.1 and 6.2 are the screenshots of Google and Baidu, which present the search results in different ways. Figure 6.1 shows the Google search query on “synovial sarcoma” on May 10, 2016, and Fig. 6.2 are Baidu’s topmost positions for the search query of “soft tissue sarcoma” during the selected time period prior to the Wei Event. In Google, the advertisements are put together with clear marks in the front, although there are no other indicators for viewers to judge the objectiveness of the information. In Baidu, the advertisement entries are put before Baidu Baike (a Baidu Baike entry is the objective information of the search, not the advertisement), a Chinese-language collaborative web-based encyclopedia provided by Baidu itself, and the entries put the character of “Tuiguang (推广)” at the bottom line of the website introduction, which can be a vague indication of advertisement. In Chinese, the meaning of “Tuiguang” is not directly related to advertisement; therefore, it is difficult for the average user to tell the difference between a sponsored advertisement and the objective results based on the algorithm matching. Another indicator of the credible advertisement on Baidu is the Baidu Verification, indicated with the letter V and the number 1 or 2 (Fig. 6.3). V1 means that the brand name of the linkage belongs to a real registered organization (the verification fee is

AdverƟsemenƟ ndicaƟon

Fig. 6.1 Search results in Google on May 10, 2016

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6 Patient Engagement in Healthcare Industry Digital Transformation

characters showing iƟ s an adverƟsement

characters showing iƟ s an adverƟsement

characters showing iƟ s an adverƟsement Baidu Baike, encyclopedia

Fig. 6.2 Baidu search results for “soft tissue sarcoma” before the Wei event

100US$ per year charged by Baidu), and V2 means that on-site verification has been done, and the website is of high quality (a fee of 900US$ per year). The verification is performed annually.

6.2.3 Data Analysis The collected questionnaire data are analyzed using the IBM SPSS statistics software 19. Among all respondents, 25% have searched online for medical information. Among them, 57% of respondents have the intention to participate in the healthcare delivery process. Among the respondents who would like to participate, 45% think that engagement can make the healthcare service process more reliable, 23% are not satisfied with the current process, and the other 15% think that they have adequate information for the process improvement. 15% of all respondents have casted doubts on the treatment suggestion proposed by the doctors, changed the hospital to verify the treatment, or proposed the prescription or equipment check.

6.2 Patient Info-Seeking and Exchanging

Verification

93

Characters showing it is an advertisement

Fig. 6.3 The verification and advertisement indications on Baidu

78% of all respondents think that online medical information is their major resource of health literacy, and that the e-Health literacy mainly comes from search engines and the online patient communities. We ask the respondents to self-report their knowledge about the health and diseases using the 5-point rating scale for the cluster analysis. Respondents are classifed into four groups according to their answer to whether themselves or close relatives have ever had the incurable or chronic diseases. Our data shows that among the four groups of patients, the chronic and rare disease patients have the higher health and disease literacy (the top-right two groups in Fig. 6.4). Among the patients who are not related to incurable or chronic diseases, some would always go online for information search once any small discomforts are felt (the general discomfort group), others do not have the idea of online information search at all even when feeling the discomfort (the traditional disease group). Four groups and their health and disease literacy levels are plotted in Fig. 6.4. • • • •

Chronic disease patients; Rare/incurable disease patients; Traditional disease patients; General discomfort patients.

94

6 Patient Engagement in Healthcare Industry Digital Transformation 100 Incurable disease patient Chronic disease patient

Disease Literacy

75

50

25 General discomfort patient Traditional disease patient

0 0

23

45

68

90

Health Literacy

Fig. 6.4 The four kinds of patients and their health and disease literary positions

In addition, the four patient groups have reported their different opinions of the currently available medical information, as well as their different actions taken in the case when the information obtained online is in conflict with that from the traditional medical service providers or other patients. The summary of these findings is presented in Table 6.2. Furthermore, the assessment of the information on Google and Baidu search results shows that Google differentiates the advertisement and neutral information well, while Baidu has made information seekers confuse the advertisement with neutral information (Table 6.3). However, both search engines only get low overall ratings, probably indicating a lot of work still needed to really satisfy the medical information needs of patients. Lastly, only 57% of the online medical information seekers show the intention to participate in the healthcare delivery process, which is not a very high portion. Possible explanations could include the generally unsatisfactory status quo of the participation tools and the existence of alternative reliable healthcare services, which means participation is only a complementary way to improving the healthcare services from the standpoint of patients. Importantly, as the online information becomes the main resource of health literacy, the prerequisite for active engagement, information quality, needs to be fully fulfilled to positively influence the effective patient engagement and, in turn, patients’ willingness to engage. Google was sued in 2003 for faked advertisements on its website, which led to the stricter information control in Google later on. Baidu has tightened its control for medical information after the Wei Event and its verification process has become much stricter than before. However, the patient survey conducted in this study demonstrates that the current available information is neither complete nor accurate enough to support the decision making of patients. A lesson to take from this study is that,

6.2 Patient Info-Seeking and Exchanging

95

Table 6.2 Differences across the four patient groups in e-Health Chronic

Rare

Use of search engines

Long-term tracking and info-sharing

Deep search and Medical service Symptom and then provider information self-treatment decision-making search search

Platforms used

Baidu + Patient communities (manyoubang. com)

Baidu + Professional platforms (e.g., dxy.com)

Healthcare delivery function facilitators (e.g., appointment)

Patient communities + Physician online consultancy platform

Information categories

Treatment and care solutions, equipment info, others’ experience

Hospitals, physicians, and therapies available

Convenience and effectiveness of healthcare delivery

Symptoms, solutions, best hospitals, and physicians

Satisfaction with 3.5 the information found online (out of 5)

2.7

4.1

3.3

Actions to conflicting information

Ask physician friends; seek information abroad; try traditional methods

N/A

Ask physician friends; show the differences to physicians

Ask physician friends; broaden the search; change hospital to verify

Traditional

General discomfort

Table 6.3 The comparison between Google and Baidu Assessment items

Google

Baidu

The respondents who trust the online information in the two platforms (out of 100)

85

76

Pages reviewed per search

2.5

5.2

Higher ranking, more reliable sites?

76% yes

45% yes

Recognition of paid search

95% yes

84% yes

The significance of advertisement

Yes (95%)

No (72%), did not know the meaning of the signals

Recognition of the signals for advertisement

广告(ads) with yellow background

推广 Tuiguang (14%), V (5%)

Action to the similar disease as the Wei Event

Try the advertisement with some doubts

Act according to the info. on Baidu without doubts

Overall rating (out of 5)

3.5

2.4

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6 Patient Engagement in Healthcare Industry Digital Transformation

the information required in the patient engagement, if not properly calidated and verified, can impede the multi-sided platform’s effective operation.

6.2.4 Conclusions Our survey shows the following results regarding the four hypotheses: Hypothesis 1 “online information enhances health literacy and e-Health literacy in patients” is supported. The online information has been the most important information source for health literacy; information from search engines and patient communities is listed as the most important resources of the e-Health literacy. Hypothesis 2 “online medical information searchers prefer more patient engagement” is supported. Although only 25% of heavy Internet users have ever searched medical information online, 57% of them have the intention to participate in the healthcare delivery process, which is much higher than the non-searcher group. Online medical information is indeed one of the important factors to promote patient engagement. Hypothesis 3 “distinguishing ads in the search results is strongly associated with the patient decision-making” is supported. When the search results of Google and Baidu are both presented during the interview with the research participants, the advertised information is very distinctive on Google and not so distinctive in Baidu, which leads to the higher trust level to the information on Google than to; the latter’s advertisement marks are not distinguishable enough. Hypothesis 4 “online information search results strongly influence the patient decision making when the search is in a niche market related to the special type of information” is supported. The four groups of research participants present distinctive preferences in search engine selection, platforms in use, information in need, and actions taken when facing conflicting information in online search. In particular, the chronic and rare disease patients have higher desires of participation, and they act more actively to the online medical information search results. Online medical information has become one of the important factors to promote patient engagement, a critical driving force for the value-based healthcare. The information quality per se and the information-based patient engagement formulate a chicken-and-egg relationship, in that the quality of the online medical information has to be improved to satisfy the requirement of the information-based patient engagement. How the health MSP can improve its information quality and, at the same time, create appropriate mechanisms to engage the desiring patients can be a key topic for the future studies.

6.3 Value-Based Care

97

6.3 Value-Based Care Our study in this chapter calls for a value-based healthcare system, stressing patient engagement. Given that patients are the end consumer of healthcare, patient engagement can facilitate the quality and cost-efficient medical service in the system, and it will become one of the most important factors for healthcare practitioners, especially those emerging e-Health platforms which desire to achieve their business viabilities. Value will increasingly matter as healthcare pivots back to the patient in extraordinarily new and different ways. Then, revenues from patient value (best possible health achieved) and system value (effective treatments at a reduced cost) will be established through measuring clinic outcomes accordingly, although so far this approach is still largely absent in most hospitals, health systems, or enterprise resource planning systems. Elton and O’Riordan (2016, p. 19) describe the value-based care in the future as follows: The move to value- and outcomes-based compensation changes the way the healthcare system positions itself with respect to the patient. Whereas to a large extent, today’s healthcare system is reactionary, giving us the health services that result from our persistence, our phone calls, our queuing, our waiting in waiting rooms, and our calls to healthcare insurers, tomorrow’s system can be a force for health maintenance and health solutions.

Chapter 7

Conclusions and Future Research

Disruptive innovation driven by the digital transformation has changed many sectors. This book zooms in on the disruptions observed in the Chinese healthcare sector with the emergence of technology-based multi-sided platforms. In understanding how the disruptions have happened, we frame the analysis into two aspects: the disruptive routes and the MSP governance. First, we identify three routes through which the disruptive innovation can happen: (1) serving the complementary market, (2) serving the new market, and (3) serving the integrated sector value chain as a whole. Second, the MSP governance is analyzed through four aspects (as per the earlier chapters): the sided members, services and advantages, chickenegg solutions, and cooperation-competition synergies. These analyses then allow us to propose a model of disruption presented in Chapter 2. Examining the selected six Chinese and four American e-Health platforms, this book articulates and compares the business models of these platforms, and outlines the distinctive context in which the Chinese e-Health businesses are developed upon the disruption. Since the healthcare reform is still ongoing and the industry restructuring is being pushed by the government at all levels, many opportunities are emerging for new entrants of the e-Health sector. Newcomers to the healthcare sector, especially those Internet giants who control a multitude of Internet and IT technology resources, initiate the disruptions from the most peripheral space of the medical ecosystem and, then, advance to the central spaces gradually, influencing all stakeholders in the sectoral value chain. Patients are the party that all the emerging platforms attempt to include and serve; they also happen to be the only party that receives a variety of benefits from the disruption. The organization of physicians, hospitals, medicine supply chains, equipment providers, and other third-party product or service providers therefore gets disrupted in one way or another, and this disruption is going to be deepened in the coming future. As a result, the medical industry is becoming more transparent and efficient with the adoption of e-Health, while illegal or underground services that used to take advantage of the lack of transparency are disappearing. In e-Health, the boundaries among traditional healthcare stakeholders are blurred due to the disruption. On one hand, the hospital consortiums digitalize the daily © Shanghai Jiao Tong University Press and Springer Nature Singapore Pte Ltd. 2020 X. Han et al., Disruptive Innovation through Digital Transformation, https://doi.org/10.1007/978-981-15-3944-2_7

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7 Conclusions and Future Research

operations and integrate the medicine supply chain and medical insurance into their platforms; on the other hand, the medicine and medical equipment distributors try to broaden their business into the last-mile primary care and chronic medical services, leading to the creation of more comprehensive platforms beyond their previous business scopes. Also observed is the insurance providers trying to integrate physicians’ information and help patients find good healthcare services. As another significant result of e-Health, patient engagement gets greatly advanced in this process. Through a survey of the four groups of patients and caregivers that differ in health literacy and disease literacy, this book highlights the multiple roles patients can play in the healthcare delivery process. Patients, once engaged in the use of Internet and online platforms, can fulfill their needs in information seeking, information exchanging, resource accessing, or resource optimization. We found that the chronic and rare disease patients tend to have a higher desire for information, while most of other patients are more interested in comprehensive eHealth platforms for both information and resources. So far, both the recognition and the usage of e-Health platforms are still at a low level, although patients’ intention to use them is reported high. Medical information in the existing search engines is not sufficient or accurate yet to fully avoid misleading on patients’ decision. The online information or service markets need to be regulated so that patients can always get safe information for their engagement and decisions. Although the industry is worried that the low health literary can prevent patients from effectively participating in the healthcare delivery process, and believes that service providers remain the center of the industry, the e-Health trends have pushed people to change this perception. New ways of broadening patient engagement must and will be created in healthcare, among which the online patient community is an important and practical tool. This current study of ten platforms is far from conclusive or comprehensive; however, it sheds light on new areas of study that echo the rapidly evolving digital transformation and the MSP technologies. We need continue to explore more eHealth MSPs and their disruptive effects on the existing healthcare industry; the analytical framework established in this book can serve a good starting point, and can be extended and advanced in other studies of MSPs based in countries other than China. Cross-country comparisons will help uncover both differences and commonalities in the rules of governance, and advance our knowledge about this emerging topic. Patient engagement is among the key themes for the future MSP studies. Understanding how patients can be better engaged and what can be done to promote good engagement outcomes will certainly inspire more innovation in the healthcare delivery process. Besides search engines, patient communities are another important channel of information accessing and exchanging for the sake of effective engagement. There is a need for a better understanding of, but not limited to, such topics as how patient communities can better benefit the patient, what a healthcare ecosystem can get from the communities, how the interactions between care providers and communities should be managed, what are some of the effective organizational and operational approaches of a community, what is the optimal function design

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of a community, and so on. Knowledge in these topics can promote the patient community’s positive roles in patient engagement and, eventually, the creation of a value-based care system.

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