On March 29, the bankruptcy and reorganization of Hengkang Medical, the first unit of private hospitals, was settled.
Beijing New Mileage Health Industry Group Co., Ltd. eventually became an industrial investor in the bankruptcy and reorganization of Hengkang. New Mileage CEO Lin Yanglin became the chairman of Hengkang Medical. This has injected a bit of vitality into the sluggish hospital M&A market.
As the most representative private hospital in the industry, the ups and downs of Hengkang in the past 7 years are almost the vane and epitome of the warm and cold of the entire hospital investment field.
Since 2014, capital has swarmed into the medical industry, and hospital investment and mergers and acquisitions have begun to set off a peak.
Hengkang Medical, which started as a blind Tibetan medicine, had an initial annual turnover of only 200 million 300 million yuan. Through the financing tool of a listed company, after several large-scale hospital acquisitions, its market value once exceeded 30 billion yuan.
After the market value of Hengkang reached its peak, this round of hospital acquisitions also reached its peak.
In 2013, there were only 26 domestic hospitals mergers and acquisitions, with a total amount of 2.15 billion; by 2016, the number of mergers and acquisitions had increased to 108 hospitals, and the number of mergers and acquisitions was 16.1 billion; this hot trend continued in 2017 and 2018. The number of mergers and acquisitions in the past two years was 14.9 billion and 14.4 billion respectively.
However, problems such as difficulty in operation, huge losses, and difficulty in exiting the hospital after the investment became prominent.
Hospital concept stocks represented by Hengkang Medical began to fall rapidly. Except for Hengkang Medical’s final collapse due to substantial losses and debts, many listed companies involved in hospital acquisitions were on the verge of delisting.
Even China Resources Medical, a state-owned enterprise with hundreds of medical institutions, has a market value of only half of its peak value.
After trial and error, the listed companies and funds that paid tuition have withdrawn one after another, and the hospital M&A market has become cautious.
PwC's latest "2020 China Medical and Health Industry M&A Market Review and Outlook Report" shows:
In 2020, both the transaction volume and the transaction volume of domestic hospitals have fallen to the lowest point since 2016.
Throughout 2020, the number of mergers and acquisitions of domestic hospitals was only 11.9 billion, a decrease of 44% from 2019.
The transaction of large-scale general hospitals has dropped to a freezing point. Except for mergers and acquisitions to complete the task of restructuring state-owned hospitals, it is almost difficult to find cases of mergers and acquisitions of general hospitals in the capital market.
Under the indiscriminate bombardment of capital real money, medical care could not ever tell stories, and new giants are constantly being created. However, the imagination of hospital mergers and acquisitions was affected by various factors, and the pause button was pressed.
The actions of the capital market have undoubtedly brought us a huge question-is investing in hospitals still a good business?
Happy horse racing, crazy premium
“Before there were 20 calls a day, now one is two days.” Zhuang Yiqiang, director of the Guangzhou Alibi Hospital Management Research Center (GAHA), clearly felt that the enthusiasm for investors had faded.
In 2016 and 2017, the craziest investment in hospitals, investors' thoughts were all-I want to buy a hospital, can you find it for me? It is best to be 1 billion, and at least not less than 200 million. Our company has a lot of money and the scale is too small, so we don't want it.
"In terms of the scale of funds and operational efficiency, some large hospitals should indeed be acquired." Zhuang Yiqiang believes that when capital is hot, some people are very impetuous and do not understand the industry. This industry is a deep pocket-deep pocket. Some pockets are so shallow that you can reach them as soon as you reach out, and very shallow things are easy to fall out. Some pockets are deep, but there is a piece of gold in the deepest place.
He told the capital that the time to dig the gold is at least 10 years, but the capital often does not have the patience to wait.
General hospitals were once-promising targets and were once the focus of hospital mergers and acquisitions.
Different from the small-scale and small-scale characteristics of specialty hospitals, general hospitals are generally larger and can occupy higher advantageous resources, with stable cash flow and relatively easy performance improvement. Investment and mergers and acquisitions have always maintained a steady and hot trend.
Whether it comes from medical-related industries, such as pharmaceutical companies and medical device companies, or from industries that are out of reach, such as real estate, automobiles, or even pearl farming companies, these companies have entered the fast lane of hospital acquisitions.
They are confident-the share of social medical services accounts for only 10% of the entire market. Everyone is full of hope and thinks that it can occupy 30% of the domestic market.
Seeking greatness and completeness has almost become synonymous with madness.
The Great Wall of China, which started with engineering investment, announced in 2016 that it would take the "medical and health industry" as another development focus and won the bid for multiple medical PPP projects. Before falling into the debt crisis, this company had a medical dream to acquire 100 hospitals to create a medical group.
The investment scale and management difficulty of general hospitals is far greater than that of specialized hospitals. A specialized hospital has only one department. However, in a general hospital with 30 departments, the differences in products and services, and the requirements for expert technology are far higher than those of specialized hospitals. Also, profitability, availability, and reproducibility are much worse than those of specialized hospitals.
Before 2018, the National Medical Insurance Bureau had not yet been established, and the good days of general hospitals relying on medical insurance to maintain hospital operations are still in the golden age of hospital concept stocks being sought after by the capital market.
Therefore, the entrants increased their prices frantically when purchasing hospitals, at any cost, to force their competitors back.
Hengkang Medical had planned to acquire a tertiary hospital at a price of nearly 1 billion yuan. However, due to financial problems, it could not be completed. When the hospital was finally acquired by another medical group, the purchase price almost fell by half.
Later, many hospitals that were bought at high prices in the previous few years faced discounts and sales after 2018 after the tide of hospital acquisitions subsided. An investor revealed to Badian Jianwen that the discount rate is about 60% to 80% off.
The pit that investors stepped on
Capital's imagination of the hospital market has suffered a head-on blow after 2018.
Beginning in 2018, under the combination of mass procurement, reform of medical insurance payment methods, and other medical insurance control fees, private hospitals are worried about internal and external problems. It takes time for internal intensive cultivation and iterative upgrades, and public hospitals are heavily attacked by public hospitals.
The medical industry is large but not strong, which is extremely terrifying.
China Great Wall, a cross-border company that once tried to share in the medical market, was forced to withdraw from the market due to poor management.
The same is true for Hengkang. It was unable to operate after the acquisition by debt. In 2018 and 2019, it lost 1.4 billion and 2.5 billion. Its market value was only one-tenth of its peak. It was overwhelmed by the huge debts owed during the previous acquisition of the hospital. , And finally ended up in bankruptcy and reorganization.
Some other radical hospital acquirers, such as Innovative Medical, Yihua Health, and Yibai Pharmaceutical's stock prices, have experienced cuts or even knee cuts after 2017 and 2018.
Institutions that have paid a heavy price have similar investment experiences—purchasing hospitals across the country, regardless of specialty or general, large cities or counties. Going from east to west, north, south, and middle. It takes big and small targets. It is difficult to coordinate resources. The management radius is too large to keep up after the investment, which leads to a financial crisis in the end.
An industry insider told Eight Points Health News, especially some hospitals in poor and backward areas. After the acquisition, they found that the medical insurance policy was far from ideal. The advance payment was often not returned, and the cash flow of the hospital was stretched.
Investors have stepped on all kinds of pitfalls.
An investor told Badian Jianwen that in 2015, he spent 240 million yuan in a hospital 2015, a cross-border medical treatment in the financial field. At that time, I didn't understand each department at all. The hospital was still painting the walls and renovating for more than a year, and soon the money was spent. "The old shareholder turned the money into arrears for the project, and later discovered that the project was done by his relatives." He finally posted 20 million yuan and paid his employees. Until the hospital was finally acquired by a fund company.
The hospital is a system with extremely complex internal systems and entangled interests.
An investor who has been engaged in hospital mergers and acquisitions for a long time told Badian Jianwen that in the hospital merger case, after the completion of the gambling agreement, the profits of the acquired hospitals fell sharply or even lost, which is almost an open secret in the industry. During the gambling period, the hospital can achieve performance goals by reducing labor costs, supply chain profits, and adjusting medical insurance bad debts. After the gambling period is completed, the hospital can compensate employees and suppliers.
Many hospitals acquired by Hengkang Medical have performed well during the first three years of gambling, and then they have suffered huge losses. For example, the Wafangdian Third Court lost 130 million yuan in the second year after completing the gambling agreement.
A person in charge of a medical group said that he is now very picky about the target area, scale, and historical background. "I would rather buy more expensive than to buy this kind of target that is not well located or has more problems."
Dr. Feng Qingming, an industry veteran who has been engaged in hospital acquisition and operation for many years, also told Badian Jianwen that large groups are now more cautious in acquiring hospitals. "In relatively large cities like Beijing, Shanghai, and Guangzhou, there is almost no need to think too much about hospitals as long as they can. You can ask for hospitals as long as they can. A single hospital is not big or small, and its income in Wuhan can be about 500 million yuan before it will be considered. If it's only one or two billion, it will hardly be considered."
For some hospitals that have been packaged and purchased, if the target cannot be selected, shutting down is even a better choice.
Is there a way out for general hospitals?
The reshuffle of private hospitals has begun, but it is not over yet.
After the epidemic, government investment in public hospitals has increased. Guangdong Province has stepped up efforts to build high-level hospitals. There are a total of 50 hospitals in the first and second batches of high-level hospitals, and each hospital has received 300 million yuan in financial support. And these 50 hospitals are all public.
Local governments will have supporting measures. In Dongguan, Huizhou, and other places, the ratio is 1:1. The provincial government gives 300 million yuan, and the local government gives another 300 million yuan. Shenzhen is more generous. Shenzhen People's Hospital was rated as a high-level hospital in Guangdong Province. In addition to the 300 million yuan financial support from the provincial government, the Shenzhen government also allocated 900 million yuan, a total of 1.2 billion yuan for development, and it will be spent within three years.
The strength of public hospitals will undoubtedly greatly squeeze the living space of private hospitals.
According to Zhuang Yiqiang's analysis, in the next few years, the increase in social medical services will not be much. Compared with general hospitals that focus on asset investment, there will be more increase in the specialties of light and beautiful.
According to medical data, in 2020, the proportion of mergers and acquisitions in specialty hospitals has risen from 38% in 2016 to 89%. From 2012 to 2015, dental and maternal, and child specialist hospitals occupied the leading position in mergers and acquisitions; in 2016, the medical aesthetics industry represented by plastic surgery hospitals was a hot spot for investment and mergers; starting in 2018, ophthalmology became the focus of hospital mergers and acquisitions, and in 2020 the entire specialist mergers and acquisitions accounted for 75%.
Nigeria, a chain cancer specialist private hospital located in cities below the second tier, reaches the monthly break-even point within 3 to 9 months after starting operations, but the industry average is generally around 36 months. Relying on the advantages of gyro knife equipment with independent intellectual property rights and the ability to quickly replicate and expand the business, it will be listed on the Hong Kong Stock Exchange on June 29, 2020.
"Now, many institutions may think that tumor radiotherapy is a good market, and they will do it all. However, Hygeia has erected industry barriers, and latecomers, if they do not have strong execution and such further innovation capabilities, may not be able to get out. ." An industry veteran said.
Under the fact that general hospitals are not favored by capital, people in the above-mentioned industries believe that if medical institutions are patient and calm down to further improve operational efficiency and reduce costs, they will be able to come out in the future.
After specialized hospitals become bigger and stronger, they will also acquire general hospitals as their weapons. On January 25, the private medical group Hygeia announced that it intends to acquire 99% of the equity of a private for-profit tertiary general hospital in South China. It is reported that the tertiary hospital may be located in Huizhou, and it has been operating well before.
Wuhan Asia Heart Hospital, which has been rooted in Wuhan for 22 years, is the top private cardiology hospital in China. In 2013, a general hospital-Wuhan Yaxin General Hospital was established. An industry source told Eight Points Jianwen, “If you rely on a cardiology specialty to make the country such a large scale, the income will be more than one billion yuan. And, with the centralized procurement of heart stents, profits have been greatly squeezed. "
Perhaps there will also be a cycle of capital.
However, it is difficult for outside capital to re-enter in the short term. Zhuang Yiqiang divides medical capital into two categories, one type of capital within the circle, such as New Mileage, Fosun Medical, etc., which has been deeply involved in the field of medical services for many years; the other is capital outside the circle, such as real estate, funds, and so on. Capital in the circle is also divided into high intervention, moderate intervention, and light intervention. Highly involved, such as New Mileage, are mainly engaged in the business of hospital investment.
"If it is light capital, it may withdraw depending on the circumstances. The rest is this kind of highly and moderately involved capital in the circle. At this time, they may buy the bottom."
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