China's recently unveiled medical reform plan is no doubt a shot in the arm for millions of her people who find it difficult to access decent and affordable medical services. Among others, this is expected to positively impact technology companies suffering from the global economic slowdown.

The Chinese government announced earlier this month its plans to invest 850 billion yuan over the next three years to revamp the medical system, and pledged to ensure fair and affordable care for the entire 1.3 billion population. It has also raised the ante for IT firms at home and aboard.

The companies expect the plan to translate into orders worth billions of dollars for hardware and software from the country's huge public health system and over 300,000 hospitals. Demands for IT systems and facilities has long been stifled by the country's rigid medical system.

"The reforms will unleash huge market demand as the computerization level in China's medical system is lower than that in most other industries," said Wang Jun, sales director of Lenovo's big client business department, which also looks after the healthcare business.

Wang said Lenovo plans to grow by over 35 percent in China's healthcare industry this year, much faster than the 3 percent growth rate research firm IDC has predicted for China's overall personal computer market in 2009.

According to the reform plan, China plans to spend one-third of its 850 billion yuan investment for building new hospitals and upgrading existing facilities. The plan also aims to expand the coverage of China's medical insurance system and establish national networks of electronic patient records that could be shared by different hospitals around the country.

These programs, Wang said, will inevitably stimulate the PC demands of hospitals, rural clinics, drugstores and even insurance companies. He said the rapid growth will continue at least for the next three years, making it one of the most important market generators at a time when companies are reducing their IT spending amid the economic slowdown.

Matt Wang, vice-president of IBM's China Development Lab, also expects the reform plan to create "huge" market opportunities. He expects at least 1,000 Chinese hospitals to invest a minimum of $1.5 million each for establishing electronic patient records in the coming years. That in turn could generate over $1.5 billion in new spending in software from hospitals and clinics in the country.

"The government's involvement in the healthcare sector reform is expected to create huge market opportunities because it makes possible a nationwide and unified network that connects together the highly scattered Chinese hospitals," he said.

As the world leader in healthcare software systems that provide electronic patient record systems and regional healthcare solutions for several US states, IBM recently launched a new industry solution lab in China focusing on the healthcare market earlier this month and released four software solutions that could help hospitals establish electronic patient records at reduced costs. "We hope to be a trusted advisor to the Chinese government," Wang said.

Inadequate IT investment

A result of a mixed socialized-private healthcare system implemented in the early 1990s, China's hospitals, especially those in rural areas, often have inadequate IT investments. As government reduced its funds and encouraged hospitals to fend for themselves, most hospitals are more willing to purchase medical equipment that could directly generate revenue rather than computers and software.

According to statistics from China Hospital Information Management Association (CHIMA), a non-profit industry organization, the investment in computerization only amounted to 0.7 percent of a Chinese hospital's total income, while the IT budget of hospitals in developed countries is on an average 2.4 percent of their total budget.

That, according to experts, has increased patient difficulties in getting favorable treatment and severely limited the coverage of China's medical insurance network. It has also reduced the government's capability to deal with public disease such as HIV, Severe Acute Respiratory Syndrome (SARS) and bird flu.

"In fact, investment in IT plays a critical role in China's medical reform plan because it is nearly impossible to provide fair and affordable healthcare service in such a huge country without the support of information technology," said Yao Zhihong, an expert from Chinese Health Information Society, an industry organization.

In its latest plan, China plans to build a national network to enable sharing of patient information and drug distribution information among hospitals, communities, medical insurers, and health administrations to increase the efficiency and coverage of the country's medical system.

It also aims to establish a public health monitoring network and actively promote the use of telemedicine in rural areas.

That is expected to create a market that few technology firms, including General Electric Company, Siemens, Intel and Dell, could afford to lose.

"I think the 850 billion yuan investment is just a warm-up," said Wang. "If the healthcare reform could successfully activate market mechanism in this sector, the market itself could create business opportunities much larger than the investment."

(China Daily 04/27/2009 page12)