Following up our previous Special Alert on the opening up of China’s healthcare sector to foreign investors, two major US groups appear to have taken the lead by planning to establish 100% foreign­owned hospitals in China. Massachusetts General Hospital of Boston announced its plans to build MGH Hospital China and Columbia Pacific Management announced that it will invest up to $200 million for two hospitals in China.

These developments come on the heels of the groundbreaking pilot program issued by the National Health and Family Planning Commission and the Ministry of Commerce in July of this year. The pilot program requires that an overseas investor “[h]ave experience in directly or indirectly engaging in medical and health investment and management” and is able to provide one of the following:

  1. An internationally­advanced hospital management philosophy, management model and service model;
  2. Medical technology and equipment of international sophistication; or
  3. Improvements to local insufficiency in medical service capacity, medical technology, funds and medical facilities.”

If a foreign investor meets one of the above criteria, it should be able to establish a wholly­foreign owned hospital in any one of the designated seven pilot cities and provinces. Typically a foreign investor would first need approvals from the local level health authorities, then from provincial level health authorities, and finally from the provincial level commerce departments.

It is still unclear what the specific steps necessary to establish a hospital are under the pilot program since none of the authorities in the seven pilot cities and provinces have released standards or measures relating to the pilot program. Note, however, that in the absence of specific implementation measures or standards, the Ministry of Health has advised that the current provisions and measures governing the establishment of specialized hospitals will apply.

Nonetheless, we understand that lawmakers in the seven pilot cities and provinces are currently producing their own implementation measures which are subject to final approval by the National Health and Family Planning Commission and the Ministry of Commerce. This will take some time. Until then, and as evidenced by the recent news, foreign investors seem to be moving forward with their investment strategies and preparing preliminary applications for approval.