After recognizing an overall shortage of health care supply and uneven distribution of health care resources between urban and rural China, the Chinese government has been actively developing telemedicine. Beginning in 2010, the Chinese central government invested more than $13.3 million in establishing community-based remote medical systems in the Central and Western Regions of China. By 2013, these remote medical services were adopted in various forms in more than 2,000 hospitals. Globally, the telemedicine market has grown from $9.8 billion in 2010 to $11.6 billion in 2011, and it is expected to further expand to $27.3 billion in 2016.
Chunyuyisheng (春雨医生), “Chunyu Doctor,” is an online telemedicine platform in China. Among the telemedicine companies in China, it has the largest Internet penetration rate, and it has accumulated more than $61 million in capital. Through its mobile app, Chunyuyisheng allows their patients to use their mobile device to make online appointments with physicians from second and third tier hospitals. Patients can communicate with the physician through text messages, voice-based phone calls over the internet, and transfer of data files. Currently Chunyuyisheng offers multiple practice areas to patients, including family practice, maternity, and pediatrics. In addition, patients can ask questions directly and receive an answer within three minutes from a physician at a second or third tier hospital. Chunyuyisheng currently has more than four hundred such physicians providing their services through the mobile platform.
In July 2015, Chunyu Doctor opened Cycares (春雨国际) to provide Chinese patients with health care from outside of China. The platform connects Chinese patients with foreign physicians and provides four major types of service. First, patients can seek second opinions with a foreign physician through video conferencing. Second, Cycares can send patients to a foreign hospital to receive treatment. Third, patients can book a trip to receive a comprehensive physical examination at a foreign hospital. Cycares organizes the entire travel experience, including booking the physical examinations, making travel arrangements, accompanying patients at the foreign location, and providing follow-up services after the physical examination. Forth, Cycares provide reproductive health care services in Thailand and in the U.S. In September 2016, Cycares completed its series C venture capital fund raising round, raising $50 million, the largest round of venture funding ever achieved in the Chinese telemedicine industry.
Many have asked whether Chunyu Doctor is worth a $50 million C round? I argue yes.
First, Chunyu Doctor is one of the first online platforms to provide telemedicine services for Chinese patients, and it has reached a significant economy of scale that will be difficult for new entrants to match. Telemedicine platforms have a significant network effect. The more doctors a platform has, the more appointments it can provide, and the more patients it can attract.
Second, Chunyu Doctor has a unique value proposition. Even though it has raised significant capital, it already generates a profit each time a patient books an appointment. Patients pay for the online appointment directly. Moreover, Chunyu Doctor generates profit by providing data to pharmaceutical companies. Thus, their revenue generation does not depend on commissions from physicians.
Third, telemedicine has significant growth potential, particularly in China. In the past decade, China has seen tremendous expansion in its economic ability and the standard of living, which brings with it an increase in necessary health care services. Personal spending on health care quadrupled from RMB 270.5 billion in 2000 to RMB 956.5 billion in 2012, with an annual growth rate reaching up to 11.8%. Patients in China face significant difficulty seeking treatment due to the health care structure. As a result, telemedicine is attracting significant interest and investment from all major sectors of the economy. For instance, all three Chinese technology giants, Tencent, Baidu, and Alibaba, have invested in telemedicine. Traditional real estate companies, such as China Sunshine Corporation, have also invested in intelligent communities with a community health department.