Term Paper on "Executive Presentation of Problem Analysis Action Plan Taken and Financial Analysis for Providing Healthcare"

Term Paper 5 pages (1729 words) Sources: 1+

[EXCERPT] . . . .

Proactive Medicare Enterprise (HK) Limited:

Providing Healthcare in Mainland China Case Study

For Proactive Medicare Enterprise (HK) Limited, the opportunities at first glance appear unlimited and very promising as their initial success both from a partnership standpoint with Johns Hopkins International and from an execution of initial strategy in Shanghai. Taken at face value the case study implies the need for analysis of two emerging growth opportunities, both initially financially and strategically attractive, and little if any downside to the two expansion strategies. What is in fact missing is a more realistic assessment of healthcare throughout China which is one of the most impoverished and under-funded in the world. In addition the baby quotas in China and one-child initiatives make the growth prospects considerably less rosy than the case study indicates. It is the intent of this case study analysis to show the realities of healthcare growth opportunities for the companies involved in this case study, with attention paid to the ethical dilemma of operating a business that could easily become influenced by the One Child Policy and sex selection practices that China has become globally known for. Nonetheless, there is a huge gulf in the earning power of China's top 15% of the population and the remaining 85%. This just exacerbates the fact that in many rural areas, healthcare is among the worst levels globally today.

Johns Hopkins International (JHI) also needs to realize that any ethical lapse in judgment by anyone associated with these facilities in terms of premature abortions of girl fetuses (a common practice in the rural areas of China as this analysis shows) and the efforts of many wealthy couples to have artificial insemination techniques guarantee them a boy could potentially be very damaging to JHI.

Just the two factors alone show that the future is far less rosy, and worry-free for growth as the case study suggests. Paradoxically, the larger this operation becomes, the greater the pressure from the Chinese government to support state-defined birthing practices and policies. The least risky path for this consortium of companies to grow is to pursue an elitist, high-end strategy of care for the nation's top 15% of population who have the incomes to support this strategy. What is critical however is that ethical guidelines and programs must be put in place to ensure the clinic's freedom from being used for either late-term abortions of girls or the various techniques Chinese obstetricians use for selecting the sex of a child before birth. If an ethical meltdown occurs and this consortium of companies is implicated in any state-run programs to police birth control, all involved will have to switch industries as no one will ever want to work with them again.

Market Dynamics in China

What is astounding is that throughout this case study no mention of the birth rate in China drastically dropping and the policies of China to specifically focus on this area. McGraw-Hill (2007) details trending of population growth by fertility rates by year. This graphic alone speaks volumes as to why the fundamental growth assumptions in the case need to be much more critically evaluated and that the growth prospects, while promising need a much greater level of granularity.

Figure 1:

Comparing Birth and Fertility Rates in China

Source: Prentice-Hall (2007)

Secondly, the revenue dynamics of the Chinese healthcare market are shifting, as Table 2, Revenue Analysis by Year for Chinese Treatment Programs, illustrates.

Table 2: Revenue Analysis by Year for Chinese Treatment Programs

Source: Chow (2006)

Year Revenue per outpatient yuan

Revenue from medicine

Revenue from medical examination

Revenue per inpatient yuan

Revenue from medicine

Revenue from medical examination

1990

The shift away from medicine for both in-patient and out-patients in China towards examinations shows meteoritic growth however in China. Factoring for the core competencies of Proactive Medical Care (HK) Enterprise Ltd., into the above mix of revenue streams illustrates why the broadening of services over and above obstetrics is necessary. There issue for Proactive is to define which of the key areas of medical practice they need to concentrate on.

The last major market dynamic to consider is the growth of incomes in the coastal areas and the relatively low level of income growth in the more rural areas of the country. Figure 2 illustrates per capita income distributions. Clearly for Proactive, the future is best planned in these higher per capita income provinces.

Figure 2: Per Capita Income by Province

SWOT Analysis

The following SWOT Analysis provides the framework by which Proactive Medical Care (HK) Enterprise Ltd., needs to evaluate the growth opportunities before them. This analysis includes both internal and external factors.

Strengths

Proactive has sustainable credibility with JHI which needs to be carefully nurtured and relied on only after strategies with high levels of success are chosen.

Excellent connections in the Chinese government agencies critical for the joint ventures' success, including Dr. Cheng, one of the foremost obstetricians in China. Her allowing of a single bed is the basis of am American multi-city tour to enlist the support of JHI turns out to be successful; yet this alliance needs careful attention as she is most likely given the task of ensuring birth quotas are met.

Exceptional abilities at fund raising and the development of bond initiatives to debt finance expansion throughout China.

Highly experienced and talented team of managers from the healthcare field will be able to successfully recruit the best possible mix of physicians, nurses, and staff.

High levels of per capita income growth in coastal provinces in conjunction with the established Shanghai clinic form the basis of an excellent foundation for growth.

Weaknesses

Fundamental assumptions about the role of medical insurance in China being a catalyst for growth are erroneous and fraught with risk. While the Chinese government has stated that their explicit goals are to provide wide insurance coverage for basic services through the development and use of individual savings accounts, Chinese citizens in general are among the most poorly provided for globally. The communist party's approach to social pooling of spending account has been a failure.

The voluntary new cooperative medical scheme (NCMS) since 2003 has had low opt-in rates and the less generous urban scheme of providing 700 RMB so large co-payments and out-of-pocket payments for uncovered care is also at low use rates.

Appendix a shows the resulting outcomes of China's One Child policy and focus on support of only male births.

Opportunities

The growth of per capita incomes being driven by the growth of Foreign Direct Investment in coastal provinces presents a fertile area for growth of specific clinics, with the need to branch into other medical coverage areas in addition to obstetrics and pediatrics.

The top 15% of families with per capita incomes consistently pay for their own medical care and childbirth. Proactive Medical Care (HK) Enterprise Ltd., can easily capitalize on this trend and cater only to the highest levels of clientele. It will however need to keep the Chinese government out of its approaches to delivery and pregnancy counseling.

Threats

Dr. Cheng, as one of the lead physicians affiliated with state-run services in China, may enforce birth quotas and forced family planning through any and all locations of Proactive Medical Care (HK) Enterprise Ltd.. Her reluctance to work with American hospitals can be seen as reflecting a potential future strategy of using these clinics to ensure higher levels of birth quota attainment. This is a major risk.

The broader initiative of birth control and child quotas is also a major threat as the ethics of this policy continue to be universally questioned as a human rights violation. Presented below is a section of the Child Policy Regulations for Fujian Province.

Source: Fujian Province Regulations (1.5 Child Policy Region)

The ethics of this practice are a major threat to Proactive Medical Care (HK) Enterprise Ltd.., and its partners in this venture.

Moving through the labyrinth of Chinese reimbursement programs is going to require much more expertise in the wide variations in urban vs. rural policies and procedures for reimbursements of medical programs. Figure 3 shows the workflow for Chinese Urban medical costs reimbursement.

Figure 3: Chinese Urban Medical Costs Workflow Source: Tufts Working Papers (2005)

Comparing Figure 3, with Figure 4, Chinese Rural medical costs reimbursement, one can see the major variations in processes. For Proactive Medical Care (HK) Enterprise Ltd., and its partners to succeed, they will need to recruit expertise in each of these process areas.

Figure 4: Chinese Rural Medical Costs Workflow

Source: Tufts Working Papers (2005)

Summary and Recommendations

The critical issues that Proactive Medical Care (HK) Enterprise Ltd., need to confront the paradoxical risks of expanding in a nation that has vigorously asserted its right to define how many children its citizens can have, of what sex, and has a history of imposing significant fines if these laws are not obeyed. These fines are so exorbitant that many women in rural provinces abort girl fetuses. Against this potentially disastrous ethical landscape, Proactive Medical Care (HK) Enterprise… READ MORE

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