Analysis on the development status and investment logic of rehabilitation medicine

December 19, 2018

Original author: Miao Yujia & An Ke

This article will tell you:

1. Basic Definition and Classification of Rehabilitation Medicine
2. Overseas Rehabilitation Medical Services
3. The Current Situation of Rehabilitation Medical Services in China
4. Domestic Listed Companies Involving Rehabilitation Medicine
5. Investment Logic and Risk Tips

Basic Definition of Rehabilitation Medicine

Since the mid-20th century, it has emerged as “the four major medical sciences” together with preventive medicine, health care medicine and clinical medicine. It can alleviate, remedy and rebuild human dysfunction through physiotherapy, exercise and other therapies.

According to the types of diseases, rehabilitation medical treatment includes six categories: rehabilitation of nervous system diseases (stroke, etc.), rehabilitation of bone and joint muscular diseases and disability (amputation fracture, etc.), rehabilitation of cardiovascular and respiratory diseases, rehabilitation of the elderly, rehabilitation of children’s diseases and rehabilitation of mental disability.

The most important difference from clinical medicine is that the object and purpose of treatment are different. The main purpose of clinical medicine is to cure diseases, while rehabilitation is mainly aimed at functional disorders, supplemented by corresponding treatment and training, so that groups can return to normal social life.

Rehabilitation treatment group includes Physiatrist, PT, OT, ST, psychotherapist, P&O, RT and SW. In China’s rehabilitation treatment system, the introduction of Chinese medicine with Chinese characteristics.

Rehabilitation practitioners need to cooperate with each other in their work. After the rehabilitation program is given by the rehabilitation physician, the rehabilitation practitioners and other persons in the rehabilitation treatment group will carry out the rehabilitation program together.

At present, the groups rehabilitative treatment is usually divided into acute stage, post-acute stage and long-term care period according to the development of the disease. Therefore, the corresponding three-level rehabilitation medical network is a relatively sound common model of rehabilitation medical service system in developed national regions.

Overseas Rehabilitation Medical Service Status

As a global wind vane, rehabilitation medicine in the United States has experienced four stages in the past hundred years: germination, formation, development and maturity.

In its infancy (1917-1946), the U.S. Army set up a post-war physical rehabilitation and rehabilitation department in 1917, and since then began the rudiment of rehabilitation institutions. At that time, rehabilitation institutions formed such methods as sports training, compensatory function and prosthetic orthosis, speech therapy and recreational therapy.

During the formation period (1946-1982), Howard A. Rusk (father of American Rehabilitation Medicine) systematically elaborated and established the rehabilitation physiotherapy system. During this period, many rehabilitation hospitals were established in the United States, and the post-payment system was implemented. But the excessive medical care triggered by this rehabilitation physiotherapy system has made the US government’s medical and health expenditure reach hundreds of billions of dollars, making it difficult for health insurance to pay and entering the adjustment stage.

In the period of development (1982-1997), in 1982, the United States established a standard prepayment system for acute rehabilitation, limited the total cost of treatment, controlled the treatment cycle, and successfully reduced medical insurance expenditure to 2/3. The shortening of the period of rehabilitation in the acute stage directly leads to a sharp increase in the demand for rehabilitation treatment after the acute stage, which makes the patients have to turn to the special rehabilitation hospital after the operation, and makes the special rehabilitation hospital develop rapidly.

In the mature period (1997-present), the necessity of rehabilitation treatment has kept the cost of rehabilitation treatment increasing by 20%. In order to control costs, in 1997, the United States government adjusted the advanced payment system to apply to the post-acute rehabilitation institutions. It proposed that the FRGs (Function Related Groups) standard should replace DRGs, and that FRGs should cooperate with the functional assessment measurement of rehabilitation patients, gradually forming a perfect evaluation system FIM (Function Independent Measurement). According to FIM, the curative effect was evaluated and the corresponding amount was paid. The improvement of the evaluation system makes the treatment plan, hospitalization period and curative effect controlled effectively, and greatly reduces the cost control. This scheme has been used up to now.

In the three-level rehabilitation system of the United States, the rehabilitation process of the rehabilitation group is built according to the needs. The three-level rehabilitation system creates a whole process of rehabilitation program for the needs group. Based on the FIM (Function Independent Measure) Independent Function Scale, the insurance assesses the age, complications, treatment effect and budgetary rehabilitation costs according to FRGs, and then adjusts accordingly to guide the patient’s direction.

In Britain, according to different diseases, the corresponding standard operating procedures were designed to guide referral and complete the whole process of rehabilitation after clinical treatment.

Germany is more “wise” in the payment of medical insurance. The first payment of rehabilitation treatment by insurance is higher. For patients who do not follow the rehabilitation guidelines, the insurance does not bear compensation after the second attack, so as to guide patients to actively participate in rehabilitation treatment.

In Hong Kong, besides the three-tier system, there are also long-term care hospitals (including sanatoriums and nursing homes) providing life-long care services.

In the above countries and regions, rehabilitation medicine is included as a major in the University curriculum. There are 761 institutions of higher learning in the United States with rehabilitation medicine specialty. Rehabilitation physicians are the planners and team centers of the treatment plan, which are implemented by rehabilitation therapists. Rehabilitation therapists earn between $5 and $10W, while rehabilitation physicians earn more.

The United States has developed a comprehensive three-tier rehabilitation system, including in-patient rehabilitation facility (IRF), professional nursing facility (SNF) and long-term care hospital (LTCH), and family rehabilitation. In 2015, there were a total of IRF 1182 in China, of which 262 were independent IRF.

Health insurance policy has a great impact on the development and operation of rehabilitation institutions in the United States. Since CMS (American Medical Insurance and Medicaid Service Center) updated medical insurance payment standard in 2004, the proportion of neurological injuries (such as stroke and brain injury) in IRF patients has increased greatly, from 25.7% in 2004 to 42.1% in 2015; correspondingly, the proportion of cases related to bone and joint injuries has increased from 2.7%. In 2004, 37.2% fell to 18.3% in 2015.

Overall, there are 60,316 rehabilitation businesses in the U.S. market, including about 16,000 to 18,000 clinics for physical therapy.

1.Hospital: HealthSouth

HealthSouth was founded in Birmingham, Alabama, in 1984. It was launched in Nasdaq in 1986 and transferred to NYSE in 1988. The company currently dominates the independent IRF (Inpatient rehabilitation) market, accounting for about 50% of the market share. The market share of the remaining individual institutions is no more than 6%. From the perspective of departments, HealthSouth has a very high medical standard in stroke, neurological disorders, spinal injury, heart and lung diseases, plastic surgery and amputation. The former flag operates 107 rehabilitation hospitals, 29 rehabilitation clinics and 165 family rehabilitation institutions with a total of 7095 beds. Coverage of 33 states has been achieved.

The company is very good at capital operation. From 1993 to 1997, it bought 28 hospitals and 45 community centers from National Medical Enterprise for $1 billion, ReLife Company for $180 million, Surgical Health Corporation for over $150 million and Surgical Health Corporation for $200 million, respectively. Horizon/CMS and Columbia/HCA’s Surgery Unit were acquired by On and Novacare’s Rehabilitation Hospital for 650 million yuan and 500 million yuan respectively. With the promotion of a series of mergers and acquisitions, the profit level of HealthSouth has been increasing, forming a large chain rehabilitation hospital management group with more than 50 hospitals up to now. So far, the annual net profit has maintained a growth of about 10%.

2.Clinic: Athletico

Founded in Chicago in 1991 as a single orthopaedic rehabilitation facility, it now has more than 450 clinics in 11 states.

At present, from 1500 professional physiotherapists, occupational therapists, sports trainers, personal fitness coaches, to strength and training experts and massage therapists, we mainly provide more than 40 kinds of rehabilitation and fitness services for our customers, which are located in “community health care in retail environment”, and adopt a 24-hour business system. Provide services for C-end customers and create vocational rehabilitation programs for B-end customers.

At present, it occupies about 2.5% of the market of physiotherapy in the United States, with a revenue of $10 million in 2017. But on the whole, outpatient clinics in the United States, like Althletico, mainly focus on physical therapy.

Current Situation of Rehabilitation Medical Services in China

According to the definition of rehabilitation medicine, it can be estimated that there is a huge market space for rehabilitation by corresponding treatment for groups with functional disabilities. According to the forecast, the annual compound growth rate of rehabilitation industry in China is not less than 18%.

With appropriate rehabilitation, at least 50% of disabilities can be controlled or delayed. In recent years, the incidence of stroke is younger and higher. In developed countries which pay attention to rehabilitation treatment, the disability rate is less than 30%, while in China it is as high as 75%. In our country, stroke patients are hospitalized 3-4 times a year. If they do not receive rehabilitation treatment, they will be forced to reuse medical insurance for many times because of dysfunction. Compared with those who can get timely rehabilitation treatment, 84% of stroke patients can recover their self-care ability, which is the best balance between treatment effect and medical insurance funds.

Especially in the field of congenital disability of children, early rehabilitation treatment can make children very likely to be cured and return to normal social life.

In recent years, rehabilitation medicine has gained great progress and policy attention in China, but there are still some problems:

1.There is still a gap in the number of rehabilitation institutions and a serious shortage of supply. By the end of 2014, there were 3 288 general hospitals with rehabilitation departments, while there were 8 973 hospitals above the second level in China (2002 tertiary hospitals and 6971 secondary hospitals). Compared with the requirements, only less than half of the hospitals above the second level had rehabilitation departments. Taking Beijing as an example, there are only 1953 beds in rehabilitation hospitals in such a large city as Beijing, and a certain proportion of them are not used for rehabilitation treatment.

The following picture shows the top 40 rehabilitation hospitals in China before 2017, of which only 14 are non-public institutions.

2.The lack of rehabilitation talents. There are 16,000 in-service rehabilitation doctors and 14,000 therapists in China, i.e. 1.2 rehabilitation doctors per 100,000 population. In developed countries, 30-70 rehabilitation doctors per 100,000 population are required. There are not 100 undergraduate institutions offering rehabilitation therapeutics in China. There are only about 10,000 graduates (including doctors and therapists) each year. Under the existing medical system, their income is low and their mobility is high.

3.Popular awareness is insufficient. Compared with the corresponding vaccines for prevention, the prophylactic medicine for vaccination according to the need; the health medicine for health products, traditional Chinese medicine conditioning and exercise, which is closest to the people’s livelihood, is seriously inadequate for the recognition of rehabilitation medicine among the Chinese people, even for the clinical medicine of registered doctor, examination, medication or operation. Rehabilitation medicine will be misunderstood as massage physiotherapy or nursing. Even in the most developed regions of Guangdong, only 7-8% of patients received rehabilitation after surgery. Of course, due to the serious shortage of medical resources, public hospitals have to use limited resources in the clinical treatment process in order to obtain better benefits.

4.The matching of rehabilitation treatment cost and medical insurance is insufficient. In the course of rehabilitation treatment, patients spend about 500-600 yuan per day, plus equipment use fee, hospitalization fee, labor fee, etc. The rehabilitation treatment cycle usually takes 28-90 days or longer. Only in 2010 did China’s medical insurance include nine rehabilitation treatment items in the medical insurance reimbursement list. Medical insurance is increasingly strict in the management and control of general hospitals. Under the medical insurance control fee, general hospitals often transfer the rehabilitation quota, making the reimbursement rate of rehabilitation patients less than 50% in the actual treatment process. With the joint promotion of medical insurance payment and “graded diagnosis and treatment” system, in some cities of China, the pilot single-disease rehabilitation package settlement, such as cerebral hemorrhage, cerebral infarction, craniocerebral injury, brain tumor surgery, spinal cord injury, artificial hip/knee replacement, was given 15,000-18,000 yuan for the package settlement of rehabilitation reimbursement, reaching 85-95%. The proportion of reimbursement is a great innovation. The following picture shows the rehabilitation program covered by medical insurance in China.

Listed companies involved in rehabilitation

1.Xiangya humanity rehabilitation hospital (Hunan Development 000722)

Established in May 2012 and held by Tasly Group. It was introduced by the cooperation of Xiangya Hospital of Central South University and Hunan Pok Oi Rehabilitation Hospital. The first phase has a construction area of about 32,000 square meters, the number of beds is 451, and the area of rehabilitation treatment business is more than 20,000 square meters. It was officially opened on September 28, 2012. At present, Hunan Development is building a three-level rehabilitation medical service system based on “Xiangya Hospital as the technology leader, Xiangya Pok Oi rehabilitation hospital as the service platform, and grass-roots medical and health service institutions”.

According to public data, revenue reached 100 million yuan in 2014, exceeding the promised net profit in 2015 and 2016, reaching 16.2109 million yuan and 22.1671 million yuan. The net profit margin is estimated at about 12%.

2.Australian Science and Technology (002172)

In addition to viscose soybean fiber, the original main industry acquired Australian Ocean Construction Investment in July 2015. Assets include Australian Hospital, Yanghe Hospital, Sanxing Hospital and Shunkang Hospital, but the focus of the hospital is different. Shunkang Hospital mainly does rehabilitation medicine. In November 2015, we plan to invest 960 million yuan in the construction of the rehabilitation hospital and rehabilitation chain. The rehabilitation in Hong Kong is set up according to the standard of the second-level hospital. With the rehabilitation medicine departments of bone and joint, neuro-stroke and spinal cord injury, we plan 300 beds with a total floor area of 20,000 square meters to build the rehabilitation specialist in East China. Hospital.

Chain layout strategy considers the selection of economically developed areas lacking rehabilitation hospitals in eastern China, and co-construction with local hospitals. Australia and Oceania mainly assist departments in management and equipment provision.

The overall layout is expected to be completed in 2019, and the profit cycle is expected to be around 9 years.

3.Hejia Share (300273)

Domestic medical equipment enterprises, the original business includes tumor minimally invasive comprehensive treatment, medical gas purification engineering, medical imaging and routine diagnosis and treatment, hemodialysis, medical information, mobile medicine, overall operation, financial leasing and so on.

In April 2015, a strategic cooperation agreement was signed with Zhengzhou People’s Hospital Medical Management Co., Ltd. Zhengzhou People’s Hospital Management Company accounted for 20% of the equity of rehabilitation hospital. Based on the cooperation, the company invested in the establishment of rehabilitation hospital to build the development of rehabilitation hospital management, personnel training and technical exchange. The key departments were neurological rehabilitation and bone injury rehabilitation. Section. In the same year, we cooperated with Utah University Medical Group, including the design guidance of rehabilitation hospital, the development of wealth-seeking process, the training of medical staff, the introduction of rehabilitation education projects, CARF certification guidance, distance education development, consultation and other all-round cooperation modes with training talents as the main part.

In addition, Nantong purchased a nursing home and set up 200 beds of rehabilitation hospital, using an area of nearly 12,000 square meters, which was qualified for medical insurance in June 2018.

4.Sanzhen Rehabilitation

Established on December 21, 2011, it currently includes Changsha Sanzhen Rehabilitation Hospital, Dongfeng Branch of Sanzhen Rehabilitation Hospital, Meixi Lake Branch (trial operation) and four trusteeship community health service centers. The company was listed on the new third board at the end of 2016.

Other listed companies, such as Bangjie Stock Company and Jiaying Pharmaceutical Company, have plans for the layout of rehabilitation hospitals.

Investment Logic & Risk Tips

1.Return on investment cycle is relatively short, which is favored by listed companies. According to the statistics of the Chinese Medical Association, the return period of general private hospitals is usually more than five years, and the average return period of investment in domestic medical industry is more than ten years, while that of rehabilitation hospitals is the shortest, about three years. Throughout the current process of the development of Listed Companies in transitional medical services, rehabilitation hospitals are sought after as a strategic layout choice. Compared with ophthalmology, oncology, general hospitals and other specialized medical service institutions with higher threshold, they have higher cost-effectiveness and shortest return cycle.

2.Rehabilitation medical service institutions have relatively low threshold. Compared with 500-1 million yuan in general hospitals, 300-500 thousand yuan in single beds in rehabilitation hospitals can be spent. Compared with clinicians, the training cycle of rehabilitation therapists is shorter and faster. It is a good opportunity for public hospitals to supplement the social capital when the rehabilitation departments are unable to pay attention to and the number of beds is insufficient to cover.

3.The development trend in the future will help rehabilitation medicine. The introduction of rehabilitation medical information system, data collection and analysis, can reverse the design and application of commercial insurance products, reduce the burden of medical insurance and improve the effect of rehabilitation diagnosis. Rehabilitation robots are also an important trend in recent years. Intelligent wearable rehabilitation devices can replace rehabilitation therapists to a certain extent. They can gradually improve limb function through rehabilitation training, especially to supplement the inefficiency of manual treatment by therapists.

4.It is suggested to build a rehabilitation system with grass-roots rehabilitation and high-end rehabilitation. At present, the first-tier cities in China have a certain degree of cognitive awakening for post-operative rehabilitation, neurological rehabilitation and bone and joint motor rehabilitation. But at present, the existing rehabilitation hospitals and rehabilitation clinics are mainly aimed at the basic rehabilitation medical needs using medical insurance. The service environment and privacy conditions can not meet the high-end population with rehabilitation needs. In the target, it is advisable to consider both the rehabilitation service system and build a commercial insurance payment system to cover the high-end population and the basic rehabilitation medical service demand of establishing brand reputation with medical insurance or lower treatment cost.

5.Pay attention to the risk of medical insurance dependence. The income of some existing rehabilitation hospitals mainly depends on industrial injury identification and medical insurance payment, and the medical insurance audit is becoming more stringent, so we need to pay attention to the treatment of the target medical insurance.

(This article is a reprint of WeChat Official Account Gao Tejia’s investment article, deleted if invaded.)