Market Insight

Demographic shifts in China mean new opportunities for ultrasound equipment

October 24, 2018

Holley Lewis Holley Lewis Senior Analyst, Healthcare Technology
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China was the second-largest ultrasound market in the world in 2017, growing an impressive 15.8%. China’s ultrasound market has grown more than 10% nearly every year since 2009 when Healthy China 2020 policies were first implemented, but its landscape looks much different now than it did a decade ago. New reform initiatives are shifting ultrasound funds toward underdeveloped regions and healthcare facilities. Policies that once restricted private hospital market growth have been lifted. While international companies led the market with GE Healthcare, Philips Healthcare, and Siemens Healthineers capturing the top three market share positions, domestic ultrasound manufacturers continued to expand their presence.

The release of pent-up demand for healthcare, alongside China's slowing economic growth, is putting a strain on provincial government finances, and there are concerns regarding the long-term sustainability of the country's health-financing strategies. The Chinese market is in a perpetual state of flux, and the provincial- and hospital-based tenders are pilot programs where it is unclear how influential or standardized they will become. The Chinese ultrasound market will remain one of the most attractive markets in the world in the coming years, but increasing local competition, distribution challenges, and a shortage of skilled medical personnel will pose challenges to market growth. During the next five years market opportunities will be found in new places.

Investment is bringing more ultrasound equipment to Central and Southwest China.

Investment, infrastructure development, and government healthcare initiatives are shifting ultrasound market opportunities to new regions. The rich coastal regions of East China and South China have historically been the most important regions for the Chinese ultrasound market, but Central and Southwest China’s ultrasound revenues will grow the most of all regions during the next five years. Figure 1 shows the percentage change for ultrasound revenues by region from 2017 to 2022.

Central China’s ultrasound market will grow at a higher rate than the total Chinese market through 2022. The region’s strategic location as the link between the more developed eastern regions and the lesser developed but resource rich western regions has driven economic growth. Cities like Wuhan, the capital of Hubei, are becoming crucial to China’s long-term economic success. Development and investment is bringing more hospitals, trained doctors, and medical technology to Central China which is driving growth for the region’s ultrasound market.

Stimulated by investment and improving consumption levels, the provinces Chongqing, Guizhou, and Tibet are outpacing the rest of China in terms of economic growth. Chongqing was founded in 1997 to facilitate building the Three Gorges Dam and it has been the fastest growing city in China for many years. Guizhou, currently the poorest province in China, has set out to become a big data hub which is attracting investment and promoting economic development. Millions of Southwest China inhabitants have been lifted out of poverty since 2012 which is intensifying demand for better healthcare services.

Healthcare policies are promoting ultrasound utilization in Tier 2 and Tier 1 hospitals.

A three-tier system is used to classify China's hospitals: Hospitals with over 500 beds are classed as Tier 3 and provide the top level of care; Tier 2 hospitals are medium-sized city or county institutions; and Tier 1 institutions are township hospitals. The distribution of Tier 3, 2, 1 and ungraded hospitals in 2017 is shown below:

Chinese patients have traditionally sought medical care at the largest, highest-tier hospitals – even for minor ailments. Healthcare reform policies of the past decade exacerbated the patient volume imbalance between Tier 3 hospitals and other healthcare facilities. From 2009 to 2013, the Chinese market for ultrasound grew more than 10% every year but market growth was driven by Tier 3 hospitals purchasing premium cart systems. In 2017, Tier 3 hospitals accounted for just 0.2% of healthcare facilities but 45% of ultrasound revenues.

China's ongoing health reforms are now focused on addressing this imbalance. Tier 2 and Tier 1 hospitals are assuming more responsibility for healthcare delivery in China which is driving demand for more of these institutions and more ultrasound equipment. Figure 3 shows that growth for the number of Tier 2 and Tier 1 hospitals outpaced all other healthcare institutions from 2016 to 2017. Funding by central and local governments has been used to construct Tier 2 and Tier 1 hospital infrastructure, purchase advanced equipment, and improve medical staff salary. As a result of these efforts, Tier 2 hospitals purchased the most ultrasound equipment of all healthcare facilities in 2017.

During the forecast period the government will continue working to alleviate the strain on Tier 3 hospitals by improving Tier 2 and Tier 1 hospital services. Planned actions to achieve this goal include increasing the number of patient visits, improving the diagnostic and treatment capabilities, and expanding Tier 2 hospitals’ roles in medical teaching and research. These actions will encourage hospitals to purchase ultrasound equipment, especially high-end and premium cart systems. During the next five years Tier 2 and Tier 1 hospital ultrasound revenues are projected to grow at compound annual growth rates (CAGRs) of 6.4% and 7.8%, respectively. The ultrasound market for grass-roots institutions, healthcare institutions providing the most basic level of care, will grow more than other facility markets but will remain small relative to the hospital markets. The percentage change for ultrasound revenues by facility is shown in Figure 4.

Private hospitals are providing new opportunities for ultrasound manufacturers.

Historically, Chinese hospitals were mostly public, but the government opened the healthcare system to private investors and encouraged Chinese physicians to practice at private hospitals as part of the Healthy China reforms. Figure 5 shows that private hospitals comprised 42% of all Chinese hospitals in 2012, growing to account for 60% of hospitals in just five years.

Most Tier 3 and Tier 2 hospitals are publicly owned, but the number of Tier 3 and Tier 2 private hospitals is on the rise. Demographic changes are driving growth for top tier private hospitals. The Chinese population is becoming wealthier and demanding better healthcare services. Private hospitals provide these patients with access to desirable foreign healthcare products, specialized services, and more one-one-one attention. Another factor driving growth for top tier private hospitals is the government’s attempts to more evenly distribute healthcare services and allay the pressure on Tier 3 public hospitals. By shifting resources away from overcrowded public Tier 3 hospitals towards lower tier and private hospitals, the Chinese government can start to resolve one of the biggest issues plaguing its healthcare delivery model.

The private market will offer many opportunities for ultrasound manufacturers to sell equipment through 2022. The differences between public and private ultrasound funding structures make private hospitals more attractive to ultrasound manufacturers. Public hospitals purchase ultrasound equipment cyclically. Public hospital management and ultrasound departments must prepare materials to present to the Chinese government for funding approval. This approval process takes a least six months and it can stretch longer than a year. In contrast, private hospitals are generally run like a company and management has cash on hand. The time between agreeing to purchase an ultrasound system and transferring money may only take a month.

China continues to offer exciting opportunities for ultrasound manufacturers. As the first wave of the ultrasound boom comes to an end, market growth is shifting toward new regions and healthcare facilities. During the next ten years China could overtake the United States to become the largest ultrasound market in the world. Understanding the shifting Chinese healthcare landscape is more important than ever before.

A full assessment of the global market for ultrasound clinical applications is available from IHS Markit in the Ultrasound Intelligence Service. This service offers regular quantitative and qualitative analyst insight, market share analysis and granular visibility into clinical applications. A deep-dive application database contains analysis of the global ultrasound market split by country, product and clinical application with 5-year forecasts. The ultrasound equipment database provides detailed revenue, unit shipment and ASP 5-year forecasts for 9 ultrasound product types in over 30 countries with market share provided at a sub-regional level for all product types.

For more information, please contact:

Holley Lewis

Senior Analyst, Healthcare Technology

 +1-(512)-813-6303 | holley.lewis@ihsmarkit.com

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