Big data and the rise of Smart Healthcare

Huang: Today all kinds of industries are embracing technology in China and one of them is healthcare. Given China’s large and aging population, how to provide more accessible and efficient healthcare services is one of the top concerns we face today.Many years ago, a number of great entrepreneurs had made a lot of efforts to explore the use of technology in healthcare. However, this has not drawn much attention especially from capital markets until the recent three to five years. The COVID-19 pandemic highlights the importance and accelerates the trend of informatization, technology adoption and digital transformation in the healthcare industry, which has caught the world's eye and will likely drive the future of healthcare. As a veteran in investment banking, I have been closely watching the development of China’s healthcare industry and working on many projects in this industry. I’m very proud to say China is at the global forefront in this field. Today we are very glad to hold this discussion on digital healthcare and have Mr. Ming Kuang, Founder of ClouDr., share his perceptions, ideas and thoughts on his journey in creating the industry-leading smart healthcare platform. Next, I would like to spend a few minutes to introduce ClouDr. and Mr. Ming Kuang. Founded in December 2014, ClouDr. is an independently developed smart healthcare platform that incorporates hospital and pharmacy SaaS (software as a service) and the internet application to offer full-spectrum, integrated and digital solutions for China’s hospitals, pharmacies and patients with chronic diseases including diabetes, liver and cardiovascular diseases, and tumors. ClouDr. leverages the internet technology to build a smart platform that brings together hospitals, doctors, patients and pharmacies to enable more efficient and better care for patients with chronic diseases. Here is some good news to share with you. Despite the challenging macro environment, ClouDr. had completed its RMB1bn financing by the end of 2019. Congratulations to Mr. Kuang! Mr. Kuang graduated from Shanghai Jiao Tong University and the University of Cambridge and started his career in the United States. He founded ClouDr. in 2014 after returning to China from the United States. Now Mr. Kuang, I’d like to ask you some questions. ClouDr. has gained some attention from investors and capital markets. Could you please share with us what inspired you to start your business and how you found your way to use technology to solve healthcare issues?

Kuang: Sure. Thank J.P. Morgan for giving us this opportunity to be here and thank you, Mr. Huang, for introducing ClouDr. Now I’d like to briefly explain what inspired us to start this business. When I was a student at the University of Cambridge, we had the opportunity to see how NHS system worked efficiently to cope with a large population in the U.K., especially those with chronic diseases who were far older than their counterparts in China. Later, when I was engaged in R&D and marketing at Johnson & Johnson Medical Devices, I also witnessed how the U.S. insurance and healthcare system was functioning efficiently. Then we realized that for a very long period of time, there was not a good healthcare system or procedure in China, which has four or five times the population of the United States, to serve over 500mn people with chronic diseases. Given the long-lasting nature of chronic diseases (the more than 20 chronic diseases that we cover last for over 20 years on average), there lacked an efficient, economic and effective system or procedure, either in or out of hospital, to help these patients in the long run. Since then, we have been thinking about doing something about it and started our business in 2014 when conditions were ripe. Next, I’d like to share with you what ClouDr. actually does and how we use technology to improve the current healthcare services. Put simply, ClouDr. is a comprehensive platform designed to facilitate the management and treatment of chronic diseases. The foundation of the platform is an infrastructure based on various SaaS systems and applications. Our services are composed of three key components. The first component is the SaaS management platform for hospitals. The platform has several key roles. First, it can help hospitals establish a standard and paperless process for their departments to treat chronic diseases. There are approximately 8,000 or 9,000 secondary or higher-level hospitals in China and the first thing we need to do is to clarify and standardize their process. Second, it can digitalize and improve the paper-based process that many Chinese hospitals are still using to reduce the occurrence of clinical incidents and improve the efficiency of treatment. This can be of a huge help for medical workers, hospitals and patients. Currently our in-hospital SaaS platform covers approximately 2,000 or 20% of China’s hospitals at different levels. The second component is an internet application platform based on big data. The platform connects patients with doctors and allows patients to initiate consultation with their doctors via the ClouDr. application on further treatment, information sharing or health management. In the meantime, the ClouDr. application connects to our in-hospital SaaS to ensure consistency. The third component is a pharmacy in-store SaaS.

Huang: Just as Mr. Kuang said, they use the internet and technology to facilitate the treatment of chronic diseases and ClouDr. now covers thousands of hospitals and pharmacies and offer a wide range of services to them. We will ask about the result achieved after the connection is restored.  So as I said, China is already at the forefront of the global healthcare tech space. Listed Chinese companies in this space, such as Ping An Good Doctor and Ali Health, are all using technology as a tool to improve the accessibility and efficiency of healthcare services. If you have any questions, please feel free to send them to us. We will continue our talk with Mr. Kuang after the connection is restored. In the space of healthcare tech, different companies have different dimensions in which they operate and different focuses on the pain points they would like to address. If you are interested, we can arrange discussions with more healthcare companies in this field. I see a question asking which two companies we like in this field and why. As I said, a number of great entrepreneurs started to make some attempts in this regard five years ago. At present, only a few listed companies are engaged in this space and two of them are receiving the most attention. One is Ping An Good Doctor, whose IPO was led by J.P. Morgan. The other is Ali Health. There is another great company listed in the US called 111, Inc., which is probably drawing less attention from investors. I think every company has its unique features and it is difficult to summarize in a few words. Generally speaking, all these companies aim to tackle the biggest pain point of China’s healthcare industry, which is the accessibility and efficiency of healthcare services. The internet offers an important tool to achieve this end. These companies, especially Ping An Good Doctor and Ali Health, operate in different dimensions to tackle this pain point. Their earnings are well received by the market and their stocks are performing well. I'm not going to go into much detail about it here. Currently we have these companies listed in the market, but more importantly, there are a lot of unlisted companies operating in the field of digital health and healthcare tech with different focuses and approaches. As we discussed here, ClouDr. aims to tackle the problem of chronic diseases by using SaaS to build an integrated platform connecting hospitals, pharmacies and patients. As you know, China has a large population with chronic diseases. For example, the number of patients with diabetes in China, as I remember, is close to 80mn. This is a huge number and patients with diabetes need long-term care and therapy. We see tremendous potential in this area and suggest paying attention to some unlisted companies operating in this promising market.

Kuang： Let me summarize what I have said. Our services are composed of three components. The first is the in-hospital SaaS system. The second is the internet hospital connecting doctors with patients with chronic diseases. The third component is the pharmacy SaaS system which can take orders from the internet hospital and make deliveries through the vast pharmacy store network in China. Currently we cover approximately 15% of China’s pharmacies. So we use two SaaS systems and one online application to build this chronic disease management and treatment platform, with aim to offer better-quality and more efficient services to patients with chronic diseases and eventually help them receive better treatment. That’s pretty much about it. Mr. Huang.  

Huang: OK. Thank you, Mr. Kuang. I was answering some questions for you when we tried to restore the connection. Could you talk about the impact of COVID-19? What role does ClouDr. play in the battle against the COVID-19 pandemic? What services do you offer?

Kuang: Sure. I think COVID-19 has changed the way the healthcare industry and the society operate. Now let me share some details around what we are seeing and doing at ClouDr..First, we are seeing an increasing recognition of the importance of health big data. Obviously, the health big data can help us identify high-risk and low-risk locales of the COVID-19 across the country and thereby maintain the normal functioning of lower-risk communities. This essentially indicates a way to unlock the value of health big data. Second, we are seeing a wide application and adoption of the online treatment and management model. During the outbreak of COVID-19, hospitals are definitely a high-risk venue for patients with chronic diseases. A widely-accepted transition from face-to-face therapy to online treatment is an enormous boon to the internet healthcare industry as a whole. Third, we are seeing strong government support of this transition. Given the important role that online big data, healthcare information systems and internet hospitals play in helping alleviate the pressure facing China’s hospital system during the COVID-19 pandemic, the government has introduced a set of policies to support online healthcare services and facilitate access to medical insurance for online diagnosis and treatment. Therefore we believe the COVID-19 pandemic should drive the development of digital and online healthcare in China. As the No. 1 player in the treatment of chronic diseases during the pandemic, ClouDr. has made a major contribution in response to COVID-19 with our unique franchise.Here I’d like to give you a few examples. First, in late January when the pandemic was at its height, we were invited by the Huoshenshan Hospital to provide our best-in-class chronic disease management system during its swift construction. The reason we were chosen is that our system can help medical workers more efficiently and minimize their contact with others, which was the most important consideration at that time. We were the first company to be invited because the mortality of chronic diseases is very high. We sent a team to Wuhan and helped install our system at the Huoshenshan Hospital. After being commissioned, the system operated smoothly and helped a lot of patients. Second, we provided open and free access to our internet application platform connecting patients with doctors during the pandemic. Our online traffic grew more than ten-fold as users swarmed to initiate consultations on chronic diseases, especially in February and March when the virus was spreading rapidly. And because we use the existing network of 500,000 pharmacies in China to distribute drugs, patients with chronic diseases can still get their drugs from local pharmacies even as the COVID-19 lockdown disrupted delivery services.That is pretty much what we have done in response to the COVID-19 pandemic, Mr. Huang.

Huang: Thank you, Mr. Kuang. A question just popped up asking who pays for your services. Can you explain it?

Kuang: This is a good question. First I’d like to point out that China’s healthcare service payer system is a bit different from developed countries. As far as ClouDr. is concerned, currently we have four major payers for our services. The first payer is government insurance. Due to the pandemic, this year online diagnosis and treatment has been given full access to the government medical insurance, which is a terrific tailwind for us to serve more people. What we have pioneered in managing healthcare services is to involve the corporate sector as the second payer. Since last year, we have been building strategic partnership with many companies in order to get them to purchase our services for their employees and VIP customers. The third or the largest payer is the individuals. The last emerging payer is the commercial insurance. In 1H20, the number of bills paid by commercial insurance grew more than ten-fold, representing the fastest growth among the four payers. Despite its small volume in our current payer system, I’m very optimistic on its future growth. Let me summarizie. The first one is government insurance, the second one is commercial insurance, the third one is corporates and the last one is individuals. 

Huang: Thank you for the great answer. As we said, China is at the forefront of the global digital healthcare and healthcare tech space. Since healthcare is one of the most regulated industries in the world, what role do you think government plays in the digital healthcare and healthcare tech space, especially in connection with ClouDr.?What can government do to better help the industry to grow?

Kuang: OK. First we understand that healthcare is a regulated industry not only in China, but also around the world because it involves a large population and concerns people’s health, safety and wellbeing. Currently the Chinese government is very positive and supportive towards the positioning of online healthcare. This is evidenced by a slew of government policies and regulations introduced in the recent years, from measures supporting the development of the online healthcare sector to those facilitating access to medical insurance for online diagnosis and treatment. Second, we understand that the government also plays a critical role in setting industry guidelines and standards. Such guidelines and standards can help us operate in a solid way and offer high-quality services, and in the meantime ensure patients receive effective and safe treatment. In practice, the government tends to involve key state-owned enterprises such as China Electronics Corporation (CEC) in the standard-setting process. We are fortunate to have the opportunity to work with CEC Data, a subsidiary of CEC, to establish the Big Data Center for Chronic Diseases and set guidelines and standards for the medical data of chronic diseases. We hope such guidelines and standards, once published, can help the industry grow and operate in a more standardized way. Lastly, the Chinese government is mulling more policies to streamline the access to medical insurance and the establishment of online diagnosis and treatment service providers. So my understanding is that online diagnosis and treatment and internet healthcare would receive strong government support not only in China, but also in the whole world.

Huang: OK. Thank you. Another question from investors is about going global. ClouDr. is both a healthcare service provider and a technology company. Technology has no border or boundaries. Could you share with us your ideas and thoughts on the globalization of ClouDr. as a tech-enabled service?

Kuang: OK. First, I strongly agree with you that it is easy for technology to cross borders today. At ClouDr., we also believe diseases are a global problem without national or ethnic boundaries. Chronic diseases have a high morbidity and long-lasting impacts in all racial/ethnic groups. So from the very beginning, our goal has been to expand or replicate our solutions, models and elements, including data mining techniques, AI algorithms, AI-based computer-aided diagnosis and SaaS systems, in regions outside of China. For instance, it is relatively easy for us to bring our model, SaaS and technology to many underserved areas in Asia which possess even less medical resources than China. And it is also relatively easy for us expand our coverage to more developed regions because our online solutions can generate great value for governments and people there with more transparent data and lower costs.

Huang: As we approach the end of our time, here is my last question. Many investors online are wondering how ClouDr. would benefit, or achieve faster growth, from the investment in and development of new infrastructure including 5G, the internet of things and artificial intelligence. Could you share with us your comments on this matter?

Kuang: Sure. We are looking forward to the development of AI, 5G and AIoT technologies because they are the underlying infrastructure of digital and internet healthcare. Stronger infrastructure would give a big boost to digital healthcare and enable us to build the health big data system in a faster and better way. In the meantime, it would empower us to improve our data tracing, structuring and deep mining as well as artificial intelligence technologies, providing better aid to doctors’ diagnosis and research and boosting the R&D of new drugs. In addition, the potential wide adoption of 5G and AIoT would greatly improve data transmission and processing, bringing online diagnosis and treatment closer to the offline experience and allowing more offline activities to move online. As online data is more transparent and easier to be regulated and standardized, and providing services online would be preferred for industry players due to its higher efficiency and lower cost, the adoption of AIoT and 5G should further reduce the cost associated with the migration to online services and therefore drive the development of digital healthcare. On a final note, I believe the improving digital healthcare will likely reshape the value chain and organization mode of the healthcare service industry and enhance the efficiency of hospitals and the healthcare system. So that is what we are looking forward to and what we are excited about for the future.

Huang: OK. Thank you, Mr. Kuang. I see a lot of questions here, but we might not have enough time to answer all of them. I think we can arrange some other activities if you are interested. Clearly investors online here today are showing great interest in healthcare tech, digital healthcare, and especially the future growth of ClouDr..Thank you, Mr. Kuang, for sharing with us your thoughtful, intriguing and forward-looking insights. Again I’m sorry for the connection breakdown and we will do better next time. Thank you all and thank you, Mr. Kuang. Thanks, everyone!