Cui Yutao, a pediatrician at Beijing United Family Hospital, delivers a lecture at a training class for medical workers in Beijing on August 6 (XINHUA)

Jeffrey Williams had not considered private treatment before he came to Beijing in the summer of 2014 and developed a respiratory tract infection. When the 39-year-old senior executive at a foreign bank went to a large public hospital, he had to wait nearly an hour as patients bustled in and out. When he finally met the doctor, the weary medico gave him only five minutes, telling him it was a common illness and quickly jotting down a prescription.

While the consultation and medicine only cost him $15, Williams sought to ensure his peace of mind and made the decision to sign up for a better quality of medical service. Finally, Williams opted for a private medical insurance plan provided by the Bayley & Jackson Medical Center in downtown Beijing, a private hospital with headquarters in Hong Kong. The plan's premium cost him about 30,000 yuan ($4,713) annually, which includes outpatient and inpatient services, regular check-ups and accommodation costs.

In comparison to the majority of Chinese who seek treatment in public hospitals, those who use private medical facilities see it more as a luxury service that is not time-consuming, overcrowded or impersonal.

Value 

On any given day, the scene at well-known public Peking Union Medical College Hospital in Beijing is a familiar one: hundreds of people lining up in front of the registration windows from the crack of dawn. Registration fees vary between 5 yuan ($0.76) and 14 yuan ($2.2) depending on the treatment needed. But while traditionally most of the public hospitals in China's big cities are government-funded, there has been a slow shift to foreign investment in this sector in recent years.

Most foreign capital making its way to China's hospital sector has until recently been directed toward high-end consumers, fed initially by the expat market. But increasingly this trend is shifting to China's own middle class. "Half of our outpatients are expats working or living in China, such as diplomats and executives of foreign-invested companies. And the other half is high-income Chinese residents. We sell by word of mouth," said Zhu Ying, President of the Beijing Bayley & Jackson Medical Center.

"I can communicate directly with the doctor in English here about my medical history," Williams said. "And the privacy is better protected."

Also, Zhu said that patients paying out of their own pockets at private hospitals have high expectations, demanding more professional and personalized services.

China's healthcare sector is estimated to be at 8 trillion yuan ($1.26 trillion) by 2020. More and more Chinese are demanding international-standard medical services as their wallets grow, says Roberta Lipson, CEO of United Family Healthcare (UFH) and Chindex International. In 2013, Chinese patients contributed about one third of the UFH's $87.5 million annual revenue.

In August 2014, China's health and commerce authorities issued a circular, encouraging foreign investors to set up solely foreign-invested hospitals in seven municipalities and provinces—Beijing, Tianjin, Shanghai, Jiangsu, Fujian, Guangdong and Hainan.

Analysts say that opening up the healthcare sector will boost high-end medical services. In the past decade, the government has supported the development of private hospitals by relaxing market access, land and capital requirements.

Cindy Zheng, China office manager of a company in the United States, fits the customer profile of a Chinese high-end medical provider. The 33-year-old had a bad experience with the antenatal care of her first child at a public hospital. "I had to get up as early as 6 a.m. to queue for registration," she said, complaining of overcrowding and long waits in endless queues.

After falling pregnant with her second child, Zheng sought the services at Beijing United Family Hospital. She said that the rooms were cleaner and quieter with better medical facilities, compared with public hospitals. Services offered also reduced waiting time for consultation.

For delivering a baby, public hospitals charge about 4,000 yuan ($628) on average in Beijing. It's about 10 times that much at a UFH facility, but for Zheng, one of many of China's rising middle-class citizens, the professional service offered is worth it.

Meantime investors have seen the potential of hundreds of millions of patients and are rushing into China's booming medical business.

"Investors have a strong interest in this sector, and they are waiting for investment opportunities," said Simon Li, General Manager of Shanghai's Kantar Health, a world leading healthcare consulting firm. Li added that a growing market means there are still a lot of unmet medical needs.

Vipul Prakash, Director for Manufacturing, Agribusiness and Services in the Asia-Pacific at the International Finance Corp. (IFC), said that having been given freer rein, private companies and foreign investors in healthcare are optimistic about the prospects. The IFC injected about $300 million in the sector in the recent past.

As a sign of the increasing demand for high-quality medical services, more private hospitals have opened in China. By the end of September 2014, there were 11,963 private hospitals, 11 percent more than in the same period of the previous year, according to official statistics.

In 2014, U.S.-based Warburg Pincus LLC invested $100 million in Beijing-based AmCare Women's & Children's Hospital to help its expansion. By May 2013, AmCare had assisted in more than 10,000 births and its total revenue soared 50 percent to 300 million yuan ($49 million). Today AmCare occupies about half of the high-end healthcare market for women and children in Beijing, which is dominated by private hospitals.

Bottlenecks 

With problems such as shortages of beds and doctors and overcrowding plaguing China's medical system, private capital has become important for healthcare system reform. This year, non-public medical institutions are supposed to provide 20 percent of all hospital beds and health services, according to the Plan on Deepening the Reform of Medical and Health System in the 12th Five-Year Plan Period (2011-15) released by the State Council, China's cabinet. Local governments are also trying to woo foreign investment.

But although investors are ready, there is a shortage of well-trained medical workers. In 2012, China had 14.6 physicians per 10,000 people compared with 38.5 in Australia, 24.2 in the United States and 17.6 in Brazil, according to the World Health Organization.

"Lack of high-caliber physicians will always be a key constraint in private hospital development," said Zhao Chun, Executive Vice President of Chinese Hospital Association's Private Hospital Management Branch.

"We're short of medical professionals as we expand," said Hu Lan, CEO of AmCare. "We hope to attract more."

Yu Ying, a former ER physician at the Peking Union Medical College Hospital, set up a clinic in partnership with AmCare. For it, the incentive was to establish a model of service in line with its concept of "happiness and respect [to treat and to cure]."

"Doctors at private clinics are not paid the highest average salary [in the sector], but each of them wants to devise different treatment modes and learn different management systems that promote greater efficiency," Yu said. "This is the best time for private healthcare with more private capital coming in and policies being relaxed."

China needs to expand the country's basic medical insurance program to cover more procedures and at the same time, to ensure this spending can be applied toward procedures completed within a privately owned hospital, said Benjamin Shobert, Managing Director of Rubicon Strategy Group, a consulting firm specializing in market and project management work in healthcare. He added that this sort of flexibility in payment would send an important signal to the private sector and investors that China is serious about setting in motion a viable for-profit hospital sector and is willing to reimburse private operators.

Wang Hong, Chairwoman of the private Beijing Huilan Hospital, said that the government needs to provide a wider range of measures to regulate investment in the healthcare sector and ensure its healthy development.

"As the market opens up, many investors don't have the right concept. They just want quick profits," she said. "But in the health sector, that's simply not the case."

Copyedited by Sudeshna Sarkar

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