When Nashville-based China Healthcare Corp. (CHC) breaks ground in April on its first hospital, a $120 million facility in the Chinese city of Cixi, the project will mark the first public-private healthcare partnership of its kind. While CHC will own a 70 percent stake, the Cixi municipal government will own 30 percent.

 

CHC’s chief executive officer, Charles A. “Chuck” Elcan, said the company’s foray into the burgeoning Chinese market is the result of healthcare reform announced last year by the country’s federal government, which has pledged $124 billion to remake China’s medical delivery system. The new CHC hospital will replace an aging 150-bed, government-owned hospital in Cixi, about 100 miles south of Shanghai in China’s Zhejiang Province. Pronounced “Tsuh-Shee,” Cixi boasts a population of nearly 2 million.

 

“This is my own theory, but the Chinese have somewhat paralleled what the U.S. did as far as infrastructure goes,” Elcan surmised. “After World War II, the U.S. put a lot of money in infrastructure – roads, power plants, dams, etc. – and then turned and focused on the service industry, which was healthcare, primarily Medicare in the 1960s. If you look at what the Chinese have done in the last 30 years, it’s been very similar. They have put a lot of money into infrastructure, and now they’re looking into the service industry.”

 

Founded in April 2008, CHC is the brainchild of Elkin, Thomas F. Frist Jr., MD, and Chinese business partner Henry Zhou, who had previously worked with Elkin in a real estate investment trust. Zhou is shepherding the project on the ground in China. Frist, Elkin’s father-in-law, is a founder of HCA, yet there’s no corporate connection between HCA and CHC, Elkin said. Elkin’s healthcare background includes more than four years, from October 2003 to April 2008, as executive vice president for Medical Office Properties for Health Care Property Investors. Prior to that, he was CEO and president of MedCap Properties in Nashville. From 1992 to 1998, Elcan was a founder and investor in Behavioral Healthcare Corp., now Ardent Health Services.

 

Elcan said CHC will bring “American healthcare management and processes expertise” to the Chinese delivery system, which is predominately a government-pay structure. Yet, China’s emerging middle class has introduced more private-pay patients to the mix. “Part of the model for the hospital is that we will service the government-pay, as well as the private-pay, and there is potential for private-pay in that area,” Elcan said. “That area is a wealthy area of China.”

 

A full acute-care hospital, the doors are expected to open in the third quarter of 2011 with about 400 beds. “It will be designed to expand to 600 beds fairly easily, offering the full range of services from cardiology to oncology to orthopedics,” Elcan said.

 

Staff from the existing hospital will move over to the new hospital, and CHC will be recruiting additional physicians, nurses and other personnel. “We’ll bring over Western-trained doctors, as well, to help train in specialty-type services,” he said, adding that Chinese doctors already are in the United States for specialty training. “We are in the process of trying to recruit a CEO for the hospital, and we’re looking worldwide for that,” Elcan said.

 

Gresham, Smith and Partners (GS&P), headquartered in Nashville, is designing the Cixi hospital, and it’s not the company’s first healthcare venture in China. Previous projects have included the Shanghai International Medical City for Medical Tourism, Shenzhen Eye Hospital, Dalian-Gilson Hospital and PLA 301 Hospital in Beijing. GS&P is working in concert with the Shanghai Institute for Architecture Design and Research. Chinese architects, more familiar with the country’s building codes, have been traveling to Nashville to join forces with GS&P designers. “At some point, we will transfer focus of the design work to their office in China,” Bill McCowan, GS&P’s project manager, said.

 

Because the Chinese healthcare model differs from America’s, the Cixi hospital’s design is different, as well. One section of the hospital will be a clinic with its own entrance, because patients generally go directly to a hospital when they’re sick rather than to a physician’s office. “The doors open at a certain time of day, and the humanity marches in,” McCowan explained. “You register, and you pay in advance. The volume of people is much greater than you would see here.” Adjacent to the clinic will be three hospital floors devoted to surgery, diagnostic services such as imaging and other treatment facilities. The hospital will feature a 10-story patient tower. “We’re trying to create a situation that doesn’t create the hubbub that you normally see in a Chinese hospital — clearly defined paths of travel for different kinds of patients and visitors to avoid the crowded conditions,” McCowan said.

 

When it comes to patient rooms, flexibility is key. In China, it’s common to find three beds to a room, and families actively participate in the healthcare process. Patients’ length of stay is typically longer than in American hospitals. Yet, as more private-pay patients seek treatment, demand is rising for private rooms and even so-called VIP suites with a bedroom and accommodations for family. GS&P is incorporating a module design for the patient floors to offer the necessary flexibility.

 

McCowan said now’s the time to be cultivating Chinese business ties. “When you go to China, you see places like Shanghai, where there’s a building boom going on. Major cultural change is under way, and we have the opportunity to be a part of it,” he said.

 

James Bearden, GS&P’s CEO, echoed those sentiments. He said China offers his firm “a whole gamut of opportunities,” and not just in healthcare, but in arenas such as aviation, transportation and industrial development.

 

“It’s hang onto your hat,” Bearden said.

 

That’s certainly the idea at CHC, which is “looking at other acquisition opportunities,” Elcan acknowledged.