Hu Bo:Cheer for the Check-up

For 10 years, Ciming Checkup developed from a tiny physical examination center in Panjia Garden, Beijing to a large group with 40 regular stores and 60 chain stores in 19 cities. As one of the largest professional physical examination institutions in China, Ciming Checkup received about 1.6 million customers every year, with which it earned the title as “the largest check-up center in Asia having the largest number of customers in the world”.

In March, the China Securities Regulatory Commission published the Declaration Draft of Prospectus of IPO from Ciming Checkup (hereafter Prospectus). According to the Prospectus, Ciming Checkup plans to issue 40 million shares to raise the capital of 175 million yuan for the construction of the Olympic-Asia Physical Examination Center. The company might go public in the board for small- and middle-sized enterprises of the Shenzhen Stock Exchanges. Citing its board chairman Hu Bo, the check-up business of Ciming Checkup could only fledge and fly up through capital operation.

The journalist of China Business Focus had an interview with Hu Bo, hoping to find the development path of China’s physical examination industry through his story.

Start the Business with His Wife

Compared with other entrepreneurs, Hu Bo is more like a doctor. He prefers being called “Dr. Hu” instead of“Mr. Hu” or “boss”.

Actually, he is a real doctor. Born in a family closely related with medical skills, young Hu Bo was greatly influenced by his parents, who both graduated from famous medical universities in China. When he grew up, he became a doctor serving in the army not long before his marriage. His wife Han Xiaohong graduated from the Medical School of Beijing University with the master degree and went to Heidelberg University for the PhD degree in 1999. Hu Bo went to Germany with his wife too, and during that period the couple found a great business opportunity from the vast need of healthcare services.

As Hu Bo said, in Germany, many people enjoyed good healthcare services, which is among the legal rights of citizens. But in China, though its economic level improved step by step after two decades of reform and opening up, the actual healthcare services for ordinary people were under-developed. According to the foreign standard, the demand for healthcare services is great when the GDP per capita reaches a certain level. Therefore he believed that such an industry owned a great outlook. After a thorough and careful investigation, the couple decided to throw their first investment into the healthcare market. In 2001, Hu Bo and his wife returned to China. One year later, they started their business. “At that time, we felt that the ordinary people particularly needed healthcare services. We do not think too much of the business pattern. We only found our opportunity during the process,” said Hu Bo. In 2002, the couple rented a store covering 1,500 square meters in Panjia Garden, Beijing for their own business. The initial investment amounted to hundreds of thousand yuan and the business was with biomedical instead of physical examination.

“I was 30 when I started my own business. For me, it was a new start of my life. But everything was difficult at the beginning. Later, we started to provide check-up services based on our original business. The price was not high and the result was unexpectedly good,” Hu Bo said. According to him, the real turning point emerged in 2003 when the SARS was haunting the whole country. With the fear of cross infection, many people did not want to go to hospitals for physical examinations. They all went to Ciming Checkup, which great boosted the development of Hu Bo’s company.

Hu Bo was quite surprised to see this. Why was the check-up service so popular? While considering this question, he made a quick decision to move his business center to the physical examination, which then skyrocketed at an amazing pace.

Hu Bo shared a story with us which enlivened his career life. “At the end of 2003, our third branch in Beijing was attacked by a fire accident, which nearly burned out this branch with millions of yuan of investment. The loss was great, but someone joked that Ciming Checkup could be heated up by the fire.” Interestingly, Ciming Checkup’s business did have a stable growth from that accident. According to Hu Bo’s plan, Ciming Checkup would grow and expand to the whole country with Beijing as the center.

Encounter Cut-throat Competition

When speaking of the cut-throat competition in the check-up industry of China, Hu Bo never hid his concerns. He admitted that Ciming Checkup was followed by its peers when it was born. The cut-throat competition with low price troubled him very much. At first, Ciming Checkup had to lower its price to seek the balance point in the market.

As he said, the physical examination institutions emerged out like bamboos after the rain in Beijing from 2005. The participants initiated the war of price, with which they greatly improved their size, putting the industry into a chaotic situation. Some participants even launched free check-up items and used some immoral measures, like exaggerating the bad results of most indices of physical examination to ask their customers to accept further“healthcare services” so that they could earn more money.

It is known that the cost of lowprice check-up service is extremely low and the saved cost usually comes from the medical tools. For example, some biochemical detectors used in some physical examination institutions are second-hand devices which could cause great errors in the results.

“In that year, there were check-up services that only charge one yuan for each item. An ordinary people could have a thorough examination with less than 100 yuan, much lower than the average cost of this industry. The ordinary people prefer the cheap services but actually they are damaged by these unqualified services,”Hu Bo explained. Ciming Checkup never provides check-up services with the price lower than the cost, because this is an immoral measure which can disorder the whole industry.

It is known that China has not issued the relevant standards for the physical examination industry, which should be mainly blamed for the chaotic cutthroat competition in that field. Hu Bo calls for the government’s permission and encouragement of social capital into the physical examination industry. The service quality should be the main weapon to win the competition and the behavior of taking customers with low price should be stopped.

Try Capital Cooperation to Boost the Business

According to Hu Bo, 80% of the customers of Ciming Checkup are whitecollars from companies. They belong to the group of middle-class consumers. The fees of Ciming Checkup’s services are based on the sum of charges of ordinary hospitals’ checkup items in addition to a certain discount. In that way its charges were lower than ones in the ordinary hospitals. That’s why Ciming Checkup is favored by such a large number of people. With a growing business, Hu Bo also wants to turn to capital operation. In 2004, Ciming Checkup received the first venture capital from Dinghui Investment.

“After the second round of fundraising, we began the campaign of mergers and acquisitions in which we acquired 10 check-up service providers in Guangzhou, Shenzhen, Wuhan and so on. From the mergers and acquisitions we gradually found a complete new healthcare service pattern,” Hu Bo said. In western countries the private physician is very common. However, in China, the number of physicians is too small to satisfy the demand of such a large population. A kind of professional institution is needed to provide systematical and comprehensive physical examination services for the masses. Therefore there are unlimited opportunities in this field.

After the merges and acquisitions, Ciming Checkup saw the improvement in its business volume as it could provide check-up services for 5,000 people every day or 1.6 million people every year. Such a large number of customers is unparalleled in the world. “Even foreigners are shocked by this number. This is what we found without purpose during our exploration and were recognized by our international counterparts.” As he said, the famous hospitals like Zhongshan Hospital and Huashan Hospital attracted customers with some famous physicians, but Ciming Checkup relies on its pattern instead of some famous figures.

For Hu Bo, the capital operation is a kind of art. “The capital operation aims at boosting the project. Right now our physical examination business is like a fish swimming in sky. It will fly into the sky after going public,” he said.

Then how to turn a fish into a bird? The method Ho Bo gives out is the extension of check-up services.

In other words, what would customers do when they get the checkup results? A car needs comprehensive maintenance and repair after being sold. For those who are willing and able to afford the high-end following services, the extension means solutions to their health problems and measures of improving their health status.

“Recently, the Hongqiao International Medical Garden was founded with the support of the Minister of Health Chen Zhu. We are going to actively explore and cooperate with it to found the East China Headquarters. Meanwhile, we invest hundreds of million yuan to build an Olympic-Asia Healthcare and Medical Club in Beijing to march into the highend market,” Hu Bo said. According to his plan, the high-end health management market will be the core of Ciming Checkup’s plan in the next ten years.“15% of our customers are suffering chronicles. That means about 150 thousand people out of the 1.6 million customers of us may have diabetes or other chronic diseases. These people provide a great business opportunity.

Go Public without Blind Expansion

Now Ciming Checkup is preparing for going public. When the test of going public is waiting ahead, some people doubt that its core competitive power is weak and some people think low of its outlook.

“Going public is for improvement and upgrade. Actually, we have a 100% annual growth rate from 2003 to now,”Hu Bo said. His company began to prepare for going public from last year. He said confidently that going public is not for private benefits but for deputizing the support of government to the healthcare industry. The successful case of Ciming Checkup, if going true, could prove that the healthcare industry in China can be favored and trusted by capital and the Chinese people have an improving sense of keeping their own health.

But going public does not mean blind expansion. Though Ciming Checkup has received many invitations of cooperation from Chinese and foreign peers, but Hu Bo said that he would not take measures of blind expansion. In the future Ciming Checkup will still specialize in the domestic physical examination industry for continuous and stable industry.

“The check-up service is our core business forever,” said Hu Bo. “In the future, we might extend our arms to healthcare and aged care through cooperation. We plan to fledge and grow up our business through capital operation to let this industry fly up. We do not want to stay in the low-level business forever because we know that no progress means recession.”