Summary of Key Points
The medical market in 2025 is expected to show a trend of "contraction and differentiation": While the number of outpatient visits is increasing, this growth is solely driven by tertiary hospitals and primary care facilities. The number of inpatients, the total number of hospitals, and the number of beds are all on the decline, with particularly sharp reductions in the number of hospitals at the primary level, primary care facilities, and private hospitals. Tertiary hospitals are the only winners, with a continuous increase in their share of both outpatient and inpatient services. The implementation of DRG/DIP systems has led to decreased efficiency in hospitals at the primary and secondary levels (with longer average lengths of stay), increasing their risk of loss, and the market is likely to become more concentrated in larger medical institutions.
I. Outpatient Services: Tertiary Hospitals and Primary Care Facilities Drive Growth, While Primary and Secondary Hospitals Are Left in the Middle
Outpatient services are the only segment of the medical market that is still growing, but the distribution of growth is uneven:
- Who is growing? Tertiary hospitals and primary care facilities. Primary care facilities account for 53% of outpatient visits (for minor illnesses), while the number of outpatient visits at tertiary hospitals has doubled over the past decade (patients trust larger hospitals for more complex treatments).
- Who is stagnant? Primary and secondary hospitals have had zero growth in outpatient visits for two consecutive years. This is due to a situation where minor illnesses are taken care of by primary care facilities, and more serious illnesses are diverted to tertiary hospitals, leaving these middle-level hospitals with few patients.
- Who is spending the most? Tertiary hospitals. Although there are more patients at primary care facilities, the cost per outpatient visit is lower (1/2.5 of that at tertiary hospitals and 1/4.8 at township health centers), resulting in tertiary hospitals having higher total outpatient expenditures.
II. Inpatient Services: Tertiary Hospitals Are the Only Ones Growing, While the Number of Inpatients at Smaller Hospitals Is Dropping Dramatically
The inpatient market has a "pyramid-shaped" structure, with tertiary hospitals gaining more and more dominance:
- Overall decline: The number of inpatients is expected to decrease by 12.81 million (a 4.11% decrease), the largest decline since 2020.
- Hard-hit sectors: Hospitals at the primary level (-20.42%), primary care facilities (-11.76%), and private hospitals (-11.61%); the number of inpatients at secondary hospitals is even lower than in 2015.
- The only winner: Tertiary hospitals, whose share of inpatients is increasing by 2.12% to 55% (rising from 49% in two years). This trend suggests that their share could exceed 60% by 2030. Why? Tertiary hospitals are more efficient (with an average length of stay of 7.7 days and a bed occupancy rate of 88.3%), making them more attractive to patients.
III. For the First Time, the Number of Hospitals and Beds Is Declining, with Private Capital Withdrawal
The medical market is shifting from expansion to contraction:
- Decrease in the total number of hospitals: There will be 551 fewer hospitals in 2025, with 475 of those being private hospitals (accounting for 86%), indicating that the era of capital investment in hospitals is coming to an end.
- Reduction in the number of beds: The total number of beds will decrease by 259,000, with reductions in hospitals at the primary level (-10%), secondary level (-3.22%), and primary care facilities; the number of beds at private hospitals will decrease by 114,000 (2.7 times that of public hospitals).
- Tertiary hospitals are the exception: Although their proportion of hospitals is only 11%, they will account for 40% of the total number of beds (up from 33% in 2020), potentially increasing to 50% in the future, enhancing their dominance.
IV. Efficiency Has Not Improved Under DRG/DIP Systems, and Smaller Hospitals Are Losing More Money
DRG/DIP systems allocate funds based on the type of illness, but many hospitals have not adapted well:
- Primary and secondary hospitals are suffering: The average length of stay has increased (9.9 days at primary hospitals and 9.8 days at secondary hospitals), leading to higher costs and greater risks of loss.
- Tertiary hospitals are slightly better: Their average length of stay is shorter, and the decline in daily costs has slowed.
- Primary care facilities show mixed results: The efficiency of community health centers has improved (with a smaller decline in daily costs), but township health centers and secondary hospitals remain inefficient and may face closure or merger in the future.
V. Future Trends: Larger Hospitals Will Become Even Stronger, and Opportunities for Primary Care Facilities Will Disappear
The "Matthew effect" in the medical market will become more pronounced:
- Tertiary hospitals will continue to expand: Their share of the market will increase, making them the dominant force.
- Smaller institutions will exit the market faster: Primary and secondary hospitals, as well as private and primary care facilities, will either close or be merged with larger hospitals.
- Capital will shift: Investment in smaller hospitals is no longer profitable, so resources will concentrate in larger medical institutions, leaving primary care facilities with fewer opportunities to survive.
In summary, patients will either go to community health centers for minor illnesses or to larger hospitals for more serious ones. Smaller hospitals will face increasing difficulties, and their numbers will decrease. If they do not improve their efficiency, their situation will only get worse in the future.