Interview Synopsis

Bang Er Orthopedic – hospital operations & market competencies

  • Multi Asset
  • Healthcare
  • Greater China

It’s a mixed picture for China-based Bang Er Orthopedic, with some of its departments and hospitals making profits but others suffering losses. Third Bridge Forum spoke to a former director at Bang Er Orthopedic Hospital Group Co Ltd to discuss the private organisation’s challenges and opportunities.

Investors see China’s orthopaedic market as a “blue ocean”

The Interview started with an overview of the orthopaedic market in Zhejiang, which is dominated by public hospitals. “Private hospitals are no match for public ones in terms of the size and technology, though they are at an advantage in terms of the number,” the expert said. We heard that investors are bullish about the orthopaedic market, seeing it as a blue ocean. “Nevertheless, the barrier to entry into this market is quite high.”

Bang Er Orthopedic has operated in the market for 10 years but half of its hospitals suffer losses of RMB 1-10m each year. However, some of its hospitals can make a profit of RMB 10-20m annually. Despite the COVID-19 pandemic, the company’s revenue increased by 20% in 2020, according to the Interview. “However, its profit wasn’t as high as that of 2019 because of a sharp increase in costs.” 

The Interview also assessed the competitive landscape in the private orthopaedic market, with the specialist noting that Bang Er Orthopedic is “among the top private orthopaedic brands in Zhejiang and even in China”. 

When asked about Bang Er Orthopedic’s expansion plans, they said the company is unlikely to “expand vigorously” in the near future — at most adding one or two hospitals — because it is preparing to go public. “In addition, of its hospitals in Zhejiang, only those in Yuhang, Haiyan, Jiangshan under Quzhou are profitable currently.” The expert added that the company will be cautious about acquiring hospitals, as most of its previous purchases are still losing money.

The Interview also looked at operational performance, highlighting the best and worst branches. In light of the aforementioned challenges, the company is adjusting its revenue and treatment structure, and shifting its focus from surgery to treatment. “The profit from a tiring surgical operation may be RMB 2,000-3,000, but physical therapy may bring a higher net profit because the number of patients receiving such therapy is big.”

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The information used in compiling this document has been obtained by Third Bridge from experts participating in Forum Interviews. Third Bridge does not warrant the accuracy of the information and has not independently verified it. It should not be regarded as a trade recommendation or form the basis of any investment decision.

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