Neo-Health Group (https://www.neohealth.com.hk/) is Hong Kong’s leading holistic medical centre. It is also a leader in research, development and treatment of sexually transmitted diseases (STDs).

Script of Interview

Interviewee                                                                 Dr. Francois Fong (FF)

Position                                                                        Managing Director

Company name                                                          Neo-Health Group

Company website URL                                             http://www.neohealth.com.hk

Interviewer                                                                 John D. Evans, CFA (JE)

Interview conducted on                                            27th  July 2020

About Dr Francois Fong

JE: Start off by giving a brief personal overview of yourself (where you live, what you studied, etc.)

FF: I am Dr. Francois FONG, I was trained in Australia but am now living in Hong Kong. I did my undergraduate medical studies in Monash University in Melbourne. I also did a degree in Health Informatics and, also, bio-medical science.

JE: You seem to have a hybrid background; you have a clinical, medical background but you also have a business background as well, the informatics. Is that a common thing for people who are doctors or a little bit unusual?

FF: It is probably unusual in Asia, but in Australia the bio – informatics background the program is actually under the medical faculty. They specialize in health informatics, so information systems.

JE: So, do you consider yourself a doctor first and a businessperson second, or vice versa or equally both?

FF: I am still a primary doctor and second a businessman.

JE: But you have those two different aspects to you, which reminds me of my days in academia where people would be both a researcher and a more general teacher. Maybe there is an analogy there. What about Neo-Health Group, your business? When did it start, it is located in Hong Kong, give us some background on your company.

FF: So, in the year 2000, I returned to Hong Kong coming back from Australia and started Neo-Health Group in 2008. Initially, it was a medical Center, but we developed into other areas like health informatics development of information systems. We have a bio-tech company researching on some bio re-agents and also developed our clinical laboratory services. Right now we are also starting a wholesale, pharmaceutical business.

JE: On the clinical side, when you started, were you a general GP practice or have you had a specialization in sexual health from the very start?

FF: At the very beginning, after my return to Hong Kong, I joined a general practice, multi-disciplinary service. When I started our own business, we had to find a way to differentiate ourselves in the market. That is why we chose sexual health, which at that time was still a very much untouched area.

JE: Is that something you would have studied at university in Australia or was that something very new for you?

FF: I studied sexual health in the University of Sydney, a Master in Health Science, specializing in sexual health.

JE: What is it like starting a new business in Hong Kong in 2008, finding people, finding ofices, was that a very challenging thing to do? Start-ups anywhere are very difficult.

FF: At the beginning we had to consider a number of things. The most important thing is our position. Whether we want to do a local market practice or do a more premium market. Considering our own specialties and since we were trained in Australia, that is why we focused more on the expat market initially.

JE: Your business has always been of private healthcare, you or your staff don’t also work in the public hospitals, is that correct?

FF: We focus mainly on private medicine, but we also have some involvement with the public hospitals and the universities more for developing collaborations and finding other ways to enhance our business.

JE: So, potential partnerships or alliances with the public health system but Neo-Health is a private provider of health care.

About Neo-Health Group

JE: We have already moved into the second paragraph, which is talking about Neo-Health. Give us an update on what Neo-Health is today: location, number of clinics, staff, specialization, etc. a current balance sheet.

FF: We are now located in Hong Kong. We have a branch in Malaysia. We have a rep ofice in Mainland China. We are also planning to open a center in Taiwan but with the COVID situation we have had to hold back on overseas development. So, we are focusing now in Hong Kong where we have two locations.

JE: As a medical company, has there been any business upside to you with COVID19? We know there is a lot of business disruption, but are there any new businesses that came out of that for Neo-Health Group?

FF: There are opportunities but mainly in doing COVID tests. We are having a discussion with a partner to potentially helping the local district councils to run some tests.

JE: Would this be in your office as I suspect there would be a real risk of infection when you get into testing with people walking in off the street?

FF: Exactly, and that is one thing we have been reluctant to get into.

JE: I guess COVID19 is much more easily transmitted than any sexual diseases?

FF: Absolutely.                                                                                                                                                           

JE: You have mentioned other ofices, but we have also had lots of news coming out about the Greater Bay Area (GBA). Is that going to change your expansion focus or is that just something in addition to consider?

FF: Certainly, the GBA and all of China is a very big market. And a very different market from the rest of the world, in some ways. We chose Taiwan, Malaysia and potentially Thailand because we know the health system there and it is more familiar to us.

JE: Does Australia have the one-on-one GP practice, as I know it from the UK? If that is true, is that also the case for Taiwan, Malaysia and Thailand? Is that the common factor there?

FF: No, each individual country has its own system. So, for example, in Taiwan, there is very little private market and 90% of health provision are under control by the government. But we do see there is a market there where we can provide high value and more personalized service to the individual.

JE: The three territories that you mentioned, Taiwan, Thailand and Malaysia, are they welcoming private medical companies to come in or is private healthcare restricted?

FF: No, there are no restrictions. For example, Taiwan is open to private medical providers entering and providing services that do not rely on the national heath system. The issue is the mentality, how people perceive things. If they feel the current service is adequate, then they may not be prepared to pay for private services.

JE: So, in a market like Taiwan, where is the niche for a private provider to enter the market? Would it be specialization in sexual health as opposed to providing GP services?

FF: The things about sexual health is that people are more concerned about their privacy and their health information being shared in the public system. So, there is

JE: Do they allow privacy of health records in the private sector in Taiwan, Malaysia and Thailand?

FF: Yes.

JE: OK, so there is an opportunity to provide something unique; it gives the customer privacy that they want.

About the Healthcare Industry

JE: Compare and contrast the public and private healthcare systems in Hong Kong and Mainland China

FF: I think the main difference is that in Hong Kong there is a perception that private doctors, particularly those in premium locations, are more knowledgeable and skillful and better doctors compared to the public system where it is free.  However, in the Mainland, many patients are still looking to go to the ‘AAA’ hospitals, which they see as being more trustworthy. There have been many scandals in the private market in China and services are very variable.

JE: I assume that operating as a private healthcare provider in China you have to share all data with government sources and so there is no anonymity of sexual health records for the patient?

FF: In a way yes. There are more restrictions in China.

JE: What is the strategy to enter into China given the lack of data privacy in the area of sexual health? Would you look to offer a more mainstream service?

FF: I think with sexual medicine, involving patients with HIV, it has become a very sensitive public health issue in China. There has to be a lot of government support to actually implement it in the private sector. Also, the regulatory process is much slower in China and it takes much longer to open a medical facility there.

JE: COVID19 makes planning difficulty but what is your next focus, China, Malaysia, Taiwan?

FF: With the current border closures it places a lot of limitations on what we can do.    Not being able to visit premises, sign documents, etc., we have to hold back on our expansion.

JE: Are borders also closed with Taiwan, Malaysia and Thailand (from Hong Kong)?

FF: There is permission to travel, however, in Taiwan, there is 5 days quarantine upon arrival and two weeks quarantine on returning to Hong Kong.

JE: So, legally allowed to travel but not practical so things are on hold. What do you do in the interim as there must be a concern the border closing will go on for a long time? Does this mean you focus on Hong Kong and new initiatives there?

FF: There are opportunities here as we consolidate our client base. Rents are becoming cheaper and so we are looking at expanding our facilities here at the moment.

JE: What is happening in Hong Kong now with the new security law? Is there any consensus about what the business environment will be in one year’s time? Are a lot of expats going to leave? What is the current thinking?

FF: Given our experience, and a lot of our clients are expats, a lot are returning to their home countries. It is dificult to assess whether it is being driven by COVID19 or the national security law. But many find it more dificult to run a business in Hong Kong or China.

JE: Is that expats from all countries or more just Americans?

FF: Americans and Europeans.

JE: As your clientele had been focused on the expat what is the replacement patient target market?

JE: I don’t know how the new security law will impact the medical industry, does it have any impact on medical regulation in general in Hong Kong?                                                                                                                                                                         

FF: So far, no, Hong Kong is still running its own medical system. There may be some changes about where data may be stored about patients from China.

JE: At the moment, is there still anonymity of health records in Hong Kong for people coming from the Mainland?

FF: Yes.

JE: How do you see the opportunities and challenges in the private healthcare sector in Mainland China? What do you think is the best winning strategy for a company like yours to expand in the Mainland?

FF: It is important to build a sense of trust with a patient as trust is important in the medical field. So the doctor – patient relationship we have in the west is something that needs to filter into China.

JE: That sounds like it might be a very long term process. It takes a long time to build up trust and if there have been scandals with other private healthcare providers then this may take a very long time to change.

FF: It will take time. But, at first, we will focus on patients who are educated overseas who have returned to China or local expats as a starting point. That is the entry points and then can be expanded to family and friends over time.

JE: We looked at a chart about new private healthcare facilities being opened in Shanghai and China. There was a big decline in Shanghai after 2015 and in China after 2017. How do we interpret that? Are foreign healthcare providers seeing China as less attractive or is there some other explanation for that decline of new entrants?

FF: My understanding is a lot of people hyped opening healthcare companies. In those years, we came across a lot of agencies in China who would refer patients from China to Hong Kong. In China, you don’t need to be a doctor to open a health related company. But there is a shortage of healthcare professionals as most are still in the public system. A few years ago, as an example, there was estimated to be a shortage of 300,000 pediatricians.  So, it was easy to open a facility but recruiting the right people was difficult.

JE: On the aspect of hiring professionals, can a good, qualified doctor, fully move into the private sector or must they keep one foot in the public sector.

FF: Recently there has been a change in regulations allowing doctors to work in both the public and private sector. However, it has proven to be difficult logistically. Firstly many of these experienced doctors don’t have experience in running their own practice. Also, when the public hospital learns a doctor wants to leave it often puts various restrictions on them. They will also lose some of their public benefits if they leave the government system.

JE: So, it sounds like attracting qualified staff is a big challenge in Mainland China.

FF: Yes.

JE: Now that creates a bit of a conflict as so many of the private facilities being opened have been really big hospitals, big facilities, not small ones. So, some of the large private hospitals we see are virtually empty inside. Is that due to their inability to recruit qualified staff?

FF: Well, it comes in both ways, developing the trust of patients and, quite often, these private hospitals will be seen as too expensive and only affordable by a very small number of wealthy persons.

JE: Has there been a foreign private facility that you believe has been commercially very successful in China?

FF: One that is believed to be successful is United Family Healthcare. Many others are probably not breaking even.

JE: What is the business model of United Family and why has it worked?

FF: They are very focused on the more wealthy business people.

JE: It seems to me there may a conflict here. If you are targeting the wealthy persons that means being in the larger cities, need to recruit qualified staff and thus competing against the larger/better public hospitals. But, it is the bigger cities where most of the competition is.

FF: Yes, I think that is one of the problems. It is expensive to build a hospital, dificult to recruit qualified staff but, also, if you recruit local staff then patients will ask why should they pay the much higher fees of the private sector?

JE: We have heard lots of news stories about how the number of expats in China is declining. What is China’s attitude to foreign doctors coming and working in China? Can you bring in foreign staff to address the labour  shortage?

FF: We are frequently getting requests from Mainland entities to create collaborations between Mainland and Hong Kong doctors. Particularly so in the GBA area. So this collaboration will help address the training need. For example, Hong Kong University already has a medical training centre in Shenzhen. But changing attitudes in Mainland China takes time.

JE: It sounds like the first step of Neo-Health into China has to be the GBA.

FF: For geographic convenience that is the better strategy. Also, a lot of older Hong Kong people when they retire will likely move to the GBA. I think a lot of the elderly will move to the GBA and not stay in Hong Kong.

JE: Is that because of the cost-of-living?

FF: That is one of the reasons. Also, many (Cantonese) have their roots in the GBA. A lot moved to Hong Kong in the 40’s & 50’s and still have relatives in the GBA.

JE: What are some of the other activities NHG is involved in? I know you have a R&D centre at Science Park.

FF: In Science Park we are developing a male HPV testing kit. Right now, there is no recognized test for HPV is males, most related research is in female testing and detection. It first involves the sample collection process, which are necessary to do the tests. Second, it involves developing a male detection reagent that maximises the accuracy in male testing.

JE: Hong Kong is still a different regulatory environment for certification than the Mainland? Or are we seeing convergence between Hong Kong and China?

FF: As long as a reagent is CE approved it can be used in Hong Kong. But, for China, it needs the different CFDA approval and the CFDA approval is a much longer process. These is discussion about allowing what is approved in Hong Kong to be used in the GBA. So, the border becomes more blurred.

JE: How does that work within a regulatory framework as there is no border between Shenzhen and the rest of China?

FF: There are still some logistical issues that need to be discussed.

JE: Male HPV testing appears to have huge potential in China. Is that a potential business to be opened in China separate from the strategy to open GP clinics?

FF: The GP clinics strategy is limited by the number of doctors available. However, with diagnostic kits, in China the consumption of female diagnostic kits has been over 60 million. So testing can be a much bigger process. The two businesses are somewhat separable. Having clinics gives you a location for doing the testing.  However, they can also be sold to other clinics and hospitals for testing.

JE: Many VC funds are biased to investments that can be scaled up in a large way and quickly. This does not seem to be the case with opening clinics but does seem to be the case with the diagnostic testing, at least when you get the relevant approvals.

FF: Yes, that is right.

JE: Are you close to getting the regulatory approvals for the Male HPV testing?

FF: We are close to it but need to get more clinical data. We also want to get the CE approval (for Hong Kong) before starting CFDA approval. We hope to get the CE approval in twelve months. We don’t have to wait for CE approval before starting the CFDA application.

JE: Are there other research initiatives going on at NHG?

FF: We are also working with the government on early detection of female cervical cancer, which often comes from HPV. It not only potentially increases early-stage detection but, also, the embarrassment of the pap smear means many women don’t do screening at all. This is even a greater risk (of not testing) in culturally conservative countries. For example, this is an issue in Malaysia and Indonesia.

JE: Is it common for a medical practice to be fundamental research, as you are doing?

FF: It is not common for Hong Kong doctors after they have gone into private practice to engage in research. But, when I set-up NHG, we wanted to be involved in three areas: 1. Clinical services, 2. Education and 3. Research. That is why each year we have publications with the University of Hong Kong or the Chinese University of Hong Kong.

JE: How does education fit into the picture?

FF: We provide basic training for aspiring doctors in both undergraduate and graduate degrees. Our UG students are from Hong Kong University and we train the post grads in Shenzhen in Family Medicine and Sexual Health. We have also had applications from the international medical program at Duan University. I am also Honorary Professor at both universities in Hong Kong.

JE: Any other points that you would like to add at this final point before we talk about a specific case study?

FF: My last word would be: don’t do things that others are doing. You need to find a special way, niche market either in a new way of service or service area or service delivery. I think they need to have some new ideas introduced into China.

JE: What will be your unique point when entering China?

FF: To develop the brand is important. In healthcare that comes down to personal experience in the clinic. They feel like there is a closeness and building trust with the doctor. In China, if a person gets good service they will promote you through their circle of friends.

Case Study

JE: Let us look at this case study in a forward looking way. We have not yet talked about technology in the healthcare sector and I know that is important these days. So, as a possible case study, how do you see technology being used at NHG, what do you see as changing in your existing or future clinics from a technology perspective?

FF: Telemedicine, personalized telemedicine, diagnostic devices, personalized monitoring, all are important elements. Integrating all of it into a healthcare system for the individual that is what we are looking into.

JE: I am guessing that whether it is moving forward with the Male HPV test kit or the introduction of technology as discussed above, are you looking for partner with companies, raise external capital? How will you fund those projects that may have a large capital cost?

FF: We would like to have more people involved and raise more funds. But we want to have something more concrete before looking for investors.

JE: I want to close off by asking you to look into your crystal ball as a medical doctor. How long are we going to have to deal with these issues (transportation, quarantine, etc.) before things return largely back to normal?

FF: I would say another twelve months or more. It will depend a lot on what level of infection governments are targeting.

End.