Wang Shuling,Shi Ping

(School of Business Administration,Shenyang Pharmaceutical University,Shenyang 10016,China)

Abstract Objective To study the current status of independent clinical laboratory (ICL) in China to offer some suggestions for further development of the industry because independent clinical testing is gradually occupying an important position in the medical market with the change of medical service mode.Methods The PEST-SWOT matrix model was constructed to sort out the strength and weakness,opportunities and threats of ICL and medical institutions.Results and Conclusion ICLs should enhance their social recognition by improving testing technology and industry operating standards.At the same time,it is also necessary to enhance their position in the clinical diagnosis industry and promote diversified competition in the field of clinical diagnosis so as to better help the development of national grading diagnosis and precision medicine.From the perspectives of SO,ST,WO,and WT,the development strategies of ICL are proposed,including personalized clinical diagnosis services and the construction of a database,and the family doctor system with community+ICL services.The remote diagnostic services should be implemented to help national graded diagnosis and treatment,and different operation schemes should be made to conform to market development.Besides,the access standards for ICL must be strictly required.Then,differentiated operations of enterprises should be valued for establishing industry brands and social awareness.Lastly,enterprises must focus on talents construction and management.

Keywords:independent clinical laboratory; clinical diagnosis market; clinical diagnosis institutions; PESTSWOT matrix

With the progress of modern medicine,clinical diagnosis and treatment are increasingly dependent on the results of medical test.Therefore,there is an urgent need for more medical test items.At present,not all medical institutions have complete testing laboratories,some primary medical institutions have no testing capabilities.In order to meet the needs of social medical diagnosis and treatment,ICLs came into being as supplementary institutions for hospital clinical diagnosis services.Originated in the United States,independent clinical laboratory (ICL) is a clinical diagnosis service organization integrating disease detection,screening and prevention.Luo Yuchun[1],a scholar,believed that under the background of insufficient clinical diagnosis resources in hospitals,ICLs could be an important part of clinical and preventive medicine.Another scholar,Li Yan[2]also believed that ICLs could promote the diagnosis and treatment rate and meet the needs of patients for personalized testing services.While Gong Fangfang[3]believed that ICLs could effectively reduce medical costs.Although the ICL in China started late,its scale has increased year by year with the opening of clinical diagnosis market.In 2018,their revenue exceeded 23.8 billion yuan,and the number of laboratories had grown from 21 in 2001 to 1 459 by the end of 2018.In their process of rapid development,they also face such problems as the restrictions on the medical insurance system,imperfect supporting regulatory regulations,and low market recognition.Therefore,the difficulties and opportunities of the survival and development of China’s ICLs in the testing market were studied in this paper from the perspective of the clinical diagnosis industry.

1 Overview of the development of ICLs in China

1.1 Connotation of medical laboratory and ICL

A clinical diagnosis institution can conduct cytology,immunology,biochemistry,genetics,and other tests on materials taken from the human body to diagnose,prevent,treat human diseases,and evaluate human health with official reports.China’s clinical diagnosis institutions include medical institutions such as the laboratories,pathology departments and thirdparty testing institutions set up by the hospitals.ICL refers to a new type of medical service institution independent from the hospital,which mainly carries out clinical examination and pathological diagnosis.Besides,it is licensed by the health department and has independent legal personality[3].

ICLs originated in the United States in the 1950s as small medical laboratory technology service organizations.With the help of the rapid development of market economy and information technology,they gradually developed into an industry integrating multiple items such as medical clinical routine testing,disease screening,special disease detection with prediction and genetic testing[4].In 1994,China’s first ICL,the King-Med Diagnosis Center,was established,taking the first step in the development of China’s ICLs.

1.2 Classification of operation and service models of ICLs

(1) According to the service mode,ICLs can be divided into comprehensive laboratories and professional laboratories.Comprehensive ICLs can provide comprehensive outsourcing services for medical diagnosis,including clinical diagnostic information,health management,clinical trial,cold chain logistics,health inspection,judicial identification,health examination and other diversified services.Currently,most ICLs in China belong to this type.

(2) According to the operation mode,ICLs can be divided into chain type and graded type.Due to the fixed service radius and limited market capacity of a single ICL,the chain-type ICL solves the problem of service regionalization through cross-regional operation.Graded ICLs refer to the laboratories that are divided into second-level laboratories and firstlevel laboratories according to the regularity and timeliness of the project.Second-level laboratories are also generally called rapid response laboratories because they often undertake routine testing projects with high timeliness requirements.

1.3 Development scale of ICLs in China

The market of China’s ICLs has not yet become mature.Its market size in 2015 was 7.8 billion yuan,accounting for about 3.2% of the domestic clinical diagnosis market.In 2016 and 2017,China’s public hospital inspection revenues were 249.988 billion yuan and 278.514 billion yuan respectively,but ICL only accounted for about 4.2% and 5%.In 2018,the revenue of public hospital inspections was 313.679 billion yuan,of which the inspection revenue of tertiary hospitals accounted for 70.62%,more than half of all public hospitals’ inspection revenue.The secondary hospitals accounted for 28.54%,the primary hospitals accounted for 0.84%,and the ICLs accounted for approximately 7.6%.The details of public hospital inspection revenue from 2015 to 2018 are shown in Fig.1.

Although China’s ICLs started late as a whole,with the gradual opening of the medical laboratory market,ICLs have developed rapidly in recent years.Fig.2 shows more details.The number of ICLs had grown from 21 in 2001 to 1 459 by the end of 2018,gradually forming a “4+x” pattern.That is to say,the four large medical laboratories of King-Med Diagnostics,Dian Diagnostics,Adicon Clinical Laboratory and Da-an Gene occupy most of the market share of the industry,and other clinical laboratories occupy a small part of the market share.

Fig.1 Inspection income in public hospitals from 2015 to 2018

Fig.2 The number and growth rate of ICLs in China

2 PEST-SWOT analysis of the development of ICLs

PEST analysis is a management method for industry or enterprise to assess the macro environment,generally including political (P),economic (E),social(S) and technological (T) factors.The first letter of each factor makes PEST analysis.SWOT analysis method is often used in enterprise strategic planning,which mainly includes four aspects:strength,weakness,opportunity,and threat.It is also called SWOT analysis by extracting its first letter.The PESTSWOT matrix is obtained by combining the two methods,and then the external macro-environment and internal conditions faced by the enterprise are coordinated to derive the competitive strategies of SO,ST,WO and WT.PEST-SWOT matrix analysis,as a common method of industrial strategic development analysis,can not only analyze the current P,E,S and T conditions and environment of ICLs,but also combine ICL’s own micro-environment,development opportunities,and internal conditions.Therefore,the future development strategy and direction of the ICL are explored based on the strength (S),weakness (W),opportunity (O) and threat (T) of the internal factors from ICL[5].

2.1 Development strengths of ICLs

(1) In terms of “P”,the development of the industry often requires policy support and promotion.With the start of a new round of reform of the medical system and the pilot of public hospital,China’s ICLs also have opportunities for development.In October 2010,the “Twelfth Five-Year Plan” made it clear that social capital should be encouraged to invest in the medical service system to form a diversified medical pattern.Meanwhile,more space is called for nonpublic medical institutions in the regional health plan,which will gradually optimize the development environment of China’s ICLs[6].In 2017,with the promulgation of the “Notice on Deepening the Reform of the Medical and Health System in the Thirteenth Five-Year Plan” and the “Notice on Printing and Distributing the Sanitary and Health Plan of the Thirteenth Five-Year Plan”,the development of ICLs was promoted fast.Subsequently,the Report of the Nineteenth National Congress of the Communist Party of China emphasized the development strategy of public health.It affirmed the clinical diagnosis services provided by ICLs.

(2) In terms of “E”,the scale effect of ICLs can reduce medical costs.Clinical diagnosis services were initially provided by medical institutions in China.Due to the imperfect testing conditions in some secondary and primary medical institutions and the scattered testing items,the cost of single testing in hospitals was high,which prompted medical institutions to outsource some testing items to an ICL.ICLs not only avoid the risk of high costs caused by small sample sizes in medical institutions through large-scale procurement of testing raw materials,but also expand the bargaining power of upstream suppliers in the same industry,which greatly reduces medical costs[7].

(3) As to “S” factor,ICLs can help the average allocation of medical resources.Laboratory examiners refer to practicing physicians who are responsible for the combination of inspection and clinical work after undergoing specialized training in testing.According to theNational Health Statistics Yearbook,by the end of 2018,the average number of licensed physicians in every third-level and second-level hospital in China was 414.5 and 117.3,and the average number of licensed physicians in each level was 53.3.Therefore,most talents are concentrated in a few large public hospitals in China,and the medical level of primary hospitals is relatively low.At present,China’s medical and health investment is insufficient to introduce high-end technology into primary institutions,which provides a favorable condition for the development of ICLs[8].ICLs can help the optimal allocation of medical resources in the region by buying the highend clinical diagnosis equipment and gathering a large number of clinical diagnosis talents.This can effectively help average the medical level of different medical institutions in the region.

(4) In terms of “T”,ICLs have undergone rapid technological changes with the help of more big projects.The medical tests in hospitals are jointly undertaken by the pathology department and the laboratory in China.The third-level hospitals with relatively complete facilities can test about 500 items,while large ICLs can test up to 2 000 items.It can be said that ICLs have irreplaceable advantages in promoting technology development.

2.2 Development weaknesses of ICLs

(1) From the perspective of “P”,the medical insurance system restricts the development of ICLs.Most developed countries in the world adopt a variety of insurance settlement methods for medical treatment.Taking Germany as an example,in accordance with the principle of social market economy,German medical insurance is divided into statutory and private insurance.Part of insurance can be settled with third-party inspection agencies.Within this range,ICLs with low costs have price advantages.At the same time,it provides a more simplified claims process for applicants participating in insurance[9].At present,the development of ICLs in China is limited because medical insurance is settled directly between hospitals and insurance companies.But the costs of independent clinical tests are not included in medical insurance charges.Besides,the government’s support for public hospitals with a large amount of resources in the inspection of medical institutions also indirectly affects the development of ICLs.

(2) At the “E” level,the establishment and maintenance of ICLs require a large amount of funds in the early stage and the long recovery period of funds,making many laboratories difficult to operate.In addition,due to the low level of development of China’s medical market,it is hard to cooperate between ICLs and large medical institutions.Besides,the upstream cost of the ICL industry is high.Upstream enterprises of ICLs include manufacturers of medical devices and diagnostic kits.Foreign products such as Hitachi,Siemens,and Beckman are the first choice for most domestic medical laboratories.But domestic brands with low prices such as Mindray and Boke have low industry acceptance.

(3) In terms of “S”,the combination of ICLs and clinical treatment is not high.Taking clinical testing as an example,samples in the region is concentrated in the laboratory for testing,and the final diagnosis results of the testing are sent back to the hospital clinicians through electronic reports or paper reports.In this process,because the specific conditions of clinical patients cannot be judged,the degree of clinical integration of the doctors to the diagnosis of the results is not high,which may result in misjudgments.

(4) As far as “T” is concerned,the related technologies for inspection support need to be improved.The operation of an ICL includes logistics,sales,and inspection.Among them,samples transfer is the key link.Different from the process of sending samples in the hospital,the distance between the samples and the location of the ICL makes it difficult to store and transport the samples.The time of the transport determines the timeliness of the test report.Due to the strict physical storage conditions required by the samples and the fact that there are no uniform transportation rules for ICLs in China,there are still some inspection accidents caused by improper preservation of samples in the process of transportation.The PEST-SWOT matrix model of China’s ICL is constructed through analysis,as shown in Table 1.

Table 1 PEST-SWOT matrix model of ICL

(to be continued)

Continued Table 1

2.3 Development opportunities of ICLs

(1) In terms of “P”,the new medical reform brings about favorable opportunities for the development of ICL.On the one hand,it can promote state-level diagnosis and treatment.The new medical reform promotes graded diagnosis and treatment,which means that the government must solve the problem of decentration and even distribution of medical resources to local medical institutions.ICLs provide testing sample service to primary hospitals,which not only helps the government to save health resources,but also promotes the graded diagnosis and treatment policy effectively.On the other hand,precision medicine lays a good foundation for the development of ICLs.Precision medicine originated from the clinical diagnosis in China when experts advocated to use accurate instrument test results for diagnosis and treatment instead of doctors’ intuition and experience.In 2015,General Secretary Xi Jinping requested the establishment of the National Expert Group on Precision Medical Strategy,which aims to provide individuals with the best solution for their clinical treatment through personal genomic information,combined within vivoprotein and metabolome[10].Under the guidance of precision medicine,ICLs can use their technology platforms to cooperate with hospitals,research institutes and other institutions to strive for the realization of China’s precision medicine plan.

(2) In terms of “E”,the demand for medical testing in ICLs is strong because capital drives the industry to develop continuously.On the one hand,most services are given to private medical institutions,primary medical institutions,and medical examination centers by ICLs.These testing requirements directly affect the development of ICLs.With the injection of a large amount of private capital into private medical institutions,physical examination centers,etc.,a healthy and sustainable development environment has been created for the clients of ICL industry.As far as the financing of ICL is concerned,leading ICL companies,such as Jinyu,Dean,and Meikang Biology,have obtained several rounds of social financing through the company’s listing.Therefore their economic development situation is good[11].

(3) As to “S” factors,population aging and people’s health needs can promote the development of the industry.As of the end of 2019,China’s annual birth population was 14.65 million,with a birth rate of 1.05%.The second child policy has greatly promoted the development of medical examination items such as infant health care,maternal health care and disease prevention in China.In addition,China has 253.88 million people aged 60 and above,accounting for 18.1% of the population.Since the health needs of the elderly are much higher than other ages,it has a significant role in promoting the services of medical inspection in China.

(4) In terms of “T”,big data management helps the development of ICLs.A large number of inspection projects and information-based medical equipment in ICLs are bound to generate rich medical information.Leading ICL companies will create a large database of their testing data to provide reference for clinical diagnosis,clinical decision-making and China’s medical academics.For example,Jinyu Company has created six major databases with more than 1.1 million samples,including rare disease positive cases,cervical lesion detection,genetic metabolic disease detection,vitamin D detection,renal pathology detection,and cervical cancer detection for rural women.It not only promotes the transformation of medical examination technology,but also helps the development of AI diagnosis in China.

2.4 Development threats of ICLs

(1) In terms of “P”,industry access standards are not unified because industry regulations are incomplete.The leading enterprises of ICLs in China have partially passed ISO15189 laboratory certification,CAP,ISO/IEC17025 and other international certifications.Most of them have passed one or even two of the three,which means they still have a certain gap with the international inspection level.Besides,as a long-term industry,the regulations related to ICLs are still incomplete.In 2010,the “Administrative Measures for Clinical Gene Amplification Testing Laboratories in Medical Institutions” was promulgated,emphasizing the national and provincial regulatory management of clinical gene amplification testing laboratories.But there is still a lack of supporting regulatory management methods,which has caused some enterprises to conduct business in violation of regulations.This disorderly competition can affect the long-term development of the industry.

(2) In terms of “E”,China’s investment in medical services is much lower than that of other developed countries.China’s total health expenditure accounted for 4.98% of GDP in 2010 to 6.40% in 2018,while the total health expenditure in the United States accounted for more than 15% of national GDP.With the development of the economy,people’s awareness of health has increased.But the low level of economic investment has made the demand for the medical test market inconsistent with the actual supply,which hinders the development of the industry in the short term.

(3) As to “S” factors,low social recognition may result in the repeated use of medical resources.Traditionally,Chinese people generally have a high degree of approval for public hospitals and a low degree of acceptance for ICLs with more private capital[12].Because some public hospitals don’t approve the testing results from ICLs,patients have to repeat medical tests in ICLs and public hospitals,resulting in waste of medical resources.

(4) In terms of “T”,the technical standards of the industry are not unified,resulting in large regional restrictions.The method of testing a sample can be mass spectrometry or comparative testing with reagents.The results obtained by different methods are inevitably inconsistent.It is also difficult to convince the public without an open and transparent testing method.In addition,the low activity of the detection samples determines the coverage area of ICL,which means the detection radiation radius of the ICL is not big.

3 Discussion on the development strategies of ICLs

Through the PEST-SWOT matrix analysis of ICLs,the strengths and weaknesses of the enterprises are obtained.Combined with external opportunities and threats,four strategies of SO,ST,WO,and WT are designed.First,we should make good use of strengths and opportunities to reduce threats.Second,the external opportunities should be utilized to make up for the weaknesses.

3.1 Discussion on SO strategy:building a big data platform and developing personalized medicine

To develop high-end inspection technology continuously is one of the guidelines for the development of ICLs in the market.ICLs use highend technologies such as genetic testing and special genetic disease testing to gain their market share in the clinical diagnosis.(1) ICLs can build a big data platform to make statistical analysis of different types of diseases so that they will provide reference for relevant government departments to invest in the region’s medical and health expenditures and manage the public health project.As a result,they can make a contribution to clinical treatment and disease detection in China.(2) It is necessary to develop personalized medicine to meet social needs.Personalized medicine is to obtain a huge database of different diseases through a large amount of patient information collected during clinical diagnosis.When a patient has a disease,he can be given a personalized treatment plan according to the database analysis results.(3)Community+ICL services can help the family doctor system develop fast.Taking the community-based model of ICLs as an example,after ICLs conduct basic medical tests for patients,family doctors can provide targeted medical advice to patients based on the test results and recommend appropriate hospitals for further treatment.It can not only avoid repeated use of medical resources by patients,causing unnecessary waste,but also effectively promote the development of national graded diagnosis and treatment.

3.2 Discussion on WO strategy:strict access standards for the laboratory industry to avoid excessive competition

(1) To gain the public recognition and enhance the competitiveness of enterprises,China’s ICLs should strengthen the industry access standards.It is necessary to define quality management standards clearly to ensure the quality of medical services.(2) Enterprises must differentiate their operation strategies to avoid the intensification of homogeneous competition in the pharmaceutical service industry.In order to achieve scale effect in the development process of ICLs,chained laboratories are often set as strategic goals.However,due to factors such as insufficient business volume,lack of support from local governments,and hospital’s low profit,a few profit-making laboratories in the chain have to feed most loss-making laboratories.This requires enterprises to change their operating strategies flexibly to avoid excessive competition in the industry.(3) Enterprises can enhance their competitiveness through low-cost strategy but good service quality.Since the price of the kit depends on the upstream manufacturers,the cost of the ICL is directly determined by them.If there is no difference in the quality test results,the domestic brand kit can be used as an alternative to save cost for patients.

3.3 Discussion on ST strategy:helping the government develop telemedicine with the industry’s own advantages

(1) The digital medical era enables ICLs to possess the special function of information diagnosis and treatment.ICLs can provide intensive medical inspection services for the public because of their high-quality and standardized testing mode.To break through geographical restrictions and help the allocation of medical resources for national graded diagnosis and treatment,ICLs can create a digital remote pathological diagnosis platform.The team of pathologists can use the platform to conduct online diagnosis and treatment based on patient’s detection results.In this way,the scarce medical resources can be shared to improve basic pathological diagnosis services.(2) Merger and acquisition of enterprises can increase industry concentration.The level of investment in medical resources determines the size of the medical laboratory market.In the future,the development of ICLs will inevitably reshape the market structure through mergers and acquisitions.Some small enterprises that cannot form scale effects will be merged into large ICLs.(3) Corresponding operational plans should be formulated for medical institutions at all levels to improve the efficiency of social medical services.The large-scale hospitals normally have complete medical laboratory equipment,and their cooperation with ICLs focuses on the outsourcing of high-end projects and expert’s research projects.The medium-sized hospitals with incomplete medical laboratory departments can test few items.Therefore,they can outsource some projects with high costs to ICLs to maximize economic benefits.For small and primary medical institutions,due to their insufficient medical resources for testing,they should cooperate with ICLs for most testing projects.In this way,patients can be diagnosed at primary medical institutions and it improves the efficiency of social medical services.

3.4 Discussion on WT strategy:enhancing industry recognition and strengthening talent cultivation

As a high-tech industry,the social recognition of ICLs is closely related to their comprehensive capabilities.(1) To set up an industry brand is the good way to strengthen the industry’s recognition.On the one hand,ICLs should actively participate in social welfare activities.public welfare propaganda can be carried out for specific groups on national statutory festivals,such as on China’s Ear Care Day,World Diabetes Day,National Hypertension Day,etc.In addition,free inspection and testing activities for female groups can be conducted on Women’s Day.Employees can be organized to go to the community to conduct high blood pressure and high blood lipid testing for the elderly.On the other hand,enterprises should actively participate in the prevention of social disease emergencies to reward society with professional knowledge.Take Convid-19 in 2020 as an example,enterprises must actively participate in production of disease kits,vaccine research and development,which can enhance their social recognition.(2) Enterprises should pay attention to the training of professional talents.Technology is the foundation of ICLs.Enhancing the level of professionals can improve industry recognition,and talents are the most important part of enterprises.Besides,enterprises can open special channels for promotion of technical engineers.They should ensure the talents to participate in the formulation of corporate strategies.In short,ICLs should adhere to the concept that the development of enterprises must depend on technology and professionals.

4 Conclusions

According to the above discussions,ICL industrial strategy analysis matrix is obtained,as shown in Table 2.

Table 2 SWOT strategy analysis matrix of ICL

ICLs have shifted from the stage of rapid development to the stage of optimized development.Under the premise of reshuffling the industry structure,combining information technology to create a large database,personalized testing and prevention will be a major breakthrough.The industry should conform to the development of policies and concentrate on telemedicine,graded diagnosis and treatment,and precision medicine.In addition,with the increasing awareness of health,people’s demand for clinical diagnosis technology is also increasing.In order to conform to changes of policy,economy,and society and occupy a more important position in the clinical diagnosis industry,ICLs should enhance their social recognition.While constantly enhancing their inspection technology,they should also regulate industry operating standards,which will highlight the importance of independence medical inspection industry.