The giant medical group of 46,000 beds has come to reveal GM's acquisition of Gem Flower

In the past 20 years of state-owned hospital restructuring, GM Technology Group has not necessarily been the biggest winner, but it must be the largest one – after merging with Jewel Flower at the end of February, it has become a giant medical group with 46,000 beds.

If you use an analogy in the field of e-commerce, it is roughly equivalent to the merger of Pinduoduo and JD.com, and the final volume exceeds Alibaba:

In the 2021 Elebi Social Medical & Hospital Group, The 12,000-bed Gem Flower Medical Group ranked fourth, while GM already had 32,000 beds at the end of last year.

These two players, who benefited from the restructuring of state-owned enterprise hospitals, embarked on a crossroads of fate when the reform limit came.

The question that arises is, will you be able to become stronger when you are bigger? Can tying small sampans together make an aircraft carrier? The dilemma faced by Gem Flower Medical Group before will also be placed in front of GM.

"Short-lived" cooperation

It is not a sudden incident, according to people familiar with the matter, as early as the first half of 2020, Gem Flower Medical Group was looking for a buyer.

Founded in 2017, Gem Flower is a star project in the restructuring of state-owned hospitals. At that time, PetroChina raised social capital to set up the Straits Energy Industry Fund, and the Straits Energy Industry Fund established the Jewel Flower Medical Group by integrating more than 100 medical institutions under PetroChina.

In order to complete the divestiture and reorganization of the medical institutions affiliated to these more than 100 central enterprises, the registered capital of the fund is as high as 10 billion, and the main LPs are China Merchants Wealth, Industrial Wealth, Shenwan Hongyuan and Xiamen Jinyuan Investment Company, who do not participate in the management of the company as investors and pursue financial returns.

The actual operation managers of Gem Flower are still PetroChina, the management of Gem Flower and Gaoneng Tianhui Venture Capital Co., Ltd.

According to China Petroleum News, Gem Flower "jointly invested about 3 billion yuan" to the first batch of seven petroleum hospitals that completed the restructuring, and the future development of hospitals has funds, technology, resources and organizational guarantees.

An insider at Gem Flower Medical recalled that the management at that time was ambitious and planned to acquire another large medical group, or even go public.

But in just three years, the storm suddenly changed, and the former reform star began to find another buyer.

On the one hand, the transaction and listing of the entire general hospital category fell into a trough, seeing that the listing was hopeless, and several investors of the fund were eager to withdraw to recover costs.

According to the above-mentioned insiders, the previously agreed "loss reduction and supply chain collection and procurement are not too well completed." ”

On the other hand, PetroChina is still one of the most important controllers of the Straits Energy Industry Fund and Gemflower, when Wang Shihong, chairman of Gemflower Medical Group, was also the assistant general manager of CNPC, and PetroChina also had the motivation to withdraw: the SASAC was still promoting the restructuring task of "main and auxiliary separation" that lasted for nearly 20 years , large central enterprises have withdrawn from non-main businesses , and medical care is obviously not the main business of PetroChina.

The head of a fund that had been interested in participating in the Gem Flower acquisition told Eight Point Jianwen that he had no chance from the beginning because PetroChina mainly talked with three medical groups with a background in central enterprises — China Resources, Sinopharm and General Motors.

According to his understanding, China Resources withdrew from the competition in the second half of 2020, and Sinopharm and GM pk had several rounds, and the last winner was GM.

In fact, in the first half of 2021, PetroChina and GM have signed a framework agreement, but because the purchase price has not been negotiated, "it has been grinding for almost a year".

Another insider with insider knowledge of the merger told Eight Points that the final purchase amount was about the same as the registered capital of the Straits Energy Industry Fund.

In return, GM took over several major contributors to the Straits Energy Industry Fund and replaced PetroChina as the de facto controller of Gem Flower.

"A flower that never fades"

The gem flower is the symbol of PetroChina and is known as a flower that never fades.

Like Peking University Medical, which later became 10 billion yuan in debt and changed owners, when it was first established, the establishment of Gem Flower Medical Group was also worthy of attention.

The year 2017, when Jewel Flower was born, was the craziest year of the merger and acquisition tide of Chinese hospitals - after the State Council and five ministries and commissions issued a document to encourage social capital to enter the medical industry, a wave of hospital acquisition frenzy was set off, in the primary market, regardless of whether it is good or bad, as long as it is a hospital asset, it will be acquired at several times the premium; in the secondary market, many hospital concept stocks have directly doubled their market value in one year.

At the same time, it is also the year before the first arrival of the large limit of state-owned enterprise hospital restructuring - according to regulations, on December 31, 2018, thousands of enterprise-affiliated hospitals born in a special historical period needed to be stripped of the original state-owned enterprise system through four ways, such as closure and cancellation, classification into the public hospital system, acceptance of social capital restructuring and reorganization, and integration on the state-owned platform with medical care as the main business.

Against this backdrop, the gem flower came into being.

Through the capital injection, restructuring and reorganization of petroChina's hospitals, Gem flower medical group has 156 medical institutions of various types at all levels, including 7 tertiary hospitals, 18 secondary hospitals, 25 primary hospitals, 103 grass-roots community medical and health service institutions, and nearly 12,000 management beds.

Whether it was going public or selling at a high price, the management at that time was full of confidence. After all, in those years, the market value of China Resources Medical, which is the same main business, was as high as 30 billion yuan, and the "pseudo-hospital concept stocks" that acquired some private hospitals, such as Hengkang Medical, Yibai Pharmaceutical, and Yihua Health, were also worth up to 20 to 30 billion.

Later, it was proved that 2017 was the last glory of general hospital stocks, medical treatment is a slow business, and general hospitals began to be affected by medical insurance control fees in 2018, which could not meet the high expectations of the capital market - the market value of China Resources Medical and Yibai Pharmaceutical has dropped to around HK$5 billion today; Yihua Health has fallen below the market value of 3 billion; Hengkang was once heavily bonded by ST, introducing new milestones as restructuring investors in order to avoid bankruptcy.

In fact, for the gem flower, the hidden danger was already buried at that time. Gem flower hospitals are mainly petroleum departments, and there were a few hospitals with better benefits before, but most of the loss-making medical institutions mainly rely on local oil companies for blood transfusions.

According to the Beijing News, gem flower medical group released 2019 results show that in 2019, the group achieved a total revenue of 8.14 billion yuan, a net profit loss of 610 million yuan, and a year-on-year loss of 470 million yuan. Among them, the operating income of the group's main business, its hospitals, reached 7.15 billion yuan, an increase of more than 18% year-on-year; the loss was 600 million yuan, a loss of 480 million yuan compared with the previous year.

That is to say, the revenue loss of its hospital in 2018 was 1.08 billion yuan, and the loss in 2019 was 600 million yuan.

Since 2020, it has been affected by the epidemic, and the hospital's revenue is not sluggish.

An industry expert who did not want to be named also said that the main thing is that the management is not good, and the operation cannot keep up with the loss, "The development of the hospital group does not mean that you tie the hospital together." ”

In fact, for Gem Flower, "the medical groups tied together are not easy to manage."

Taking China Petroleum Central Hospital as an example, the pipeline bureau of the previous hospital's organizer contributed 38% of the shares with medical equipment, current assets and intangible assets, while Gem Flower Medical contributed in cash, accounting for 62% of the shares. Most of the hospitals under The Gem Flower follow this model, with the Gem Flower accounting for 65%-85% of the shares, and the hospital's original petroleum organizers still retain a small part of the shares.

A source who understands the internal problems of gem flowers revealed that the salaries of PetroChina Hospital are good, compared with the treatment of the PetroChina system, but the profits of the hospital and the profits of PetroChina cannot be compared, and it is very difficult for Gem Flower to carry out performance management.

Although Gem Flower dominates the equity, according to many people who know Gem Flower Group, Gem Flower's control over its hospitals is not strong, and the supply chain reform is not progressing well.

Where will the 46,000-bed "giant ship" go?

After the completion of the medical delivery of General Technology's acquisition of Gem Flower, General Technology will have 330 hospitals, about 46,000 beds under management, and 50,000 employees.

In July 2020, GM took over a 50% stake in Guozhong Kangjian, a wholly-owned subsidiary of the State Grid, which has total assets of 7.1 billion yuan and nine medical institutions, focusing on the pension industry.

In February 2021, GM added Aerospace Medical Health Technology Group Co., Ltd. to its subsidiary.

So far, GM Technology Group's medical territory includes state-owned hospitals backed by state grid, aerospace and Sinopec.

"The transaction between GM and Gem flower is not entirely a market-oriented transaction, but more of a position problem for large central enterprises," commented an investor who has been engaged in hospital mergers and acquisitions for many years.

In fact, after a vigorous medical rush, the trade in large general hospitals began to chill.

In the entire 2020, the amount of mergers and acquisitions of domestic hospitals was only 11.9 billion, which was 44% lower than that in 2019. The transaction of large general hospitals has fallen to the freezing point, and in addition to the mergers and acquisitions to complete the tasks of state-owned hospitals, there are few cases of mergers and acquisitions of general hospitals in the capital market.

On December 31, 2018, when the deadline for the restructuring of state-owned enterprises mentioned above arrived, there were still many state-owned enterprise hospitals that could not be completed as scheduled. Therefore, the State-owned Assets Supervision and Administration Commission gave a three-year grace period, and designated the six major platforms of China Resources Group, Sinopharm Group, General Motors Group, China Chengtong, China State Investment Corporation, and China Guoxin, and the restructuring of state-owned enterprise hospitals began to accelerate.

By the end of 2021, the SASAC notified and praised Sinopharm, China Resources and GM as central enterprises with medical and health as the main business to actively participate in restructuring and mergers and acquisitions.

Among them, the number of beds in China Resources Medical has also risen rapidly from 15,000 to 27,000, but the market value has indeed fallen all the way, only a quarter of the peak period.

"It doesn't make sense to mention how many beds there are now, but it makes sense to have a lot of profit." Zhuang Yiqiang believes, "Can you be stronger after you become bigger?" Not necessarily. Tying small sampans together piece by piece makes it difficult to become an aircraft carrier. If scientific post-investment management cannot be carried out, there will still be problems in the future. ”

Judging from the existing structure of Gem Flower, there are 103 primary community medical and health service institutions, accounting for 66% of the total medical institutions. Under the existing inverted pyramid medical system, whether public or private, it is a problem to revitalize county resources.

Zhuang Yiqiang analyzed that there are some leading hospitals located in large cities under the umbrella of Gem Flower, which are relatively competitive in the local area, and can bear their own profits and losses, and also have a slight surplus. However, the vast majority of hospitals mainly serve oilfield miners, geographically remote, in the tidal flats, ravines and other areas, in addition to workers and family members of no other patients, previously can rely on enterprise assistance, after stripping it is difficult to survive.

The investment institutions that have paid a heavy price before have all fallen into the dilemma of "east, west, south, south and north, it is difficult to coordinate resources, the management radius is too large, but after investment, they cannot keep up".

In Zhuang Yiqiang's view, in order to revitalize such a large-scale medical group and avoid becoming the second jewel flower, GM must be ready to shut down and transfer some less qualified hospitals at any time, from the ranking of performance, discipline development, competitiveness, etc., according to market demand to implement the last-place elimination system.

However, considering GM's social responsibility as a central enterprise, it is actually difficult to carry out drastic integration and reform.

In addition, the actual control of the hospital after the merger (personnel appointment and removal, property ownership, etc.) largely determines the effectiveness of the merger. Eight Points jianwen learned that there were also buyers who terminated negotiations with gem flowers due to governance and marketization issues.

Where the 46,000-bed medical giant ship is, in a sense, a problem to be solved by GM and a common problem that thousands of state-owned hospitals will face after the restructuring.

Shi Chenjin and Luo Chunhao | writing

Xu Zhuojun and Li Lin | editors

This article was first published on the WeChat public account "Eight Points Health" (ID: HealthInsight)

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