A past home healthcare client reached out to me right before Christmas around some challenges they had encountered in pursuit of their license in China. Our exchange triggered a couple of thoughts on my part as foreign senior housing and home healthcare companies craft their market access strategies.
First, we cannot underscore enough how divergent the experiences municipality-to-municipality are for the licensing process in healthcare and senior care. The central government publishes these big ideas about what it wants to see happen with particular industries, and even when these are not aspirational documents – in other words even when they ARE formally promulgated regulations, even then the provinces and municipalities take wide liberties in how they interpret the central government’s intentions. One company we have worked with received their license in a week. Another company in six months. And yet another had a license with the exact same language used by the previous example rejected entirely. From the point of view of a foreign company new to China, this is infuriating – and rightfully so. Yet, it is an essential part of the China experience. Right now, we are getting conflicting signals as to licenses. On one hand the central government in late December again issued a proclamation that it wants to see the licensing process expedited and fewer obstacles for overseas investors in healthcare and senior care. And on the other hand, I can tell you first and second hand stories of people encountering more on the ground licensing challenges in the last half of 2016 than in the first half.
Second, the very American idiom that you “only get one chance to make a first impression” has relevance during the license negotiation. What does this mean? Well, be careful what you delegate to your local team or local counsel. Yes, they may speak the language and they may be able to change schedules at a moment’s notice, but the cornerstone of any healthcare or senior care business entering China is your license, and because of this you want to make sure you – the laowai 老外 – are present when the first formal ask is made by your company for the license you want. While we have used local counsel to prep the Chinese officials for this meeting, the formal ask as to the licensing language should ideally be done with at least one member of your non-Chinese team present. The best way to really cement your seriousness and the commitment your organization wants to make in China is to have your team actually be present during a formal licensing discussion. The preparation for this meeting needs to be extremely precise, and it is not something you want to walk into without a fully developed licensing strategy as to the scope of your business license itself.
Third, if the cornerstone of your business is your license, the strategy you are going to take as to your business scope within your license is critical to have mapped out in detail. This is a word-by-word, phrase-by-phrase parsing of what you want to include in your license, how you want to position each service, and what parts of the license you are willing to “give up” during the negotiation (because you will – unless you are eminently lucky – have to give something up in terms of your ideal scope of services offered in the home). During the meeting you participate in with your local team and the Chinese officials, we recommend that you re-visit those licenses that have already been approved in other parts of China, and very deliberately explain your business model and your proposed language. As you explain what you want to do in the home, ask them how they would describe these services, and then ask them if the language they have just used would be acceptable as a business scope in your application. Then map their language onto the other approved licenses, and ask the officials if they are comfortable moving forward with this as your proposed license scope of services.
Fourth, go into your licensing negotiation with a clear understanding of the licensing risk you are willing to take as a business. Here’s what I mean by that: China’s home healthcare regulations are on one hand overly specific, and on the other hand too general. Consequently, there are obvious incompatibilities (something one type of license says you can do in the home, but another regulation says you can’t) and gray areas (service lines that China very much needs, which you as a home healthcare company know how to do, but are completely new to China and as such not described or covered by any regulation at all). You need to have a legal theory of the case, if you will, around how you plan to defend your business license if something bad were to happen (an angry family member who files a formal complain with the local health bureau as one example we are familiar with). In a situation where the business license is being formally audited by the officials and they are looking specifically at how your business scope aligns with the actual services you are offering in the home, more than likely something else has happened that is leading the officials to evaluate the scope, and they are going to find “something” to take issue with. Under this situation, you and your local counsel need to have a strong conviction that you can offer these services and that should your license be audited, you can defend what you have been providing in the home.
All of these are manageable risks, but they require a strong up-front licensing strategy and, I need to reinforce this: do not try to craft or launch your licensing strategy on the cheap! Spend the money for top-shelf advisors, legal counsel and – this might sound silly – make sure your laowai are present from the get go when the licensing discussion begins. Start smart, and you will find the process gets easier to manage, slightly more predictable, and results in more robust relationships with key officials. Nothing in China is given other than you having an “interesting” experience. But the best way to make sure you get a good start is to build your go-to-market strategy reflecting the above insights.