After submitting a second application to the Hong Kong Stock Exchange, WeDoctor aims to explore "medical insurance payment."

The parent company of China's first internet hospital is seeking to go public.

Recently, Weiyi Holdings Limited (hereinafter referred to as "Weiyi") submitted an IPO application to the Hong Kong Stock Exchange.

Weiyi's "Wuzhen Internet Hospital" is the first internet hospital in the country, and it has since expanded its business to include internet consultations and other services.

In addition to internet consultations, Weiyi is exploring more diversified business models through AI large models—collaborating with government departments to establish digital health communities in coordination with local grassroots medical institutions, expanding health management membership services for chronic diseases.

The significant profit source of this business comes from medical insurance savings.

The prospectus shows that within the health community system composed of multiple hospitals, the Medical Insurance Bureau formulates a budget for Weiyi's health management membership services based on individual consultation costs. Within this budget, Weiyi directly settles the consultation fees generated by its members with the medical insurance.

If there is a surplus in the budget, Weiyi can share the savings with the medical institutions within the health community.

This means that if Weiyi can improve the efficiency of medical insurance fund usage, the share it receives will also be higher.

Currently, this business has been implemented in Tianjin, with plans to expand to more cities in the future.

Weiyi's diversified business has already brought it scaled revenue, but it has not yet achieved profitability.

From 2021 to 2023, revenues were 962 million yuan, 1.368 billion yuan, and 1.863 billion yuan, while net losses during the same period were 2.498 billion yuan, 3.718 billion yuan, and 1.432 billion yuan, respectively.

After going through G round financing, Weiyi's shareholder lineup is quite strong. Tencent, 5Y Capital, AIA Group, Sequoia Capital, Goldman Sachs, and others have all invested in Weiyi.

When Medical Insurance Becomes a Client

This is not Weiyi's first attempt to go public.

As early as April 2021, Weiyi submitted an application to the Hong Kong Stock Exchange, but there was no further news afterward. During this period, there were also rumors that it was considering going public in the U.S. through a SPAC, but there was no progress on that front either.

Nearly four years later, Weiyi has chosen to make another attempt at the Hong Kong Stock Exchange.

Compared to the previous IPO, Weiyi's business model has changed.

Before 2021, Weiyi mainly relied on providing "online + offline" medical services to generate revenue, with payment sources being C-end patients or enterprises, and payment methods including self-pay, medical insurance, corporate health benefit plans, and private health insurance.

During the pandemic, the demand for online medical services surged, and the acquisition of Genea to expand assisted reproductive services drove rapid revenue growth for Weiyi, with revenue at one point increasing nearly threefold year-on-year in 2020.

However, with the end of the pandemic, the commercialization prospects of Weiyi's internet consultation remain unclear.

In fact, the difficulty of achieving profitability in the internet consultation business is a common challenge in the industry. For example, Haodaifu Online insists on generating revenue from internet consultation services rather than selling drugs, but has never achieved profitability and ultimately "sold itself" to Alipay.

Currently, in addition to consultation services, Weiyi is also seeking alternative commercialization paths—AI medical services.

Weiyi's revenue is divided into two main parts: digital medical platform and AI medical services The digital healthcare platform, similar to its previous business, directly provides paid "online + offline" medical services to patients, generating revenues of 614 million yuan, 636 million yuan, and 805 million yuan from 2021 to 2023, accounting for 63.9%, 46.5%, and 43.2% respectively.

In addition, the AI medical services that WeDoctor began to expand in 2020 have gradually become an important source of income, achieving revenue of 1.024 billion yuan in 2023, a year-on-year increase of over 60%.

AI medical services include health management membership services, cloud pharmacies, and more.

Health management membership services have gradually taken on a significant portion of revenue, generating 354 million yuan and 1.032 billion yuan in 2023 and the first half of 2024, accounting for 19% and 56.8% respectively.

This success is closely tied to support from the Tianjin region.

In 2020, WeDoctor signed a strategic agreement on "Digital Health" with the Tianjin government, leading the establishment of the Tianjin Digital Health Community with 266 grassroots medical institutions in the city, empowering local medical institutions with AI for digital transformation, and providing health management membership services focusing on diabetes.

This model differs from other AI medical companies.

The currently listed "first stock of medical large models," iFlytek Medical Technology (2506.HK), primarily provides AI-assisted diagnosis and treatment services to grassroots medical institutions through agreements with local health commissions, with the direct purchaser being government departments.

However, WeDoctor's payment method is based on the surplus of the medical insurance fund.

WeDoctor's model settles the medical treatment costs incurred by its members directly with the medical insurance within the fixed budget. If there is a surplus in the budget, it can be shared with the medical institutions within the health community.

As of the end of June 2024, WeDoctor's health management service membership has reached 900,000, covering multiple chronic diseases such as diabetes.

From this perspective, the core profit point of health management membership services depends on how much surplus WeDoctor can bring to the medical insurance bureau.

Chronic disease patients, such as those with diabetes, frequently visiting clinics can put pressure on the medical insurance fund. However, under WeDoctor's health management membership service, doctors at grassroots medical institutions can use AI-assisted diagnosis and treatment methods to provide services to patients, reducing their visits to higher-level hospitals and lowering costs; at the same time, this service system can monitor prescriptions to reduce risks of false reporting.

From January 2023 to June 2024, the average surplus rate per capita for diabetes patients participating in health management membership services within the Tianjin health community exceeded 25%; in 2023, WeDoctor assisted Tianjin's medical insurance in intercepting suspicious orders amounting to 100 million yuan.

The demonstration effect of the Tianjin project may be bringing WeDoctor more opportunities for market expansion.

How to Expand Beyond the Region

The health management membership service business also faces certain challenges.

First, how WeDoctor can expand this business to cities outside of Tianjin.

In response, WeDoctor plans to use its own actuarial model to assess cities, ensuring that the new markets can generate economic benefits, and has already made some breakthroughs Starting in February 2024, WeDoctor has successively signed agreements with the government of Guiyang and the government of Yinchuan to establish a health community service system locally, and it is expected to sign related agreements with several district governments in Shanghai in the first half of 2025.

"In addition to the above achievements, we are still actively exploring and negotiating cooperation opportunities in municipalities and provincial capital cities, aiming to expand our health management membership services beyond Tianjin," WeDoctor stated.

However, whether it can be replicated on a large scale still requires time for observation.

Second, the profit margin of this business is limited.

In the first half of 2024, the profit margin of the health management membership service business was 3.8%.

The main reason is that the service expenses related to this business are relatively high, reaching 993 million yuan in the first half of 2024.

Currently, the scope of this business is limited, and AI applications have not yet achieved scalable returns; at the same time, costs are considerable, requiring offline health managers and doctors to follow up with patients, thus achieving health management interventions from hospitals to home care.

Third, after the surplus in medical insurance, it may prompt the government to reduce the overall budget in the next fiscal year, which could further compress WeDoctor's profit margins.

"Because the overall direction of medical insurance development is still to improve efficiency. In this case, for example, if the budget for WeDoctor this year is 1 billion yuan and there is a surplus of 200 million yuan. Will the budget for the next fiscal year be reduced to 800 million yuan, and will the pressure of surplus increase? These are all challenges," pointed out a medical industry insider in Beijing.

Despite facing numerous challenges, the health management membership service business that WeDoctor is laying out is also bringing more possibilities.

On one hand, if WeDoctor can continue to expand this business to more cities, it can not only bring scalable returns to achieve "winning by volume," but also further enhance user coverage and penetration, providing opportunities for expanding its health management business, thus moving beyond a reliance solely on medical insurance payments.

"Actually, at this stage, it is somewhat like customer acquisition, which is to achieve coverage of the user group through cooperation with localities first, and then there will be opportunities to expand some personalized services within this system," pointed out a medical industry insider in Shanghai.

For example, WeDoctor has currently launched health management services such as weight management, which are expected to have higher gross profit margins.

On the other hand, deeply laying out health management membership services in different cities is also beneficial for WeDoctor to further train its AI medical large models to improve diagnostic accuracy and other aspects.

Currently, WeDoctor has successively launched its self-developed WeDoctor Medical Large Model, WeDoctor Medical Assistant Large Model, WeDoctor Health Assistant Model, and WeDoctor Text Generation Algorithm, and has developed applications such as AI Doctor, AI Pharmacist, AI Health Management, and AI Intelligent Control.

With the improvement in accuracy, whether WeDoctor's AI medical large model can unleash more potential to explore diversified business models is something the market is eagerly watching.

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