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Shares of a prominent Chinese eye care hospital group declined following reports that its chairman was linked to a scandal involving several psychiatric facilities accused of fraudulently claiming funds from the national medical insurance program.
Today, the company’s stock closed down 3.8% at CNY 11.07 (roughly USD 1.59) in Shenzhen, after falling as much as 5.2% earlier in the morning.
It has been reported that Xiangyang Hengtaikang Hospital, one of the psychiatric clinics implicated in the scandal, is under the control of the company’s chairman, Chen Bang. Additionally, sources revealed that Chen holds investments and controlling shares in approximately 20 psychiatric clinic networks through his investment firm.
The largest shareholder in the hospital group owns a 34% stake, with Chen himself holding 80% of that company, which translates into nearly a 16% stake directly in the overall group.
In response to the allegations, the company clarified that Xiangyang Hengtaikang Hospital is a joint venture formed by the company and other investors. It emphasized that the hospital is not a subsidiary, nor is there any ownership or operational linkage between the two. The hospital operates independently under a management team, with no involvement from the main company in its daily functions.
Earlier this week, a local news outlet published an investigation uncovering that several psychiatric hospitals in Xiangyang and Yichang—both in central China’s Hubei Province—admitted patients without mental health issues and created false diagnoses to illicitly claim money from the national insurance fund.
Following these revelations, authorities in Hubei assembled a joint investigation task force to probe the facilities in these cities thoroughly. The national health security administration also announced that local officials would conduct self-audits of mental health clinics and initiate targeted inspections throughout the year.
Supervising psychiatric hospitals presents unique challenges compared to standard healthcare facilities. Due to the difficulty in accurately assessing whether diagnostic and treatment practices meet regulatory standards, expert verification from specialized organizations is often necessary.
Addressing violations in psychiatric clinics is complex, as revoking their licenses could lead to the displacement of genuine patients, potentially resulting in societal risks. Experts warn that shutting down these clinics must be managed carefully to avoid unintended harm to vulnerable individuals.
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