Investigations by Chinese outlets and a long-form probe by independent journalists have linked the chairman of listed Aier Eye Hospital, Chen Bang, to a network of private psychiatric hospitals that repeatedly siphoned public health insurance funds. Journalistic sleuthing traced ownership through layers of holding companies to show that seven psychiatric hospitals controlled by a Hunan-based affiliate ultimately sit under an investment vehicle tied to Chen, and multiple facilities have been administratively punished for identical schemes of overcharging and fabricated billing.
The pattern is familiar: duplicate charges, splitting single items into multiple billable entries, billing for treatments that were not provided and inflating frequency or price beyond regulated limits. Several hospitals were fined repeatedly over multi-year stretches; one provincial administrative document even categorised a case explicitly as "insurance fraud" (欺诈骗保). Penalties documented in public administrative notices range from a few thousand yuan to more substantial recoveries, and regulators in Hubei have opened joint investigations after an undercover report exposed similar abuses there.
The controversy overlaps with a previously reported set of practices by Aier and affiliated charitable foundations. Public filings show that the Hunan Eye Charity Foundation — seeded and heavily funded by Aier-related companies — channelled large donations to other foundations and to local social-welfare bodies, which in turn paid sums to Aier-controlled hospitals as the executing partners for so-called "free" or subsidised surgeries. Journalists found that much of the money the foundation paid out cycled back to Aier subsidiaries, prompting questions over whether charity was being used to steer insured patients and to capture reimbursements from public funds.
Company statements have sought to draw a legal line. Aier declared that the implicated psychiatric hospital is not part of its listed corporate group and that the joint-venture hospital was operated by an independent manager; it also denied equity control or day-to-day management ties with the Hunan psychiatric chain. But the ownership trail shown in public corporate records and the near-identical billing techniques across facilities have hardened suspicions of a broader, group-level problem.
Why this matters extends beyond one corporate reputation. China's basic medical insurance (医保) is a crucial social safety net and a sizeable fiscal burden shared by local and national authorities. Fraudulent extraction of those funds reduces resources for legitimate care, corrodes public trust and exposes systematic weaknesses in oversight and provider incentives. The case also highlights the regulatory grey zone where non-public charitable giving and private medical provision overlap, producing perverse incentives when philanthropy is used to route patients to affiliated providers.
For investors and regulators the story carries direct consequences. Aier is a market-facing, listed healthcare conglomerate whose share price and access to capital could be affected by widening probes into its effective controllers. For policymakers it presents a test: whether to tighten auditing of medical insurance payments, increase transparency around foundation-to-provider transfers, and pursue criminal as well as administrative sanctions where evidence supports it. For patients, especially vulnerable psychiatric inpatients, the scandal raises grave ethical questions about consent, patient protection and the misuse of institutional care as a revenue source.
Chinese authorities have already moved to investigate clusters of psychiatric hospitals in Hubei and other provinces, and local insurers have issued fines and demanded remedies in documented cases. The recent disclosures suggest that enforcement will need to be sustained and more forensic than episodic: tracing capital flows, auditing foundation accounts, cross-checking patient records and imposing meaningful penalties on management that orchestrates or tolerates systematic fraud. Global investors monitoring healthcare exposure in China should re-evaluate governance risk and regulatory tail-risk in the sector.
The story is not simply one of isolated bad actors. It underscores structural tensions in China's healthcare market: a fragmented insurance architecture, fee-for-service incentives, the rise of large private hospital groups, and blurred lines between charity and commercial activity. How regulators respond will shape not only Aier's corporate trajectory but also the broader credibility of China's efforts to contain healthcare costs while encouraging private investment in medical services.