Japanese Medical Fees Are Not Too Low

In recent years, controlling healthcare expenses and lowering medical fees as promoted by the Koizumi Government that took office in April 2001 have been blamed as a major cause of the accelerating breakdown of community medicine in Japan. However, a succession of data indicating that this is not necessarily the case has become apparent.

Table 1: Japanese private-sector medical groups
  No. of facilities Financial data (million US dollars)
Hospitals Satellites Income Current profit
Total assets Net assets
Chuo Medical Group 73 60 2,897 114
2,930 1,378
Tokushukai Group 55 57 2,735 75
3,086 600

(Note) Data are FY 2008 results.  Exchange rate is 90 Japanese Yen to 1 US dollar.
(Source) Created by the author from Japan Medical Planning's 2009 White Paper on Medical Management

Table 2: Comparison of average annual wages at public and private hospitals
  Public hospitals
Private hospitals
Hospital CEOs 219 352 0.62
Physicians 166 172 0.97
Dentists 146 124 1.18
Pharmacists 75 53 1.41
Nursing staff 66 51 1.30
Nursing aid staff 42 30 1.43
Medical technicians (radiology technicians, lab technicians, nutritionists, etc.) 70 48 1.46
Office personnel 70 44 1.56

(Note) Data are FY 2008 results. Unit is thousands of US dollars.
Exchange rate is 90 Japanese Yen to 1 US dollar.
(Source) Created by the author from the 17th Survey on Economic Conditions in Health Care (June 2009 survey)

Table 1 shows data for two of Japan's typical large private-sector medical groups. Chuo Medical Group is an integrated healthcare network (IHN) that operates primarily in Tokyo and Saitama Prefectures. This IHN is older than those in the United States, Canada, Australia, and so on. It can be considered a pioneer of the medical business model that vertically integrates medical facilities providing diverse functions. It is noteworthy that even while most public hospitals are struggling with red ink, Chuo Medical Group achieved a current profit ratio of 4.0 percent. This indicates that it is possible to operate profitably if a complete lineup of the medical services required by local residents is provided and patient retention is carried out. In other words, Japan's medical fee system is not too low overall. This is further confirmed by the fact that Chuo Medical Group's rival, Tokushukai Group, also operates at a profit. One reason that Tokushukai Group's profit ratio of 2.7 percent is lower than Chuo Medical Group's is that Tokushukai Group has facilities scattered all over Japan, preventing it from fully realizing the advantages of an IHN system.

Such being the case, why is community medicine breaking down in Japan? Table 2 provides a clear answer. The salary system at public hospitals, which should play a central role in community medicine, is unsuitable, encouraging doctors to leave. The salary system for public hospital personnel is linked to the wages of local government employees in positions that are irrelevant to healthcare. Compared with private hospitals, doctors' salaries are low, while salaries for other positions are much higher. The Democratic Party of Japan Government that took office in September has a policy of investing resources to raise doctors' salaries in order to prevent the collapse of community medicine. It will also be necessary to correct the distortions in the salary system in order to secure the required financial resources.

Yukihiro MATSUYAMA , Other Columns & Papers

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