Regional Integration of Hospitals Supervised by MHLW

Revenue shortage is often claimed to be the main culprit for the deteriorating situation of the medical delivery system in Japan. A bigger problem, however, is that national/public hospitals, which are expected to serve as safety nets, are managed in an uncoordinated manner because they were individually founded by various organizations. Six national centers for advanced and specialized medical care, 145 national hospitals, 52 social insurance hospitals, and 22 Labor Accident Hospitals, all supervised by the Ministry of Health, Labour and Welfare(MHLW), are run independently from one another. They do not share patient information even among institutions located within the same medical district and are competing with each other rather than cooperating.

In 2004, 145 national hospitals came under the jurisdiction of an independent administrative institution, the National Hospital Organization. The hospitals were divided into 6 regional blocks with the aim of tailoring the hospitals to regional needs. As shown in Chart 1, the balance of payments for these 145 hospitals as a whole has improved; the medical revenue increased from 7,585 million US$ in 2004 to 8,232 million US$ in 2008, and the net profit increased from minus 17 million US$ in 2004 to plus 333 million US$ in 2008. Individually, however, the hospitals are having severe financial difficulties.

Chart 1 National Hospitals (145) Consolidated P/L
(Million US$ : 1$=90Yen)
  2004 2005 2006 2007 2008
Operating Income 8,290 8,517 8,530 8,877 8,976
  Patient service revenues 7,585 7,783 7,778 8,124 8,232
Operating expense Government Grants 573 566 553 544 539
Other subsidy 10 18 19 16 13
Other revenues 122 150 179 193 191
Operating expense 8,287 8,477 8,392 8,556 8,540
Operating profit or loss 2 40 138 321 436
Extraordinary income or loss (20) (36) (38) (56) (103)
Net profit or loss (17) 4 100 265 333

Note: Some of the totals may not exactly sum owing to rounding of the figures
Source: Prepared by the author based on materials published by the National Hospital Organization

As shown in Chart 2, 40 of the 145 hospitals had deficits for fiscal year 2008, and 99 of the hospitals were classified as small- and medium-sized hospitals with medical practice revenues (calculated by subtracting education/training revenues, clinical research revenues, and other ordinary revenues from the total revenues) of 60 million US$ or less.

Chart 2 Performance Distribution of National Hospitals

Source: Prepared by the author based on materials published by the National Hospital Organization

Along with advances in medical technology, healthcare delivery has shifted from inpatient to outpatient or home care. In order to stay financially sound and realize continued growth, healthcare entities need to improve their services in areas other than inpatient care so as to keep attracting patients. To achieve this goal, it is essential that they share roles with nearby hospitals in the same group and share patient information with affiliated healthcare institutions. However, since national hospitals had been run as individual institutions without any administrative discretion, most have fallen into diminishing equilibrium.

The situation is even worse for Social Insurance Hospitals and Labor Accident Hospitals, which share the same problems. For fiscal year 2008, 23 of 52 Social Insurance Hospitals had deficits in the balance of payments, and Labor Accident Hospitals are continuing to make losses on a consolidated basis, despite receiving a substantial amount of public funds. Nevertheless, closing these financially ailing hospitals would not save our medical delivery system from collapsing; a more inventive approach, such as utilization of their management resources, would be required. Hospitals should be integrated within each medical district on a scale that would increase the clinical governance of the medical service division through patient information sharing. The suggested model, that is, integrating the hospitals supervised by the Ministry of Health, Labour and Welfare on a regional basis and exploring a private-sector management method, is expected to serve as a guideline for promoting the restructuring of the entire public hospital sector including municipal hospitals.

Yukihiro MATSUYAMA , Other Columns & Papers

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