Prioritize Struggling Community Hospitals for Government Aid

In its FY2024 "Survey on Economic Conditions in Health Care (Medical Institution Survey)," the Ministry of Health, Labor and Welfare found that 70% of general hospitals in Japan are currently operating at a loss.

Causes identified included rising prices and labor costs. Acute care hospitals that require large staff and high quantities of medical supplies for surgical procedures, especially, were struggling financially.

The survey findings will serve as the basis for the government's medical fee adjustments. They will guide the schedule for "revisions to medical payments" from FY2026.

Wide Gap in Profitability

In Japan, medical fees are paid through taxes, insurance premiums, and patient copayments. Medical institutions are divided into two tiers: "hospitals" with 20 or more beds, and "clinics" with 0 to 19 beds. Overall, clinics remain profitable, although their profit margins have shrunk.

Medical resources, including human and financial resources, are limited. Therefore, the top priority is to provide focused support to medical institutions that play a role in local emergency care and collaborate with home medical care and nursing care providers. Whether they are hospitals or clinics, such services are becoming increasingly important due to Japan's aging population.

Nevertheless, regarding schedule revisions, the remuneration system first needs more clarity. Otherwise, it cannot improve the protection of patients' health and lives.

*Directors of national university hospitals hold a joint press conference in Chiyoda Ward, Tokyo.*

Gap in Profit Margins

The survey results revealed a wide gap in average profit margins per facility. For general hospitals, that margin was a -7.3%. However, clinics run by medical corporations were, on average, in the black by 4.8%. Meanwhile, privately run clinics were in the black by 28.8%.

One reason for hospitals' deteriorating business results is that their medical services are provided at fixed prices. However, rising labor costs and supply prices cannot be passed on to patients. Clearly, further management efforts are necessary. However, revisions to compensation levels will likely be required to address the current difficulty in managing costs.

The government has earmarked ¥534.1 billion JPY ($3.43 billion USD) in its FY2024 supplemental budget as emergency support for hospitals, clinics, insurance pharmacies, and other facilities. Prime Minister Sanae Takaichi explained that revising the remuneration levels will "bring forward the effects" of the government's broader plan.

Population Shifts

However, the problems will not be solved simply by haphazardly providing support to medical institutions. In some regions, the population is declining, and the number of patients is decreasing. Meanwhile, the age structure is also changing, but medical departments have not been changing accordingly. Hospital reorganizations, too, have lagged.

Revisions to compensation should therefore prioritize medical institutions that are struggling, despite fulfilling essential roles in the community. But at the same time, they should also encourage restructuring.

One idea worth further evaluating is more efficient cooperation between large hospitals where patients are frequently taken by ambulance, and small and medium-sized hospitals that take in patients after that initial response.

Also, some clinics have signed agreements with local governments to provide medical care in the event of new infectious disease outbreaks. There should be ways to evaluate their needs and efficiency.

(Read the editorial in Japanese.)

Author: Editorial Board, The Sankei Shimbun