Accepted Manuscript What would be a better strategy for national university hospital management? Hae-Wol Cho, PhD, Editor-in-chief, Professor Emeritus, Chaeshin Chu, PhD, Managing Editor PII:
S2210-9099(16)30070-4
DOI:
10.1016/j.phrp.2016.05.003
Reference:
PHRP 349
To appear in:
Osong Public Health and Research Perspectives
Please cite this article as: Cho H-W, Chu C, What would be a better strategy for national university hospital management?, Osong Public Health And Research Perspectives (2016), doi: 10.1016/ j.phrp.2016.05.003. This is a PDF file of an unedited manuscript that has been accepted for publication. As a service to our customers we are providing this early version of the manuscript. The manuscript will undergo copyediting, typesetting, and review of the resulting proof before it is published in its final form. Please note that during the production process errors may be discovered which could affect the content, and all legal disclaimers that apply to the journal pertain.
ACCEPTED MANUSCRIPT What would be a better strategy for national university hospital management? Hae-Wol Choa,b,*, Chaeshin Chua,*
National university hospitals are not different from private ones as the public role played by
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the former is not clearly defined in Korea. They have to compete with other general hospitals in the same region [1]. The introduction of nation-wide Korea Express Train (KTX) has made accessibility to medical institutions in the metropolitan area increased since 2003. This has resulted in increased patients in big hospitals in Seoul from other regions. As national
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university hospitals in these regions strive to prevent the loss of local patients, the competition among regions to secure patients is becoming more intense [1].
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Hospital profitability refers to successful business performance achieved by treating patients as well as carrying out other business activities during a fiscal year. Hospitals are different from general companies in that their unique characteristic of treating patients emphasizes their public social responsibility as much as their financial output. Thus, they must measure their business performance based not only on financials but also on qualitative features of services such as social benefits [2-4]. However, as it is difficult to define or
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measure the output of medical services, a profitability index is most commonly used as the tool to measure hospital business performance [5]. Hospital revenues are achieved through capital and finance management and are largely measured by the relationship between invested capital and profits, or medical
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revenues and profits [3]. Many studies have analyzed the profitability of hospitals. A study by Whitcomb et al. [4] used return on assets as the hospital profitability index, while Becker et al.
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[5] used net income to stockholder equity, net profit to total assets, and operating margin. A study by Coyne et al. [6] used net profit to total assets, normal profit to total assets, and operating margin as the index, whereas Hibbard et al. [7] used operating margin and net profit to gross revenues. Griffith et al. [8] argued that operating margin and net profit to gross revenues are appropriate as profitability indices for Korean hospitals since such measurements compare medical revenues and expenses related to genuine medical practice and are most similar to the concept of hospital cost, take surplus and deficit into account by reflecting final business performance of a hospital, and include all details of the hospital. It is not easy to establish a theory that can deductively explain what factors influence hospital profitability. Therefore, inductive analysis is considered the best method to depict the 1
ACCEPTED MANUSCRIPT determinants of profitability [2]. Overseas studies that demonstrated the determinants of profitability using these hospitals features were conducted by Cleverley [9], Trinh & O’Connor [10], Bolon [11], and Younis et al. [12]. Since the 1990s, relevant studies in Korea have been actively conducted as the competition in the health care market has intensified. These studies analyzed financial data from specific years for these hospitals and thus
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did not accurately present a time-series management state. There is also almost no research that analyzed the finances of national university hospitals. Based on an awareness of this, this study aims to reflect the reality of the medical community and find strategic alternatives by analyzing the business performance of national university hospitals using data from the four
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years from 2009 to 2012.
In the current issue of Osong Public Health and Research Perspectives, a study
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aimed to provide information for decision making of the managers and the staffs of national university hospitals through the analyzing financial statement. The author analyzed the finances of national university hospitals by using the report of final accounts announced by each hospital from 2009 to 2012 as baseline data. The research subjects were 10 national university hospitals [13].
The author has showed that most hospitals (except for a few) had medical expenses
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exceeding their medical revenues, resulting in a net deficit; however, there were significant differences amongst the hospitals. The result of adjustments based on a standard size of 100 beds showed that most hospitals had medical revenue deficits, and there were significant differences between hospitals in terms of medical revenues and medical costs.
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The author has concluded that whether an expansion of national university hospitals is not always beneficial for increasing net revenues, and suggested to establish a
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differentiation strategy to increase profitability, by securing financial soundness. The author presents an important perspective in managing national university hospitals in Korea. We expect a further study applied to other public hospitals
*Corresponding authors Hae-Wol Cho, PhD, Editor-in-chief, Professor Emeritus a
Osong Public Health and Research Perspectives 2
ACCEPTED MANUSCRIPT Korea Centers for Disease Control and Prevention, Cheongju, Korea, b
College of Medicine, Eulji University, Daejeon, Korea
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E-mail:
[email protected]
Chaeshin Chu, PhD, Managing Editor a
Osong Public Health and Research Perspectives
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Korea Centers for Disease Control and Prevention, Cheongju, Korea
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E-mail:
[email protected]
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