“70% of Hospitals Are Actually Operating at a Loss”: Why Highly Educated Doctors Fail at Management – Gendai Business

News Highlights

According to an article in Gendai Business, approximately 70% of hospitals run by highly educated doctors are operating at a loss. Reasons cited include the fact that doctors are not necessarily skilled in management, and the necessity of maintaining unprofitable departments due to a sense of mission to sustain regional healthcare. It is suggested that early consultation with experts, negotiation for the release of personal guarantees, and choosing business succession over closure can lead to the continuation of regional healthcare and maximization of benefits for stakeholders.

Perspective from M&A Medical Editorial Department

The shocking figure of “70% of hospitals operating at a loss” goes beyond a superficial issue of differing management capabilities. It is presumed that many cases, particularly in small to medium-sized hospitals responsible for regional healthcare, involve doctors with advanced specialized knowledge facing management challenges such as the introduction of the latest medical equipment, the complexity of the medical fee system, and rising labor costs, leading them into a dilemma where they cannot concentrate on their core mission of providing medical care. For example, there is a case where an acute care hospital in a regional city was forced to limit its acceptance of emergency patients due to a shortage of doctors, resulting in a significant decrease in medical revenue. In such circumstances, by consulting with specialists like M&A intermediaries early on and considering business succession schemes while the hospital is still healthy, the possibility of maintaining the healthcare provision system for local residents while reducing the personal debt burden of the hospital director increases. Business succession from the perspective of “continuing regional healthcare,” rather than simply “eliminating deficits,” is what is now required.

Points Raised by This News

• The disconnect between doctors’ specialized expertise and their management skills has become a structural problem leading to deficits in hospital management.
• The mission to sustain regional healthcare forces the maintenance of unprofitable departments, pressuring management.
• Early consultation with M&A experts broadens the possibilities for reducing the hospital director’s personal debt risk and continuing regional healthcare.
• Negotiating the “release of personal guarantees” in business succession is important to conduct while the hospital is still healthy.

Practical Questions Arising from This News

• Before my own hospital falls into deficit, what specific indicators should I use to grasp its management status?
• When proceeding with M&A by releasing personal guarantees, what conditions and negotiations are necessary?
• In a situation of lack of successor, what are the concrete steps to achieve business succession without closing down?

If You Feel “Should I Consult Too?”

If you are a manager or successor who feels that the news “70% of hospitals are operating at a loss” is not just about others, please first check your own hospital’s “operating profit margin” and “current ratio.” If these figures are on a downward trend or are expected to worsen in the future, early consultation with an expert is essential. In particular, M&A while personal joint guarantees from the hospital director remain narrows the room for negotiation. Before reaching the option of closure, it is well worth consulting with an M&A intermediary to see if it is possible to balance the continuation of regional healthcare through succession with the reduction of your own management risks.

M&A Medical (CentralMedience Inc.) supports the business succession of medical corporations, hospitals, and clinics on a full success fee basis as a certified M&A support institution by the Small and Medium Enterprise Agency. We handle consultations with strict confidentiality. Free consultation here