Hospital Management Faces Difficulties Despite Positive Revisions to Medical Fees (Page 2) – Nikkei Medical

News Highlights

Although the medical fee revision for fiscal year 2024 resulted in a positive adjustment, hospital management continues to face severe challenges. The revision rate of +0.86%, with an increase of only 0.72% in the base fee, and considering the -0.16% for home medical care and long-term care fees and -0.04% for drug and material price revisions, which will be carried over to subsequent years, results in a limited actual increase. Especially with ongoing increases in labor costs and general price inflation, many hospitals may face management difficulties with this revision rate. Leveraging economies of scale and tax schemes is becoming increasingly important in future management and succession strategies.

Perspective from M&A Medical Editorial Department

Despite the superficial positive numbers of this medical fee revision, it may prove to be a case of “preaching to deaf ears” for many hospitals. The base revision rate of 0.72% may only result in an annual revenue increase of tens of millions of yen for a hospital with approximately 200 beds. However, considering the soaring labor costs, the negative impact of -0.16% for home medical care and long-term care fees (which could lead to a deficit of several hundred million yen in some cases), and the rising costs of medical supplies, it is difficult to achieve substantial profit improvement. In particular, for regional acute care and chronic care hospitals, it is conceivable that management sustainability will be difficult to achieve with this revision alone. Under these circumstances, pursuing “economies of scale” through group formation or M&A, including the utilization of tax schemes such as maintaining facility standards, dispersing the burden of capital investment, and transitioning to a social medical corporation, will likely emerge as a more realistic and urgent management and succession strategy.

Points Highlighted by This News

• The base revision rate of 0.72% is insufficient to cover price inflation and increased labor costs, raising concerns about actual profit decline in many hospitals.
• The -0.16% adjustment for home medical care and long-term care fees, which will be carried over to subsequent years, could be a factor pressuring hospital management.
• Joining a group or engaging in M&A to benefit from economies of scale can be an effective measure for maintaining facility standards and dispersing capital investment burdens.
• The utilization of tax schemes, including the transition to a specific medical corporation or social medical corporation, holds the key to management and succession strategies.

Practical Questions Arising from This News

• How specifically will our hospital’s revenue be affected by this revision?
• What are the potential benefits and drawbacks of considering group formation or M&A?
• To what extent would the tax benefits of becoming a social medical corporation be effective in our hospital’s situation?

If You Feel “Should I Consult Too?”

Hospital managers who, despite the positive medical fee revision, do not expect substantial management improvement due to the impact of labor costs and price inflation, or who feel anxious about future management, should consult with experts. Particularly, if it is determined that continued operation as a standalone entity is difficult, business succession through M&A, enjoying economies of scale through group formation, and utilizing tax schemes such as becoming a social medical corporation can be effective options for enhancing your hospital’s sustainability. Early consideration may lead to more favorable terms for succession or management improvement.

M&A Medical (CentralMedience Inc.) is an M&A support institution certified by the Small and Medium Enterprise Agency, providing support for the business succession of medical corporations, hospitals, and clinics on a complete success fee basis. Consultations are accepted with strict confidentiality. Free consultations are available here.