Japan Faces ‘Worst

News Highlights

Concerns are being reported about a surge in bankruptcies across almost all industries, including medical institutions, due to the impact of soaring naphtha prices. Specifically for medical institutions, a situation where ‘the more injections are given, the greater the deficit’ is being pointed out, along with figures showing a 26% increase in bankruptcies within the painting contracting industry. This situation highlights the importance of business succession and M&A consultations at an early stage, as it leads to a decline in operating profit margins and a worsening current ratio. From the perspective of releasing personal guarantees and maintaining regional healthcare, consulting with experts while the business is still healthy is essential.

Perspective from M&A Medical Editorial Department

The situation described in the Daily Shincho article, where ‘the more injections are given, the greater the deficit,’ exposes the fragility of the cost structure in healthcare institution management. The surge in naphtha prices directly impacts the procurement costs of pharmaceuticals and medical supplies, and the portion not covered by medical fee revisions squeezes operating profits. For example, assuming a medium-sized hospital bears annual pharmaceutical costs of 100 million yen, a 10% increase in naphtha prices would result in an additional cost of 10 million yen, which could plausibly lead to consecutive deficits. The 26% increase in bankruptcy rates in the painting contracting industry also suggests a ripple effect on other sectors, and medical institutions are no exception. In this environment, negotiating the release of the hospital director’s personal guarantees is only possible through M&A while the business is still financially sound. It is a critical juncture where considering succession schemes to transfer patient bases and staff employment to the next operator, rather than closing down, can lead to the maintenance of regional healthcare and the securing of related employment.

Points Raised by This News

• The structural problem of soaring naphtha prices increasing costs for pharmaceuticals and medical supplies, thereby worsening operating profit margins.
• The situation of ‘losing more money the more injections are given’ suggests a reality where rising costs cannot be absorbed by medical fees alone.
• The 26% increase in bankruptcies in the painting contracting industry indicates the overall economic strain, as seen from the impact on industries other than medical institutions.
• The necessity of considering M&A before the business deterioration becomes significant and while there is still room to negotiate the release of personal guarantees.

Practical Questions Arising from This News

• Specifically, which pharmaceuticals and medical supplies are most affected by the rise in naphtha prices in terms of cost?
• Are there revenue streams other than medical fees or cost reduction measures that can specifically improve the situation of ‘losing more money the more injections are given’?
• In succession schemes aimed at preserving regional healthcare, how can the transfer of patient bases and staff employment be practically managed?

If You Feel ‘Should I Consult Too?’

If your institution has experienced a decline in operating profit margins or consecutive deficits for several months to over a year due to increased procurement costs for pharmaceuticals and medical supplies, or if you see signs of this happening, it is time to consider consulting with an expert. Especially if you are considering the future release of personal guarantees or wish to continue contributing to regional healthcare, exploring M&A or business succession options at an early stage, before the business situation further deteriorates, will lead to a more favorable outcome.

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