Abstract
Considering the variety of stakeholders surrounding hospitals, hospital financial distress should be understood as a social issue, rather than just a matter involving the hospital owners. The present study aimed to assess Japanese hospital insolvency and related factors based on a nationwide financial dataset, and to identify indicators of the risk of insolvency. The legal financial reports used included a balance sheet and a profit-and-loss statement of hospitals owned by healthcare corporations, representing about 70% of all Japanese hospitals. This case–control study with descriptive analyses was conducted to clarify the financial status of healthcare corporations and to assess associations between specific factors and insolvency. Insolvency was found in 5.9% of healthcare corporations in 2016. Insolvency was significantly associated with operational income per sales (odds ratio, 0.16), and both short- and long-term borrowings per sales (odds ratios: 1.46 and 1.22 in this order). The present study found that 5.9% of Japanese healthcare corporations were insolvent, and hospital profitability and borrowing (both short- and long-term) could be key factors related to preventing hospital insolvency in Japan. To maintain sustainable healthcare services by hospitals, decision makers should consider the risk of insolvency, and balance the amount of borrowings against sales.
Highlights
One of the major concerns in recent healthcare management is financial distress among hospitals and subsequent unwilling hospital closure, which affects a wide range of stakeholders, including patients
As the proximate financial distress to the hospital closure, insolvency is thought to be suitable to prevent hospital closures before they happen. ( bankruptcy exists between hospital insolvency and closure, studies of bankruptcy, as well as hospital closure, tend to be difficult because this state cannot be defined from financial data (Holmes et al 2017).) even though scientific research is expected to facilitate more effective financial management of hospitals, some Japanese hospitals have gone into financial distress with incredible levels of borrowing from banks (e.g., a Japanese hospital owned by a healthcare corporation went into bankruptcy with more than 40 million dollars in borrowings in 2019 (Teikoku Data Bank 2020))
The present study found that 5.9% of Japanese healthcare corporations were insolvent, and hospital profitability and borrowing could be key factors related to preventing hospital insolvency in Japan
Summary
One of the major concerns in recent healthcare management is financial distress among hospitals and subsequent unwilling hospital closure, which affects a wide range of stakeholders, including patients. The index of financial distress for hospitals has recently been introduced as a good measure to understand the financial status of a hospital, comprising: (1) unprofitability; (2) declining equity; (3) insolvency; and (4) closure (Holmes et al 2017). Along with this index, as the proximate financial distress to the hospital closure, insolvency is thought to be suitable to prevent hospital closures before they happen. As the proximate financial distress to the hospital closure, insolvency is thought to be suitable to prevent hospital closures before they happen. ( bankruptcy exists between hospital insolvency and closure, studies of bankruptcy, as well as hospital closure, tend to be difficult because this state cannot be defined from financial data (Holmes et al 2017).) even though scientific research is expected to facilitate more effective financial management of hospitals, some Japanese hospitals have gone into financial distress with incredible levels of borrowing from banks (e.g., a Japanese hospital owned by a healthcare corporation went into bankruptcy with more than 40 million dollars in borrowings in 2019 (Teikoku Data Bank 2020))
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