After becoming an iaa the nhos earnings rose steadily

After becoming an IAA, the NHO’s earnings rose steadily, a result of a higher
contribution to meet local needs (including emergency care) and provision of
better nursing care, reflecting the higher nurse–patient ratios. The number of
hospitals with a deficit fell to 25 in 2011. By reducing facility and construction
investments and such like, the growth rate of revenues exceeded that of expen-
ditures, resulting in a shift to a profitable structure: recurrent profits climbed
from ¥190 million in FY2004, the first year after IAA conversion, to ¥58.3 bil-
lion in FY2010 (figure 9.3).
8

National Hospital Reform in Japan: Results and Challenges 159
Universal Health Coverage for Inclusive and Sustainable Development
Although financial transfers from the MHLW to the NHO have continued in
the form of “Management Expense Grants,” these grants have been made to fund
the employees’ retirement reserve to cover for the period prior to the transfer,
for the proportion of pension benefits that were funded from the old Civil
Servant Pension scheme, and for project-based subsidies for defined clinical
activities. These grants declined from 7.8 percent of total operating income in
2004 to 4.7 percent in 2011. By 2012, none had been allocated in the form of
project-based subsidies. Still, the NHO continues to make transfers to the gov-
ernment’s National Pension Fund in the form of partial payment of the employ-
ees’ basic pension contributions that would have been covered by the govern-
ment in private organizations, and payment from the reserves that have been
evaluated as being excessive by the government.
9
Inpatient Profitability
By upgrading inpatient medical services, the fees for inpatient medical proce-
dures have been raised, thereby improving profitability. An influx of new inpa-
tients arose from new community medical service cooperation offices, which
lifted rates of referral and reverse referral (the fee paid to the hospital for refer-
ring back the patient). In 2007, the increase in revenues due to the increased
work intensity (increased number of operations, etc.) and higher nurse–patient
ratio exceeded the accompanying increase in personnel costs, also boosting
Figure 9.3 Trends in Earnings and Expenditures of NHOs
650
700
750
800
850
900
950
2004 2005 2006 2007 2008 2009 2010 2011
Amount, ¥ billion
0
1
2
3
4
5
6
7
Percentage of profits
Year
Earnings Expenditures Profit ratio
Source: NHO annual financial statements.

160 National Hospital Reform in Japan: Results and Challenges
Universal Health Coverage for Inclusive and Sustainable Development
profitability. In 2011, profitability
10
was 27 percent higher than in 2007 for for-
mer national hospitals (350–499 beds) and former sanatoriums with general
beds.
Long-Term Borrowing
Management improvements have reduced long-term borrowing. It was ¥747.1