Hospital Management and Public Health Role of National Hospitals after Transformation into Independent Administrative Agencies

Abstract

The development of medical care, technological advances, and the ageing of society have led to rising medical costs. As a result, there is a demand to improve the efficiency of healthcare delivery systems, including public healthcare institutions, in order to ensure the sustainability of healthcare functions. In 2004, as part of national civil service reform in Japan, national hospitals were merged in order to form the National Hospital Organization (NHO). The NHO used new public management methods and was required to be self-financing and to maintain critical functions under a five-year management plan. The objective of this study was to examine whether the NHO was able to maintain its key function in the national infrastructure in terms of management. An analysis of the business conditions of the NHO was performed based on the financial statements from FY 2004 to FY 2018 using evaluation indexes. In the first and second periods, the NHO achieved its targeted management improvements. However, since FY 2014, even with the utmost restrictions on capital investment, the profits have not increased, and the free cash flow has been negative. Our results suggest that further organizational reforms are needed in order to sustain the NHO infrastructure in the long term and to withstand health crisis management during periods such as the COVID-19 pandemic.