Former Vice Superintendent of NTU Hospital
Taiwan’s Hospitals Seeking Revenue Outside of Healthcare to Make Up for Losses under NHI
While Taiwan is admired for its universal health insurance coverage, medical centers find it difficult to remain profitable, so they seek revenue elsewhere, using food courts, convenience stores and parking lots to balance the fiscal gaps from insufficient NHI reimbursements.
Taiwan’s Hospitals Seeking Revenue Outside of Healthcare to Make Up for Losses under NHIBy Ming-chiu Wang
Editors' Note: This article is translated from an op-ed from Opinion@CommonWealth
The National Health Insurance Administration (NHIA) recently published the financial statements of 148 hospitals across Taiwan with a total annual income of more than NT$400 million.
The NHIA reported that the Linkou Branch of Chang Gung Memorial Hospital posted a surplus of NT$730 million from food courts, parking lots and other non-healthcare income, far exceeding its balance of only around NT$400 million stemming from its core healthcare business. Coming in behind the Linkou Branch were the Kaohsiung Branch of the same hospital with a surplus of NT$360 million from non-healthcare business, China Medical University Hospital with NT$295 million, National Taiwan University Hospital with NT$290 million, and Taipei Veterans General Hospital with NT$118 million.
What this news did not explicitly mention is that, although National Cheng Kung University Hospital generated a surplus of NT$945 million with non-healthcare business, its medicine and healthcare activities incurred a NT$146 million shortfall. Kaohsiung Veterans General Hospital reported a surplus of NT$555 million from non-healthcare business, while its medicine and healthcare activities posted a budget gap of NT$379 million. These two major medical centers actually depend on non-healthcare income to sustain their original core services in medicine and healthcare.
Some people might wonder if these leading hospitals truly make so little money from their traditional healthcare business. I myself doubt that several hospitals that are even larger than the hospital where I work earn so little with their core business in healthcare. Or is this professional accounting problem so complex and impossible to comprehend that it’s better if we don’t investigate it any further?
Why are food courts and parking lots more profitable than traditional healthcare services? Food courts and parking lots generate more money than healthcare services for three simple reasons.
First, these miscellaneous business activities have high profit margins. Just by subletting property to a tenant, the hospital will be able to make a large amount of money.
Second, since hospitals are frequented by large crowds of people every day, they constitute a very stable source of customers. Crowds of people mean tons of money.
Third, profits in the core healthcare business are so low because the NHI awards few payment points [for certain treatment items], and those values are often discounted, deleted or rejected. Gains from healthcare services are are therefore quite limited.
Profits in the food and beverage industry are already high. Food and beverage establishments that are based in hospitals pay high rents, so they set high prices, which in turn results in high profits. They can do this because their customers are either patients, who are already physically unwell, or patients’ relatives and friends, who are often exhausted and not in the mood to run around comparing prices.
I am sure that anyone who has been to these large hospitals has witnessed the flood of people consulting doctors or visiting hospitalized friends or relatives there. These people won’t haggle over prices; they only wish to consult a doctor and get a meal in a convenient and comfortable setting. Therefore, the parking lots that people use when visiting the hospital, the food courts where people relax and eat after seeing the doctor will of course make a fortune. Haven’t you noticed that all the retail and food court spaces affiliated with each medical center have become hot commodities for various related businesses?
Actually, not only food courts but even humble convenience stores [are very lucrative]. The convenience stores inside medical centers are very likely the most profitable ones amid the several thousand convenience store chain outlets across Taiwan. I still remember how the foreign boss of one convenience store franchise wondered aloud during a visit to Taiwan how one of their franchises was able to obtain a prime location with such a high revenue.
Is Mass Market Reliance Normal for Hospitals?
In fact, given the overall insufficient [NHI] reimbursements, medical centers must rely on every pill, every test reagent, every laboratory test, and every examination item in order to profit from their healthcare services. In other words, medical centers are entirely dependent on high patient volume, which means high procurement quantities that can bring down costs and create economies of scale, as well as their income derived from the considerable amount of money patients are willing to spend on self-paid medical supplies, drugs, and hospital room upgrades.
Given the slim profit margins that rely greatly on patient volume, hospitals naturally came up with the idea of converting the crowds inundating the premises into a flood of cash by renting their space to food courts and parking lots.
Many foreign nationals are amazed at the enormous numbers of people seeking medical attention at outpatient clinics and emergency rooms or being hospitalized at medical centers. It goes without saying that most hospitals abroad don't have retail outlets or food courts; many even guard their entrances to restrict access.
Do so many people in Taiwan truly need to visit a medical center to consult a doctor?
If Taiwan’s NHI system wasn’t so wasteful, offering “all-you-can-eat” plans for such low co-payments as long as you have paid your premium, would so many people still be seeing doctors at major medical centers?
Food Court, Parking Lot Income Should Subsidize Healthcare Staff Salaries
March 14 marked the anniversary of the first reported case of the terrifying SARS [severe acute respiratory syndrome] epidemic that hit Taiwan 15 years ago. Most people likely still remember this. For half a year, beginning from March of 2003, few people in Taiwan would even think of going to a hospital unless they were seriously ill.
During that period, not only did the number of patients in medical centers drop drastically, the number of customers at hospital-based food courts declined sharply as well. Revenue was so low that store owners were almost unable to pay rent to the hospitals. They also used various approaches to urge hospitals to lower their rent.
During this half-year period when no one wanted to go to the hospital, when the number of outpatient visits at medical centers in particular declined and their durations became shorter, general health did not deteriorate at all. Nor did the mortality rate rise. Since people were afraid of contracting SARS, they even practiced healthier habits.
For sure, overcrowded hospitals aren’t a good thing. But it is worse if food courts in hospitals generate a higher surplus than the hospitals do with their healthcare services. It is utter irony that the NHIA, which, after creating wasteful healthcare spending, then comes up with a global budget system that keeps discounting payment point values, telling the public that most large hospitals in Taiwan make more money from non-healthcare business than from medical services.
Shouldn’t a portion of the flood of cash brought in by the crowds frequenting food courts and parking lots be utilized for the salaries and social welfare of medical personnel? Of course it should. After all, the “flood of cash” from non-healthcare income is owed to the sweat and tears of our medical staff. If it wasn't for them, there wouldn’t be so many people visiting the hospitals to eat, drink and park their cars, right?
Without the healthcare services that our medical personnel provide, the hospitals would be little more than buildings s containing machines and equipment. Where would the crowds come from? Dear hospital bosses: Don’t keep thinking only about making big bucks. The least you could do is take a portion of the surplus from these non-healthcare-related activities that are intricately linked to the income from medical services, and use it to attract healthcare colleagues with better welfare.
The author is the former vice superintendent of National Taiwan University Hospital.
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