TOKYO REPORT: Public Hospitals in Japan under Severe Financial Strain

Tokyo, Nov. 10 (Jiji Press)–Public hospitals operated by local governments across Japan are facing increasingly severe financial pressure. Fiscal 2024 results compiled by the internal affairs ministry show a record combined ordinary loss of 395.2 billion yen, squeezed by higher personnel costs and rising prices. More than 80 pct of facilities posted red ink. As many of the hospitals provide essential but unprofitable services in depopulated areas, local governments and hospital operators are calling for stronger support to sustain regional health care systems. In fiscal 2024, which ended in March this year, revenue from core medical services at 844 public hospitals nationwide rose 2.3 pct to 4,682.1 billion yen, driven by higher inpatient numbers. At the same time, however, medical service expenses climbed 4.2 pct to 5,723.8 billion yen. “Costs are rising faster than revenues,” an internal affairs ministry official said. Staff compensation, accounting for about half of the total medical service costs, increased 5.0 pct to 2,866.2 billion yen, reflecting wage gains across the public and private sectors. Pay for public hospital employees is set on the basis of recommendations from the National Personnel Authority and local government personnel commissions, in line with the national agency’s guidance. In addition, expenditures on materials, including pharmaceuticals, rose 3.1 pct amid broader inflation. Regulated medical service fees, a cornerstone of hospital finances, are revised every two years in principle. Hospitals therefore cannot quickly pass rising costs on to patients. Consequently, public hospitals’ combined ordinary loss doubled year on year to 395.2 billion yen in fiscal 2024. Losses were recorded at 703 facilities, or 83.3 pct of the total, the highest level on record. From fiscal 2020 to 2022, amid the COVID-19 pandemic, public hospitals reported profits, largely due to national subsidies to help secure hospital beds. With that support now scaled back, operating conditions have deteriorated rapidly. “It’s now difficult to respond through management efforts alone,” Fukushima Governor Masao Uchibori said. Public hospitals provide services that private institutions often cannot, from delivering care in remote areas to offering emergency treatment and responding to infectious disease outbreaks. Roughly one-third of Japan’s 844 public hospitals are located in municipalities with fewer than 30,000 residents, making them a vital part of regional health care. Izumi Mochizuki, who heads the Japan Municipal Hospital Association and Hachimantai municipal hospital in Iwate Prefecture, expresses a sense of urgency on the issue. “Some public hospitals may struggle to receive local government support. If this continues, local residents may no longer have adequate access to medical care,” he said. In fiscal 2025, which began in April, the internal affairs ministry expanded support for public hospitals by introducing a new class of hospital business bonds to bolster cash flow for institutions undertaking business reforms, such as reducing bed counts. It also revised the unit cost parameters used to calculate tax revenue allocations. But the key to any improvement is still raising medical service fees, which make up the bulk of hospital revenue. The association and other stakeholders are calling for a substantial increase, of more than 10 pct, in the fiscal 2026 revision, but securing the necessary funding will be challenging. All eyes are on year-end negotiations between the health ministry and the Finance Ministry. END [Copyright The Jiji Press, Ltd.]