Your browser does not support the NLM PubReader view.

Go to this page to see a list of supporting browsers.

An Analysis of the Financial Performance of Korean Medicine Hospitals in Korea: Focusing on Financial Ratios and Investment Efficiency

Article information

J Korean Med. 2020;41(1):1-10
Publication date (electronic) : 2020 March 9
doi : https://doi.org/10.13048/jkm.20001
WonYoung Choi1orcid_icon, Byungmook Lim2,orcid_icon
1Department of Korean Medicine, School of Korean Medicine, Pusan National University
2Division of Humanities and Social Medicine, School of Korean Medicine, Pusan National University
Correspondence to: 임병묵 경상남도 양산시 물금읍 부산대학로 49 부산대학교 한의학전문대학원 316호 인문사회의학부, Tel: +82-51-510-8453, Fax: +82-51-510-8446, E-mail: limb@pusan.ac.kr
Received 2019 September 2; Revised 2019 November 8; Accepted 2019 December 10.

Abstract

Objectives

This study investigated the financial performance of Korean Medicine hospitals in Korea in order to understand the current status of hospital management and improve its efficiency.

Methods

Financial statements of 24 medical corporations, 19 juridical foundations and 18 school hospitals from 2016 to 2018 were obtained from the secondary data published by the Health Insurance Review and Assessment Service, the National Tax Service and the Korea Advancing Schools Foundation. Financial performance was measured on 6 dimensions: liquidity, profitability, activity, growth, cost and productivity (investment efficiency) by analyzing 8 financial indicators: Liability to Total Assets, Net Profit to Patient Service Revenues, Total Assets Turnover, Growth Rate of Patient Service Revenues, Operating Expenses to Patient Service Revenues, Value Added to Patient Service Revenues, Value Added to Total Assets, and Value Added to Personnel Expenses.

Results

Korean Medicine hospitals showed lower Liability to Total Assets, Liquidity and Value Added to Total Assets than Western Medicine hospitals did. They also showed higher Value Added to Patient Service Revenues and Value Added to Personnel Expenses than Western Medicine hospitals did. The net profit decreased significantly (−50.8%) in 2018 whereas Patient Service Revenues increased (6.9%) for the same period due to Operating Expenses increase and Non-Operating loss.

Conclusions

These findings suggest that the Korean Medicine hospital sector in Korea needs to improve liquidity and financial structure and to enhance profitability by reducing Personnel Expenses and generating Non-operating revenues in order to improve its investment efficiency and competitiveness.

Keywords: Korean Medicine; Financial Management; Hospital Management; Financial Performance; Investments; Efficiency

Financial Indicators

Characteristics of Analyzed Korean Medicine Hospitals

Balance Sheet of Korean Medicine Hospitals (per 100 beds, Fiscal Year 2018)

Income Statement of Korean Medicine Hospitals (per 100 beds, Fiscal Year 2018)

Financial Ratio Analysis of Korean Medicine Hospitals (Fiscal Year 2018)

Investment Efficiency Analysis of Korean Medicine Hospitals (Fiscal Year 2018)

References

1. Ministry of Health and Welfare. Health and Welfare Statistical Yearbook 2018 [2018 Bogŭnbokji Tonggye yŏnbo]. (Korean). 2018.
2. Health Insurance Review & Assessment Service. 2008~2017 Medical Expenses Statistical Index Jinryobi Tonggyejipyo. (Korean). 2008~2017.
3. Korea Institute of Oriental Medicine. 2018. Korean Medicine Industry Survey-Statistics 2018 Hanuiyak Sanŏp Siltaejosa-Tonggyejip. (Korean). 2018.
4. Ministry of Health and Welfare. 2017. Korean Herbal Medicine Consumption Survey-Basic Report Hanyak Sobi Siltae Josa-Gicho Bogosŏ. (Korean). 2018.
5. Kim JH. Financial Analysis of Korean Medicine Hospital of Medical Corporation in Korea. Doctoral thesis Wonkwang University; 2017.
6. Lee WC. Financial Ratio Analysis of Oriental Medicine Hospital affiliated with Universities. Journal of Society of Preventive Korean Medicine 2014;18(1):43–52.
7. Lee WC. The Factors Affecting the Profitability of Oriental Medicine Hospital of University in Korea. Asia-Pacific Journal of Business and Venturing and Entrepreneurship 2014;9(2):109–116.
8. Lee WC. Relations between the Financial Ratios and the Management Performance in Oriental Medicine Hospital. Asia-Pacific Journal of Business and Venturing and Entrepreneurship 2012;7(2):35–44.
9. Lee WC, Lee SD, Kim JH. A Profitability Analysis of Sixteen Oriental Medicine Hospitals. Journal of Society of Preventive Korean Medicine 2011;15(2):145–155.
10. Kwak SH. The Study on the Determinants of the Profitability in Oriental Medical Hospitals. Doctoral thesis Daejeon University; 2009.
11. Kong TH. Financial Structure of Oriental Medicine Hospitals in Korea. Journal of Dong-Busan College 2012;31:449–466.
12. Ministry of Health and Welfare. ‘Rules on Account Standards of Medical Institutions’ and ‘Financial Statement Guideline’ [Uiryogiguan Hoigyegijun Gyuchik] [Jaemujaepyo Sebujaksŏng Bangbŏp]. (Korean).
13. Korea Health Industry Development Institute. Statistics for Hospital Management 2016 2016 Byŏngwon Gyŏngyŏng Bunsŏk. (Korean). 2017.
14. The Bank of Korea. Financial Statement Analysis for 2017 2017 Giŏp Gyŏngyŏng Bunsŏk. (Korean). 2018. p. 22–45.
15. Kang TL. Financial Characteristics of Oriental Hospitals. Journal of Society of Preventive Korean Medicine 1997;1(1):42–47.

Article information Continued

Copyright © 2020 The Society of Korean Medicine all rights reserved

Table 1

Financial Indicators

Financial Indicator Definition
Financial Ratio Analysis
1. Liquidity Liability to Total Assets (Current Liabilities + Non-Current Liabilities) ÷ Total Assets × 100
2. Profitability Net Profit to Patient Service Revenues Net Profit ÷ Patient Service Revenues × 100
3. Activity Total Assets Turnover Patient Service Revenues ÷ Total Assets
4. Growth Growth Rate of Patient Service Revenues (Patient Service Revenues of This Year - Patient Service Revenues of Previous Year) ÷ Patient Service Revenues of Previous Year × 100
5. Cost Operating Expenses to Patient Service Revenues Operating Expenses ÷ Patient Service Revenues × 100
Investment Efficiency Analysis
Value Added Patient Service Revenues – (Material Expenses + Stationaries + Power Utilities + Outsourcing)
Value Added to Patient Service Revenues Value Added ÷ Patient Service Revenues × 100
Value Added to Total Assets Value Added ÷ Total Assets × 100
Value Added to Personnel Expenses Value Added ÷ Salaries × 100

Table 2

Characteristics of Analyzed Korean Medicine Hospitals

(Unit: Number of Hospitals)
Number of Beds
160+ 120~159 80~119 40~79 0~40
Region
 Metropolitans 28 - 2 9 9 8
 Other Cities 32 - - 12 16 4
 Rural Area 1 - - - 1 -
 Total 61 - 2 21 26 12
Ownership
 Government - - - - - -
 Consumer Cooperative - - - - - -
 School Foundation 18 - 1 10 7 -
 Juridical Foundation 19 - 1 6 8 4
 Medical Corporation 24 - - 5 11 8
 Individual - - - - - -
 Total 61 - 2 21 26 12

Table 3

Balance Sheet of Korean Medicine Hospitals (per 100 beds, Fiscal Year 2018)

(Unit: Korean million won)
Total Average Medical Corporation Juridical Foundation School Foundation p-Value
Number of Hospitals (Beds) 61(4,256) 24(1,340) 19(1,316) 18(1,600)
I. Current Assets 2,615 (21.9%) 3,865 (22.2%) 1,715 (22.9%) 1,900 (20.1%) 0.030
 1. Quick Assets 2,541 (21.2%) 3,785 (21.8%) 1,714 (22.9%) 1,758 (18.6%) 0.029
 2. Inventory Assets 74 (0.7%) 80 (0.5%) 1 (0.0%) 142 (1.5%) 0.000
II. Non-Current Assets 9,347 (78.1%) 13,531 (77.8%) 5,778 (77.1%) 7,535 (79.9%) 0.002
 1. Investment 775 (6.5%) 1,195 (6.9%) 942 (12.6%) 40 (0.4%) 0.000
 2. Tangible Assets 8,453 (70.7%) 12,298 (70.7%) 4,512 (60.2%) 7,486 (79.3%) 0.004
 3. Intangible Assets 51 (0.4%) 38 (0.2%) 106 (1.4%) 9 (0.1%) 0.000
 4. Other Non-Current Assets 68 (0.6%) 218 (2.9%) 0.000
Total Assets 11,962 (100.0%) 17,396 (100.0%) 7,493 (100.0%) 9,435 (100.0%) 0.001
I. Total Liabilities 6,521 (54.5%) 9,658 (55.5%) 5,229 (69.8%) 3,703 (39.2%) 0.000
 1. Current Liabilities 3,706 (31.0%) 5,036 (28.9%) 4,723 (63.0%) 860 (9.1%) 0.000
 2. Non-Current Liabilities 1,986 (16.6%) 4,182 (24.0%) 499 (6.7%) 627 (6.6%) 0.002
 3. Reserve Fund for Essential Business 196 (1.6%) 11 (0.1%) 7 (0.1%) 641 (6.8%) 0.000
 4. Medical Development Provisions 633 (5.3%) 429 (2.5%) - 1,575 (16.7%) 0.017
II. Net Assets 5,441 (45.5%) 7,738 (44.5%) 2,264 (30.2%) 5,732 (60.8%) 0.000
Total Liabilities and Net Assets 11,962 (100.0%) 17,396 (100.0%) 7,493 (100.0%) 9,435 (100.0%) 0.001

Table 4

Income Statement of Korean Medicine Hospitals (per 100 beds, Fiscal Year 2018)

(Unit: Korean million won)
Total Average Medical Corporation Juridical Foundation School Foundation p-Value
Number of Hospitals (Beds) 61(4,256) 24(1,340) 19(1,316) 18(1,600)
I. Patient Service Revenues 12,425 (100.0%) 10,577 (100.0%) 19,412 (100.0%) 7,515 (100.0%) 0.000
II. Operating Expenses 12,076 (97.2%) 10,330 (97.7%) 18,970 (97.7%) 7,127 (94.8%) 0.000
 1. Personnel Expenses 6,188 (49.8%) 6,217 (58.8%) 8,095 (41.7%) 4,135 (55.0%) 0.003
 2. Material Expenses 786 (6.3%) 663 (6.3%) 534 (2.8%) 1,216 (16.2%) 0.000
 3. Administrative Expenses 5,102 (41.1%) 3,450 (32.6%) 10,341 (53.3%) 1,776 (23.6%) 0.000
III. Operating Income 349 (2.8%) 247 (2.3%) 442 (2.3%) 388 (5.2%) 0.087
IV. Non-Operating Revenues 218 (1.8%) 150 (1.4%) 68 (0.4%) 468 (6.2%) 0.211
V. Non-Operating Expenses 346 (2.8%) 361 (3.4%) 279 (1.4%) 397 (5.3%) 0.911
VI. Income before Income Taxes 221 (1.8%) 36 (0.3%) 231 (1.2%) 459 (6.1%) 0.553
VII. Income Taxes 44 (0.4%) 60 (0.6%) 67 (0.3%) - 0.000
VIII. Net Profit before Reserve Fund 177 (1.4%) −24 (−0.2%) 164 (0.8%) 459 (6.1%) 0.322
IX. Transfer/Return to Reserve Fund −246 (−2.0%) −17 (−0.2%) - −812 (−10.8%) 0.035
X. Net Profit −69 (−0.6%) −41 (−0.4%) 164 (0.8%) −353 (−4.7%) 0.035
*

Note: I – II (1+2+3) = III, III + IV – V = VI, VI – VII = VIII, VIII +/− IX = X

Table 5

Financial Ratio Analysis of Korean Medicine Hospitals (Fiscal Year 2018)

Financial Ratios Total Average Medical Corporation Juridical Foundation School Foundation p-Value
Number of Hospitals (Beds) 61(4,256) 24(1,340) 19(1,316) 18(1,600)
1. Liquidity
 Liability to Total Assets (%) 49.7 54.7 67.7 24.0 0.000
2. Profitability
 Net Profit to Patient Service Revenues (%) 1.6 −0.3 0.9 5.0 0.346
3. Activity
 Total Assets Turnover (Times) 1.3 0.7 2.6 1.0 0.000
4. Growth
 Growth Rate of Patient Service Revenues (%) 5.4 3.0 12.4 1.2 0.001
5. Cost
 Operating Expenses to Patient Service Revenues (%) 97.5 98.5 97.8 95.9 0.615
 -.Personnel Expenses 52.8 59.6 42.4 54.6 0.000
 - Material Expenses 8.4 6.5 2.9 16.7 0.000
 - Administrative Expenses 36.4 32.4 52.5 24.6 0.000

Table 6

Investment Efficiency Analysis of Korean Medicine Hospitals (Fiscal Year 2018)

Financial Indicators Total Average Medical Corporation Juridical Foundation School Foundation p-Value
Number of Hospitals (Beds) 61(4,256) 24(1,340) 19(1,316) 18(1,600)
Productivity and Efficiency
Value Added to Patient Service Revenues (%) 76.9 87.7 64.0 76.0 0.000
Value Added to Total Assets (%) 94.0 56.8 161.5 72.5 0.000
Value Added to Personnel Expenses (%) 148.9 151.9 150.7 142.9 0.252