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JKM > Volume 41(1); 2020 > Article
Choi and Lim: An Analysis of the Financial Performance of Korean Medicine Hospitals in Korea: Focusing on Financial Ratios and Investment Efficiency

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.

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

참고문헌

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