Hospital Finance

The Financial Supervision for the Health Institutions in Taiwan


  Under the system of the National Health Insurance (NHI), the healthcare institutions in Taiwan receive bulk of their incomes through the fee for service (FFS) system. And the FFS service payments come from the insurance premium paid by the pubic. The Taiwan Healthcare Reform Foundation has been advocating the public’s right to know if their NHI premium is being spent efficiently. However, the healthcare institution’s financial activities remain largely undisclosed due to the lack of government regulation and supervision.

  Currently, majority of Taiwan’s not-for-profit hospitals are operating in a way similar to a private corporation. Their ambiguous status allows them enjoy tax break as a not-for-profit medical institutions at the same time elude the regulations for hospitals as a private business. Obscure audit makes the financial supervision and discourse of Taiwan’s medical institutions more urgent.

  How does hospital become high profit-making business in Taiwan that lures investments from numerous corporations? The total number of hospitals in Taiwan has in fact decreased 30% over past decade, during which around 167 private hospitals were closed. However during the same period, the number of corporate-run hospital actually increased from 24 to 50. One of the causes triggered such phenomenon was the tax breaks enjoyed by the hospitals, which made them ideal for the corporate investments. This phenomenon has brought forth a trend of rapid commercialization among the medical institutions, in which profits taking precedence over healthcare qualities has gradually become a norm.

The following are two examples of the overtly profit-driving management method which are becoming common in Taiwan:

1.    Corporate-Influence and Commercialization:

  The corporate involvement in Taiwan’s health sector can be best illustrated by the surging number of corporate-run none-for-profit hospitals in recent years. Such type is hospital is apparatus under a host corporation, which grants it powerful purchase and bargaining power. It can often purchase equipments from its host corporations with prices much cheaper than the scale set by the NHI reimbursement, or out bargain any individuate private hospital when purchasing equipments and other materials.

  Tax privileges and vast market are probably two significant factors that attracts corporation into the healthcare business. Because its tax privileges, some corporation would use its hospital group to transfer its property. Taking from examples we observed, the hospital would rend its operating facility from the host corporation, then the profits made by the hospital would transfer back to the host corporation in form of rent payment. The host corporation could also transfer its property simply as donation to its hospitals. In conclusion, some of these corporate influences have severely undermined hospital’s priority in medical care delivery.

2.    Outsourcing:

  Outsourcing has gradually become a trend for various medical fields in Taiwan. In extreme cases, entire hospital would function like a department store, in which every department is “rent?out to exterior agents. The outsourcing allows the hospital management to redirect the cost of human resource to individual doctors or firms. At the same time the hospital management could shrink its regular staff rotation, and replace them with the temporary or outside staff do not entitle to benefits and could be fired without compensation. The outside personnel could be temporary hired by the facility to pass the scheduled government inspection. Currently, there are few regulations on the hospital outsourcing activities. And we concern this outsourcing trend would gradually degrade the over all healthcare quality in Taiwan.

  The absence of clear regulation, standard, and supervising mechanism on the hospital’s financial activities has created many loopholes in our current legislation. And under the trend of rapidly commercialization in hospital care business, many corporations has turned their hospitals into a predominately profit making institution. On the other hand, the Department of Health (DOH) only requires the hospital to disclose their financial status voluntarily. And a 2001 data showed only about 2.4% of hospitals had disclosed their audit record to the public. Another 2004 data reported more than 4 hospitals have made more than 100 million NTD per year, with the richest among them having around 6.7 billion NTD asset ?a clear illustration of high profit-yielding business the hospital of Taiwan had became.

Our Advocacies

  The Taiwan Healthcare Reform Foundation urges the Department of Health, the Bureau of National Health Insurance and the Legislative Yuan to take role in supervising health institution’s financial activities. We find governmental supervision is crucial to improve the current NHI budget spending and to stop further commercialization of healthcares.

  Our advocacy does not mean to condemn the hospital for making profits. However, we believe in the standard care quality should be compensate with reasonable prices. But the public currently has no way to know whether their NHI premiums are being used effectively to ensure the quality care.

  The Taiwan Healthcare Reform Foundation has launched series of news conferences and articles to urge the disclosure of health care institutions?audit report. The disclosure of health institution’s financial activities will be the perquisite to an effective monitoring system, which is essential to prevent the private businesses abusing the NHI budget. The disclosed information would also help to distribute national medical resources more fairly to different kinds of health facilities. Unfortunately, the responses from the government were limited.

  In as early as 2002, the Department of Health had requested all non-for-profit hospitals to release their annual Balance Sheet and Income Statement to the public. And in 2003, the department published a much more detailed version of the “Non-For-Profit Hospital Financial Report Form", which content includes the Balance Sheet, the Income Statement, the Abridged Balance Sheet, the Abridged Income Statement, the Explanation of Account, and Abridged Explanation of Account. But by 2004, only 15 non-for-profit hospitals, around 30% of total non-for-profit hospitals at that time, disclosed their 2002 financial reports. And none of these 15 hospitals released their 2003 financial report. In 2006, the Department of Health released 16 hospital’s 2005 financial reports, which still accounted only for 29% of the non-for-profit hospitals. The lack of information transparency and government supervision has made non-for-profit hospital only exists in name.

  Also, the Department of Health had planned at September, 2004 to install a regulation which would require all healthcare institutions to disclose its financial activities and annual balance report. This proposal, however, was dropped during a private negotiation within the Legislative Yuan at December.

  Currently, the Taiwan Healthcare Reform Foundation is still observing the development of this issue closely, which we believe will be a crucial part of the future healthcare reforms.