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[Special] Small, midsize hospitals make losses due to rising labor costs
  • By Song Soo-youn
  • Published 2019.11.26 14:18
  • Updated 2019.11.26 14:18
  • comments 0

A general hospital in the Seoul metropolitan area used to be "successful.” Accommodating about 500 sickbeds, the hospital has continued to make profits, while other similar-sized hospitals have been suffering from losses.

That changed this year. The hospital turned to red for the first time in 15 years. Its deficit is expected to mark around 2 billion won ($1.7 million). The forecast is even more shocking because the hospital expects the total income has increased by about 7-8 percent this year from a year earlier.

The situation is quite similar in other general hospitals in capital Seoul and its vicinity. Another general hospital, which had been steadily growing in size, has seen its income rise 8 percent this year but expects a deficit of 5 billion won. The financial health this year is the worst since the hospital opened, according to the hospital.

Small and midsize hospitals have usually been in a difficult situation, compared to large hospitals. However, their financial status has become worse recently, and even successful hospitals had a setback, hospital operators said.

They attributed the worsening deficit in small and midsize hospitals to soaring salaries of physicians amid the shortage of medical professionals. As large hospitals take away not only patients but doctors and nurses, smaller hospitals suffer from the double whammy of the staff shortage and high employment cost, they said.

Medical costs at 42 tertiary hospitals higher than those at 312 general hospitals

The national health insurance statistics show how large hospitals have dominated market share.

According to the National Health Insurance Service’s statistics, the health insurance fees (including patients’ co-payment) paid to 42 tertiary general hospitals in the first half of the year amounted to 7.22 trillion won, a 28.4 percent rise from 5.6 trillion won in the same period last year.

Medical expenses paid to 42 tertiary general hospitals were larger than those paid to all general hospitals.

The total medical expenses at 312 general hospitals in the first half totaled 6.97 trillion won, 240.6 billion won less than those at tertiary general hospitals. The growth rate of medical costs was 17.1 percent, slower than that of tertiary hospitals.

Midsize hospitals shut down operation room due to lack of nurses

As physicians and nurses also prefer working at large hospitals, small and midsize hospitals have no other choice but to raise wages to hire them.

Tertiary general hospitals have expanded the nursing and care integration service. University hospitals, including Ewha University Seoul Hospital and the Catholic University of Korea Eunpyeong St. Mary's Hospital, have grown in size to absorb the nursing workforce. Consequently, small and midsize hospitals suffered a shortage of nurses.

A general hospital had to raise nurses’ wages by more than 30 percent in the past three years, and another general hospital, 11 percent. Another third general hospital with 500 sickbeds suffered an exodus of nurses who used to work at the operation rooms. The hospital had to close four out of nine operation rooms.

“After skilled operation room nurses left for university hospitals, we tried to hire new nurses, but no one is coming,” the head of the general hospital said. “So, we decided to operate some of the operation rooms. It’s not easy to hire new nurses now.”

Yet another head of a midsize hospital said, “The 52-hour workweek and the minimum wage hike did not affect us much. Rather, large hospitals have massively hired the medical workforce, which led to a rapid increase in labor costs. This was detrimental to the worsening financial situation.”

Smaller hospitals find it hard to hire doctors, too

Small and midsize hospitals also find it difficult to employ clinicians.

As the law capped the maximum work hours of trainee doctors at 80, tertiary general hospitals hired more hospitalists, and this had a significant impact on smaller hospitals. The government is expected to include the employment of hospitalists in the criteria for designating a tertiary general hospital.

Seoul National University Hospital said Monday it would increase the number of professors exclusively teaching hospital medicine from 11 to 51. Hospital medicine professors will provide patient care at 12 departments, instead of five, SNUH said.

A midsize hospital said it had to pay 500 million won salary to hire one neurosurgeon.

Wages of trainee doctors increased more at small and midsize hospitals than those at large hospitals.

According to the hospital evaluation by trainee doctors across the country, released by the Korean Intern Resident Association (KIRA), the monthly wage of a trainee physician working at a hospital that employs 100-200 interns and residents went up to 3.79 million won in 2019, 21.5 percent increase from 3.12 million won in 2016.

In contrast, the monthly wage of a trainee doctor at a large teaching hospital employing over 500 interns and residents inched up 3.9 percent to 3.69 million won in 2019 from 3.55 million won in 2016.

‘Vicious cycle of wage hike and patient shortage’

Chung Young-ho, president of the Korea Small and Medium Hospital Association, said, “The number of patients who visited small and midsize hospitals decreased due to the concentration of patients in large hospitals. But above all, the labor costs went up.”

In the past, the hospitals lacked only nurses, but now, they find it difficult to hire physicians and pharmacists, he added.

“As smaller hospitals find it hard to get medical staff, they are competitively raising wages. If a hospital provides a high salary for one person, it has to raise all the other existing employees’ salaries,” he said. “If we can’t get a doctor and close a department, or the service quality worsens, we will have fewer patients. Small and midsize hospitals are gripped by this vicious cycle,” he said.


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