What Would Be a Better Strategy for National University Hospital Management?

National university hospitals are not different from private hospitals as the public role played by the former is not clearly defined in Korea. They have to compete with other general hospitals in the same region [1]. The introduction of the nationwide Korea Express Train has increased accessibility to medical institutions in the metropolitan area since 2003. This has resulted in an increased number of patients in big hospitals in Seoul from other regions. As national university hospitals in these regions strive to prevent the loss of local patients, the competition among regions to secure patients is becoming more intense [1]. Hospital profitability refers to successful business performance achieved by treating patients as well as carrying out other business activities during a fiscal year. Hospitals are different from general companies in that their unique characteristic of treating patients emphasizes their public social responsibility as much as their financial output. Thus, they must measure their business performance based not only on financials but also on qualitative features of services such as social benefits [2e4]. However, as it is difficult to define or measure the output of medical services, a profitability index is most commonly used as the tool to measure a hospital’s business performance [5]. Hospital revenues are achieved through capital and finance management and are largely measured by the relationship between invested capital and profits or medical revenues and profits [3]. Many studies have analyzed the profitability of hospitals. A study by Whitcomb and Cleverly [4] used return on assets as the hospital profitability index, while Becker and Choi [5] used net income to stockholder equity, net profit to total assets, and operating margin. A study by Coyne [6] used net profit to total assets, normal profit to total assets, and operating margin as the index, whereas Hibbard et al [7] used operating margin and net profit to gross revenues. Griffith et al [8] argued that operating margin and net profit to gross revenues are appropriate as profitability indices for Korean hospitals since such measurements compare medical revenues