Study On Liabilities Status And Related Risk Control Strategies Of Non-profit Hospitals In China

ObjectiveThis study based on the empirical data, focusing on the liability scale and debt structure of non-profit hospitals in China, to analyze the basic situation of debt and explore the appropriate scale of liability, reasonable debt structure and differences among hospitals with different grades, which was meaningful for health authorities to develop related policies and hospitals to guard against the financial and operational risks. Furthermore, some strategies for liability risk control were proposed.Methods1. Literature research.2. Financial analysis: the trend analysis, comparative analysis, ratio analysis was used to reveal the debt status of non-profit hospitals in China.3. Statistical Methods:1) Descriptive analysis: to analyze the ratio and rate of indicators in the balance sheet. .2) ANOVA: to analyze weather there exist statistically significant differences in asset/liability ratio among non-profit hospitals with different grades.Results(1) The size of the liability of health institutions in China has expanded each year recently. The total amount of liabilities had reached 331.197 billion RMB in 2007, and the assets/liabilities rate was 29.18%.(2) The average amount of liabilities was 23.97 million RMB in each government-run non-profit hospital, and the assets/liabilities rate was 28.32% in 2007.The total liability of urban hospitals is greater than that of county-level hospitals, while the assets/liabilities rate was lower. For the debt structure, the proportion of current liabilities was higher than that of long-term liabilities. Within the current liabilities, accounts payable, other payables and short-term borrowings accounted for the most apart, while, long-term borrowings took up 81.05% in long-term liabilities, which was mainly used for infrastructure and equipment investment.As to the solvency of non-profit hospitals in 2007, the flow rate was 1.35, the quick ratio was 1.31 and the cash ratio was 53.02 percent, which represented the short-term solvency was well. At the mean time, the long-term assets suitable rate was 1.11 and the interest coverage ratio was 3.75, which showed the long-term solvency was fine. However, the profitability was not very satisfying, which means the profit security for the solvency need to be considered.(3) The regional situation:â‘ The situation of some provinces and autonomous regions was typically analyzed. It showed that the assets/liabilities rate of non-profit hospitals in eastern provinces is lower than that in western provinces. Furthermore, the quick ratio was a little to much higher in those provinces with low assets/liabilities rate, which alerted the efficiency of funds use should be paid attention.â‘¡For Hubei province, the total liabilities of non-profit hospitals had increased year by year, and the assets/liabilities rate of urban hospitals was lower than that of county-level hospitals. For the debt structure, the proportion of current liabilities was higher than that of long-term liabilities, which was same as to the national circumstances. As to the different grade non-profit hospitals in Hubei in 2004-2006, the difference of assets/liabilities rate was not significant in each year.Conclusions(1) As to the liability scale, the total liabilities and asset-liability ratio of the non-profit hospital was increased every year, however, it is difficult to estimate the appropriate asset-liability ratio for hospitals right now, just because of the design defects of the current hospital accounting system. According to the empirical data form some provinces, 35% for urban hospitals and 30% for county-level hospitals could be referenced roughly.(2) As to the debt structure: although the proportion of current liabilities was much higher than that of long-term liabilitie liquid, the symmetry of assets-liabilities structure was well. (3)As to the debt funds resources allocation: it is much easier for urban hospitals than county-level hospitals to acquire the capital loans form financial institutions, however the efficiency of funds use should be improved.Suggestion:(1) For the government: developing the related policy, improving the system and strengthen macro-regulation should be taken. Establish the corporate governance structure of hospitals, in order to clarify rights and responsibilities of borrowers and repayments.(2) For the hospitals, accurately estimate of the size of liabilities, reduce financing costs and monitor the risks during the whole cycle, including: improving the debt management system, carrying out feasibility analysis, distributing and using loan funds reasonably, establishing early risk warning model, monitoring the liabilities related indicators dynamically, improving efficiency of the use of debt capital, establishing a "sinking fund" and setting up special accounts.(3) For financial institutions: strengthen supervision and management of hospital loans; cooperate with health authorities and urged the hospital to bring the repayment into the annual budget plans; balance the load funds between urban hospitals and county-level hospitals.