Complete Explanation of Medical Fee Revisions for Hospital Executives: Reading the Future of Hospital Management, Part 23
Part 23: The Reason Why Some Hospitals Are 'In Danger Despite Being Profitable'—Hospital Management Through the Lens of Cash Flow
"We are profitable, but we have no money."
I sometimes hear this phrase in the field of hospital management.
The financial statements show a profit. Medical fee revenue is coming in steadily. The bed occupancy rate is not bad either.
Even so, when bonus season arrives, cash flow becomes tight, the replacement of medical equipment is postponed, and consultations with financial institutions increase.
In fact, such hospitals are by no means rare.
I have seen many such hospitals in the field of business turnaround.
Since the fiscal year 2026 medical fee revision, the discussion on "how to increase revenue" has become even more active. However, what concerns me is a different perspective.
Even though profits are being made, why is there no cash left?
To truly understand hospital management, one cannot avoid this question.
Profit and cash are completely different things
Profit is an accounting figure. On the other hand, cash is the blood that keeps the hospital running.
Salaries. Bonuses. Purchasing pharmaceuticals. Purchasing medical equipment. Repayment of loans.
These cannot be paid with profit. They are all paid with cash.
No matter how much profit is made, if cash runs short, hospital operations will stop.
I consider cash flow to be the "body temperature of a hospital." Financial statements are a health checkup. But body temperature tells you the state of the hospital at this very moment.
The first thing I check is "how many months will the cash last"
When I visit a hospital, I first ask to see the cash flow statement.
At that time, the first thing I check is,
"How many months can this hospital operate with its current cash?"
That is what it means.
It comes before profit margins. It comes before whether you are in the black or the red.
This is because a management crisis begins with a lack of funds, not a lack of profit.
A year with overlapping capital investments. A period when loan repayments are concentrated. The month bonuses are paid.
When these coincide, cash flow can temporarily become tight.
The issue is whether or not you can predict that situation in advance.
Characteristics of hospitals where cash flow worsens despite being profitable
In the field of business turnaround, there are several common points.
1. Managing profit and cash flow separately
They look at the monthly trial balance. However, they do not create a cash flow statement.
As a result,
they conclude that "it is fine because we are making a profit."
They make that judgment.
2. Misjudging the timing of capital investment
Updating CT, MRI, and electronic medical record systems is unavoidable.
However,
"Buying it because it is necessary"
if you judge based only on that, it will significantly worsen your cash flow.
What is important is,
not "whether to buy it," but "when to buy it."
3. Loan repayments and cash flow are not aligned
Borrowing itself is not a bad thing.
The problem is,
a state where the repayment plan and future cash flow do not match.
If this perspective is missing, it will lead to a funding shortage in a few years.
Hospitals are not 'profit-maximizing organizations'
In corporate management, there is the concept of profit maximization.
However, hospitals are different.
Protecting regional healthcare. Accepting emergency patients. Providing advanced medical care.
They bear these public responsibilities.
That is why chasing only profit will not last long.
On the other hand, a hospital cannot survive if it ignores profit.
What I always think about is,
'How can we maintain healthy cash flow to protect regional healthcare?'
.
Profit is not the goal, but a means to continue regional healthcare.
Hospitals with good cash flow make decisions quickly
Even among profitable hospitals, there is a big difference in cash management.
What is that difference?
I believe it is,
Speed of decision-making
is what I believe it is.
Reorganization of clinical departments. Review of ward functions. Changes in staffing. Prioritization of capital investment.
Hospitals that do not postpone these decisions also have stable cash flow.
Conversely,
"Let's wait and see a little longer"
Hospitals where this continues see their financial situation quietly deteriorate.
Cash flow is a mirror that reflects the accumulation of management decisions.
The "management strength" required by the 2026 revision
In this revision,
Medical DX. Wage increases. Regional comprehensive medical wards. Emergency care for the elderly.
Various changes were required.
All of them are important.
However, executing these requires management strength.
What is that strength?
I
believe it is the power to generate cash, not profit.
I think.
Hospitals with cash can invest in the future. Hospitals without cash are fully occupied just dealing with immediate issues.
This will become a major difference in a few years.
Management that retains cash is also management that protects the community
A hospital with sufficient cash can:
Introduce new medical equipment. Invest in staff training. Create a comfortable working environment. Support regional healthcare even during disasters.
In other words, improving cash flow is not just for the hospital's sake.
It leads to protecting the future of the community.
Conclusion: A hospital's true strength is reflected in its cash
Profit on the financial statement is important. However, that alone is not enough.
What you really need to look at is:
"Does this hospital currently have the cash to invest in the future?"
That is what matters.
In my work with business turnarounds, I look at cash flow before profit.
This is because cash flow directly reflects the decision-making of the management.
The 2026 medical fee revision demands many changes from hospitals. For example, responding to "wage increases" and "medical DX" requires "upfront investment (cash outflow)."
Whether or not you can respond to those changes is not a matter of point differences.
It is whether you have the cash to invest in the future.
That is where the true difference in management capability lies.
Next Issue Preview (Part 24)
"The Power of 'Management Accounting' That Hospital Directors Don't Know: Hospital Management Changes with Departmental Profitability"
Even if the hospital as a whole is in the black, the departments generating that profit may be limited. In the next issue, I will explain the concept of "departmental profitability," which is invisible in financial accounting, and how management accounting changes hospital management, based on actual field experience. This is a management perspective that hospital directors, board chairpersons, and administrative directors should share as a common language.
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FY2026 Medical Fee Revision for Hospital Executives
Hospital Selection Series
Part 1: The 'Selection of Hospitals' Begun by the FY2026 Revision—The Difference Between Hospitals That Survive and Those That Struggle
Part 2: Initial Consultation Fees Have Risen. The Real Reason Hospital Management Is Still Getting Tougher
Part 3: Price Adjustment Fees Are Not Enough—The Quiet Limit Reached by Hospital Management
Part 4: People Are Disappearing from Hospitals That Cannot Raise Wages—The Reality Posed by the FY2026 Revision
Part 5: Hospital Disparities Widen with Regional Comprehensive Medical Wards—Hospitals That Grow and Hospitals That Struggle
Part 6: What Hospitals Distracted by the Medical DX Addition Are Overlooking
Part 7: How Will Hospitals Survive in an Era Where Nurses Cannot Be Recruited?
Part 8: Hospitals That Use AI vs. Hospitals That Do Not—The Management Gap That Will Open in 5 Years
Part 9: Paper Culture Is Hurting Hospitals—The Hospital Operations Demanded by the FY2026 Revision
Part 10: Toward an Era Where 'Hospitals That Can Perform Surgery' Survive—Surgical Capability Becomes the Turning Point
Part 11: Hospitals That Cannot Accept Elderly Emergency Patients Will Be Left Behind
Part 12: The Reason Management of Regional Comprehensive Care Wards Suddenly Becomes Difficult
Part 13: Hospitals That Will Remain Until 2040 and Hospitals That Will Disappear—This Revision Was a Trailer for 'Something I Especially Want Directors of Small and Medium-Sized Hospitals to Read'
Part 14: The Day When Remaining an Acute Care Hospital Becomes the Greatest Risk
Part 15: The Hospital Is Full, Yet There Is No Profit—The Culprit Was 'Exit Congestion'
Part 16: Toward an Era Where Convalescent Rehabilitation Wards Are Chosen Based on 'Results'
Part 17: What Has Changed in DPC Standard Hospital Groups 1 and 2—Coefficient Differences Create Revenue Disparities
Part 18: Hospitals That Cannot Coordinate with Nursing Care Will Not Be Chosen—The Strength of Hospitals with Discharge Destinations
Part 19: The End of Hospital-Complete Medical Care—The Reason the FY2026 Revision Steered Toward Home Care
Complete Guide to Medical Fee Revisions for Hospital Executives: Reading the Future of Hospital Management
Part 20: What Do Hospitals Earn Money From in This Era? 'Structural Reform of Profits' Is More Important Than Medical Fee Revisions
Part 21: 'Unprofitable Hospitals' Have Common Traits: The Numbers I Look at First During Business Turnarounds
Part 22: It Is Too Late to Turn a Hospital Around 'After It Goes Into the Red': Danger Signals Appear in the Numbers
Part 23: Why Some 'Profitable Hospitals' Are Actually at Risk: Hospital Management Viewed Through Cash Flow
Part 24: The More a Hospital Director Cannot Read Financial Statements, the More Dangerous the Hospital Is: Why Hospitals Fail Even When Profitable
Part 25: The Power of 'Management Accounting' That Directors Don't Know: Hospital Management Changes with Departmental Profitability
Part 26: Why Do Hospitals Lack 'Budgets'? The Real Reason They Repeat the Same Mistakes Every Year
Part 27: Is That Management Meeting Really Necessary? Why Hospitals That Only Report Numbers Cannot Change
Part 28: 'Hospitals That Have Numbers but Cannot Make Decisions': Common Traits of Organizations with Slow Decision-Making
Part 29: What Should Be Changed First in a Hospital Turnaround? Looking at 'Structure' Rather Than Cuts
Final Part (Part 30): Where Is Hospital Management Headed After the 2026 Revisions? The Conditions for 'Surviving Hospitals' Seen After Writing 30 Parts