Since the global budget system carried out by National Health Insurance Bureau in 2003, hospital autonomy management practiced in 2003 as well as reviews carried by specialized doctors system established, local hospitals have faced critical impacts. The fluctuating point reimbursement was applied, it not only restrains the reimbursement received by the hospitals, but also causes management difficulties for local hospital as the fluctuating points shrink year by year. The number of western medical hospitals is decreasing. The number in 2000 was 575, but now only 500 local hospitals operate in Taiwan. For survival, local hospitals have to establish sound financial system in order to deal with changing national health insurance policies. On the other hand, they are encouraged to use strategy management theories to promote the competitiveness for local hospitals to well control their expenditures and create their income. The study has analyzed the statistical data from Statistical Office, Department of Health and National Health Insurance Bureau and integrated related literatures to understand the management strategies and responses of local hospitals under national health insurance policies and the economic, demographic and political environment. Results of the study will be provided for reference. Beside statistic data and literatures, strategy management concepts and theories were also adopted to clarify current policies of health insurance, reimbursement system and the situation of local hospitals to probe into the difficulties and possible solutions. Local hospitals were chosen to be the study subjects, and through SWOT Analysis, Poter¡¦s Five Force Analysis, Blue Sea Strategy and the findings from literature review, we found that (1)the financial gap of health insurance has transferred to medical organizations, especially local hospitals; (2)under global budget system, local hospitals have to increase income and decrease expenditures by transformation, running pay business or joint outpatient service; ¡]3¡^cost management is critical for local hospitals to establish internal strength; (4) referring to blue sea strategy to develop distinguished business and differential products can create niche for local hospitals to break through the bottleneck.