[K-Insurance Trapped by Regulations - Part 2] Hotbed of Illegal Activities 'Samujang Hospitals'... Strengthening Detection through Special Judicial Police Introduction Needed

Low Medical Infrastructure and Frequent Over-treatment
1 in 10 Office-Managed Hospitals Are Nursing Hospitals
Fixed Fee Increase Major Cause of Insurance Fund Leakage

[Asia Economy Reporter Ki Ha-young] Illegitimate medical institutions known as "Samu-jang Hospitals" are considered hotbeds of insurance fraud. A Samu-jang Hospital refers to an illegal medical institution established and operated by non-medical personnel borrowing the name of a medical professional or corporation who is the official founder of the medical institution. These entities provide inappropriate medical services to the public by pursuing profit through low-quality medical infrastructure, poor medical service quality, and excessive treatment. Additionally, since they generate profits through non-reimbursable treatments under the National Health Insurance, they are identified as a cause of financial leakage in the health insurance system due to fraudulent and false claims. This is why there are calls to introduce special judicial police authority (special investigation rights) to the National Health Insurance Service to strengthen the crackdown on illegal medical institutions such as Samu-jang Hospitals.

Samu-jang Hospitals Have Low Medical Staff Ratios and High Injection Prescription Rates

According to the detection status of Samu-jang Hospitals announced by the National Health Insurance Service (based on 2018 data, targeting 1,531 institutions with recovery decisions from 2009 to 2018), Samu-jang Hospitals were found to pose risks to patient safety due to low quality of medical services and excessive treatment. The number of beds per hospital room was 6.08, which is 1.03 more than general institutions, while the employment rate of medical personnel was 12.5%, 5.6 percentage points lower than general institutions. Notably, the turnover rate of doctors within six months reached 45.5%, which is 21.4 percentage points higher than that of general institutions.

The prescription rates of injections and antibiotics at Samu-jang Clinics were 47.0% and 48.8%, respectively, which are 13.0 and 13.1 percentage points higher than those of general institutions. This indicates that while medical infrastructure is poor, excessive treatment is being conducted.

Among the detected Samu-jang Hospitals, the highest proportion was nursing hospitals (9.3%). These are considered major causes of improper insurance payouts in both public and private insurance. Unlike general hospitals that claim costs for each individual medical procedure to the National Health Insurance Service, nursing hospitals operate under a "fixed-rate payment system," where a set average cost per patient is paid based on the number of patients and days of hospitalization. This structure generates profit as long as patient numbers are secured. Consequently, experts point out that this makes them vulnerable to insurance fraud such as patient recruitment through brokers and inflating patient numbers, leading to a decline in the quality of medical services.

In particular, high-cost non-reimbursable treatments were excessively provided to patients with private indemnity insurance. Nursing hospitals have lower facility standards compared to general hospitals and do not require expensive medical equipment, leading to a rapid increase in their numbers. The number of nursing hospitals rose from 690 in 2008 to 1,577 last year, approximately 2.3 times more in 11 years.

Excessive Non-Reimbursable Treatments... Main Cause of Rising Loss Ratios in Public and Private Insurance

As such, Samu-jang Hospitals, which are hotbeds of various illegal activities including illegal patient recruitment (involving brokers such as planners) and false or excessive treatment, are blamed not only for the leakage of health insurance finances but also as the main cause of rising loss ratios due to the abuse of non-reimbursable treatments in private indemnity insurance. The amount of health insurance financial leakage was 3.4869 trillion KRW (based on data from 2009 to June 2020, targeting 1,621 institutions), and the damage amount has been increasing every year. However, due to preemptive asset concealment and other factors, the recovery rate was only 5.2% as of June 2020. This indicates the severity of financial leakage. The loss ratio of private indemnity insurance has also been on the rise, increasing from 109.8% in 2011 to 133.9% last year.

Accordingly, experts and industry representatives argue that it is necessary to introduce the special judicial police authority system to the National Health Insurance Service to strengthen the crackdown on illegal medical institutions such as Samu-jang Hospitals. Through this system, it is necessary to preemptively block fraudulent claims for both health insurance benefits and private insurance non-reimbursable treatments to enhance the financial soundness of public and private insurance. The 20th National Assembly failed to pass the bill due to opposition from the medical community. This time, attention is focused on whether related bills proposed by Democratic Party lawmakers Jeong Chun-sook and Seo Young-seok can pass in the current National Assembly.

This content was produced with the assistance of AI translation services.