Supreme Court Presents Criteria for 'Office-Manager Hospitals'... "Must Recognize Abuse of Medical Institutions"

En Banc "Medical Corporations Lose Qualification if Public Interest and Non-Profit Nature Deviated"
Opposing Opinion "Concerns Over Threat to National Health Insurance Financial Soundness"

The Supreme Court has established a new standard, ruling that if a non-medical professional is involved in a medical institution opened under the name of a medical corporation, it constitutes a violation of the qualifications for opening a medical institution.

Supreme Court plenary session verdict announcement. [Image source=Yonhap News]

The Supreme Court en banc (Presiding Justice Ahn Cheol-sang) on the 17th overturned the original ruling that sentenced Mr. A, who was indicted for violating the Medical Service Act and other charges, to 2 years and 6 months in prison with a 4-year probation, and remanded the case to the Daegu High Court.

Mr. A was indicted on charges of establishing a medical corporation in name only despite not being a medical professional, then opening and operating a nursing hospital as the chairman of the board. He was also charged with fraud under the Act on the Aggravated Punishment of Specific Economic Crimes for receiving 13.78 billion KRW in nursing care benefits from the National Health Insurance Service.

The first trial court found Mr. A guilty and sentenced him to 2 years and 6 months in prison, based on the fact that Mr. A had substantive decision-making authority over the operation of the medical corporation's board of directors. The second trial court upheld the guilty verdict but reduced the sentence to probation.

According to the Medical Service Act, hospitals can only be established by medical professionals or medical corporations, but non-medical professionals are allowed to establish medical corporations. This provision has led to issues such as office-managed hospitals borrowing the name of medical professionals or ghost medical corporations that only have a formal appearance. Office-managed hospitals and similar entities are subject to punishment.

Until now, courts have recognized guilt if a non-medical professional took the lead in managing the facilities and personnel of a medical institution, filing establishment notifications, conducting medical business, financing, and profit allocation, effectively violating the law by opening and operating a hospital.

However, the en banc court ruled that since the establishment of a medical corporation by a non-medical professional is permitted, punishing a medical institution under the name of a medical corporation solely because a non-medical professional led the establishment and operation of the medical institution could violate the principle of legality.

The en banc court stated, "To determine that a non-medical professional violated the qualifications for opening a medical institution by opening and operating one, it must be recognized that the non-medical professional abused a medical corporation that only had a formal appearance as a means to illegitimately open and operate a lawful medical institution."

Furthermore, the court presented the following criteria for judging violations of qualifications for opening a medical institution: ▲ circumstances where the non-medical professional abused a medical corporation that lacked substantive property contributions and thus had no real substance as a means to open and operate a medical institution, and ▲ circumstances where the non-medical professional improperly diverted the medical corporation’s assets, deviating from the corporation’s public and non-profit nature.

The en banc court also ruled, "If a medical corporation has opened a medical institution through lawful procedures and has been operating the institution normally for a considerable period under the continuous management and supervision of the city or provincial governor, it is difficult to conclude that the medical corporation’s normative essence is denied and that it was abused as an illegitimate means to open and operate a medical institution solely because there were some deficiencies in the establishment process or temporary illegal acts such as embezzlement or breach of trust involving the medical corporation’s assets during operation."

On the other hand, Justices Park Jung-hwa, Min Yoo-sook, Kim Sun-soo, Lee Heung-gu, and Oh Kyung-mi dissented, stating, "Restricting the establishment of for-profit medical institutions is intended to ensure the appropriateness of medical care and to protect and promote public health, and failure to do so could undermine the legislative purpose of the Medical Service Act and threaten the soundness of the National Health Insurance finances."

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