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Business-run Hospitals

Posted May. 13, 2005 23:22,   


Soon, businesses will be able to open and run hospitals, and hospital advertisement regulations will become less stringent than the current regulations.

The Ministry of Health and Welfare announced on May 13 that it plans to complete relevant measures to reform medical services within the year.

Health and Welfare Vice Minister Song Jai-seong said that it is necessary to ease regulative policies in order to boost the medical service industry and strengthen its global competitiveness. His comment, however, is expected to create serious stirs as such measures are highly likely to unsettle the “public good” nature of the medical service and the public insurance system.

Hospitals Run by Business-

With an aim to attract capital investment to medical institutions, business-run hospitals and their issuance of bonds will be taken into consideration, according to the ministry.

Currently, private hospitals are divided into non-profit corporations and privately owned hospitals. The medical law gives non-profit corporations a tax benefit to some extent, but they still have to raise their own capital and operation funds. Also, if they terminate, their property and fortune are handed to the government or other similar corporations.

The allowance of business-run hospitals means that hospitals could act as a corporation. In this case, the method to raise funds would vary, leading to enhanced medical services and competitiveness of hospitals, while those with poor conditions would likely close.

Hospitals would also be able to remit their retained earnings, if stock listing, income sharing for their employees or investors, the allotment of remaining assets upon closure, and foreign capital investment are allowed.

Some view the ministry’s decision as a countermeasure against the foreign medical corporations scheduled to open in 2008 in the special economic zone in Songdo, Incheon Metropolitan City.

“There are no functional differences between public and private hospitals,” according to

Lee Yong-gyun, research team leader of the Korea Institute of Health Services Management (KIHM). He pointed out that business-run hospitals would greatly improve the quality of medical service.

“Even with health issues, the gap between the rich and the poor passes onto the next generations and the situation is getting worse,” said Secretary General Kim Chang-bo of the Health Right Network. He criticized the ministry’s decision, arguing that the measure will eventually unsettle the public insurance system, and in the end, private insurance companies will rule the medical service industry.

The Ministry of Health and Welfare is planning to remarkably expand the public health service, which for now accounts for only 13 percent of the whole medical service. However, disputes continue regarding how well the industrialization and the public good nature of medical services could coexist.

Enhanced Medical Competitiveness-

Currently, doctors are not allowed to practice unless they open their clinics. The ministry is considering changing this to let a doctor practice in more than one medical institution as a contract doctor. In other words, doctors running their clinics would also be able to work for university hospitals.

With this, good doctors would be able to practice without the constraint of regions and the scale of hospitals, while those with poor professional skills would lose ground.

Other measures the ministry has in mind for further enhanced medical competitiveness include expanding the scope of hospital advertisements and supporting the attraction of foreign patients. In Korea, hospitals are not allowed to air their advertisements on TV and radio channels, while they can advertise two times a month in newspapers. The contents are also strictly limited to the inclusion of only 12 items including the name of the hospital, location and practice hours, and the advertisement is banned if it references the number of practices or their treatment rate.

The ministry is also actively considering a permit of foreign doctors to practice in domestic medical institutions so that foreigners staying in Korea will be able to receive treatment from foreign doctors.

Hee-Kyung Kim susanna@donga.com