National Health Insurance Act | Administrative Court Judgment Holding That the National Health Insurance Service's Re-Recovery Disposition of Medical Care Benefit Costs Against an Office-Manager Hospital Was Not Unlawful

OO Convalescent Hospital was a so-called 🔗office-manager hospital, in which a non-medical person installs a licensed medical practitioner as a figurehead and opens and operates the hospital.

When this fact came to light, the defendant issued against the plaintiff a disposition recovering, on the ground that the plaintiff “was employed by B, who opened a medical institution in violation of the Medical Service Act, and performed medical practice,” the entire medical care benefit costs of approximately KRW 5 billion received during the period of employment.

In response, the plaintiff filed suit seeking revocation of the disposition, arguing that the person who employed the plaintiff was the physician C, not the non-medical person B, so the ground for the recovery disposition was not established, and that the disposition was unlawful as a deviation from or abuse of discretion.

On this, the court of first instance dismissed the plaintiff's claim, finding that all grounds for the disposition were established, and the appellate court likewise dismissed the plaintiff's appeal.

The Supreme Court's judgment on the plaintiff's final appeal, however, was different.

The Supreme Court held that, without considering circumstances such as the content and amount of the medical care benefits provided by OO Convalescent Hospital and the role and degree of illegality of the nominal opener in the process of opening and operating it, collecting the full amount of the medical care benefit costs from the nominal opener constitutes a deviation from or abuse of discretion, and accordingly reversed the lower judgment.

After this case, the defendant newly established the “Guidelines on Handling the Reduction and Adjustment of Recovery Amounts for Illegally Opened Medical Care Institutions,” a standard to be applied when collecting as unjust enrichment the medical care benefit costs received by office-manager hospitals.

Accordingly, the defendant issued against the plaintiff a re-recovery disposition for approximately KRW 3.9 billion, stating that it “decides on re-recovery in a partially reduced amount.”

The plaintiff filed suit seeking revocation of this disposition, and the Supreme Court determined that the standard newly established by the National Health Insurance Service could not be regarded as objectively reasonable, and that applying it mechanically to make a disposition would result in a collection amount excessive relative to the content of the breach of duty, thereby losing validity.

Thereafter, the defendant revised the items and ratios for reducing the Service's contribution and newly established the “Guidelines on Handling Dispositions (Reductions and Exemptions) for Illegally Opened Institutions.”

The defendant explained that the purpose of this standard was, among the amounts determined for recovery of unjust enrichment from office-manager hospitals, to comprehensively consider factors such as voluntary reporting or the degree of participation in the illegality and thereby set the reduction ratio for the amounts determined for recovery of medical care benefit costs and health examination costs.

Under these guidelines, the defendant set the plaintiff's reduction ratio at 60% and notified the plaintiff that the recovery amount would be reduced to approximately KRW 2 billion, and the plaintiff filed this administrative litigation against that disposition.

The administrative court ruled that, “because the defendant established each set of guidelines before making the disposition at issue, and because, taking into comprehensive account the content stated in the disposition document, the relevant statutes, and the process leading up to the disposition, the basis and reasons for the disposition could be sufficiently ascertained, the procedural unlawfulness asserted by the plaintiff is without merit.”

According to the Supreme Court's judgment, when the National Health Insurance Service collects unjust enrichment, it must exercise its discretion by considering matters such as the content of the medical care benefits provided by the medical care institution (whether they were performed by a qualified medical practitioner, whether excessive treatment was carried out, and the like) and the role and degree of illegality of the nominal opener in the process of opening and operating the medical institution; collecting without considering these factors constitutes a disposition that deviates from or abuses discretion and amounts to an unlawful act. (See Supreme Court, Decision of June 4, 2020, 2015 Du 39996, among others)

Accordingly, the defendant revised the discretionary standards once again and established guidelines, and the court determined that, because these guidelines expanded the range of the reduction ratio for nominal openers such as the plaintiff, the disadvantage to be incurred by the plaintiff would not be significant.

In addition, because these guidelines subdivided and specified the amounts into 25 brackets according to the amount of the improper claims so that the recovery amount could vary depending on the degree of violation, the court determined that the defendant was faithfully reflecting the matters to be considered in exercising its discretion.

The court further ruled that, even though a substantial reduction had been made under the guidelines established by the defendant, the total medical care benefit costs themselves amounted to a large sum exceeding approximately KRW 5 billion, so the recovery disposition was due to the considerable illegality of the plaintiff's conduct, and it was difficult to find that the defendant's guidelines lacked objective reasonableness and thereby deviated from or abused discretion; the court therefore dismissed the plaintiff's claim.