Medical Service Act | Analysis of a Supreme Court Judgment Holding That a Medical Institution Cannot Claim Medical Care Benefits When One of Its Co-Directors Receives a Suspension of License

The plaintiffs who brought this lawsuit were four in total, and all of them are physicians.

Several years ago, the plaintiffs jointly established and operated a hospital together with another fellow physician, A.

However, A was put on trial on the charge of having defrauded the National Health Insurance Service of tens of millions of won, and a fine was finally confirmed against A.

Accordingly, the Ministry of Health and Welfare issued a disposition suspending A's physician's license for three months, from August 2018, on the ground that A had falsely claimed treatment costs in violation of the Medical Service Act.

In early September of the same year, one month after the suspension began, the plaintiffs filed an application to change the permitted matters so as to record A as having withdrawn as a co-director.

The problem began thereafter, when the plaintiffs requested the Health Insurance Review and Assessment Service to review the medical care benefits and medical care benefit costs.

The plaintiffs requested a review for payment of approximately 600 million won in medical care benefits and medical care benefit costs incurred from August 2018 to early September, that is, during the period in which A's physician's license was suspended.

However, the Review and Assessment Service rendered a determination of "review impossible," reasoning that because A's physician's license was suspended during this period, the hospital where A had been registered as a co-founder was not qualified to claim costs during that period.

In response, the plaintiffs filed a lawsuit with the court seeking revocation of the disposition denying payment of the medical care benefit costs, among others.

The courts of first and second instance ruled in favor of the plaintiffs.

The lower courts first found that, during the period in question, the plaintiffs other than A had provided medical care benefits and medical care benefit services suitable for the treatment of patients while maintaining adequate personnel, facilities, equipment, and the like.

On that basis, the lower courts held that the plaintiffs had the right to request a review of the costs from the Review and Assessment Service and to be paid the appropriate benefit costs.

The Supreme Court's determination was different.

It reversed the lower judgment, which had granted the plaintiffs' claim, and remanded the case to the lower court.

The issue in this lawsuit was whether, where the plaintiffs, who are medical persons, performed medical acts while still keeping A as a co-director even though a suspension of license had been imposed on A, the plaintiffs' hospital qualified under the current law as a medical care institution or a medical benefit institution during the period in which A was registered as a co-director.

Examining the legislative purpose of the Medical Service Act and other factors, the Supreme Court held that during the disposition period in this case, the plaintiffs' hospital could not engage in medical practice and, accordingly, could not claim the benefit costs either.

Where a founder of a medical institution commits a criminal act and a suspension of license is imposed on that founder, the effect of the prohibition on medical practice arises immediately with respect to the medical institution that the founder established as well; the same applies even where several medical persons jointly established the medical institution.

The Supreme Court added that, once one of the persons who jointly established such a medical institution receives a disposition, suspending the medical practice of the medical institution that the person co-established cannot be regarded as violating the principle of personal responsibility or as an excessive restriction on the business freedom of the remaining co-founders.

We have introduced the Supreme Court judgment holding that, during the period in which one of a hospital's directors received a suspension of physician's license, that hospital does not qualify as a medical care institution or a medical benefit institution.

As with the courts of first and second instance in this lawsuit, the courts had until now largely recognized claims for benefit costs in respect of treatment performed by the remaining directors, even where one of the hospital directors listed together had been deprived of his license.

Because the hospital's operation and revenue generation were largely unaffected even when one of the hospital's key members committed a serious crime, there had been continued criticism that such rulings did not accord with the legislative purpose of the Medical Service Act and that their sanctioning effect was inevitably weakened.

With the Supreme Court now offering this new interpretation of the Medical Service Act, considerable change is anticipated in practice as well.

Daeryun Law Firm LLP has recently been working to strengthen the capacity of its Medical Litigation Group, including by recruiting Attorney Oh Gyeong-rok, who specializes in medical disputes.

In addition, in cooperation with a hospital-based medical advisory panel rich in medical knowledge and clinical experience, the firm provides medical advisory services not only for various disputes and litigation but also for the overall operation of hospitals.

If you have any inquiries regarding medical-related litigation, you are welcome to reach out to Daeryun Law Firm LLP.