[비즈한국] Medical corporations that operate local small and medium-sized general hospitals and provide essential medical services, such as emergency care and inpatient treatment, currently lack a viable institutional pathway to normalize their operations through mergers with other medical corporations, even when facing financial crises. In response, the Korea Medical Corporation Association argued that while the non-profit nature and public role of medical corporations in providing essential regional healthcare should be recognized, measures such as mergers must be established to prevent these struggling medical corporations from being left to collapse.
The Korea Medical Corporation Association explained the role of medical corporations in essential public regional healthcare and the necessity for institutional improvements during a meeting hosted by the Korea Medical & Bio Journalists Association on the 9th. The Association was launched in 2004 as the Korea Medical Foundation Association to improve the medical corporation system and represent the interests of its members in accordance with the changing medical environment. It later changed to its current name to distinguish itself from "office-manager hospitals" (illegal clinics) and clarify its identity as a legitimate medical corporation.
According to the Association, there are currently around 1,300 medical corporations operating medical institutions nationwide. The Association explained that, in particular, many of the small and medium-sized general hospitals run by local medical corporations handle a significant portion of essential regional medical services, including 24-hour emergency care, inpatient treatment, and surgeries.
Kim Chul-joon, Vice President for External Cooperation at the Korea Medical Corporation Association (Director of Daejeon Wellness Hospital), emphasized, "Small and medium-sized general hospitals run by medical corporations located in local areas are the core pillars supporting 24-hour emergency care and essential regional healthcare," adding that "university hospitals alone cannot handle all the essential medical needs of local residents."
The Association argues that establishing new public hospitals is not the only solution to regional healthcare gaps. They suggest that it is more efficient to utilize existing medical corporations that already have established clinical infrastructure as partners for essential regional healthcare, rather than building public hospitals, which require massive budgets and time. The explanation is that by supporting essential medical personnel, on-call labor costs, and facility/equipment expenses for medical corporations, the regional healthcare system can be maintained more efficiently by utilizing existing medical resources.
However, it is not just financial support that the Association emphasized at this meeting. They also stated that as medical corporations carry out public duties, the unreasonable regulations that constrain their management should be improved.
Vice President Kim explained, "The core of what we are requesting from the government is not special treatment or support, but rather an end to unnecessary regulations. By structure, medical corporations cannot have individuals misappropriate or embezzle funds, and all earnings or investments must revert to the corporation." He added, "Funds belonging to the corporation are used for medical services such as hospital land, buildings, medical equipment, and labor costs, and even if profits are generated, they are reinvested into hospital facilities and equipment, eventually returning to the public."
"Why can school corporations merge, but medical corporations cannot?"
A representative institutional limitation pointed out by the Association is the fact that mergers between medical corporations are effectively blocked. School corporations, which are also non-profit, have separate merger procedures under the Private School Act, allowing the surviving or newly established school corporation after a merger to succeed the rights and obligations of the dissolved school corporation. In contrast, the Medical Service Act lacks separate procedures for mergers between medical corporations, the Association pointed out.
As a result, there is no restructuring path for financially distressed medical corporations to normalize their operations through mergers with other medical corporations.
Vice President Kim said, "Among the 1,300 medical corporations nationwide, quite a few hospitals are struggling, but under the current system, there are insufficient normal means for exit or liquidation," adding, "Side effects are occurring where hospitals are left to remain as 'zombie hospitals' until they go bankrupt. We need to open an exit path that allows for management normalization through mergers between corporations."
He also added concerns that in some cases, founders or chairmen pledge personal assets or real estate as collateral to keep the hospital running, which, if financial difficulties intensify, could lead to both the medical corporation and the individual going bankrupt.
This means there is a need for an alternative to find other corporations that can normalize debt and hospital operations, rather than simply buying and selling the assets of medical corporations through mergers.
However, concerns follow that allowing mergers of medical corporations could be abused for the commercialization of medical institutions or become a de facto trade of hospital operating rights. This is because if medical corporation mergers are permitted, significant corporate assets such as hospital buildings, land, and medical facilities, along with the right to operate the medical institution, would pass to another corporation.
In fact, there have been cases that went up to the Supreme Court where non-medical personnel acquired the operating rights of a medical corporation, appointed relatives as chairmen or directors, and led the operation of a nursing hospital. In October 2023, the Supreme Court ruled that it cannot be concluded that a hospital is an "illegal opening" under the Medical Service Act solely because a non-medical person was involved in the operation of a medical corporation. However, it did rule that the decision-making structure, the ownership of assets and profits, and whether there is substantive management control must be examined comprehensively.
This ruling shows that when the operating entity of a medical corporation changes, it is necessary to examine not only the formal corporate structure but also who actually controls the corporation and manages its assets and profits. If a medical corporation merger system is introduced in the future, the mechanisms to prevent corporate privatization or expedient trading of operating rights will become a key issue alongside the merger procedures.
In response, Vice President Kim emphasized that M&As of general corporations and mergers of medical corporations are structurally different. He explained, "While general conglomerates or private equity funds can expect dividends or exit profits when acquiring a company, medical corporations cannot pay dividends at all," adding, "There is no equity and no shareholders; the board of directors is responsible for operation. It should not be viewed as a structure aimed at exit profits or dividends after acquisition, as private equity funds do."
As Autonomy Expands, Transparency Must Also Increase
The Association maintains the position that while medical corporations have stronger public characteristics than general private hospitals based on their non-profit nature and performance of essential regional healthcare, their management autonomy, including mergers, must also be expanded. Ultimately, the future point of contention in the institutional improvement process will be determining to what level private management autonomy should be allowed while recognizing medical corporations as a pillar of public healthcare, and how to guarantee the corresponding public nature and transparency.
Vice President Kim emphasized that the profits of medical corporations are not distributed to individuals but are reinvested in medical services. He explained that the financial statements of medical corporations undergo audits and are subject to the oversight of the competent authorities, and the financial statements of public service corporations are also disclosed according to law. He said, "The movement of capital and the details of usage are all contained in financial statements and audited, so they cannot be hidden," and added, "If the system is improved, it will be even clearer to verify."
However, as the mergers and management autonomy of medical corporations expand, the transparency to externally verify how much of the profit earned by the corporation is actually reinvested and how much is used for essential regional healthcare will inevitably become more important. If regulations are to be eased based on the public nature of medical corporations, the task remains to concurrently refine the management and disclosure systems that can objectively demonstrate that public nature.