The Korea Herald


[Editorial] For-profit hospitals

By 류근하

Published : July 14, 2011 - 18:49

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The long drawn-out controversy over the establishment of for-profit hospitals in Korea has been rekindled as the government and the ruling Grand National Party seek to pass bills allowing such hospitals on Jeju Island and in the Incheon Free Economic Zone.

If passed through the National Assembly in August as planned, the bills will allow private investors to set up and operate hospitals in the two areas to make money, just as a company is run to earn profits.

Currently, doctors can set up hospitals and keep the profits from their operation. But these for-profit hospitals are small in scale. To establish a large-scale hospital, you have to set up a non-profit foundation first. Under the current law, a non-profit foundation operating a hospital is required to reinvest all the profits it earns into the hospital. This requirement discourages corporations from entering the hospital business.

Allowing private investors to establish for-profit hospitals was one of President Lee Myung-bak’s campaign pledges. But the incumbent government has been split on this issue. Advocates argue that for-profit hospitals, if allowed, would open the floodgates for investment in hospitals, making medical services one of the nation’s new growth engines.

According to the Bank of Korea, the introduction of for-profit hospitals would boost gross domestic product by 21 trillion won and create 250,000 jobs in the medium to long term. The Korea Economic Research Institute estimated the measure would boost output and employment by 0.3 percent.

But critics argue that for-profit hospitals would drive up the costs of medical services for ordinary people, given the small number of state-run hospitals that they can rely on. Furthermore, detractors say, for-profit hospitals would monopolize high-caliber doctors and research personnel, making it difficult for low-income people to access high-quality medical treatment.

In the face of strong resistance from opposition parties and civic groups, the government has been promoting the establishment of for-profit hospitals on Jeju Island and in the Incheon FEZ on a trial basis.

But opposition parties and civic groups even oppose these pilot projects on the grounds that they would pave the way for a full-fledged introduction of for-profit hospitals across the nation.

In June, the ruling GNP thought of pushing for the passage of the bill on Jeju Island, encouraged by a shift in the stance of doctors from outright opposition to the government’s scheme to conditional endorsement. But it stopped short of taking action as it could not enlist cooperation from the main opposition Democratic Party.

Blind opposition to the pilot projects does not make sense. For-profit hospitals have both positive and negative aspects. But it is difficult to calculate the benefits and costs without actually operating the new type of hospitals. In this sense, it is logical to give the pilot projects a try. We can scrap the whole idea if the trial hospitals fail to meet expectations.