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KMID : 0986720140220020007
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Korean Journal of Medicine and Law
2014 Volume.22 No. 2 p.7 ~ p.31
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A Study on Establishment of For - Profit Subsidiary of Medical Corporation
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Shin Eun-Joo
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Abstract
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Currently, hospitals run by medical corporations are not allowed to pursue profits so that it could focus on providing adequate medical service to patients. However, as many hospitals continue to suffer from financial difficulties, there have been concerns about deterioration of medical service quality and ineffective use of medical resources. For that reason, Medical Service Act permits medical corporations to engage in commercial activities by allowing it to run affiliated businesses of certain types. Until now, the medical corporations have been operating its hospitals with the earnings from medical treatment and other commercial activities. However, to maximize its commerciality, the medical corporations now wish to establish for-profit subsidiaries.
Under the current law, a corporation that is entitled to establish a medical institution may establish a subsidiary if it meets the requirements of sincere public-service corporation and gets approval from the minister of the Ministry of Health and Welfare. Accordingly, medical corporations may also establish subsidiaries. However, as for the policy reason, the Ministry of Health and Welfare has been denying the approval, so that the medical corporations may concentrate on its principal purpose of providing medical service.
According to the government"s 4th Round of Investment Boosting Measures, medical corporations will be allowed to establish for-profit subsidiaries to improve overall health of the medical industry and to strengthen hospitals" financial foundation. The government measure adheres to the principles of Medical Service Act and still prohibits outside investment and broad commercial activities for medical corporations. However, as for its subsidiaries, the outside investment is permitted. Not only that, but the commercial activities of the subsidiaries and allocation of the profits to the outside investors are also permitted as well. This allows medical corporations to induce outside investors so that it could raise the funds needed to set up the subsidiaries. Profits then would go back to the investors and the medical corporations so that it could provide better medical service with more sound financial condition. However, there is a great concern over the government"s measure and many medical related interest groups and consumer organizations are fiercely opposed to the plan protesting that it is the first step toward the for-profit hospital.
A medical institution should be established and operated to pursue its principal purpose of providing medical service. Any affiliated business should also be conducted within the boundary of that purpose. Thus, although it may be possible to establish a subsidiary under the current law, if the types and scope of the affiliated businesses exceed that of the parent corporation, a borderline between for-profit and nonprofit corporation will become vague and cause many problems. Therefore, the law should specify the types and scope of the affiliated businesses that a subsidiary may conduct, so that medical corporations may faithfully carry out its principal purpose of providing medical service.
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KEYWORD
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medical corporation, nonprofit corporation, for-profit subsidiary
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FullTexts / Linksout information
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