Hospital brokers pocketed W1.7b steering patients to Gangnam clinics

58 arrested in medical referral kickback scheme

Brokers set up marketing firm, recruited 37 patient recruiters

802 patients referred; 530 million won taken from one hospital alone

A diagram illustrating the structure of the medical fee payback scheme. [Seoul Metropolitan Police Agency]

"You can receive quality care at a top Gangnam hospital — all covered by your private health insurance."

A group that used pitches like this to lure patients into medical facilities and collect billions of won in kickbacks has been arrested. Hospital staff at plastic surgery clinics and other Gangnam-area facilities that received patient referrals from the brokers were also caught for violating the Medical Service Act.

The Seoul Metropolitan Police Agency's Financial Crime Investigation Unit said Tuesday it had arrested 58 people — including hospital brokers, patient recruiters and hospital staff — on charges of violating the Medical Service Act, and forwarded the cases to prosecutors without detention on Oct. 30.

According to police, the brokers set up a hospital promotion and marketing firm between January 2023 and June, recruited insurance agents and others as referral agents, and steered 802 patients to hospitals and clinics in the Gangnam area.

The group is accused of collecting 20 to 30 percent of each patient's medical fees through a "payback" scheme, netting a total of 1.7 billion won ($1.25 million) in illegal proceeds. In one case, the brokers allegedly received 530 million won in fees for referring 200 patients to a single hospital.

Kim Mi-ae, a senior investigator at the Seoul Metropolitan Police Agency's Financial Crime Investigation Unit, briefs reporters at the agency's Mapo office on Tuesday on the arrests of hospital staff and brokers for violations of the Medical Service Act. [Kim Do-yoon]

Two brokers recruited 37 people — including insurance agents and hospital coordinators — as patient recruiters. Those recruiters were paid 10 to 15 percent of the fees the brokers received from the hospitals, police said.

A total of 13 medical institutions were implicated in the referral scheme: three general hospitals, three plastic surgery clinics, one neurosurgery clinic, two obstetrics and gynecology clinics, one ophthalmology clinic, one dental clinic, one internal medicine clinic and one urology clinic.

Police said they plan to continue investigating the implicated facilities where evidence of insurance fraud or illegal "ghost hospital" operations — in which non-medical personnel run clinics under a borrowed doctor's license — has been confirmed.

Patient referrals for profit are strictly prohibited under the Medical Service Act to prevent distortions in the healthcare market. Kickback payments can skew medical fees and lead to unnecessary over-treatment or insurance fraud as providers seek to cover the cost of illegal commissions.

Violating the patient solicitation and referral provisions for profit carries a prison term of up to three years or a fine of up to 30 million won.

"Fee payback marketing tied to patient referral brokers has been spreading at some medical institutions recently," a police official said. "We will continue to crack down strictly on medical fee payback schemes and insurance fraud."

kido@heraldcorp.com