Hospitals Targeting Only "Profitable Patients" Scam 670 Million Won... Staged "Treatment Shows" with Nonexistent Equipment [New Insurance Fraud]

'A New Level of Fraud Exploiting Blind Spots Is Surging'
Unprofitable Patients Transferred and Medical Records Manipulated

Editor's NoteInsurance fraud is becoming increasingly sophisticated. New methods of insurance fraud, such as overtreatment based on falsified medical certificates, fake hospitalizations, and organized claims orchestrated by hospitals, insurance planners, and patients, are spreading rapidly, representing a level of complexity far beyond that of the past. However, due to institutional limitations such as the absence of a control tower and low levels of punishment, it is difficult to prevent insurance fraud in advance. This ultimately leads to a vicious cycle in which the burden of insurance premiums increases for honest policyholders. Asia Economy has examined the latest types of insurance fraud currently occurring in the medical field.

Recently, there have been cases in the medical field where fraudsters exploit regulatory blind spots by deceiving patients and insurance companies into believing that hospitals are equipped with medical devices that they do not actually possess. It is also common for hospitals and clinics to manipulate medical information in violation of government standards during the process of exchanging patients based on whether or not they are deemed "profitable." As the health authorities have relaxed regulations on new medical technologies, a new type of fraud has rapidly increased, which is fundamentally different from simply inflating medical costs to overclaim insurance payouts.

'A New Level of Fraud Exploiting Blind Spots Is Surging'

Obstetrics and Gynecology Clinic A, located in the Chungcheong region, had leased a high-intensity focused ultrasound (HIFU) device for intensive ultrasound surgery, but returned it after the lease contract was terminated. The clinic's counselor then discovered that this change had not been updated in the records of the Health Insurance Review and Assessment Service (HIRA). Based on this, the counselor planned an insurance fraud scheme. Since HIRA's records still listed Clinic A as possessing the uterine fibroid device, the counselor believed that it would be difficult for insurance companies to deny excessive insurance claims for patients. HIRA's failure to accurately track Clinic A's equipment status provided an opportunity for the fraud to occur.

An insurance company official who uncovered the fraud at Clinic A explained, "This was a case where the hospital submitted false claims for procedures, even though the medical equipment had been returned and was no longer on site. Since HIRA's records did not accurately reflect the equipment status, insurance companies believed Clinic A still had the device when patients filed claims, and so paid out the insurance money."

The counselor persuaded a nurse to issue falsified medical certificates, medical records, and receipts. At the same time, the counselor convinced an insurance planner from a corporate general agency (GA) to act as a broker, recruiting patients. It was agreed that, once the insurance money was received, the hospital staff and the planner would split 60%, while the patients would receive 40%.

From March 2021, over a 10-month period, Clinic A and the planner issued false medical certificates, receipts, and medical records for 90 patients, claiming they had undergone HIFU procedures that were never performed. The patients fraudulently obtained a total of 673 million won from 11 insurance companies (6 non-life insurers and 5 life insurers) before being caught. The counselor was sentenced to 5 years in prison, the planner to 2 years, and the nurse to 2 years in prison with a 3-year suspended sentence.

Experts have advised that a law should be enacted to require medical institutions to report the status of their medical equipment to HIRA. As the health authorities have significantly relaxed regulations on advanced medical technologies such as early-entry medical devices and cutting-edge regenerative medicine, the adoption of non-covered items has accelerated, and hospitals and clinics can use expensive medical equipment to lure patients and commit fraud.

Lee Juyeol, professor of Health Administration at Namseoul University, pointed out, "Until now, equipment management and notification regulations in the healthcare sector have been a blind spot, and it has become routine for both clinics and tertiary hospitals to bring in advanced equipment and collude with patients to overclaim medical and insurance fees. Currently, there are no laws regarding the importation of medical equipment, but in the future, at the very least, special laws or enforcement decrees should be established to properly manage the importation of advanced regenerative medicine or new medical technology equipment at the government level."

Unprofitable Patients Transferred and Medical Records Manipulated

There have also been cases of medical fraud exploiting ambiguities in the Ministry of Health and Welfare's notification on new medical technologies, such as unclear criteria for the usage and methods of certain procedures. One doctor, judging a patient to be unprofitable, transferred the patient to another clinic. The receiving doctor then falsified medical information to perform high-priced, non-covered procedures.

On February 20, a patient identified as Mr. D (68), with a prostate volume of 104.32 cc, was refused treatment at Hospital B in Seoul. Instead, he was referred to Clinic C, also in Seoul. Clinic C enticed the patient by claiming to be operated by a renowned specialist skilled in Rezum, a new medical technology for steam-based prostate resection. Although Rezum is not covered by insurance, it is popular among patients because it carries fewer side effects than covered procedures.

On February 21, the day after visiting Hospital B, Mr. D went to Clinic C. Clinic C falsely recorded Mr. D's prostate volume as 52.57 cc instead of 104.32 cc, as received from Hospital B. Falsifying medical information in medical records is a violation of the Medical Service Act and can result in suspension of license or criminal penalties (up to 3 years in prison or a fine of up to 30 million won) if caught.

According to the Ministry of Health and Welfare and the National Health Insurance Service, most covered procedures for benign prostatic hyperplasia do not have volume restrictions, but non-covered procedures are generally limited to prostates under 100 cc. Patients with smaller prostate volumes are considered more profitable. The prostate ligation procedure, approved as a new medical technology by the ministry in 2015, is only allowed for volumes under 100 cc.

In contrast, Rezum, the latest procedure approved as a new medical technology in 2023, is limited to volumes between 30 and 80 cc. The price of prostate ligation ranges from 200,000 to 11 million won, making it one of the most frequently abused non-covered procedures for insurance fraud. Rezum, which is less well-known, costs between 8 million and 11 million won. Clinic C reduced Mr. D's prostate volume to qualify him for the more expensive and lesser-known Rezum procedure.

An insurance company official who uncovered Clinic C's fraudulent activity stated, "This was a patient who could easily have received covered treatment, with a copayment of only 140,000 to 250,000 won, and in fact, the patient wanted the covered treatment. However, due to the doctor's recommendation, the patient underwent an expensive procedure and became involved in an insurance fraud case."