A restructuring is being pushed for the contract specimen testing market worth 2 trillion won a year. The plan is to revise the existing method in which hospitals billed testing expenses in a lump sum by introducing "separate billing," under which hospitals and testing agencies would each bill the National Health Insurance, but conflicting interests have hospitals and specialized contract testing firms at odds. Hospitals worry about reduced revenue, while specialized contract agencies are urging swift adoption.
As of the 18th, according to health authorities and the medical community, the Ministry of Health and Welfare is discussing an overhaul of the expense billing (settlement) structure for commissioned and subcontracted specimen testing agencies. Specimen testing is a basic test that analyzes samples collected from the human body, including blood, urine, and tumor tissue, to diagnose disease and determine treatment direction.
◇ "Government brings out 'separate billing' after pointing to distortions in the contract testing market
Currently, for specimen testing, hospitals and clinics bill the National Health Insurance for testing expenses in a lump sum and then settle with the contract testing agency that actually performed the test. For neighborhood clinics or small and midsize hospitals, many do not have testing equipment, so the usual method is to collect specimens such as blood and urine and request testing from an outside agency.
The problem is that, because testing expenses are paid through hospitals, a practice has spread in which testing agencies offer steep discounts on test fees to win contracts with hospitals. Industry officials say the discount rate reaches 70% to 80% for some items.
An official at a major specimen testing agency said, "Under the current structure, hospitals receive the test fee from health insurance first and then pay the agency the expense, so there is inevitably a cutthroat competition among agencies to offer hospitals high discount rates." The official added, "Because of this, agencies' profitability has deteriorated, and some firms are undergoing restructuring, including workforce reductions."
The core of the government's reform plan is a "separate billing" method under which hospitals and testing agencies each bill the National Health Insurance directly for their share of testing expenses. In that case, hospitals would bill for medical services such as specimen collection and management, while testing agencies would bill separately for performing the actual tests.
The total domestic specimen testing market is about 8.4 trillion won a year, of which contract testing outsourced to external agencies accounts for about 27% (about 2.3 trillion won a year). Green Cross Medical Foundation, Samkwang Medical Laboratories, SCL, Seegene Medical Foundation, and EONE Laboratories are major private contract testing agencies.
◇ Diverging calculations between hospitals and testing agencies over "separate billing"
Private testing agencies expect that the market structure will become more transparent once separate billing is introduced.
An industry official said, "If separate billing is implemented, hospitals and testing agencies will each bill their own fees directly, reducing the current hospital-centered price negotiation structure," adding, "It will lay the groundwork for agencies to be properly paid the testing expenses they are supposed to receive."
Hospitals, on the other hand, are showing signs of pushback. That is because revenue generated in the process of managing contract testing could shrink. In particular, clinics that lack testing equipment worry that compensation may decrease relative to the workload of specimen collection and storage and managing test requests.
A hospital official said, "In specimen testing, hospitals handle multiple tasks during patient care, including blood collection, specimen management, and test requests," adding, "If separate billing is implemented, the hospital's share could be reduced, increasing the burden on smaller providers such as clinics."
The government says a system overhaul is needed to increase transaction transparency and reduce excessive price competition. The Ministry of Health and Welfare aims to implement the reform plan in July after related discussions.
The ministry gave advance notice of an administrative plan in 2023 to overhaul the system related to contract specimen testing, but discussions were delayed due to hospital opposition. It is still coordinating details while gathering opinions from the medical community. The consensus is that system changes are inevitable. However, the industry worries that actual implementation could be delayed by hospital pushback.
Shin Myeong-geun, president of the Korean Society for Laboratory Medicine, suggested, "Because specimen testing is core infrastructure that supports public health, it is necessary to promptly implement system reforms to establish a stable testing framework."