Psychosomatic Internal Medicine Clinic Sale | Counselor Employment and Insurance-Based Medical Care Issues

When considering the business succession of a psychosomatic internal medicine clinic, numerous issues must be clarified due to its unique nature. In particular, the employment status of counselors, the continuity of insurance-based medical care, and the handling of shares (equity interests) and membership systems specific to medical corporations significantly impact the sale price and procedural complexity. This article explains the key issues in M&A and business succession for psychosomatic internal medicine clinics and provides points for achieving a smooth succession.

The business succession of a psychosomatic internal medicine clinic involves not just inheriting facilities and patient lists, but crucially, how to transfer employment relationships with professionals, especially counselors, and the long-built trust with patients. Furthermore, M&A of medical institutions involves special legal regulations and customs different from general companies. For example, for medical corporations, procedures such as the presence or absence of equity interests, approval at the general meeting of members, changes in the representative director and directors, and the return of funds are essential. Additionally, trends in medical fee revisions and future alignment with regional medical care planning are important factors in assessing business continuity.

Understanding these complex elements and proceeding cautiously in collaboration with experts is the first step toward success.

Counselor Employment Status and Importance of Handover

The role of counselors in psychosomatic internal medicine clinics is extremely important for patients’ mental care. When considering M&A, the first point to confirm is the employment status of counselors, such as whether they are full-time, part-time, or contract-based. For full-time staff, it is common to continue their employment. However, in the case of service contracts, confirmation of the contract details and coordination of new contract terms with the buyer are necessary. In particular, counselors’ qualifications, experience, and specialized fields directly relate to the quality of medical services provided by the clinic, so buyers tend to place great importance on these aspects.

Furthermore, if counselors hold medical licenses such as “industrial physician” or “psychiatrist,” it is necessary to confirm the relationship between their qualifications and the clinic’s operating license. If the buyer wishes to maintain or improve the current level of medical services and expertise, the skills and experience of the existing counseling staff, as well as the continuity of their trust with patients, can affect the sale price. For a smooth handover, it is essential to provide thorough explanations to the counselors in advance and confirm their intentions. Creating an environment where their motivation is maintained and they can continue their work with peace of mind can determine the success of business succession.

Continuity of Insurance-Based Medical Care and Impact of Medical Fee Revisions

A large portion of the revenue for psychosomatic internal medicine clinics is derived from insurance-based medical care under the Health Insurance Act. Therefore, the continuity of insurance-based medical care is extremely important in M&A. Buyers will meticulously review the currently applicable medical fee points, facility standards for meeting billing requirements, and past medical claims data. Particularly for clinics with a low proportion of private-pay services, the inability to continue insurance-based medical care or the prospect of a significant decrease in revenue could undermine the prerequisites for business succession.

Furthermore, medical fees are revised periodically. It is necessary to consider not only the most recent revisions but also the future direction of revisions. For example, in psychiatric care, efforts are being made to revise the outpatient support system additions and evaluations related to online medical care. These revision trends directly impact the clinic’s revenue structure, and buyers carefully assess their impact in light of their own management strategies. For the seller, accurately conveying these points to the buyer and providing information on future prospects to the extent possible will lead to building a trusting relationship.

Understanding these revision trends and grasping how one’s own clinic’s medical system may change in the future is a crucial element for advancing negotiations in business succession.

Succession Procedures Unique to Medical Corporations: Equity Interests, Member Changes, and Fund Returns

When a medical corporation is the subject of business succession, complex procedures based on the Medical Corporation Act, different from those for general corporations, are required. The most representative are the handling of “equity interests” and “members.” Medical corporations are composed of members (investors), and the status and interests of these members are transferred. However, the transfer of equity interests in medical corporations is often restricted in principle, and many medical corporations do not have equity interests (non-equity interest medical corporations). In the case of non-equity interest medical corporations, the focus is on member change procedures.

Procedures such as approval at the general meeting of members, changes in the representative director and directors, and amendments to the articles of incorporation are complex and require specialized knowledge. Furthermore, for medical corporations that have “funds” contributed, the return of these funds can become an issue during succession. Funds are to be returned when the medical corporation is dissolved, and how they are handled at the time of succession (whether the buyer inherits them or the seller returns them) significantly impacts the sale price and tax treatment.

1. Due Diligence (DD): Scrutinize the articles of incorporation, member registry, minutes, and financial statements of the medical corporation.
2. Approval at the General Meeting of Members: Obtain a resolution at the general meeting regarding changes in members and the appointment/dismissal of directors.
3. Notification to Administrative Bodies: Submit notifications of changes in officers and amendments to the articles of incorporation to the relevant public health center or prefecture.
4. Settlement and Return of Funds: If funds exist, reach an agreement on the method and timing of their return.

These procedures are extremely difficult to carry out without the support of specialists (lawyers, tax accountants, M&A consultants). In particular, changes in officers and members directly relate to the operation of the medical corporation, requiring careful handling.

Capital Gains Tax and Relation to Regional Medical Care Planning

In M&A of medical institutions, especially in the transfer of equity interests in medical corporations or the sale of clinics as sole proprietorships, taxes on capital gains are incurred. The amount of capital gains is calculated by subtracting acquisition costs (purchase price, equipment investment costs, etc.) and transfer expenses (brokerage fees, etc.) from the transfer price. Income tax and resident tax are levied on this capital gain. The tax rate varies depending on the holding period, with different rates for long-term and short-term capital gains. For individuals, it is generally subject to comprehensive taxation. However, if transferred by a corporation, it is subject to corporate tax, and further taxation may occur at the individual level through dividends to shareholders.

Furthermore, in recent years, the government has been promoting “regional medical care planning” with the aim of building a medical service system tailored to regional needs. When considering M&A, alignment with this regional medical care planning must also be taken into account. For example, acquiring a hospital in a region with excess beds, or conversely, acquiring a clinic in a field where the region has a shortage, and whether it aligns with the region’s medical needs, can affect administrative approval and future business continuity. By clarifying the role their clinic has played in regional healthcare and what contributions are expected after succession, sellers can facilitate smoother negotiations with buyers.

Transfer of Licenses and Facility Standards, and Points to Note

For medical institutions to continue their operations, obtaining various licenses, making notifications, and meeting facility standards are essential. In M&A, whether these licenses and notifications are smoothly transferred to the buyer is a crucial point. Examples include clinic establishment permits, permits for the installation of medical equipment such as X-ray machines, narcotic prescriber licenses, and facility standards linked to specialist qualifications for psychiatrists.

These licenses are often obtained in the name of the transferor (seller), and a name change or reapplication to the buyer (new establishment holder/administrator) may be necessary. In particular, it is important to confirm whether the “facility standards,” which are essential for calculating medical fees, are met. For the buyer to maintain current medical fees, the clinic being transferred must meet these standards. The seller is required to organize a list of acquired licenses, notification documents, and the latest status of compliance with facility standards, and provide accurate information to the buyer. Any omissions or delays in these procedures carry the risk of making business continuity difficult, so it is crucial to confirm them early in collaboration with specialists.

Utilize the Free Consultation Service of M&A Medical (CentralMedience Inc.)

M&A and business succession of psychosomatic internal medicine clinics require a great deal of specialized knowledge and complex procedures due to their unique nature. The issues to consider are diverse, including counselor employment, continuity of insurance-based medical care, legal procedures unique to medical corporations, taxation, and alignment with regional medical care planning. As an M&A support institution certified by the Small and Medium Enterprise Agency, M&A Medical (CentralMedience Inc.) provides specialized support for M&A and business succession of medical institutions. Our experienced team of specialists will carefully listen to your situation and provide support to achieve a smooth and optimal business succession. Please feel free to contact us for a free consultation.