📖 Approx. 10 min
In Japan, facing a declining birthrate, aging population, and population decrease, maintaining and strengthening the regional healthcare provision system is an urgent issue. Coupled with changes in the external environment such as physician work style reforms, medical fee revisions, and advancements in medical technology, the management of medical institutions is becoming increasingly complex and challenging. Under these circumstances, there is a growing movement not only for individual medical corporations to maintain their operations independently but also for multiple medical corporations to strengthen their management base and build a sustainable healthcare provision system through cooperation and integration. This article compares and examines the grouping strategies of medical corporations with the Regional Healthcare Cooperation Promotion Corporation system, which has been attracting attention in recent years, and delves into their respective characteristics, advantages, disadvantages, and practical considerations.
Background and Objectives of Medical Corporation Grouping
Medical corporation grouping encompasses a wide range, from cases where a single medical corporation operates multiple medical facilities to cases where multiple independent medical corporations cooperate and integrate. The background includes policy demands such as promoting regional medical plans, resolving physician maldistribution, and efficiently utilizing medical resources, as well as the management challenges faced by each medical institution.
- Responding to Regional Medical Plans and Functional Differentiation: Amidst the increasing differentiation of functions such as acute care, recovery care, chronic care, and home-based medical care, the aim is to provide higher quality medical care by clarifying each institution’s role within the region and strengthening cooperation with other institutions. Grouping may enable each corporation to enhance its specialization while facilitating seamless medical cooperation tailored to the patient’s condition.
- Improving Management Efficiency and Achieving Economies of Scale: By grouping multiple medical institutions, cost reductions through joint purchasing of pharmaceuticals and medical equipment, improved operational efficiency by consolidating administrative departments, and enhanced talent acquisition and development through centralized personnel and labor management can be expected. Furthermore, strategic initiatives can be undertaken by the entire group in response to medical fee revisions and in maintaining and improving facility standards.
- Securing Human Resources and Reforming Physician Work Styles: Securing physicians and nurses is an urgent issue for many medical institutions. Grouping makes it easier to offer diverse work style options and to create an attractive work environment through joint training programs and career path development. This can also be an effective measure in responding to physician work style reforms.
- Risk Diversification and Smooth Business Succession: Management risks can be diversified, and a stable management base can be established that does not rely on a specific medical institution. For medical institutions facing succession issues, grouping can provide options for smooth business succession through succession to another corporation within the group or through the development of successors within the group as a whole.
Main Methods and Legal Types of Medical Corporation Grouping
Various methods can be considered for grouping medical corporations, depending on their form and desired governance. Broadly, there are “multiple facility operations by a single corporation” and “cooperation and integration by multiple medical corporations,” each with its own legal and practical considerations.
1. Multiple Facility Operations by a Single Corporation: This involves an existing medical corporation opening branch clinics or acquiring and integrating other clinics/hospitals through M&A, operating multiple medical facilities under a single corporate entity. In this case, since there is only one corporation, management unification is easy, and there are benefits in consolidating administrative departments such as personnel and accounting. However, as the corporation grows larger, close attention must be paid to strengthening the governance system, licensing procedures, and the maintenance of facility standards.
2. Cooperation and Integration by Multiple Medical Corporations (e.g., Parent-Subsidiary Structure): This involves multiple independent medical corporations proceeding with substantial management integration while maintaining their respective corporate identities. For example, one medical corporation may accept another medical corporation as a member, creating a “parent-subsidiary” relationship. In this case, cooperation between medical corporations without equity interests is a prerequisite. When acquiring medical corporations with equity interests, issues such as the valuation of equity interests and capital gains tax arise, requiring careful prior consideration. In particular, the transition from a medical corporation with equity interests to one without equity interests involves complex procedures and high hurdles, such as the requirement for residual assets to be attributed to the state or other public entities.
When grouping, it is essential to understand the specific systems of medical corporations, such as changes in members (those with the right to appoint directors and auditors) and the handling of the return of funds for medical corporations that have received fund contributions. Especially when considering the acquisition of a medical corporation with equity interests, it is necessary to consider the past valuation of equity interests, the expected future capital gains tax, and even the impact on inheritance tax valuation. Generally, a transition to a medical corporation without equity interests is recommended, but the transition costs and procedural complexities should also be considered.
Overview and Characteristics of the Regional Healthcare Cooperation Promotion Corporation System
The Regional Healthcare Cooperation Promotion Corporation system is a new type of corporate entity established in 2017 through amendments to the Medical Care Act. Its purpose is to promote the differentiation and cooperation of medical functions by having multiple medical institutions cooperate to achieve regional medical plans. By obtaining certification from the prefectural governor, various preferential measures can be received.
- Purpose: To efficiently build and operate a healthcare provision system through cooperation among participating corporations to achieve regional medical plans.
- Participating Corporations: Medical corporations and social welfare corporations operating hospitals, clinics, and long-term care health facilities can participate.
- Characteristics:
- Independence: Participating corporations maintain their corporate identities and their management independence is preserved.
- Cooperation Promotion: They can engage in activities to promote medical cooperation, such as joint human resource development, joint use of medical equipment, sharing of information systems, and development of clinical guidelines.
- Tax Incentives: If certain requirements are met, preferential measures for corporate tax, registration and license tax, etc., may apply.
- Governance: The board of directors of the Regional Healthcare Cooperation Promotion Corporation has decision-making authority regarding the overall business plan, budget, and executive appointments of participating corporations.
- Licensing: Certification from the prefectural governor is required.
This system has different characteristics from general medical corporation grouping in that it aims to optimize the overall regional healthcare system from a broad perspective while preserving the independence of individual medical institutions.
Comparison of Medical Corporation Grouping and Regional Healthcare Cooperation Promotion Corporations
Both medical corporation grouping and Regional Healthcare Cooperation Promotion Corporations aim for medical cooperation and improved management efficiency, but there are significant differences in their legal basis, governance, objectives, and applicable systems. The following summarizes the main comparison points.
Highlight of Key Differences
Medical corporation grouping generally tends to have a strong “vertical integration” aspect, where a specific medical corporation takes the lead and integrates or cooperates in management through capital relationships or executive dispatch. On the other hand, the Regional Healthcare Cooperation Promotion Corporation system is designed as a “horizontal cooperation model” where multiple independent corporations participate on an equal footing with the aim of optimizing the overall regional healthcare provision system.
In particular, the practical implications are wide-ranging, including tax incentives, the relationship with the “consolidated taxation system” under the Corporate Tax Law, and conditions for medical fee additions, making close consultation with experts indispensable.
| Comparison Item | Medical Corporation Grouping (General Case) | Regional Healthcare Cooperation Promotion Corporation |
|---|---|---|
| Objective | Mainly strengthening the management of participating corporations, such as improving management efficiency, achieving economies of scale, business succession, and risk diversification. | Mainly achieving regional medical plans and improving the efficiency and functional differentiation of the regional healthcare provision system. |
| Legal Basis | Medical Care Act (establishment and operation of medical corporations), Companies Act (M&A, etc.) | Medical Care Act (Regional Healthcare Cooperation Promotion Corporation System) |
| Relationship Between Participating Entities | Generally, cooperation through parent-subsidiary relationships, capital ties, or management integration. | Multiple independent medical corporations, etc., cooperate on an equal footing. |
| Governance | The central corporation often holds strong control. | The board of directors of the Regional Healthcare Cooperation Promotion Corporation oversees all participating corporations. |
| Management Independence | As management integration within the group progresses, the independence of individual entities tends to decrease. | Participating corporations maintain their corporate identities and a certain degree of independence is preserved. |
| Tax Incentives | No specific preferential measures. Capital gains tax may arise upon M&A. | Preferential measures for corporate tax, registration and license tax, etc., may apply in certain cases. |
| Impact on Medical Fees | Strategies for facility standards and obtaining additions for the entire group are possible. | Specific medical fee evaluations for the system or additions for regional healthcare cooperation promotion may be considered. |
Practical Considerations for Grouping and Establishing Cooperation Promotion Corporations
Regardless of the strategy chosen, a wide range of specialized considerations are necessary in practice.
1. Responding to Licensing and Facility Standards: The establishment, merger, division, name change, and articles of incorporation amendment of medical corporations require approval from the competent authority (prefectural governor, etc.). Grouping or participation in a cooperation promotion corporation may affect the licensing and facility standards of existing medical institutions. In particular, standards for bed capacity, staffing, and equipment are strictly defined, and if changes occur, they must be confirmed in advance, and all necessary procedures must be completed without omission. Continuous attention to trends in medical fee revisions is also required, along with strategies to acquire and maintain favorable facility standards for the entire group.
2. Tax Treatment: The acquisition of a medical corporation through M&A may be subject to capital gains tax. Especially for medical corporations with equity interests, their valuation can vary widely and requires careful evaluation by a tax accountant. Furthermore, various taxes may arise, such as business tax and registration and license tax/real estate acquisition tax associated with the transfer of real estate. Regional Healthcare Cooperation Promotion Corporations offer tax incentives, but their eligibility requirements are complex and require confirmation by specialists.
3. Establishing Governance Systems and Integrating Organizational Cultures: When multiple medical institutions cooperate or integrate, entities with different organizational cultures and management philosophies will collaborate. For smooth operation, it is crucial to establish a clear governance system and ensure transparency in the decision-making process. The roles and authorities of the board of directors and the board of trustees should be clearly defined, and consideration must be given to integrating and adjusting personnel and labor systems to ensure that employees of participating medical institutions can work with peace of mind.
4. Consistency with Regional Medical Plans: Consistency with regional medical plans is emphasized for both strategies. Understanding the region’s medical needs and administrative policies, and clarifying the role each corporation will play within that context, is key to long-term success. This also entails accountability to regional medical professionals and residents.
Strategic Approach for Success
To successfully implement medical corporation grouping or participation in a Regional Healthcare Cooperation Promotion Corporation, the following steps are recommended:
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1.Setting Clear Vision and Objectives: Clearly articulate why grouping or establishing a cooperation promotion corporation is being pursued, and define the ultimate goals (e.g., strengthening regional healthcare provision, stabilizing management, specializing in specific diseases).
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2.Analyzing Current Situation and Identifying Challenges: Objectively assess your institution’s (or corporation’s) strengths and weaknesses, financial status, and position within the region, and clearly identify the challenges that grouping aims to solve.
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3.Selecting Partners and Negotiation: Partner selection is paramount. Evaluate potential partners comprehensively based on their management philosophy, healthcare provision policies, organizational culture compatibility, and financial status, and build a relationship of trust.
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4.Forming an Expert Team: Involve experts in law, tax, M&A advisory, etc., from an early stage to assess risks and opportunities from legal, tax, financial, and labor perspectives.
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5.Developing and Steadily Executing an Action Plan: Detail plans for the post-integration organizational structure, personnel system, information systems, and medical cooperation system, and execute them in stages. Thorough explanation and fostering understanding among staff are also essential.
In particular, medical M&A requires an understanding of the unique systems governing medical corporations. Appropriate partner selection and smooth handling of complex procedures are key to success, making advice from experts familiar with the healthcare industry indispensable. For example, numerous issues differ from general corporate M&A, such as the valuation of medical corporations with equity interests, changes in membership, and the handling of funds.
Furthermore, when utilizing the Regional Healthcare Cooperation Promotion Corporation system, it is necessary to meet system-specific requirements such as the prefectural governor’s certification procedures, consensus building among participating corporations, and the establishment of a governance system. As these processes can be very time-consuming and labor-intensive to undertake independently, utilizing support organizations with specialized knowledge can be an effective option.
Conclusion and Invitation for Free Consultation
Both medical corporation grouping strategies and the Regional Healthcare Cooperation Promotion Corporation system are viable options for building sustainable healthcare provision systems in a rapidly changing medical environment. However, the choice depends heavily on the current situation of the medical corporation, its vision, and the region’s healthcare needs. A multifaceted approach is essential, considering factors such as the presence or absence of equity interests, changes in membership, fund returns, responses to medical fee revisions, facility standards, licensing, business tax, capital gains tax, and consistency with regional medical plans. At M&A Medical, our experts with extensive knowledge and experience specializing in the healthcare industry provide comprehensive support from strategy planning tailored to your corporation’s situation to execution. Whether you have vague concerns or specific plans, please feel free to consult with us. Through dialogue with our experts, let us shape the future of your corporation together and take the first step toward its realization.
Consultations on Medical Succession to M&A Medical
M&A Medical is a specialized M&A and business succession support service for medical institutions. As an M&A support institution certified by the Small and Medium Enterprise Agency, we support the successful transfer of clinics and medical corporations facing succession issues, as well as strategic acquisitions, on a success fee basis.
- Initial consultation and preliminary assessment are free
- No upfront fees or monthly charges (success fee only)
- Strict confidentiality (proceeding under NDA)
- Services available nationwide in all 47 prefectures and for all medical specialties
Please consult with us early in your consideration phase, whether you just want to know the market value, have no successor, or are considering joining a group.