Healthy Individuals Unjustly Confined as ‘Patients’ to Defraud Public Funds: The Deep Darkness of Chinese Psychiatric Hospitals (Nikkei Business) – Yahoo! News

News Highlights

Malicious cases are being reported in Chinese psychiatric hospitals where healthy individuals are unjustly confined as patients, and public funds are defrauded. An article in Nikkei Business discusses the darkness of hospital management behind such fraudulent activities, suggesting the importance of considering options other than closure or廃業 (going out of business) for healthcare institutions facing succession issues. Specifically, it recommends early succession planning, with chairpersons and directors preparing over 5-10 years starting around age 60, and utilizing specialized advisors focused on the medical industry.

M&A Medical Editorial Department’s Perspective

The case of public fund fraud in Chinese psychiatric hospitals has once again highlighted the importance of governance and compliance in healthcare institutions. The fact that the reality behind the outward appearance of providing medical services is fraudulent activity is a point that requires particular attention during M&A due diligence. Acquirers must thoroughly investigate off-balance sheet liabilities and potential legal risks. Furthermore, this case should serve as an opportunity for Japanese healthcare institution managers struggling with lack of successors to explore the possibility of business continuation through third-party succession, not just closure or going out of business. Particularly for medium-sized hospitals that serve regional medical needs, where developing successors can be difficult, M&A-based business succession can be an effective solution from the perspective of maintaining employee employment and continuing regional healthcare.

Points Raised by This News

• Public fund fraud in Chinese psychiatric hospitals indicates the risk of fraudulent activities in healthcare institutions and the importance of due diligence.
• Third-party succession as an alternative to closure or going out of business can be an effective solution for the problem of a lack of successors.
• To maintain regional healthcare, M&A-based business succession has the potential to contribute to employee employment and the continuation of medical services.
• In M&A of healthcare institutions, confirmation of compliance systems and governance is essential, in addition to financial and legal aspects.

Practical Questions Arising from This News

• What is the likelihood of such fraudulent activities occurring in Japanese healthcare institutions?
• When considering M&A, how should the compliance system of the target healthcare institution be evaluated?
• I am considering business succession due to a lack of successors, but what options other than M&A are conceivable?

If You Feel “Should I Consult Too?”

If your institution’s chairperson or director is around 60 years old and feels anxious about the lack of successors or future management, now is the perfect time to concretely consider third-party succession. Even if not an extreme case like the Chinese example, healthcare institution management is becoming increasingly complex each year. Early development of a business succession plan and consultation with experts familiar with medical M&A are the first steps to protect your institution’s sustainable development and contribution to regional healthcare.

M&A Medical (CentralMedience Inc.) is an M&A support institution certified by the Small and Medium Enterprise Agency, providing support for the business succession of medical corporations, hospitals, and clinics on a full success fee basis. Consultations are accepted with strict confidentiality. Free consultation here