Guidance 23: The End of “Performance Fees”!? The Reproducibility of Medical Institutions Questioned – Medical Tribune

News Highlights

The Medical Tribune article “Guidance 23: The End of ‘Performance Fees’!? The Reproducibility of Medical Institutions Questioned” presents the value of choosing third-party succession over closure or廃業 (haigyō – business closure/liquidation) as a measure against succession issues. It recommends that the chairman and director prepare for 5 to 10 years starting around age 60 and utilize specialized advisors focused on the medical industry.

M&A Medical Editorial Department’s Perspective

The term “performance fees” may be discussed with an ambiguous definition, referring either to a portion of fees incidental to medical fees or to the “value” provided by medical institutions as remuneration. If the former is intended, it is conceivable that medical institutions with specific specialties or service delivery systems may be forced to restructure their revenue models in conjunction with trends in medical fee revisions. If the latter is intended, the key issue in M&A will be how to evaluate and transfer the “reproducibility” of the medical institution, including its unique know-how, brand strength, and regional role, rather than simply “operational efficiency.” Particularly in clinics that tend to depend on the individual skills of the director, verbalizing this “reproducibility” and selecting/nurturing successor candidates who can inherit it will be the key to successful third-party succession. Preparation over a 10-year period starting around age 60 is precisely sufficient time to evaluate and foster this “reproducibility.”

Issues Highlighted by This News

• The ambiguity of “performance fees” may increase the uncertainty of medical institutions’ revenue structures.
• The evaluation of medical institutions’ “reproducibility” will be at the core of M&A due diligence in third-party succession.
• For medical institutions dependent on the individual skills of the director, formalizing know-how and having a succession plan are essential.
• Preparation over a 10-year period starting around age 60 is a timeframe that balances successor development with maximizing business value.

Practical Questions Arising from This News

• What specific changes in medical fees does the end of “performance fees” refer to?
• What is an objective method for evaluating the “reproducibility” of one’s own clinic?
• If a successor candidate cannot be found, what is the specific scheme for third-party succession?
• What are the advantages and disadvantages of engaging a specialized medical M&A advisor?

If You Feel “Should I Consult Too?”

If you are a chairman or director around age 60, facing concerns about a lack of successor or medical fee revisions, you should feel that this news is “not someone else’s problem.” It may be time to start concrete considerations on how changes in “performance fees” will affect your institution’s revenue, and how to evaluate and transfer your institution’s strengths, its “reproducibility.” You should consider consulting with experts to explore the possibility of business continuation through third-party succession, not just the option of closure or liquidation.

M&A Medical (CentralMedience Inc.) supports the business succession of medical corporations, hospitals, and clinics as a certified M&A support institution by the Small and Medium Enterprise Agency, with a complete success fee system. We handle consultations with strict confidentiality. Free consultation here