Results of On

News Highlights

The Ministry of Health, Labour and Welfare has released the results of on-site inspections of hospitals conducted in FY2023 based on Article 25 of the Medical Care Act. A total of 1,000 inspections were carried out nationwide, with violations of laws and regulations confirmed in 100 cases (10%). The main violations included medical practice by unlicensed individuals, improper management of medical devices, and violations of medical treatment regulations. These results highlight the importance of compliance systems in medical institutions.

M&A Medical Editorial Department’s Perspective

The fact that 10% of hospitals were found to have violated laws and regulations in the FY2023 on-site inspections is a figure that hospital managers cannot overlook. In particular, issues directly related to patient safety, such as medical practice by unlicensed individuals and violations of medical treatment regulations, could lead to situations that cannot be resolved by mere administrative guidance. Such compliance risks can become apparent during due diligence in M&A and may lead to a reduction in acquisition price or the termination of a transaction. For example, there have been cases in the past where a medical corporation, upon discovery of medical practice by unlicensed individuals, was forced to significantly reduce its acquisition price during M&A negotiations. Furthermore, utilizing tax schemes such as joining a group to maintain facility standards and distribute the burden of capital investment, or transitioning to a specific medical corporation or social medical corporation, can be effective options for reducing these compliance risks and strengthening the management base.

Points Indicated by This News

• Violations of laws and regulations were confirmed in 10% of hospitals, making the strengthening of compliance systems an urgent task.
• Medical practice by unlicensed individuals and violations of medical treatment regulations can be risk factors not only for patient safety but also in M&A.
• The results of the on-site inspections serve as a reminder of the importance of transparency and accountability in the management of medical institutions.
• Preparing for medical fee revisions and pursuing economies of scale are management issues that should be considered in parallel with strengthening compliance.

Practical Questions Arising from This News

• Is our hospital’s management system adequate regarding the violations pointed out in this on-site inspection?
• If considering an M&A, how will past on-site inspection findings affect the acquisition price?
• What specific business succession schemes can enjoy economies of scale and prepare for medical fee revisions while reducing compliance risks?

If You Feel “Should I Consult Too?”

Hospital managers who are concerned about their institution’s compliance system or wish to avoid potential risks while considering M&A are encouraged to consult with experts. By understanding in advance the items that may be pointed out in on-site inspections and establishing a system, it is possible to prevent future reductions in valuation during M&A and business continuity risks. We will propose specific measures tailored to your institution’s situation.

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