Social Security Council (Long

Discussions by the Social Security Council (Long-term Care Insurance Subcommittee), in anticipation of the simultaneous revision of medical and long-term care service fees in 2027, present key issues deeply related to the management strategies and business succession of medical institutions. Specifically, formulating mid-to-long-term strategies with the revision cycle in mind, grouping for maintaining facility standards and distributing the burden of capital investment, and utilizing tax schemes including the transition to specified medical corporations (Tokutei Iryo Hojin) and social medical corporations (Shakai Iryo Hojin) will be crucial when considering future M&A and business succession.

Rebuilding Mid-to-Long-Term M&A Strategies in Anticipation of the 2027 Simultaneous Revisions

As of June 2026, discussions within the Social Security Council (Long-term Care Insurance Subcommittee) indicate specific directions for the upcoming simultaneous revisions of medical and long-term care service fees in 2027. For medical institution managers, especially chairpersons and hospital directors considering M&A or business succession, formulating mid-to-long-term (approximately 3-5 years) management and succession strategies with this revision cycle in mind is an urgent task. Instead of being swayed by annual revenue fluctuations, it is essential to adopt a perspective that overcomes structural changes—such as stricter facility standards due to revisions, review of staffing requirements, and enhanced referral and reverse referral rate requirements for advanced treatment hospitals and community medical support hospitals—through M&A-driven scale expansion and business portfolio restructuring.

Grouping Strategies for Maintaining Facility Standards and Reducing Capital Investment Burden

The “economies of scale” mentioned in the news highlights are gaining increasing importance, especially in recent healthcare policies. For instance, facility standards for community-based integrated care wards and convalescent rehabilitation wards tend to become stricter each year regarding staffing and service provision requirements. Maintaining these standards and continuing to provide high-quality medical care as a standalone medical institution is becoming increasingly difficult with limited resources. Joining a medical corporation group through M&A not only makes it easier to collectively meet these facility standards but also offers the significant advantage of distributing the burden of capital investment, such as the costs of introducing and maintaining expensive medical equipment (CT, MRI, surgical assistance robots, etc.). This enables individual medical institutions to enhance their specialization while stabilizing overall management.

Tax Schemes in Medical Business Succession: Considering Transition to Specified and Social Medical Corporations

In M&A and business succession for medical corporations, tax burden is always a critical issue. Especially for medical corporations with equity interests, a high valuation of these interests poses a risk of heavy inheritance and gift taxes on successors. The transition to “specified medical corporations (Tokutei Iryo Hojin) and social medical corporations (Shakai Iryo Hojin),” as highlighted in the news, is one option to alleviate these tax burdens and receive tax incentives by enhancing public benefit. Specified medical corporations, upon approval of their public benefit by the Commissioner of the National Tax Agency, can benefit from reduced corporate tax rates on their profit-generating activities and favorable limits for deducting donations. Furthermore, social medical corporations, by undertaking emergency medical care and other essential services, are eligible for even broader tax incentives. However, these transitions are subject to strict requirements, including board member composition, public benefit of operations, and thorough open access, and it is not uncommon for preparations to take several years. It is essential to meticulously consider the most suitable tax scheme for your institution’s current situation and future vision, including the transition to medical corporations without equity interests, in consultation with specialists such as tax accountants and certified public accountants.

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