212th Labor Policy Council, Labor Conditions Subcommittee (Materials)

The convening of the 212th Labor Policy Council’s Labor Conditions Subcommittee suggests that labor conditions for medical institutions will continue to change. Particularly after the enforcement of the Work Style Reform for Doctors in April 2024, medical institutions are compelled to address labor management and operational efficiency, making this an urgent issue for business succession and M&A. For medical institutions with no successor, choosing third-party succession instead of closure or discontinuation is crucial from the perspective of maintaining regional medical care. Therefore, directors and clinic chiefs are urged to begin early preparations, spanning 5 to 10 years from around age 60, in collaboration with specialized advisors focused on the healthcare industry.

New Management Challenges for Medical Institutions Suggested by the Labor Policy Council

The name ‘212th Labor Policy Council, Labor Conditions Subcommittee’ suggests that labor conditions across various industries, including healthcare, are constantly subject to discussion and will continue to evolve. Particularly for medical institutions, the Work Style Reform for Doctors (overtime work cap regulations), enforced from April 2024, is currently having a significant impact on management. The timing of the subcommittee meeting in October 2026 strongly suggests that discussions are underway regarding the implementation status of this reform and potential further reviews or enhancements.

The discussions at this subcommittee could potentially lead to new regulations or increased costs in the future, for example, through a review of the criteria for doctors’ on-call and night-duty permits, further promotion of task-shifting/sharing, or mandatory strengthening of labor management systems in medical institutions. These changes in ‘labor conditions’ will necessitate increased personnel costs, make it harder to secure doctors, and force a review of operational workflows. This will directly impact the profitability and operational structure of medical institutions, potentially leading them to consider business succession or M&A.

Business Succession Strategies and the Value of Third-Party Succession Post-2024 Work Style Reform

The Work Style Reform for Doctors, effective from April 2024, poses challenges for securing doctors and ensuring compliance with working hour management, especially for small to medium-sized clinics and core regional hospitals. Under these circumstances, medical corporations facing successor issues are increasingly finding value in actively considering third-party business succession, rather than mere closure or discontinuation.

Third-party succession allows for the strengthening of responsiveness to work style reforms and the establishment of a sustainable management foundation by introducing new management resources (capital, human resources, know-how) while maintaining the existing medical service provision system. For example, in the case of an unincorporated individual clinic, succession involving organizational change to a medical corporation can be an option, potentially offering management stabilization and tax benefits. Depending on the successor, management improvements that would have been difficult alone, such as transitioning to a multi-doctor system, leveraging IT for operational efficiency, or complying with new facility standards, can also be expected.

Early Preparation over a ‘5-10 Year Span’ and Utilizing Experts for Successful Healthcare M&A

The timeframe of ‘directors and clinic chiefs preparing over a 5-10 year span from around age 60,’ as highlighted in the news summary, is highly realistic and crucial in the practice of healthcare M&A. During this period, a wide range of preparations are necessary, including organizing financial conditions (balance sheet health, disposal of non-performing assets), optimizing labor systems (review of employment rules, clarification of labor contracts for doctors and nurses), visualizing clinical performance, and confirming compliance with licenses and facility standards.

Particularly in the business succession of medical corporations, specialized knowledge different from general corporate M&A is required, such as the valuation of equity in medical corporations with equity interests, the handling of fund repayment obligations for fund-contributing medical corporations, procedures for changing members of general meetings and boards of directors, and applications for notifications and approvals to administrative agencies. To smoothly navigate these complex processes, the utilization of specialized advisors, such as M&A support organizations, tax accountants, and lawyers specializing in the healthcare industry, is indispensable. They can propose optimal succession schemes and provide negotiation support to maximize the interests of both buyers and sellers, taking into account regulations specific to medical law, the impact of medical fee revisions, and alignment with regional medical care visions.

If you are specifically considering the succession or M&A of a medical corporation or clinic, please utilize our free quick assessment or individual consultation (strict confidentiality and a complete success-fee system).