Psychiatry/Psychosomatic Medicine Clinic M&A: Key Points for Patient Transfer and Continuity of Care

Timing and Benefits of Considering M&A for Psychiatry/Psychosomatic Medicine Clinics

M&A for psychiatry and psychosomatic medicine clinics is gaining attention as a solution for management challenges such as aging clinic directors and a lack of successors, as well as an opportunity for business expansion and new market entry. M&A can be expected to yield the following benefits:

• Resolution of Management Issues: Lack of successors, aging directors, reduction of working hours/burden, securing career paths for staff.
• Business Expansion and Efficiency: Strengthening specialization through collaboration with other clinics, sharing management resources (personnel, equipment, know-how), cost reduction through economies of scale.
• Continuous Medical Care for Patients: Preventing treatment interruptions for patients by continuing medical services even if a successor cannot be found.
• Development of New Medical Services: M&A can enable the introduction of more advanced medical equipment and the expansion of specialized fields.

On the other hand, M&A in the psychiatry and psychosomatic medicine field requires careful planning and execution because long-term trust relationships with patients and consideration for privacy are particularly emphasized.

M&A Market Valuation for Psychiatry/Psychosomatic Medicine Clinics: What is the Selling Price?

It is difficult to definitively state a “market price” for clinic M&A, as it generally fluctuates significantly based on the following factors. For psychiatry and psychosomatic medicine clinics, “patient numbers,” “specialization in diseases,” “location,” and “designation status for services like self-reliance support medical care” particularly influence the valuation.

Key Factors Affecting M&A Valuation:

• Profitability: Recurring profit and sales revenue over the past few years.
• Patient Numbers and Demographics: Stable number of regular outpatients, repeat visit rates, patient demographics (e.g., proportion of long-term treatment patients).
• Location: Accessibility, surrounding competition, future potential.
• Specialty and Expertise: Specialization in specific conditions (e.g., depression, developmental disorders, addiction), presence of specialists.
• Personnel and Equipment: Number of full-time physicians, nurses, psychologists, etc.; presence of advanced medical equipment such as MRI.
• Medical Fees and Designation Status: Status of designations for health insurance, public assistance medical care (e.g., self-reliance support medical care, services related to the Mental Disorder Patient Welfare and Support Act).
• Intangible Assets: Brand image, clinical know-how, local reputation.

Common valuation methods for M&A include the “EBITDA multiple method,” “net asset method,” and “DCF method.” For psychiatry and psychosomatic medicine clinics, if there is stable revenue and a solid patient base, they may be valued at a higher multiple compared to industry averages.

Steps to Ensure Patient Record Transfer and Continuity of Care

The most crucial consideration in M&A for the psychiatry and psychosomatic medicine field is the continuity of patient care. Given the long-term therapeutic relationships and the sensitive nature of patients’ conditions, the following steps must be taken with care:

1. Specify Transfer Items in the M&A Agreement:
   • Transfer of Medical Records and Information: Clearly define the scope and method of transferring patient medical records (electronic and paper), test data, consent forms, etc., in the agreement. This must comply with the Act on the Protection of Personal Information and related laws, and generally requires patient consent.
   • Agreements on Treatment Policy and Continuity: Establish conditions (e.g., a transition period, joint consultations) to ensure the new director respects the former director’s treatment policies and progress, enabling continuous care.
   • Staff Transfer: In psychiatry and psychosomatic medicine, the relationships and expertise of staff (especially psychologists and nurses) are also important. Agreement must be reached with the buyer regarding staff compensation and continued employment.
2. Thorough Explanation and Consent from Patients:
   • Timing of Information Disclosure: It is crucial to promptly and carefully inform patients once the M&A is confirmed to be proceeding.
   • Content of Explanation: Explain the clinic’s transfer, the new director’s appointment, changes in the medical system, and the transfer of medical records in a way that patients can understand with confidence.
   • Obtaining Consent: Obtain written or verbal consent for the transfer of medical records and continued care. Prepare in advance for situations where consent cannot be obtained.
3. Establish a Transition Period with the New Director:
   • Joint Consultations: The new and former directors can conduct joint consultations for a certain period, allowing patients and staff to adapt to the new system.
   • Transition Meetings: Arrange individual meetings between the new director and patients to discuss treatment history and current conditions, fostering a relationship of trust.
4. Secure Management of Medical Records and Personal Information:
   • Electronic Medical Record Migration: For electronic medical records, ensure the accuracy of data migration and security.
   • Storage and Disposal: Secure storage for paper medical records and safe disposal of unnecessary information must be carried out in compliance with laws and regulations.

Continuation Procedures for Self-Reliance Support Medical Care and Other Designations, and Precautions

Psychiatry and psychosomatic medicine clinics often handle tasks related to public medical and welfare systems, such as self-reliance support medical care (outpatient treatment for mental disorders) and issuing medical certificates for the Mental Disorder Patient Welfare and Support Act. It is essential to accurately carry out the continuation procedures for these designations and certifications following M&A.

Key Procedures and Precautions:

• Self-Reliance Support Medical Care (Outpatient Treatment for Mental Disorders):
• Designated Medical Institution Change Procedures: The buyer must apply to become a new designated medical institution. Generally, new designation procedures are required for transfer and acquisition.
• Relocation and Name Change: If the clinic’s location or name changes, related procedures must be completed.
• Application Timing: It is important to consult with the relevant public health center or municipal office in advance, according to the M&A schedule, to confirm the necessary documents and application periods.
• Medical Certificates for the Mental Disorder Patient Welfare and Support Act:
• Issuing Physician: Medical certificates required for renewal or new applications for the Act must be issued by a designated physician. Confirm whether a designated physician will remain on staff after the M&A or if the new director needs to obtain designated physician qualifications.
• Continuous Issuance System: Ensure that the system for issuing medical certificates is maintained so that patients can continue to use their support documents without interruption.

Comparison of M&A Schemes for Psychiatry/Psychosomatic Medicine Clinics

There are primarily two M&A schemes for clinics: “business transfer” and “share transfer.” Each has its advantages and disadvantages, and the optimal scheme varies depending on the clinic’s situation and the intentions of the seller and buyer.

For psychiatry and psychosomatic medicine clinics, the designation as a medical institution for self-reliance support medical care significantly impacts the continuity and profitability of the business. Therefore, a share transfer is often chosen from the perspective that it facilitates the inheritance of licenses. However, the optimal scheme varies depending on the specific circumstances and the buyer’s intentions. It is crucial to consult thoroughly with experts.

How M&A Medical (CentralMedience) Can Assist

M&A Medical, operated by CentralMedience Inc., is an M&A advisory service specializing in the medical industry, certified by the Small and Medium Enterprise Agency. For M&A of psychiatry and psychosomatic medicine clinics, we provide support in the following areas:

• Fair Enterprise Valuation: We conduct fair enterprise valuations based on the latest market trends and the clinic’s characteristics.
• Buyer Search and Selection: We broadly search for suitable buyer candidates nationwide, including medical corporations, clinics, and investment funds, to achieve optimal matching.
• Negotiation and Contract Support: Experts provide comprehensive support from condition negotiation to the signing of Non-Disclosure Agreements (NDA), Memoranda of Understanding (MOU), and Final Agreements (SPA).
• Due Diligence (DD) Support: Our specialized DD teams in legal, financial, tax, and medical fields conduct detailed investigations to minimize risks.
• Consideration for Patients and Staff: We provide advice and implementation support for smooth transitions regarding sensitive issues such as continuity of care, medical record transfer, and staff employment.
• Support for License and Designation Procedures: We collaborate with experts to support the smooth transfer of designated medical institution status for services like self-reliance support medical care and other licensing procedures.

M&A Medical carefully listens to your clinic’s situation and wishes to propose the optimal M&A strategy. Why not start with a simple assessment to understand your clinic’s current status?

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