Family-oriented governance of medical corporations
On 2 April 2017, Japan started a new corporate system called 'Corporations Promoting Regional Medical Cooperation' under the 7th Revision. Under this system, general incorporated associations that meet certain criteria may be accredited by prefectural governors as 'Corporations Promoting Regional Medical Cooperation'. These criteria include (1) establishing a policy of providing functional differentiation of, and cooperation among, healthcare services within a healthcare service area and (2) engaging in activities involving non-profit organisations who agree with the said policy and participate in meeting hospital bed quota and cooperative purchasing of pharmaceuticals and medical devices, exchange of personnel, and R&D among those organisations.
However, as of 1 April 2018, there are only six such accredited corporations. Of those, a corporation called Japan Sea Healthcare Net Corporations Promoting Regional Medical Cooperation was accredited on 1 April 2018. This corporation is unique in that it is managed by an independent administrative agency that was established in April 2008 as a result of a merger of two hospitals that were sponsored by different local governments. This merger represents a 'hard-type' business integration initiated by medical organisations that are sponsored by and reliant on local governments. It bears studying whether that kind of 'hard-type' business integration will become a preferred choice of local-government-sponsored medical organisations, given that, according to the latest survey reports,16 approximately 90 per cent of them were in deficit without local government funding and 'hard-type' business integration may be unavoidable.
On the other hand, for private medical corporations, we expect that 'soft-type' solutions will be more easily employed than 'hard-type' solutions because the integration of varied human resources and payroll systems generally takes considerable time and effort. These soft-type solutions include (1) business alliances or management integrations of medical corporations and (2) M&A transactions where the purchaser acquires controlling power (and if the target is a medical corporation with equity, the purchaser also acquires the equity).
We also expect that, like many other legal entities in Japan, medical institutions will start enhancing their governance systems such as safety, compliance and whistle-blower systems.
New industrial technologies
The most recent major amendments to the primary data protection law in Japan, the Act on the Protection of Personal Information (APPI) completely came into effect on 30 May 2017. The amended APPI strictly restricts the utilisation of patients' medical history and other sensitive information referred to as 'special care-required personal information'. In this regard, a special but related law, the Act on Anonymised Medical Data to Contribute to R&D in the Medical Field came into effect on 11 May 2018 with the aim of balancing industrial needs and privacy protection. Another recent law, the Act On Clinical Research, which came into effect on 1 April 2018, safeguards the quality of, and protects data subjects in, certain types of clinical research called 'Specified Clinical Research', by requiring the researchers to comply with certain clinical research standards, submit research implementation plans and be reviewed by certified clinical research review committees, and by requiring the marketing authorisation holder to disclose conflicts of interest arising from the provision of research grants.
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It is hoped that these new laws, which aim to address issues arising from new industrial technologies, will not only create legislative and administrative regulations but also strengthen self-regulation and cooperation between the non-profit healthcare industries and the for-profit industries.
Possibility of inbound or outbound investments into or from, or business partnerships with, healthcare providers
Inbound investment by foreign entities by way of contributions in medical corporations in Japan is not likely to be permissible in the near future. The JMA has taken the view not only that profit organisations should not have any controlling power over medical corporations but also that foreign entities should not have such power.
Inbound investment by way of shares of peripheral profit companies (usually family-owned companies) is possible under certain procedures under the Foreign Exchange and Foreign Trade Act, except where national security is affected. In any case, M&A purchasers who have their own R&D or commercial activities that involve medical practice in Japan must have the necessary licence under the Medical Practitioners Act before they may perform medical acts on legal residents in Japan.
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On the contrary, outbound investments by Japanese medical corporations into shares of foreign medical entities are permissible, subject to compliance with notifications issued by the MHLW,17 as long as (1) their overseas operations will not adversely affect their original business of running hospitals, clinics, long-term-care health facilities or long-term-care medical centres, (2) the aggregate investments in local entities are within their retained earning reserves on their latest balance sheet prepared in accordance with the 'Medical Corporation Accounting Standards', and (3) they make prescribed prior and periodic reports to the MHLW.
X CONCLUSIONS
The world has been watching Japan as it faces enormous and unprecedented challenges in healthcare ahead of any other country because of Japan's twin population problems of inevitable ageing and persistent population decline. As Japan continues to confront and overcome these mounting and increasing difficulties, the medical, healthcare, nursing care and related industries will need the ever increasing and ever crucial support, resourcefulness and initiative investors, innovators and professionals, including lawyers, especially in the context of M&A, financing, governance, restructuring and rehabilitation to navigate the growing needs of Japan's citizens.
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