Aug 01, 2019

Typical issues encountered in deals involving hospitals

While every hospital will present its own unique set of issues, however, some of the issues typically common to all hospitals which one should look out for are discussed below:

(a)       Land related issues:

(i)         Where a hospital is being operated on a land that is allotted by the Government, one would need to examine the underlying allotment documents for any onerous clause and consent requirements.

(ii)        Some authorities have issued separate handbooks in the context of the leased lands, which impose additional restrictions as well. One needs to be aware of the local laws, bye-laws which are not necessarily always readily available in public domain.

(b)       Requirements for Economically Weaker Sections (“EWS”):

(i)         In some states (such as Maharashtra), hospitals run by charitable trusts/societies are required to be registered under specific state laws that inter alia prescribe certain conditions as regards free treatment to the weaker section of the society etc.

(ii)        The Supreme Court has also now directed some hospitals to provide free medical treatment to weaker society.

(c)      Charity commissioner: In Maharashtra, a public charitable trust is required to be registered under the Mumbai Public Trust Act, 1950 (“MPT”), and is regulated by the Charity Commissioner and a prior approval of the Charity Commissioner could be required to implement the transaction.

(d)       Arrangements with doctors:

(i)      It is important to check the revenue share arrangements with the doctors.

(ii)     Referral Fees – Most hospitals have existing practices whereby they pay a fee to the doctors for referring a patient to the hospital, even though that particular doctor is not the attending doctor for the patient (and in some cases such doctors are not even attached to the hospitals).

(e)       Pricing control: India’s National Pharmaceutical Pricing Agency (“NPPA”) has been entrusted with the task of monitoring the prices of controlled drugs. NPPA has, from time to time, imposed caps on medicines and medical devices. One would need to examine whether the pharmaceuticals and the medical devices are being charged in accordance with these.

(f)        Clinical Trials: Many hospitals conduct clinical trials on its patients without obtaining a written consent of the patients.

(g)        Data Privacy: From a data privacy standpoint, one needs to check whether appropriate data privacy policy are in place.

(h)       Medical negligence: While medical negligence is an ordinary course item in a hospital, there has been an increasing trend where some grave negligence cases have resulted in cancellation of the hospital licenses by the authorities (under public pressure and intense media scrutiny).

(i)         Cash payments: Many hospitals accept cash payments from its patients and also make cash payments to Government agencies. A forensic diligence should be undertaken to assess if there are any cash leakages in the system.

Jasmin Karkhanis, Counsel





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