Following the introduction of the Schedule Service and Procurement Act (TSVG, or the Act) in May 2019, the first conclusive results of the Act and its impact on the German healthcare investment landscape became available at the turn of the year. The Act aims at improving service levels for patients in the German state healthcare system, while pushing back against a perceived trend of emphasising profit aspirations over proper patient care in medical care centres (MCCs, or MVZs). Most notably, the TSVG introduced a quota system for dental MCCs and tightened the establishment of MCCs as an investment vehicle in the dialysis market.
Whereas some practitioners and their professional associations claim that the Act needs further tightening, arguing that financial investors continue to compromise the diversity of medical procurement and facilitate market dominance, the German Ministry of Health has now published the results of an independent legal opinion assessing the impact of financial interests on patient treatment. The outcome is fairly unambiguous: the legal opinion concludes that current regulation provides for a sufficient level of patient protection and healthcare procurement. As a consequence, the experts consider more regulatory restrictions for financial investors unnecessary.
Furthermore, with the caveat that overall data quality is poor, the authors of the study cannot find convincing evidence that financial investments in the dental care sector jeopardise outpatient treatment more than inpatient treatment and general practice, and, hence, conclude that there is little reason for introducing a quota system for dental MCCs, directly criticising the Act for overregulation.
It is also true, however, that the experts actually suggest worthwhile changes and specific adjustments to the Act. Yet, those suggestions aim at refining details with little impact on MCC investment cases in general. Recommendations include a statutory minimum of three doctors per MCC, a statutory minimum requirement of one year's practice prior to engaging in an MCC, and more transparent communication to patients regarding (medical) doctors and (legal) ownership of an MCC.
Overall, we can take from the legal opinion that there is little room for more significant restrictions on financial investments in MCCs. The experts set the scene directly at the beginning of their study in concluding that MCCs (including those owned by financial investors) make an indispensable contribution to German outpatient treatment and healthcare procurement. It is noteworthy in this context that dental MCCs are considered equally important for German healthcare procurement, although they are underrepresented in comparison to other MCCs. It is fair to assume that financial investments in dental MCCs will continue. In fact, consolidation in dental outpatient treatment seems to have only just started.
It also appears the conclusions of the study no longer have meaningful opposition in the academic landscape: an expert opinion rendered by IGES (Institute for Infrastructure and Healthcare), and commissioned by the National Association of Statutory Health Insurance Dentists (the German professional association of dentists, KZBV), certainly supports the assertion that private equity-owned MCCs are profit-oriented. The IGES experts admit, though, that this is also not unusual for "regular" (non-private-equity-owned) MCCs, which noticeably weakens the KZBV's position.
We conclude that the outcome of the study is in line with the current Federal Health Minister's political agenda that previous and current legislation suffices to balance the financial interests of investors in the MCC market with healthcare practitioners' legitimate interest in safeguarding their medical autonomy, professional healthcare associations' interest in a diverse procurement environment, outpatients' interest in unbiased medical recommendations and last but not least the social security system's interest in economic healthcare spending.
Matthias Wiedenfels, industrial expert and senior adviser in our Healthcare practice group, states: "The outcome of the study is convincing. Despite some noise in the market, we don't expect regulation to change dramatically and believe that financial investments in MCCs will continue to be an attractive and sustainable investment option in a fairly stable regulatory environment".
"In-depth knowledge of the market and its regulatory framework is key for long-term success of investments in German healthcare" adds Maximilian Uibeleisen, regulatory partner in our Frankfurt office.
We have abundant experience in the healthcare industry and regularly advise on investments in MCCs and other healthcare businesses. Ashurst is unique in combining legal with industrial expertise so that we provide extra added value to our clients.
