The Business of Health: Corporate and Commercial Law for Canadian Healthcare Enterprises
For many medical practitioners, the focus tends to stay on the medical aspect of the profession and not the financial dimension. However, for those professionals with a more entrepreneurial inclination, there is always the possibility of expanding your operations. This transition from clinical practice to entrepreneurship can be a challenging, if rewarding journey. Establishing and managing a healthcare enterprise in Canada involves navigating a complex landscape of corporate and commercial law, a domain often unfamiliar to those trained in the healing arts. That said, understanding those legal intricacies is a must.
Coming to understand these legal and financial realities isn’t merely a matter of complying with standards, however; it’s as much about building a sustainable and successful enterprise that can effectively serve its community as well. This article provides a foundational overview of key corporate and commercial legal considerations for Canadian healthcare enterprises, designed for the practitioner turned business owner.
1. Foundational Corporate Structures: Building Your Enterprise
The initial and one of the most critical decisions for any new healthcare enterprise is selecting the appropriate legal structure. This choice has far-reaching implications for liability, taxation, and the ability to raise capital. In Canada, several options are available, each with its own set of rules and regulations.
A primary consideration is the professional corporation. Many provinces have specific legislation that permits regulated health professionals to incorporate their practices. These professional corporations are distinct from standard business corporations and are subject to the rules and by-laws of the relevant provincial regulatory body. These rules often dictate who can be a shareholder (typically limited to members of the same profession), the services the corporation can offer, and even the corporate name. The structure can offer significant tax advantages and liability protection, but strict adherence to professional and corporate legislation is paramount.
Alternatively, practitioners may choose to operate as a sole proprietorship or a partnership. A sole proprietorship is the simplest structure, where the business and the owner are legally one and the same. While easy to set up, it offers no personal liability protection. A partnership involves two or more individuals carrying on a business together with a view to profit. Partnerships can be general, where all partners share in the management and liability, or limited, with at least one general partner and one or more limited partners with liability confined to their investment. A comprehensive partnership agreement is crucial to define the rights, responsibilities, and liabilities of each partner, preventing future disputes.
2. The Law of Agreements: Contracts in Healthcare
The daily operations of a healthcare enterprise are built upon a series of contracts. These legally binding agreements govern relationships with a wide array of parties, and their careful drafting and management are essential for smooth and predictable business operations.
Employment and contractor agreements are fundamental, and so contacting legal aid when dealing with the financial aspects of healthcare is a prudent move. Whether hiring administrative staff, other healthcare practitioners, or technical support, clear and legally compliant agreements are necessary. These contracts should outline roles, responsibilities, remuneration, termination clauses, and confidentiality obligations. In a healthcare setting, non-disclosure and confidentiality clauses are of particular importance to protect patient information.
Supplier and vendor agreements are also critical. From the procurement of specialized medical equipment to the leasing of office space, these contracts define the terms of engagement. It is vital to scrutinize clauses related to warranties, maintenance, delivery schedules, and liability. Lease agreements for the physical premises of the enterprise warrant special attention. Terms regarding the length of the lease, renewal options, permitted use of the space, and responsibilities for maintenance and repairs can have a significant long-term impact on the business.
Furthermore, agreements with service providers, such as billing companies or electronic health record software vendors, must be meticulously reviewed. These agreements should address data ownership, security protocols, and liability in the event of a data breach.
3. Regulatory Compliance and Professional Obligations
The Canadian healthcare sector is one of the most heavily regulated industries in the nation and as such, compliance with a myriad of federal, provincial, and territorial laws is not optional. At the federal level, Health Canada sets standards for medical devices and drugs for the benefit and safety of patients. Provincially, the landscape is even more complex, with each province and territory having its own legislation governing the delivery of health services and the conduct of health professionals.
Provincial regulatory colleges play a significant role in governing the practice of various healthcare professions. These bodies establish standards of practice, codes of ethics, and guidelines for advertising and professional conduct. Healthcare enterprises must ensure that all practicing members of their team are in good standing with their respective colleges and that the enterprise as a whole operates in a manner consistent with these professional standards.
Advertising and marketing activities are also subject to strict regulations. Unlike in many other sectors, healthcare advertising is carefully controlled to prevent misleading or unprofessional claims. Promotions must be factual, verifiable, and not create an unjustified expectation of results. Many provincial regulatory bodies have specific guidelines that prohibit testimonials or certain types of comparative advertising.
4. Protecting Privacy: The Legal Duty of Confidentiality
The trust between a patient and a healthcare provider is sacrosanct, and the law reflects this through stringent privacy legislation. In Canada, the collection, use, and disclosure of personal health information are governed by a patchwork of federal and provincial laws. The federal Personal Information Protection and Electronic Documents Act (PIPEDA) applies to commercial activities in provinces that have not enacted substantially similar legislation. Many provinces, however, have their own health-specific privacy laws.
Healthcare enterprises must have robust privacy policies and procedures in place. This includes obtaining informed consent from patients for the collection and use of their information, implementing physical and technological safeguards to protect data from unauthorized access, and having a clear protocol for responding to privacy breaches. All staff must be trained on these policies, and the enterprise must appoint a privacy officer responsible for ensuring compliance. The rise of telehealth and digital health records has introduced new complexities to privacy, requiring enhanced security measures and a thorough understanding of the legal requirements for electronic data transmission and storage.
5. Intellectual Property in the Healthcare Sphere
Intellectual property (IP) may not be the first thing that comes to mind for a practicing clinician, but for a healthcare enterprise, it can be a valuable asset. IP in this context can take several forms.
Trademarks can protect the name, logo, and slogan of the enterprise, distinguishing it from competitors and building brand recognition. Copyright can protect original written materials, such as patient education pamphlets, website content, and proprietary software developed by the enterprise.
For healthcare enterprises engaged in research and development, patents can be crucial. A patent provides the exclusive right to a new invention, such as a novel medical device or a new diagnostic method, for a limited time. Securing and managing IP rights requires a strategic approach and an understanding of the legal framework governing these intangible assets.
6. Navigating Business Transactions: Buying and Selling a Practice
At some point in the lifecycle of a healthcare enterprise, the owner may consider buying another practice or selling their own. These transactions are complex and require careful legal and financial planning, and not just for the actual transaction. It pays to consult a lawyer to help navigate such issues should they occur (such as employment termination issues arising after the sale).
Due diligence is a critical first step in any acquisition. This involves a thorough investigation of the target practice's financial health, patient records, contracts, and regulatory compliance history. For the seller, preparing for due diligence means ensuring that all corporate and financial records are in order.
The purchase and sale agreement is the central legal document in these transactions. It will detail the purchase price, the assets being acquired (which could be the shares of a professional corporation or the physical assets of the practice), and the allocation of liabilities. Non-compete clauses, which restrict the seller from practicing in a certain geographic area for a specified period, are often a key point of negotiation. The secure and confidential transfer of patient records is also a highly regulated aspect of these transactions, requiring compliance with privacy legislation.
There’s more to the business of health than simply providing quality healthcare for patients. The business end of the profession is a multifaceted endeavour that extends far beyond clinical expertise. A solid understanding of corporate and commercial law is not a peripheral concern but a core component of building a thriving and compliant healthcare enterprise anywhere in Canada. And by proactively addressing these legal considerations, medical practitioners can create a strong foundation for their business, allowing them to focus on their primary mission: providing exceptional care to their patients.
When it comes to finding legal support for medical practitioners, it pays to have a lawyer you can trust to help you navigate matters legal. Health Law Firm provides that legal support for all regulated healthcare practitioners to ensure you get the advice and advocacy you need when you need it. Call us now at (416) 640-0508 when you need a health lawyer you can trust.