TSVG and its effects for strategic investors in dental medicine
The German Bundestag passed the TSGV (Termin- und Versorgungsgesetz) on March 14th 2019. For Private Equity-funds the investment in dental MVZ will be limited in future. Dr. Enno Burk, expert for healthcare law, explains, which consequences the new regulations imply for strategic investors.
I. Initial situation
- Since an amendment of the SHI Act to Promote Healthcare Coverage (GKV-Versorgungsstärkungsgesetz) was enacted on 16 July 2015 (Federal Law Gazette I p. 1211), it has been possible to operate ambulatory healthcare centres (MVZ) in Germany in which only dentists are employed.
- The following persons/entities are entitled to establish dental MVZs:
- accredited physicians
- accredited hospitals within the meaning of the hospital planning of the Federal States
- providers of non-physician dialysis services pursuant to section 126(3) German Social Security Code, Book V (SGB V)
- charitable organisations already involved in SHI-accredited care based on accreditation or entitlement,
- Most of the dentists in Germany have their own practices. These are not MVZs, but rather partnerships which are subject to restrictions on participations under the laws governing the liberal professions. Only certain members of a healthcare profession can participate in these practices. For investors, MVZs are therefore the preferred way to operate their own dental care centers or chains.
- The establishment of a dental MVZ can take the legal form of a partnership (Personengesellschaft), a registered cooperative society (eingetragene Genossenschaft), a limited liability company (GmbH) or a public law legal form (öffentlich-rechtliche Rechtsform).
- It is not necessary for dentists to hold shares in the owning company of the MVZ.
- Private investors are therefore entitled unter the current laws to acquire smaller plan hospitals and in this way would have virtually unlimited access to SHI-accredited dental care by either establishing new MVZs or purchasing existing dental practices.
- Needs planning only takes place to a limited extent in the dental field. In practice, freedom of establishment mostly exists.
- There was also no limit to the number of dental MVZs which could be operated by a hospital, and thus chains were formed.
- From 25 dental MVZ’s at the beginning of 2016, the number rose to more than 600 in the 3rd quarter of 2018, primarily in larger cities or metropolitan regions.
- In June 2016, the German Federal Dental Chamber (Bundeszahnärztekammer) demanded that the legislature limit the establishment of MVZ in the SHI dental sector by outside investors and lenders.
II. Measures in the Act on Faster Appointments and Healthcare Coverage of 14 March 2018 (TSVG)
1. Establishment of new dental MVZs depends on the coverage rate
- An establishment of dental MVZs by an accredited hospital in a planning area of one of the 17 Regional Associations of SHI-Accredited Dentists (Kassenzahnärztliche Vereinigungen) is precluded if the hospital thus receives a coverage share of more than 10% in the relevant planning area.
- In underserved planning areas, in which there is a shortage of dental medical care related to need of up to 50%, hospitals will always be entitled to establish dental MVZs with at least five SHI-registered offices in all.
- Additionally, in especially underserved planning areas, in which there is a shortage of dental medical care related to need of more than 50%, the hospital may also establish MVZs up to a maximum coverage share of 20%.
- In overserved planning areas (i.e. in particular those in urban spaces), the coverage share of the dental MVZs established by the hospital may not exceed 5 percent of the SHI-accredited dental care in this planning area, as only a reduced need for care exists there.
- The Act on Faster Appointments and Healthcare Coverage is to enter into force in May 2019.
2. Objective of the limitation
- The legislature hopes that this regulation will cause hospitals to establish MVZs in planning areas with less coverage in the future.
- The limitation of the coverage shares of a dental MVZ established by a hospital applies also for the expansion of existing dental MVZs of a hospital.
- As long as no expansion takes place, the provisions will have no effect on existing dental MVZs. An entitlement to establish a dental MVZ will not be eliminated retroactively.
3. Impact on strategic investments in dental care
- It will remain possible for accredited hospitals to establish dental MVZs. It will still not be necessary for the hospital to have a professional relationship to dental care.
- An expansion in overserved regions, however, will be precluded for those dental MVZs of a hospital which already provide 5% or more of the SHI-accredited dental services in an overserved care sector.
- With regard to the acquisition of a hospital which operates a chain of dental MVZs, it is necessary to ascertain its coverage share within the planning areas in order to assess the possibility of expansion.
- The Act on Faster Appointments and Healthcare Coverage grandfathers dental MVZs which have already been established. The entitlement to establish will not be eliminated retroactively. Accordingly, it will be possible to appoint replacements of SHI-accredited dental offices.
- However, the coverage shares may not be increased by hiring additional SHI-dentists if the thresholds determined in section 95 (1b) German Social Security Code, Book V, would otherwise be exceeded.
III. The wording of the new provision in section 95(1b) German Social Security Code, Book V
“(1b) 1A dental ambulatory healthcare centre may only be established by a hospital provided that the total dental ambulatory healthcare centres thus established by the hospital do not provide more than 10 percent of the SHI-accredited dental services in the planning area of the Regional Associations of SHI-Accredited Dentists in which the establishment of the dental ambulatory healthcare centre is planned. 2In planning areas in which the general medical care related to need is underserved by up to 50 percent, the license for the hospital to establish dental care centres shall cover at least five SHI-accredited dental offices or employees. 3In derogation of sentence 1, a hospital may establish a dental ambulatory healthcare centre subject to the following prerequisites:
- in a planning area in which the general medical care related to need is underserved by more than 50 percent, as long as the total dental care centres thus established by the hospital do not provide more than 20 percent of the SHI-dental services in this planning area,
- in a planning area in which the general medical care related to need is overserved by more than 10 percent, as long as the dental care centres established by the hospital do not provide more than 5 percent of the SHI-dental services in this planning area.
4The accreditation committee shall ascertain the respective coverage share on the basis of the general medical care related to need and the status of the SHI-accredited dental care. 5To this end, the Regional Associations of SHI-Accredited Dentists must draw up comprehensive and comparable overviews of the general medical care related to need and the status of the SHI-accredited dental care on 31 December of every year. 6These overviews must be prepared by 30 June of the respective following year and published in a suitable manner in the official newsletters of the Regional Associations of SHI-Accredited Dentists. 7Sentences 1 to 6 shall also apply to the expansion of existing dental ambulatory healthcare centres of a hospital.”