Starting out is a balancing act
First published in Independent Practitioner Today in February 2021
While many doctors find their businesses suffering in the lockdown, others are planning to set one up. So what do you need to know to be within the law? Kirsty Odell gives guidance on the legal considerations you need to think about if you are setting up a UK healthcare business.
There are many different ways to set up a new business and you need to consider not only what is right now, but in the future, as undoing a structure to create something new while in business is very disruptive, expensive and may even not be possible. Each option has its own advantages and disadvantages and there will also be tax considerations to take into account. Some of the main structures are as follows:
- Sole Trader – this may be appropriate for a small business where an individual is providing the services alone, like a physiotherapist. It is simple to set up and run but does not have a separate legal personality, so you are personally liable.
- Partnership – there are different types of partnerships, but a general partnership is where people are carrying on a business in common with a view to profit. As with a sole trader, there is no legal personality, and each partner is liable for all the partnership’s obligations (regardless of which partner created them).
- LLPs – there are limited liability partnerships (LLPs) which are corporate entities but taxed in a similar way to general partnerships. The members of an LLP have limited liability, and the LLP has its own legal identity.
- Limited Liability Company – again there are different types of companies, but limited companies are most common. They have their own legal identity and the shareholders have limited liability. However, there are added administration costs and disclosure requirements which sole traders and general partnerships do not have.
- CIC/Charity – only for your business if it has a charitable/social aim, then a CIC (Community Interest Company) or other social enterprise or charity may be an option. They are still companies (as above) but have more stringent regulatory requirements. Charities enjoy a number of tax reliefs, and both are liked by the public sector as they are asset locked. This means the organisation may be at an advantage in obtaining grants and some contracts.
The regulatory requirements will depend on the business that you are proposing to operate and the structure that you put in place. Some key areas of consideration for healthcare companies are registration with the CQC (Care Quality Commission) and ensuring products are passed by the MHRA (Medicines and Healthcare products regulatory Agency).
- CQC – will your business be carrying out any regulated activities? If it will, then it will need to be CQC registered. There are a number of different types of regulated activities but some of the main ones which may be relevant to you include: treatment of disease, disorder or injury, surgical procedures and diagnostic and screening procedures.
- MHRA – if you are selling a product, you will need to consider whether or not it is a medical device. If it is, then it will need to follow the requirements of the relevant regulations, dependent on the type of device that it is. For example, some devices have to be registered with the MHRA, for which there are three classes, and accessories to medical devices are classified separately. They may also need to pass conformity assessments and have CE marks. New rules will apply as from 1st January 2021, although to begin with the EU regulations have been brought into British legislation. However, changes in the EU legislation due to take effect in May 2021 and May 2022 will not apply unless they are implemented by the British Government. It does mean that devices which comply with British legislation may not be compliant for sale in the EU or EEA.
Insurance /Licences and Intellectual Property
All businesses will want to have certain insurances in place to protect it from potential liability. The big one will be professional indemnity insurance, otherwise known as medical malpractice insurance. Each individual practitioner in your organisation may be insured, but the organisation is likely to have some liability or, at the very least, is susceptible to being sued if something goes wrong. So having in place the appropriate cover for the function or services the organisation is carrying out is essential. Finding the correct cover may be a long process, and costs are high.
In addition are the usual business insurances, such as employer’s liability insurance, property insurance, and public liability insurance cover. Other types of insurance may also be required dependent on the business being operated: such as product liability and directors’ and officers’ insurance.
As well as insurances, the business will need licences to carry out some of its business operations. This will include, for example, software licences for all the information communication technology and waste carrier/disposal licences. It might also be TV and music licences, and other intellectual property.
You may also be creating your own intellectual property, not only products, but designs for your logo and website. So you may want to consider trade marking those.
Will your business be processing or controlling any sensitive data? For example, if it employs staff, it will be controlling personal information about its employees. It may also receive information about its patients/customers. You need to consider if you should be registered with the Information Commissioner’s Office.
Ensuring any personal data is properly controlled and processed, and particularly if it is to be shared, is vital. The fines for breaching The General Data Protection Regulation (GDPR) are very high. There should be a clear understanding of the data flows so that appropriate measures can be put in place to ensure compliance with data protection legislation. It is vital all staff are trained on keeping information confidential and secure. British Airways were fined €204 million (later reduced to €22m) for failing to protect customer data in 2019.
Having set up the business, you then need to contract with people to provide your goods or services. You will need to consider what contractual arrangements you need to have in place. Many disputes arise out of contracts which are made on a handshake, and then when things get tough, each party blames the other. Without a written contract, everyone stands to lose, and it may not have happened in the first place if they had sat down and thought through how it was going to work.
Some of the general contracts to consider include:
- Contracts with patients/customers – this will cover a number of different areas and will depend on exactly how the business is being run. For example, a website based business will need to have different terms and conditions to a face to face service in order to comply with legislation. As well as general terms and conditions in relation to the service/product being offered, a website business may also need website terms and conditions, privacy notices and a cookies policy. If you are providing goods or services to consumers, then any terms and conditions will need to comply with consumer regulations in that jurisdiction. Also, with a website, you will need to consider if you will be liable in other jurisdictions. Every state in the USA has its own regulations!
- Contracts with hospitals/other providers – if your business is to provide a product or service to a hospital (or other provider), then you will need to agree terms and conditions with them. Hospitals/NHS trusts may insist on their own terms being used and these could take a variety of forms and may be quite onerous.
- Contracts with suppliers/manufacturers – you will want to agree commercially acceptable terms with any suppliers or manufacturers. They may insist on their own terms and conditions being used which should be reviewed carefully. Key areas of consideration in these contracts are payment terms, delivery times, quality control, rights of termination and how liabilities are divided.
- Contracts with employees/self-employed persons – if you are engaging individuals then it may be a contract of employment, or a consultancy agreement of some kind, whereby they are self-employed. You will need to agree the terms on which they will work. You should consider if there are any particular qualifications, registrations or insurances, or perhaps practising privileges, they have to maintain in order to continue the engagement.
If you are clear about your objectives, set out a clear project plan, and have considered all the knowns, and identified the known unknowns you need to be ready for, and gained advice from others in the process, your healthcare business in the UK should be a great success!