Regulatory framework

Under Rule 23A of the Ethical Rules of Conduct for Practitioners (Rules) registered under the Health Professions Act 56 of 1974 (Act) and Guideline 3.7 of the Guidelines for Good Practice in the Health Professions (specifically Booklet 11 in respect of overservicing, perverse incentives and related matters dated March 2025), a practitioner may hold a direct or indirect financial interest or shares (Investment) in a Healthcare Practice, provided that:

• it was acquired at market-related prices in arm’s length transactions;
• the acquisition does not impose conditions or terms upon the practitioner that will detract from the good, ethical and safe practice of their profession;
• any returns on investment or dividend payments are not based on patient admissions or meeting particular targets in terms of servicing patients;
• such practitioner does not (i) over-service patients and establishes appropriate peer review and clinical governance procedures for the treatment and servicing of their patients at such Healthcare Practice; (ii) participate in the advertising or promotion of the Healthcare Practice, or in any other activity that amounts to same; and (iii) engage in or advocate the preferential use of such Healthcare Practice;
• the acquisition agreement is approved by the Health Professions Council of South Africa (HPCSA); and
• such practitioner annually submits a report to the HPCSA with the following:
  • the number of patients referred by them or their associates or partners to both Healthcare Practices in which they hold Investments in and those in which they do not;
  • the agreements concluded in relation to the acquisition and/or ownership of the Investment in the Healthcare Practice;
  • how the acquisition of the Investment is funded and whether there are other ancillary contractual relationships between all the parties to the transaction or with related parties and entities and if so, the nature of such contractual relationships;
  • policies or peer review protocols for admission of patients into such Healthcare Practice and quality monitoring mechanisms which serve to ensure that practitioners will comply with the Rules; and
  • any other information or document which the HPCSA may deem relevant.

Rule 23A of the Rules requires the practitioner to ensure compliance at all times with the criteria set out above. It must be noted that a “practitioner” is defined in Rule 1 of the Rules as both individuals registered under the Act and juristic persons exempted from registration under section 54A of the Act.

Practitioners must also be cognisant of Rule 24 of the Rules which provides that in order for a health practitioner to refer a patient to a Healthcare Practice they have an Investment in they must (i) have a conspicuous notice displayed in their waiting room indicating that they have an Investment in the Healthcare Practice; (ii) ensure that the patient is duly informed about this fact; and (iii) obtain the patient’s informed written consent prior to such referral.

HPCSA’s Business Practice Policy

The HPCSA’s Business Practice Policy was updated on 27 March 2025 (New Policy) and sets out criteria for practitioners seeking to acquire Investments in Healthcare Practices. According to paragraph 2.7 of the New Policy, Form 23A and Form 23B, the acquisition must be approved by the HPCSA in line with the Rules and the application and declaration for such approval must contain:

• details of the practitioner;
• details of the Healthcare Practice where the Investment is being offered, including a list of its shareholders;
• details of the Investment being acquired, such as the number, percentage, manner of acquisition, time the Investment is held and the value of each share (which will require an independent auditor’s report);
• evidence of share market price determination (verifications of same must be provided to the HPCSA) and whether the Investment is from a listed entity;
• the practitioner’s relationship or association with the Healthcare Practice (apart from being a shareholder) and whether the practitioner has any other Investments in other Healthcare Practices;
• patient referral details;
• funding details of the acquisitions and any ancillary contractual relationships; and
• a declaration that (i) the acquisition was acquired at a market-related price and at arm’s length; (ii) does not impose conditions detracting from ethical practice; (iii) returns and dividends are not based on patient admissions; (iv) the practitioner does not over-service patients or participate in advertising; and (v) annual reports will be submitted.

Additionally, the acquisition agreement must be provided to the HPCSA for consideration. Therefore, we would recommend that a suspensive condition in respect of the application and the HPCSA’s approval be included in the acquisition agreement and, possibly, an obligation in any shareholders agreement or relationship agreement requiring the practitioner to submit the necessary annual report to the HPCSA in respect of their Investment and to provide the Healthcare Practice with proof of such submission.

Conclusion

Practitioners wishing to acquire an Investment in a Healthcare Practice must ensure that, prior to the acquisition, they apply to, and obtain approval from, the HPCSA under Rule 23A of the Rules and paragraph 2.7 of the New Policy. In order to ensure that such acquisitions are valid, the application and approval by the HPCSA should be made a suspensive condition to the acquisition agreement.