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Recent developments in the Singapore healthcare sector

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The Singapore All Healthcare Index (“SGXHC.SI”) has gained 2.7% this year, outperforming the 1.9% gains in the MSCI AC Asia ex Japan Health Care Index. The best performing medical stocks in the SGXHC.SI have averaged an impressive 63.8% return year to date. This growth is driven by a number of factors, including demand for high-end medical services from the growing middle class in many Asian countries. Inevitably, companies and investors will continue to drive merger and acquisition activity across the regional healthcare sector.

Profit Guarantees and Medical Ethics

Profit guarantees are a common feature in mergers and acquisitions, and have proved popular with a number of Singapore-listed entities including HC Surgical Specialists, Q&M Dental Group, Singapore Medical Group and Singapore O&G. So prevalent have they become that the SGX Listing Rules protect investors by requiring listed issuers to adopt certain safeguards when accepting, or providing, a profit guarantee.

In April this year, the Singapore Medical Association (“SMA”) stated that profit guarantees, and the financial imperative that is involved, are incompatible with the profession’s ethical guidelines.

The ECEG – An Absolute Prohibition?

This move is somewhat surprising given that “profit guarantees” are not expressly prohibited under the Singapore Medical Council (“SMC”) “Ethical Code and Ethical Guidelines” (“ECEG”). These standards, which govern the practice and conduct of doctors, are based on the SMC “Handbook on Medical Ethics”. These guidelines are principles-based and are not prescriptive of every possible issue that may arise.

The ECEG states that doctors should not allow financial considerations to influence their clinical judgment or enter into financial arrangement that commits them to provide a revenue or profit guarantee to a third party where that arrangement may influence how they manage their patients. They should, as a matter of good practice, avoid such arrangements given the pressure they place on doctors to meet their financial obligations. This view is supported by the SMC “Physician Pledge”, which in turn is based on the Declaration of Geneva.

Doctors must make the health of his patients their first consideration, placing this above their personal interests and any business or financial considerations. Any opportunities for financial gain must be subservient to the patient’s interests. Examples of how a patients’ interests may be compromised include doctors over-servicing, or over-charging, their patients. Any action that links the “subjectivity” of a doctor’s clinical judgment and financial arrangements is therefore questionable. On that basis, one may assume that a doctor’s clinical judgment would be compromised by a financial arrangement involving a profit guarantee and any subsequent increase in fees.

However, it should be noted that the ECEG stops short of a presumption that a profit guarantee would compromise a doctor’s objectivity and jeopardise their patients’ interests. Drawing such a conclusion would simplify, but obscure, the complex process of clinical judgments a doctor makes against a background of their patients’ interests, ethical issues and the commercial realities of operating a clinic. The ECEG is sensitive to this issue and expressly states that “each case will be judged by its particular facts and circumstances”. Arguably, if a doctor can demonstrate 1) objective clinical judgement and 2) that the patients’ interests were not compromised, it would appears that the ECEG ethical principles can be upheld, even in the face of a financial arrangement. The reality may be somewhat different, however. In view of the evidential difficulties in seeking to prove state of mind, the practical effect of the ECEG may be to deter any such financial arrangements.

The Resolution and publication by the Ethics Committee – a warning, a presumption or a determination?

In its statement, the SMA also referred to the 1998 resolution (“Resolution”).

The Resolution stated that profit guarantees create an increased risk of unethical behavior as the patients’ interests are no longer the medical practitioner’s first consideration. This position was supported by the SMC. In 2000 the National Medical Ethics Committee (“Ethics Committee”) noted that a financial arrangement committing a doctor to a profit guarantee was strongly discouraged as it increases the risk of unethical behavior arising from doctors working under financial imperatives imposed by such financial arrangements.

This raises the question: are the Resolution and the Ethics Committee’s recommendation a warning, a presumption or a determination? If a warning, then it appears to highlight the risks associated with profit guarantees. It may also be taken to create a presumption that the patients’ interests are naturally being subordinated when a profit guarantee is provided. If it is read as a determination, as seems to be the SMA’s position, then the financial imperative imposed by profit guarantees is incompatible with the SMC’s Physician Pledge. If so, profit guarantees may automatically be treated as a breach of the rules, without further recourse to considering the doctor’s state of mind.


The lack of an express prohibition in the ECEG, Resolution and the Ethics Committee publication inevitably creates uncertainty. The SMC did distinguish between principles that state “must” and “should”. Failure to abide by principles stating “should” will not automatically result in a breach of the ECEG and each case must be judged on the facts. There is a natural reluctance to increase the rules governing the medical community, as self-regulation is viewed as a professional privilege, and the various principles have to be considered in that context.

Potential influences on a doctor’s clinical judgment involve a myriad of factors, including financial incentives. Any acquiring entity must take into account these factors in the context of the transactions. The implication is clear: profit guarantees in Singapore are viewed as undesirable and potential acquirers are well-advised to proceed with caution.