Navigating the legal landscape: Essential guidance for day hospitals

Day hospitals are reshaping primary healthcare in Australia. Running a day hospital involves navigating in a highly regulated environment with complex licensing and accreditation requirements. There are also unique financial considerations as revenue is generated principally from private health insurance and out-of-pocket patient payments, in addition to some government sources such as incentives and Medicare rebates.

In this article, we focus on the business side of key legal considerations for operating a successful day hospital.

Key legal considerations for day hospitals:

Organisational structures:

The way your day hospital is structured legally affects everything from tax obligations to liability exposure. The owners of day hospital businesses typically structure ownership through a company or trust entity (or a combination of both, with a company trustee for a trust). Company and trust structures each have their advantages in respect of limiting legal liability, access to tax benefits and rules around profit distribution. You should obtain accounting and legal advice when choosing the right structure for your business, as setting the best foundation right from the start can prevent costly restructuring in the future.

Succession planning:

For day hospital owners and operators, ensuring business continuity through proper succession planning helps protect both your personal legacy and your facility's future. Clear succession arrangements prevent uncertainty and potential disputes that could disrupt operations during already difficult times. An ownership agreement, typically referred to as an equity holders’, shareholders’ and / or unitholders’ agreement, is often relied upon to ensure appropriate succession planning. These agreements are effectively ‘prenups’ for business partners and critical for navigating both business-as-usual, and long term sustainability. 

Dispute resolution and legal conflicts:

Even well-run day hospitals can face disputes with third party contractors and suppliers. How your business negotiates its contractual arrangements with third parties can mean the difference between a quick resolution of disputes or protracted, expensive litigation. Ensuring appropriate contractual arrangements provides clarity on the rights and obligations of the respective parties and safeguards the interests of your business in a dispute situation.

Data protection and privacy:

Patient information is at the core of healthcare delivery, but it's also one of your greatest legal responsibilities. Day hospitals handle sensitive health records, billing information, and personal data that must be protected under strict privacy legislation. A single data breach can result in regulatory penalties, loss of patient trust, and potential litigation. Robust privacy frameworks and staff training are essential safeguards for your operation.

Employment and workplace compliance:

Your clinical and administrative staff are your greatest asset, but employment law is complex and constantly evolving. From award obligations and workplace health and safety requirements to managing underperformance and preventing discrimination claims, the legal dimensions of workforce management require careful attention. Non-compliance can result in Fair Work Commission proceedings, compensation claims, and regulatory penalties.

Property and facilities ownership and management:

There are both benefits to owning and leasing the premises upon which your day hospital business in conducted. Owning ensures greater control over the use and fit-out of the premises; but if you need to lease premises, you need to ensure the physical characteristics of the premises meet both regulatory and operational needs for operating a day hospital. If you need to lease a premises, it is critical to undertake a thorough due diligence and seek appropriate legal advice for negotiating the lease terms.  

Taking a proactive approach

Starting and operating a day hospital may have its challenges, but the most effective strategy for success is to be proactive and plan ahead by doing your research and utilising the expertise of your key external stakeholders. For health professionals, you specialise in the delivery of healthcare. For investors, you understand the financial dynamics and market drivers. At Avant Law, we bridge your expertise with our legal expertise to help you start or strengthen the legal foundations for your day hospital business.

Want to know more?

Avant are proud to be a corporate sponsor of Day Hospitals Australia. If you have any questions or would like more information about how we can assist you or your facility's success, please contact our team on 1800 867 113 for a confidential consultation, or click here to arrange a discussion at a time that suits you.