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I recently attended a brilliant presentation by EsmPrins of Benguela Health. She spoke to Physiotherapy Private Practitioners on the affect the eminent Consumer Protection Act may have on their businesses. She kindly agreed to let me summarise her presentation, and here are some of the things she had to say:
When does the Consumer Protection Act come into effect
31st March 2011 is when the full Act will come into full effect. There is however a section of the Act (Section 61) which will have retrospective impact as from the 24th April 2010. This essentially means that the consumer / patient may be able to take action against you for any harm caused as result of, for example, the failure of a product supplied by you to the patient without any negligence on your side, since 24 April 2011.
Liability of the entire supply chain, being the producer or manufacturer, the importer, the distributor, the retailer, and also the service provider, is contained within this section. So be sure that the medication, consumables, devices etc. that you are issuing or prescribing to your patient is of good quality and that you give consumers adequate instructions for the usage of any products supplied, as you might be held liable for failure or adverse effects. Also remember that claims for damages can be brought up to a period of 3 years after death / injury / last date on which economic loss was suffered!
So what does this mean to the Consumer
Well it contains basically a Consumers Bill of Rights, which are enforceable, namely:
- Right of Equality
- Right to Privacy
- Right to Choose
- Right to Disclosure and Information
- Right to Fair and Responsible Marketing
- Right to Fair and Honest Dealing
- Right to Fair, Just and Reasonable Terms and Conditions, and
- Right to Fair Value, Good Quality and Safety
So what does this mean to the Healthcare Practitioner
Remember that while you are a provider of service, but might also be a consumer in certain of your professional relationships. Should you be a juristic person though, with an annual turnover above the threshold as determined by the Minister (expected to be in the region of R3 million per annum), then you are not protected by this Act. Safety monitoring and recall (Section 60), as well as product liability (Section 61) will nevertheless still apply.
Also bear in mind that it is not only the traditional medical intervention as we understand it that is under regulation here, but also the information, education, advice and consultation that we provide to our patients and the goods that we provide such as medicines, gels, devices like crutches, wheelchairs and braces, and consumables!
Marketing: the Act provides that this should not be misleading, exaggerated, ambiguous or deceptive.? We as healthcare practitioners are familiar with this sort of regulation from the Health Professions Council of South Africa. But here is something new? The consumer has the right to restrict unwanted direct marketing. This means that you need to offer recipients of your electronic marketing the option to opt out, or unsubscribe and record any decision of a consumer not wishing to receive printed marketing material. You will also need to check your list of potential clients who will be receiving communication from you, whether they have registered a “pre-emptive block” on a Registry (to be established by the National Consumer Commission), prohibiting you from sending them material for promotional purposes.
Bundling of goods and services: Here the Designated Service Provider arrangements may be effected. The consumer has the right to select their supplier. There should also not be conditions attached to services or goods, where the consumer is forced into a “package deal”. For example the arrangement might entail that you can get this service from me, provided you also buy certain goods or service from me or a specific 3rd party. Unless the convenience outweighs the choice, there is economic benefit, or I can offer the items at individual prices, such arrangements would be impermissible.
The consumer also has the right to return goods for a period of up to 6 months after the purchase thereof (with some exceptions). Additionally, there is an implied warranty in any transaction by the entire supply chain that goods comply with certain requirements and standards. So if you as a physiotherapist supply a pair of crutches to your patient, you are taking responsibility for this equipment too, as you form a part of that supply chain.
Unless your forms and documents are prescribed by other legislation, the information must be provided in plain language. Your business letters, statement of accounts, advertisements etc. must also contain:
- Name, title or description under which the business is carried on
- Indicate the primary place at which the business is carried on, and
- If a business name is used, the name of the person to whom the business is registered
So what if I end up on the wrong side of the Act
Various offences can be committed, which could incur a fine and/or imprisonment of up to 12 months. An administrative fine can also be imposed up to a maximum of R1 million or 10% of annual turnover, which ever is the greatest.
So what do you need to do?
- Review your conduct and practices, as well as that of your staff
- Review your contracts
- Review your indemnity forms
- Review your informed consent forms
- Ensure that your indemnity cover takes the Consumer Protection Act into account
- Check your other insurance needs
- Train your staff, and make them aware of the implications of this new Act.
Well in a nut shell we quickly agreed that there are not really many options in this format, other than employment or association to bring someone on board. Associating with another business or practice does have its benefits, but does not contribute directly to the growth in your own business value.
So what are the current options available to a healthcare practitioner in South Africa, under the current legislation. Well there is the option to stay as a single owner solus practice, or you could register the business as a
- Incorporated company
You cannot under the Health Professions Council of South Africa regulations, register your practice as a
- Closed corporation
- Pty (Ltd)
as both of these offer a degree of shelter behind the corporate vale
So where does that leave us? Well, if my auditor’s advice is anything to go by, “A partnership is a sinking ship!”I would not take it that far, but certainly try to learn some lessons from this, being:
- If a partner ever decides to leave from the partnership (or dies), the business entity needs to be dissolved, and started again under a new name
- The name of the business, and the business as it is,will not have a long-term life span
Here are some of the benefits of setting up the business structure as an Incorporated Company
- You declare shares, making the ownership of the business proportionate to the number of shares you own
- These shares can be purchased and sold. This allows for the dynamic flow of ownership of the practice, without jeopardising the longevity of the business or its on-going concern as a viable practice
- Share value in relation to the value of the practice gives instant Return on Investment information to shareholders
Sure, so there must be a down-side to establishing an Inc. These include:
- You will have to spend the money on registering the Inc., which can be more than registering other business structures
- You will have to be audited yearly, which carries it’s own costs. In my experience though, a good auditor and good tax advice can often offset these additional costs
So where does that leave us? Well, if you are looking at taking your practice seriously, and want to build up a true asset which can work for you as a business, then consider an Incorporated company.
Why not make the shift from working for yourself, to owning a business?
After all, who owns whom?