Back in 2017, I wrote a blog about the role of directors of healthcare institutions. Now, four years later, there is still a lot of attention for this. Recently, the focus has been on tackling so-called 'healthcare cowboys'. We therefore take a fresh look at what is expected of the directors of a healthcare institution. The most important (7) (legal) rules that must be taken into account in the context of good governance are the following.
- General standard
The general standard for the performance of duties by directors of private-law legal entities[1] (including foundations) is contained in Book 2 of the Dutch Civil Code: directors must perform their duties properly and each of them is responsible for the general course of events. If they fail to do so and there is improper management, the main rule is that each director is liable for the whole. Book 2 also stipulates that the board must render account of the company's financial policy in the annual accounts.
- Health Care Sector Governance Code (ZGC) 2017
Another important source is the ZGC. This code is not a law, but it does contain seven 'principles' that the members of the five affiliated branch organisations (ActiZ, GGZ Nederland, NFU, NVZ and VGN) must comply with. Non-member healthcare institutions can also use the ZGC as a guideline. What is new compared to previous care codes is that it is no longer rule-based, but principle-based. In other words, the code is primarily aimed at self-regulation and the personal responsibility of managers.
- Admission, good governance
At present, the Act for the Admission of Care Institutions (Wtzi) still applies. Based on this Act, the "official" admission of institutions that want to offer care on the basis of the Healthcare Insurance Act (Zvw) or Long-Term Care Act (Wlz) is regulated. The Wtzi also contains rules on good governance. Examples are the distribution of different types of care, a transparent management structure and the requirement of orderly and verifiable business operations. It also regulates the possibility for these institutions to distribute profits and the right of the client council under the associated Wtzi Implementation Decree to conduct an inquiry (see point 4 below).
As of 1 January 2022 (at least that is the current target date), the Wtzi will be replaced by the Act on the Accession of Care Providers (Wtza). This Act lays down new rules for the entry of healthcare and youth care institutions. An important change is that healthcare and youth care institutions that are starting up are obliged to report. This will give the Healthcare and Youth Inspectorate (IGJ) more insight into which parties are offering this type of care. In addition, new providers will no longer be automatically admitted. It is hoped that this will counteract the 'proliferation' of care cowboys. Existing providers of this type of care will also have to deal with the Wtza, but there will be a transitional period of six months after it takes effect in order to meet the new requirements.
- (Rights of the) Client Council
The Client Participation in Health Care Act (Wmcz). The management of a number of types of care institutions is obliged to set up a client council, for example the general and psychiatric hospitals, the GGZ institutions and care and nursing homes. The client council is there to represent the collective interests of the clients. The client council has a number of important rights. For example, the council has the right to all information from the board that it requires for the performance of its tasks (right to information), the right to consult regularly with the board on the institution's policy (right to consultation) and the right to advise the board, on request or otherwise, on a number of subjects that are important to clients (right to advice) and even the right of consent on a number of subjects. In addition, the client council may nominate at least one person for appointment as a member of the management or the supervisory board (right of binding nomination). The client council also has the right of inquiry. This means that the council can submit a request to the Enterprise Section of the Amsterdam Court of Appeal to have an investigation conducted into possible mismanagement within the institution. If necessary, the Enterprise Section can take measures, such as suspending or dismissing a board member.
- External supervision
The Healthcare (Market Regulation) Act (Wmg). Please note that the Dutch Healthcare Authority (NZa) supervises the healthcare markets. For example, the NZa actively monitors that the care is provided lawfully (i.e. in accordance with the Zvw and Wlz) and that it is registered and declared correctly.
- Ensuring quality; complaint handling
The Healthcare (Quality Complaints and Disputes) Act (Wkkgz). It regulates what good care means exactly, such as that it must be safe, effective, efficient and client-oriented and must be tailored to the needs of the patient, but also how complaints about healthcare providers must be handled.
- Setting standards for top incomes
Last but not least, perhaps less intertwined with the performance of the management board, but not unimportant, is the Top Income Standards Act (Wnt), under which the maximum income of top officials in the public and semi-public sector is set at the same level as the 'balkenendenorm' (as of 2021: € 209,000).
Upcoming law: Administration and Supervision of Legal Persons Act (WBTR)
On 1 July 2021, the WBTR will enter into force. This Act aims to equalise and clarify the legislation on management and supervision for all legal persons under private law (with the exception of non-commercial foundations and associations). These rules have been in place for a long time for the BV and NV. It mainly means a change for the association, the cooperative, the mutual insurance association and the foundation, so also for many private healthcare institutions.
The WBTR provides a legal basis for the introduction of a supervisory body. This body can be part of the management (monistic system) or be established as a separate body (dualistic system). In practice, the two-tier system is the most common. It has also been laid down by law that the management board members and supervisory board members must focus on the interests of the legal entity and the company/organisation affiliated with it. Based on case law, this already applied before the WBTR.
Furthermore, there must be a regulation in the articles of association for directors and supervisory directors who are absent (temporarily absent) or unavailable (vacant). In addition, it is important that the WBTR introduces specific rules on the dismissal of a director/supervisory director by the court and on how to deal with conflicts of interest. As mentioned, these are partly rules that already applied before 1 July 2021 on the basis of case law.
Finally, it is important that directors and supervisory directors may be personally liable in the event of bankruptcy if it becomes apparent that they were guilty of improper performance of duties. The improper performance of duties is established from the moment that the accounting and/or bookkeeping obligations have not been met. In that case, it is assumed that the improper performance of duties is an important cause of the bankruptcy. This suspicion can possibly be refuted, but the director/supervisor will then be trailing 1-0.
Finally
It is advisable for every manager of a healthcare institution to go through the above, but what this means for your healthcare institution remains a tailor-made matter. Do you therefore have questions about this or do you need advice about something that is happening in your care institution? Please feel free to contact us. The care team of Kempenaer Advocaten has the knowledge and skills to advise you.
[1] Public and private limited companies, associations, foundations, cooperatives and mutual societies
