Regulatory Framework for Setting Up Private Healthcare Facilities and Services in Malaysia

In Malaysia, the establishment, operation and/or maintenance of private healthcare facilities and services are subject to various legal regulations and requirements.

Healthcare facility means any premises in which the public (one or more members) receive healthcare services. It includes a private hospital, a private psychiatric hospital, a private ambulatory care centre, a private nursing home, a private maternity home, a private blood bank, a private haemodialysis centre, a private hospice, a private community mental health centre and any other private healthcare facility or service or health-related service as the Minister of Health Malaysia may specify in the Gazette.

Healthcare services, on the other hand, include (a) medical, dental, nursing, midwifery, allied health, pharmacy, and ambulance services and any other service provided by a healthcare professional; (b) any service for the screening, diagnosis, or treatment of persons suffering from, or believed to be suffering from, any disease, injury or disability of mind or body; (c) any service for preventive or promotive health purposes; or (d) any health-related services.

A. Registration / incorporation of a local company

In Malaysia, the registration and incorporation of companies are regulated by the Companies Commission of Malaysia (“CCM”). The setting up of medical and healthcare practice requires the intended professional to register with the CCM under the Limited Liability Partnerships Act 2012 or incorporate a local company under the Companies Act 2016 (“CA 2016”). A foreign company cannot carry on business in Malaysia unless it registers a branch in Malaysia.

A foreign company is defined under the CA 2016 to include a company, corporation, society, association or other body incorporated outside Malaysia, or an unincorporated society, association, or other body which under the law of its place of origin may sue or be sued, or hold property in the name of the secretary or other officer of the body or association duly appointed for that purpose and which does not have its head office or principal place of business in Malaysia.

Therefore, persons intending to set up private practices in the medical and healthcare services can establish one of these entities in Malaysia:

1. A sole proprietor who is a registered medical practitioner under Medical Act 1971; or
2. A partnership which consists of at least one partner who is a registered medical practitioner under Medical Act 1971; or
3. A body corporate (registered branch or a newly incorporated company) whose board of directors consists of at least one person who is a registered medical practitioner under Medical Act 1971.

Note: each of the foregoing structures has its own set of requirements and implications. Compliance with the CA 2016 and other relevant Malaysian laws is crucial for the establishment and operation of the healthcare facility. It is therefore advisable to consult us to ensure that all regulatory requirements are met and that the chosen business structure aligns with the specific needs and goals of the private healthcare facility.

B. Approval to establish/maintain a private healthcare facility or service (other than a private medical clinic or a private dental clinic)

Although there are various statutes governing the establishment of private healthcare facilities, the approvals and licences to establish, maintain and/or operate a private healthcare facility or service are governed by and issued under the Private Healthcare Facilities and Services Act 1998 (“Act 586”), as supplemented by its regulations from time to time.

Under the Act 586, no person shall establish or maintain any private healthcare facilities or services (other than a private medical clinic or a private dental clinic) without first obtaining approval from the Director General of Health, Malaysia (“Director General”). In deciding whether or not to grant such an approval, the Director General will take into consideration the following matters:

(a) the nature of the healthcare facility or service to be provided

(b) the extent to which the healthcare facilities or services are already available in an area

(c) the need for the healthcare facility or service in an area

(d) the future need for the healthcare facility or service in an area

(e) any other matter which in his opinion is relevant

C. Licence to establish/maintain a private healthcare facility or service (other than a private medical clinic or a private dental clinic)

An application for a licence to operate or provide a private healthcare facility or service (other than a private medical clinic or private dental clinic) shall be made within 3 years from the date of the issuance of the approval to establish or maintain in respect of such facility or service (see Section B above).

Separate licences shall be applied for private healthcare facilities or services which are not physically, administratively or organisationally linked.

D. Summary of application to establish a private hospital in Malaysia

With the objectives to remove unnecessary compliance costs and administrative burden while enhancing regulatory consistency in the private healthcare sector, the Ministry of Health had issued a Guidelines on Application of Pre-Establishment Approval for Private Hospital and some other useful handbooks detailing the requisite steps and procedure in setting up private healthcare facilities in Malaysia.

Set forth below a summary of the relevant procedure and information required for the application to establish a private hospital in Malaysia:

E. Registration of a private medical clinic or a private dental clinic

Unlike other private healthcare facilities or services, an application for the registration of a private medical clinic or private dental clinic shall be made to the Director General in the prescribed form and manner. The Director General may register the private medical clinic or private dental clinic by issuing a certificate of registration in accordance with the Act 586.

The holder of a certificate of registration shall ensure that the registered private clinic is maintained or operated by a person in charge who shall hold prescribed qualification, have undergone training and possess relevant experience.

F. Other regulatory requirements

In addition to the requirements outlined above, the establishment, operation and/or maintenance of private healthcare facilities and services in Malaysia may also fall within the purview of the other regulatory bodies, such as:

The specific licences / approvals required vary based on the type of healthcare facility, the services offered, and the location. It is therefore crucial to engage with legal professionals, consultants and experts in healthcare regulations to ensure comprehensive compliance with all relevant laws and regulations.

G. Foreign participation in Malaysia’s private healthcare sector

To encourages joint ventures between Malaysian and foreign investors, the Government of Malaysia had liberalized foreign equity participation in certain services which includes the following:

i. Private Hospitals

ii. Medical specialists Clinics

iii. Dental Specialists Clinics

iv. Veterinary services

v. Welfare services delivered through residential institutions to aged and the handicapped

vi. Welfare services delivered through residential institutions to children

vii. Child day-care services including day-care services for the handicapped

viii. Vocational rehabilitation services for handicapped.

Notwithstanding the liberalization to allow participation of foreign investors in these services, foreign equity condition for private healthcare facilities and services is still subject to the approval by the Special Committee on Foreign Equity Participation of the Ministry of Health.

G. Other compliance requirements

Regulations in relation to patient rights and safety

To comply with the regulations set out in the Private Healthcare Facilities and Services (Private Hospitals and Other Private Healthcare Facilities) Regulations 2006 to meet minimum acceptable standards and the mandated accountability of private healthcare providers towards patient safety, the upholding of patient rights, and the assurance of quality care.

Compliance with the mandatory approval and licensing of all private hospitals and other private healthcare facilities and services under the Act 586 further upholds the protection of patients and the accessibility of healthcare consumers in Malaysia.

Regulations in relation to employment

To comply with the Employment Act 1955 and other Malaysian industrial laws, including regulations related to labor benefit, rights and minimum entitlements of the healthcare professionals and supporting staffs.

Regulations in relation to patient records and data security

To comply the Personal Data Protection Act 2010 and all other data protection regulations to implement measures for the secure handling of patient information and records.

Tan Lee Weei is a Senior Associate at Halim Hong & Quek specialising in Capital Market, Corporate/M&A, Employment Law and Regulatory & Compliance.

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