Given the recent increased levels of activity we have observed in the buying /selling of medical practices and the current intensive spotlight of privacy regulation (including in the health industry), the process of proper data segregation is an important one.
Data segregation is a process that ensures that only data which is relevant to the acquisition of a target business is managed, segregated and transferred to the acquiring entity.
Consideration of data segregation in any acquisition activities is vital, particularly in circumstances where the data which is held may be commingled with other,non-related data (which may not need to be transferred to the acquiring entity).
The successful segregation of data is particularly important for medical practices, as the personal information which is collected in the rendering of health services (including an individual’s name, date of birth, and address) is considered to be sensitive information for the purposes of compliance under the Privacy Act 1988 (Cth) (Privacy Act).
This information is consequently subject to a higher level of compliance, and the scope of its collection, use, management and disclosure is more constrained than it may otherwise be in other contexts.
Medical practices that are conducting mergers and acquisitions (M&A) transactions in buying or selling their practices must therefore take the upmost level of care inensuring they have appropriate data segregation safeguards in place, to not only ensure they comply with data protection laws, but also to preserve the quality and value of their collected data. It should be noted that amendments in the recently passed Privacy Legislation Amendment (Enforcement and OtherMeasures) Bill 2022 (which is currently awaiting royal assent) will increase the repercussions organisations in breach of privacy laws may face.
Under this bill, a contravention of the Privacy Act may result in a penalty of up to $50 million. The penalty will be calculated, if possible, to be worth three timesthe benefit the offending entity obtained from the breach, or otherwise to be30% of the adjusted turnover the entity earned, during the breach period.
While data segregation is often an ‘after thought’ in M&A transactions, data segregation should be considered as soon as a medical practice begins contemplating the undertaking of M&A activities, to ensure information is sufficiently protected and that you have complied with your obligations under the Privacy Act. The early consideration of data segregationis vital to ensure you have appropriately managed any risks arising from the obligations set out under the Privacy Act
Practically,we suggest that in acquiring a medical practice, buyers should consider:
If you have questions, or would like more information about how we can assist you and your business, please call 1800 867 113 or to organise a confidential discussion at a time that suits you, click here.
Justin Fung is a lawyer and the Head of Commercial and Corporate in our Avant Law team. Justin has over 15 years’ experience advising in commercial, corporate, risk, compliance, governance, regulatory enforcement and dispute resolution and advises clients in the private and public sectors.
He was previously General Counsel of a national allied health group of companies and held Group and Divisional Head of Legal roles in a major ASX-listed health company, whose operations covered medical and dental centres, allied health, pathology, diagnostic imaging, assisted reproductive technologies, day surgeries and hospitals. Prior to these in-house legal roles, Justin was an Executive Counsel with the global law firm Herbert Smith Free hills where he practiced for over 10 years.
Disclaimer: The information in thisa rticle does not constitute legal advice or other professional advice and should not be relied upon as such. It is intended only to provide a summary and general overview on matters of interest and it is not intended to be comprehensive. You should seek legal or other professional advice before acting or relying on any of this content. The information in this article is current to 6 December 2022.
© Avant Mutual Group Limited 2022
Liability limited by a scheme approved under Professional Standards Legislation. Legal practitioners employed by Avant Law Pty Limited are members of the scheme.
