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This article is written by Sneha Asthana pursuing a Diploma in Business Laws for In-House Counsels from Lawsikho. This article has been edited by Aatima Bhatia (Associate, LawSikho) and Dipshi Swara (Senior Associate, LawSikho).

Introduction

Among the various businesses that have risen in the past decade, the medical sector opens a lot of opportunities for people in India. The sector has consistently seen a scarcity in its services in comparison to the ever-growing population of the country. While the country sees the involvement of both the Government and private entities in the medical sector, people are still not provided with adequate resources for such services. The government in India has successfully opened several government hospitals across the country like Lady Harding Medical College & Hospital, Delhi, Osmania General College & Hospital, Telangana, J.J Group of Hospitals, Mumbai, etc., but most people fear the quality of services provided in such hospitals. A big segment of the Indian population, while willing to get treated in public hospitals at reasonable costs, hesitate to do the same because they are not satisfied with the quality of services provided or the hygiene maintained. There persists a huge lack of facilities, long waiting periods for minor surgeries, unavailability of doctors, unqualified staff in most government hospitals thereby perpetuating a system of an unreliable healthcare system. Certain studies conducted by the IMS Institute for Healthcare Informatics in 2013, across 12 states in over 14,000 households indicated a steady increase in the usage of private healthcare facilities over the last 25 years for both Out-Patient and In-Patient services, across rural and urban areas. Taking advantage of such demands, several private entities have gotten involved in the private hospital business. Such a step has helped the country greatly as more good quality services are being provided to the common folk. While the financial accessibility and after-math of such treatment is a different debate, private hospitals can be credited for introducing a plethora of Grade A services with no compromise on quality. 

The start of a private hospital is always chaotic as hospitals require intense licensing and authorizations from various regulatory and statutory bodies. Most private hospitals offer multispecialty services which make it all the more tedious for them to obtain all their necessary documents. The legal framework for private hospitals is covered under several Acts like the Clinical Establishments Act, 2010,  the Atomic Energy Act, 1962, Companies Act, 2013, Electricity Act, 2003, Indian Electricity Rules, 1956, National Building Code of India, 2005, etc. Most of the capital that goes into starting up a private hospital is divided into:

  1. Purchasing the land or building for such a business 
  2. Getting necessary beds, equipment, and machines for procedures, scans, tests, etc.
  3. Medicine and inventory
  4. Staff salary
  5. Catering services for patients and canteens for visitors.

Post these expenses, hospitals also have to focus on ambulance services, marketing services, online services, pharmaceutical services, etc. Hospitals or clinics providing super-specialty services like cancer/oncology treatments, derma services, ENT specialists, dental services, cosmetology services often don’t require lengthy procedures to be followed but they also have to equip themselves with all the mandatory documents like licenses, approvals, etc. 

This article discusses the kinds of statutory and regulatory licenses, approvals, or documents required to start a private hospital in India.

Licenses and approvals

Land license 

The safest bet to opt for land that’s best suitable for hospitals is to only go for “hospital approved areas” which are usually marked on the Municipal plans. Other than such lands any non-agricultural land is also a good fit for constructing hospitals. The land required for the construction of the hospital must have all the required documents: 

  1. Title Deeds of the land.
  2. NOCs from Municipal authorities, Pollution Control Board, Fire Department, Special Area Development Authority (if any), and Environment Clearance.
  3. Land registration documents.
  4. Floor Area Ratio certificates (FARs) and Ground Coverage certificates (GC).
  5. Parking requirement certificates.
  6. Road licenses to maintain distance from the main road.
  7. Land mutation, if any.
  8. Land conversion, if any.

Construction and installation-related approvals/licenses

Once the land and area for such a hospital have been approved, the next step is to get the building plan approved by the authorities, which is called the Building Plan Sanction. The building plan has to follow the guidelines given as per the National Building Code which talks about:

  1. structural safety.
  2. landscape planning.
  3. asset and facility planning.
  4. accessibility for the elderly and people with disabilities.
  5. gas pipelines.
  6. fire and light safety.
  7. solar energy.
  8. provisions on cement and steel masonry.
  9. industrial wastes.
  10. air conditioning and ventilation.
  11. escalators, moving walkway provisions.
  12. Water supply, drainage, and sanitation provisions.
  13. Solid waste management etc.

As Building is a state subject, state authorities have their laws to govern the construction of the same. Therefore, most licenses and approvals have to be obtained from Municipal authorities. This is for the simple reason that buildings constructed in the area can be better monitored by the departments that possess the city’s plan and have easy access to it. Some of these licenses and certificates are:

  1. NOC from fire safety.
  2. Electrical installation certificate.
  3. Height restriction certificates.
  4. Equipment licenses.
  5. Lift usage certificate.
  6. Radiation department licenses.
  7. Biohazardous permits.
  8. Drainage approvals.

Registration under Clinical Establishments Act, 2010

According to Section 11 of the Clinical Establishments Act, no person is allowed to run a clinical establishment without being registered under this Act. The Act goes on to present conditions that should be met for registering the establishments under Section 12, which are:

  1. Minimum standards of facilities and services as may be prescribed;
  2. Minimum requirements of personnel as may be prescribed;
  3. Maintenance of records and reporting provisions as may be prescribed;
  4. Such other conditions as may be prescribed. 

After such conditions have been met, the application for provisional registration has to be filed under Section 14. This application requires the entity/individual to furnish basic details such as the name of the owner and establishment, addresses, specifics of the hospital, etc., and file it either in person/post/online. Such application is to be accompanied by the prescribed fees which depend entirely on the State Rules. 

After being provided with the Provisional Registration, the entity/individual may apply for permanent registration under Section 24 of the Act. Similar to the application under Section 14, Section 24 application also calls for hospital details. Every state and Union Territory has different particulars in their forms. For the state of Telangana, the application requires basic hospital facilities and various documents to be attached to the application. For Delhi, visiting the website of delhimedicalcouncil.org helps in being redirected to the application page whereby furnishing necessary details with prescribed fees of Rs 2000/- shall be completed. Post application, certain inspections are done to check whether prescribed standards are being met or not. Upon satisfaction of the state/UT medical councils, the permanent registration is granted which is valid for the next 5 years. Upon the end of validity, fresh applications must be filed. 

Registration under Companies Act, 2013

f the private hospital is established under the ownership of a corporation, then the hospital needs to be registered under the Companies Act, 2013. Such a registration identifies the hospital as a Company thereby giving it rights of purchasing and selling property on its name, the nature of perpetual succession, and creating duties such as having a Memorandum of Association, Articles of Association, regular Board meetings, submissions, and audits. If the hospital has been registered as a company, then the directors of the company also have to have to be registered and must have a Director Index Number (DIN).

 If the hospital is under the ownership of a society, then it has to be registered as a society under the Society Registration Act, 1960. 

Licenses/approvals/permits for the functioning of Hospitals

Once the hospital has been given an identity and registered under the suitable law, all operations of the hospitals need to be approved. Multispecialty hospitals offer several facilities such as consultancy, X Rays, scanning, medical tests, etc. and these facilities require licenses for the usage of their equipment. Super-specialty hospitals don’t offer very many facilities but most specialty hospitals also need permits and approvals for their equipment, doctors, consultants, etc. These hospitals also require to get NOCs from the fire department, water department, etc. Some of these licenses, approvals, and permits are:

Atomic Energy Regulation Board Licenses

Hospitals need to obtain licenses from the AERB for all radiation generating equipment and all radiation sources, such as: 

  1. any diagnostic radiology equipment;
  2. nuclear machines being used;
  3. Radio-Immuno Assay kits (RIA);
  4. Any sealed or unsealed sources used for radiation facilities;
  5. Radiotherapy;
  6. Medical accelerator units;
  7. TomoTherapy equipment etc.

The AERB has laid down certain procedures in the Atomic Energy (Radiation Protection) Rules, 2004 to apply for such licenses for every new equipment that is to be used. The procedure mimics other licensing procedures and entails filing of hospital specifics, employee specifics, educational and academic backgrounds, and attachment of necessary documents such as Identity proofs, Registration proofs, and Employership proofs. 

Electricity, fire and water licenses 

Hospitals need to use massive quantities of water and huge loads of electricity all through the day. Therefore, they need to approach their Municipal authorities for permits of such vast usage of water and electricity and also obtain a NOC from the said departments for the same. Such licenses see their requirement in the Electricity Act and such but are entirely dependent upon the States Rules and Notifications and can be obtained from the Municipal authorities after similar applications. NOCs from the fire department are also required for the hospital to maintain. The Fire department needs to go through the entire Construction Plan, anticipated fire engines, hospital equipment, Fire Exit planning, geographical issues, and only then can it issue a NOC to the hospital.

Sanitation and biomedical waste permits

According to the studies conducted by the WHO, hospitals generate 0.5 kg of biomedical waste per bed per day. All hospitals need to obtain permits and approvals from the Municipal authorities to lay down proper plumbing and waste reduction pipes during the construction or development of the hospital. The said department has to approve the Plumbing Scheme of the hospital based on the anticipated wastes that may be generated by the hospital. Large–scale or big hospitals also need to install incinerators for the treatment of the biomedical or hazardous wastes generated by the hospitals on a day-to-day basis. Any hospital that cannot install biomedical waste incinerators needs to register with their municipal authorities for the treatment of the same. Such waste is then taken over by the suitable divisions of the department.

Healthcare facility certificate

Such a certificate is mandatory and is issued by the Municipal Authorities after obtaining the certificate of Permanent Registration of the hospital under the Clinical Establishments Act. This certificate is only issued after the minimum number of beds and equipment has been installed and inspected by the Authorities. 

FSSAI license

This license is given by the Food Safety and Standards Authority of India. Any hospital which intends on having an in-house kitchen for the patients and/or visitors must have the said license to start the functioning of a kitchen. The application is submitted on the FosCos portal. Separate licenses for state and centre can be applied with the necessary documents. The Authorities tend to take about 7-10 days to review the application. The license is only granted after a thorough inspection of the documents and the kitchen has been done.

Pharmacy registration for medical shop

Nowadays, hospitals tend to keep a pharmacy open 24 hours in their premises for easy accessibility. Having such a medical shop in the hospital also requires registration under the Central Drug Standard Control Organization and State Drug Standard Control Organization. Such an application for registration is to be made by the manufacturer or retailer and as per the forms after the payment of application fees as prescribed. Before granting such registration, the Organization looks for certain conditions to be met such as the sizable area of the store, storage facility, and the technical staff. Similar applications are to be made in the SDSCO if the hospital is located solely in one state and similar conditions are to be met there as well. 

License for purchasing, possessing and dispensing Essential Narcotic Drugs (END) 

Any hospital will require a license to purchase, possess and dispense narcotic drugs under the Narcotic Drugs and Psychotropic Substances Act, 1985. Hospitals that have been registered by the CDSCO or the SDSCO are eligible to deal with narcotic drugs by the virtue of their above-said registration. Such institutions that deal with narcotic drugs need to be Recognized as Medical Institutions (RMIs). Once they are recognized then the institutions can deal with the purchase, possession, and dispense of the narcotic or psychotropic substances.

The above licenses are required for the hospital to begin its technical functions so its daily operations can start running. However, depending upon the type of hospital the above list may change thereby adding more licenses. 

Staff registrations

While the hospital requires land, building, equipment licenses, approvals, and permits, it also requires its staff to be qualified and registered under suitable Departments and Authorities for proper and organized workflow. All medical stuff needs to be registered under the following:

  1. Doctors need to be registered under the State Medical Council.
  2. Nurses have to be registered under the State Nursing Council.
  3. Dentists have to be registered under the Dental Council.
  4. Pharmacists have to be registered under the Pharmacy Council.

After getting registered under the suitable Councils, doctors, nurses, dentists or pharmacists can be hired for their services by the private hospitals. Such Registration must be proven at the time of hiring. Additionally, if any nurse, doctor, pharmacist, or dentist has to use any equipment simultaneously, they should also get a license for the same by the suitable department. 

The above mentioned are all the basic necessary licenses, approvals, permits, and registrations required to be obtained by any entity/individual deciding to start up a private hospital. In addition to the above, other licenses, approvals, permits, and registrations are also required to be obtained by the hospital depending upon the services it provides. A few additional licenses, permits, registrations, and approvals required are:

  1. Permit for storage of petrol/diesel under the Petroleum Act, 1934.
  2. License for operating blood banks from the Drug Standard Control Organization.
  3. Registration for organ transplantation under the Human Organs Act, 1934.
  4. Registration for medical termination of pregnancies under the Medical Termination of Pregnancy Act, 1971.
  5. Registration to prohibit sex determination practices under the Pre-Natal Diagnostic Test Act, 1994.
  6. Registration of Ambulances and all hospital vehicles in the Motor Vehicles Act, 1988.
  7. License for using boilers under the Boilers Act, 1923.
  8. Licenses under the Drugs & Cosmetics Act, 1940.
  9. Registration under Births and Deaths Act, 1969.
  10. Licenses under Environment Protection Act, 1986. 

Other legal framework

As the hospital starts its functioning and perhaps expands its services and grown in scale, the hospital will also be governed by many other legal Acts, some of which are:

  1. Guardians and Wards Act, 1890;
  2. The Epidemic Diseases Act, 1897;
  3. The Mental Health Act, 1987;
  4. Environment Protection Act and Rules;
  5. Sale of Goods Act, 1930;
  6. Labor Laws etc.

Conclusion

The business of a private hospital is a wide and intrinsic business with the capability of a huge risk if attention is not paid to every minute detail. The business of a hospital is a conglomerate of several distinct aspects of human life such as health, employment, environment, etc. that numerous laws have the capacity of governing a small-scale super-specialty hospital too. Amidst the functioning of so many laws, people often believe that such an enterprise is too burdensome and get discouraged by the idea of it. However, today, there are different departments taking care of every document in need and it is obtained in no time. The rise of private hospitals has been significantly high in the last decade, thanks to the quality of its services. The different Acts that govern the hospitals may look drastic but such governance is what helps in keeping the hospitals accountable for their actions as they are dealing with something as sensitive and precious as human life. One of the businesses with the highest risk of failure is the hospital industry. Therefore, it lies in the best interest of the entity/individual to ensure all legal compliance is met and adhered to. The above legal framework also shows us the best of efforts put in the country/states/union territories in seeking the best for their citizens so that everyone can avail the highest quality of service, seek the best remedy and place their trust in the hospitals. 

References 


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