Stricter regulation, compensation fund sought for healthcare providers

Trust accounts could also protect consumers from clinics that go under.

The government should create a healthcare compensation fund to protect consumers, analysts said, after thousands of patients with at least $3.4m in claims were left in limbo when Alliance Medical Group abruptly closed.

Healthcare providers could also be encouraged to set up trust accounts to ensure prepaid funds are protected and available for refund if needed, Rathanesh Ramasundram, regional practice area leader for healthcare and life sciences in the Asia-Pacific region at Frost & Sullivan, told Hong Kong Business.

“This incident has opened a lot of vulnerability, from the consumers, the authorities, and the providers,” she said via Zoom.

“Moving forward, there should be a collaboration, a consensus, on how they are going to overcome and manage these situations again.

Hong Kong authorities, which received thousands of complaints in May, are investigating the closure of Alliance Medical Group, which offered services including vaccination packages for children.

Ramasundram said the compensation fund would be similar to the one used by the travel industry to provide financial recourse for affected consumers, funded by a levy on each prepaid contract.

Lawrence Iu, executive director at the public policy think tank Civic Exchange, cited the need for regulation and transparency, adding that industry players should be subject to routine reporting and audits.

“This isn’t the first prepayment issue in Hong Kong,” he said via Zoom. “We had one before involving a gym. The government learned a lot from that case, but the fact that it’s happening again highlights the lack of a proper system for regular audits and transparent reporting.”

He was referring to Physical Fitness, which closed in September 2024 and owed about 4,000 customers almost $133m in undelivered prepaid services.

Iu said industry players must regularly disclose information such as patient volume and financial health, which should be a factor in license issuance.

The healthcare industry has “fragmented supervision,” he said, adding that agencies should work together to ensure proper regulation.

The government has proposed a cooling-off period and limits on the duration of healthcare contracts, which Ramasundram described as "effective first-line safeguards for protecting healthcare consumers.”

“A statutory cooling-off period allows consumers to reconsider and withdraw from contracts within a set time frame, while limits on contract length and prepayment amounts essentially reduce consumers’ exposure to risk,” she said.

“Evidence from other sectors like fitness suggest that cooling-off periods can significantly reduce consumer losses in the event of sudden business closures,” she added.

But Iu said contract limits provide “minimal safeguard.”

“Healthcare providers can find a more innovative payment schedule or terms to ignore the cap.”