Foreign Capital Investments in Health Care Services in Brazil

Brazil has a new regulamentation for investments in the sector
The Law 13.097/15, recently sanctioned in Brazil, authorizes the full participation of foreign capital in Brazilian companies that operate in health care as hospitals, general or specialized medical clinics, diagnostic medicine clinics, including the holding of a controlling stake, either directly or indirectly.
The new law resulted from the conversion of Provisional Measure 656 of 2014, which amended Section 23 of the National Healthcare System Law of 1990 to allow foreign investment in the Brazilian healthcare sector. Before, the Brazilian Federal Constitution established that the health is a right of all and a duty of the State. Thus, the direct or indirect participation of foreign companies or capital in health assistance in Brazil was prohibited, except in cases provided by law.
In 1998’s year, the Law 9656/98 – which regulates private health plans offered by health insurance companies (PHI) and similar entities, such as “Cooperativas” and Health Maintenance Organizations (HMO) as well as Self-Administered Funds (together, Health Plan Operators) – allowed that individuals or legal entities resident or domiciled abroad to constitute or take part in the capital of any legal entity established under the Brazilian law aiming to provide private health plans.
However, only recently, the new law no. 13.097/15 which altered the scenario established by the Constitution, allowed ingress foreign capital and/or companies to invest and even control hospitals, clinics and other health services, therefore, extending the possibility for foreign investments in other health care services, turning the Constitutional prohibition milder.
The Brazilian public health system lacks infrastructure and basic conditions to treat the population. Nevertheless, investments in this area are not enough to meet the high demands. With this new law, foreign investors will be able to manage or construct new hospitals /clinics or even acquire existing ones, which are nowadays owned by private entrepreneurs or by Health Plan Operators (PHIs are not able to own / control hospitals and clinics).
This will result in a greater competition and a better health service. Consequently, more people will be able to afford private health care, since nowadays such services are too expensive for most Brazilians and the public health system is saturated.
Despite of this, there are some debates questioning to what extent such law may in fact be considered Constitutional. The National Confederation of the Regulated Liberal University Workers has already filed a direct action of unconstitutionality (ADI 5239) before the Supreme Federal Court, along with an injunction. Overall they claim that such law violates the Constitutional provision above mentioned and does not foresee the authorization and supervision of foreign investments by SUS. A final decision has not yet been rendered to the injunction and to the ADI 5239.
However, even if the new law is judged as unconstitutional, foreign investments in health care services will be still possible through Health Plan Operators, as they were before such law to come into force.

Azevedo Sette Advogados