RESTRICTED  
  
S/WPDR/W/48/Add.1  
 
30 April 2013  
(13-2288)  Page: 1/4  
Working Party on Domestic Regulation  
 
 REGULATORY ISSUES IN SECTORS AND MODES OF SUPPLY 
NOTE BY THE SECRETARIAT 
Addendum 
1  INTRODUCTION 
1.1.  At its meeting of 21 March 2013, the Working Party on Domestic Regulation requested that 
the Secretariat prepare a Note on regulatory issues in the health services sector, which would 
complement the Note on "Regulatory Issues in Sectors and Modes of Supply" circulated by the 
Secretariat in June 2012 (S/WPDR/W/48, 13 June 2012).  
1.2.  This Note provides background information on regulatory practices in the health services 
sector. It should be noted that, contrary to ot her sectors addressed in the June 2012 Note, health 
services were not the subject of a Background Note in the Council for Trade in Services. Hence, 
this Note stands on its own.  
1.3.  For the purpose of this Note, "health servic es" are understood to include the services listed 
under Section 8 of the W/120 ("Health related and social services"), namely hospital services, 
other human health services and social services. It also covers professional health services listed in section I.A of W/120, namely medical and dental services and services provided by midwives, 
nurses, physiotherapists and para-medical personnel.  
1.4.  As with the June 2012 Note, Members are invite d to use this Note to bring their own specific 
experiences or contribute additional regulatory  issues to the discussions, as appropriate. 
2  HEALTH SERVICES 
2.1  General observations 
2.1.  Each society organizes the provision of he alth services according to prevailing social 
preferences, cultural values, institutional characteristics and economic constraints. Some societies 
attribute a predominant, if not exclusive, role to the public sector, while, other systems rely almost 
exclusively on private supply. Most systems, ho wever, are somewhere in-between and provide for 
a combination of both public and private supply. Th e vast majority of health systems share similar 
objectives, namely universal access, equitable provision, quality services and efficient use of 
resources.  
2.2.  The primary objective of regulation in the he alth sector is the protection of the patients. The 
need for governmental intervention is particularly strong given the peculiar professional 
responsibilities of medical practitioners – arising,  e.g., from the right to prescribe treatment and 
drugs, risks for patients' physical integrity linked to malpractice, confidentiality imperatives, etc. – and the existence of important information asymmetries. The latter refers to the fact that the 
supplier tends to have better information because it is generally difficult for a patient to assess 
critical elements such as doctors' competences an d the adequacy or quality of treatment provided 
in a medical facility. Hence, regulation is necessary to ensure that health personnel and facilities 
comply with certain quality, safety and ethical standards, to name a few. 
2.3.  Also, an increased offer in health services  tends to generate increased demand and costs. 
What appears to be a market failure arises as a result of a combination of factors, including: S/WPDR/W/48/Add.1 
 
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  (i) prices are regulated1, (ii) treatment costs are borne by a third party (e.g., a health insurer), 
and (iii) capital investment in increasingly sophisticated medical equipment is significant. In this context, suppliers may be tempted to induce oversupply of healthcare, for instance by prescribing treatment which is not strictly necessary. This means that governments may feel compelled to 
intervene in order to regulate the overall level of supply. 
2.4.  Furthermore, medical systems are comi ng under stress in many countries. Ageing 
populations, a higher incidence of non-communicable diseases
2 requiring long and expensive 
treatments, as well as patients' increasing expectations are contributing to surging medical costs. 
The problem is acute in developed countries and has begun to affect low and middle-income countries as well. Against this background, the sustainability of health systems has become an important concern and various measures are put in place to control and contain treatment costs.  
2.2  The regulation of health professionals 
2.5.  The regulation of health professionals aims at ensuring that only properly qualified health 
professionals can provide their services to the public. Regulatory control takes place mainly before 
health care providers enter the market. There is, however, an increasing emphasis on continuous 
medical training and various systems, more or le ss binding, are being put in place in order to 
ensure that doctors keep abreast of new developments in medical practice.  
2.6.  Virtually all countries in the world have a licensing system for medical doctors. Licensing is 
generally granted after obtaining a medical diploma in a recognized institution (university or medical school). The average length of time for medical studies varies between 5 to 7 years and normally includes compulsory 1 or 2 years practical training in a health facility. Specialist doctors 
need to undertake additional training requirements (postgraduate studies). 
2.7.  The responsibility for licensing medical doctors normally lies with institutions reporting to the 
Ministry of Health or, sometimes, the Ministry of Education. In a number of countries, registration 
with a professional body is an additional legal re quirement before the right to practice is granted. 
In addition to adequate formal education and prof essional training, doctors may be asked to bring 
evidence of being a national of the country, being of good moral standing (e.g. absence of criminal 
record), and benefitting from satisfactory physical and mental health. 
2.8.  Professional bodies may play an important ro le in relation to licensing and registration of 
medical doctors. They may exercise delegated resp onsibilities, including the right to suspend or 
withdraw a licence to practice, for instance in case of serious professional misconduct. Professional 
bodies may also issue and mandate compliance with codes of conduct, ethical standards, or rules 
regarding continuous training. 
2.9.  Licences are normally issued for an indefini te period, but there is a tendency to put in place 
"re-licensing" systems in order to ensure that practitioners undertake continuous medical training. 
Under these systems, individual practitioners must  justify a certain number of certified activities, 
such as attending educational programmes or international conferences, lecturing or publishing. 
F a i l u r e  t o  d o  s o  m a y  l e a d  t o  s a n c t i o n s ,  i n c l u d ing suspension or withdrawal of the licence to 
practice. 
2.10.  Virtually all countries have in place legislation addressing the licensing of non-nationals 
holding foreign qualifications. Applicants are often required to take a special examination and may 
also be required to carry out a compulsory period of work under supervision in a local health 
facility. Similar requirements may apply to nationals holding foreign qualifications. Moreover, foreign doctors may need to demonstrate that they are licenced, have a right to practice in their 
                                               
1 "The common rationale for government regulation of prices is either equity-based – to ensure 
affordable services and acce ss to all income groups – or efficiency-b ased – to control the cost of care and 
overall health system expenditure." Busse R., N. Hafez-Alfifi and A. Harding, Regulation of Health Services, in Harding A. and A. Preker (eds), "Private Participation in Health Services", World Bank, 2003, p. 256. 
2 Non-communicable (also referred to as "chronic")  diseases are not passed from person to person. 
They are of long duration and genera lly slow progression. The four main types of non-communicable diseases 
are cardiovascular diseases (like heart attacks and stroke), cancers, chronic respiratory diseases (such as 
chronic obstructed pulmonary disease and asthma) and diabetes.  They are the leading cause of mortality in the world, representing over 60 % of all deaths. Contra ry to common perception, 80 % of chronic diseases 
deaths occur in low and middle income countries. See http://www.who.int/mediacentre/factsheets/fs355/en/ . S/WPDR/W/48/Add.1 
 
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  country of origin, and have a working permit or provide evidence of residence. Some countries do 
not have a centralized licensing body, and recognition requirements may thus vary from one regional authority to another. The granting of licences to foreign doctors may be subject to further conditions, such as issuance for a limited period or non-availability of local resident of national with 
similar qualifications. Additional restrictions often apply to foreign doctors wishing to establish an 
independent practice. 
2.11.  Language requirements are common in the health sector as the ability of health 
practitioners to communicate with patients, professional bodies and public authorities is seen as an 
essential prerequisite for providing reliable services. Special language examinations are not uncommon.  
2.12.  The regulation of nursing appears to vary  considerably in terms of prescriptiveness and 
coverage: while some countries have developed detailed standards for obtaining the title of, and 
the right to practice as a nurse, in other countries regulation of nursing practice is very limited, if not inexistent. Hence, there seem to be important disparities among nurses across the world in 
terms of education and professional qualificatio ns. In countries where the title of nurse is 
protected, practitioners need a licence in order to practice as such. Midwifery is often considered a 
specialty of nursing and, therefore, few countries have specific legislation for midwives. 
2.13.  Boundaries between nursing and social care are not clear. Social care workers carry out a 
number of different tasks (e.g. provision of care to older people or to young children), sometimes informal, in different contexts. This is an area which appears to be not well defined and poorly regulated. 
2.3  The regulation of health facilities  
2.14.  Health facilities are generally subject to a mandatory licensing process whose main purpose 
is to ensure that they deliver quality healthcare and meet certain basic safety requirements. This 
process entails, inter alia, the screening of inputs (physical infrastructure, personnel, equipment, 
hygiene, sanitary facilities, food, etc.) in order to ensure that they comply with certain pre-determined standards. The complexity and stringency of licensing standards for health care 
facilities vary from country to country. 
2.15.  Health facilities may also seek to obtain accreditation. These standards tend to be voluntary 
and, contrary to licensing standards, are de veloped and implemented by non-governmental 
bodies. They are also based on process-oriented criteria (namely, how is healthcare delivered), 
rather than structures and inputs. Accreditation aims at informing the public that a given facility 
meets certain quality standards. 
2.16.  In addition to quality and safety, licensing may also be used to regulate the capacity of the 
health system in order to prevent waste of resources or concentration of healthcare in certain 
areas. In other words, licensing is used to ensu re that additional capacity respond to a social 
need.
3 Hence, many jurisdictions use various measures to control additional capacity, through 
e.g., limitations on the number of medical establishments or beds, or restrictions on the purchase 
of heavy medical equipment (e.g. CAT Scan equipment), the type of medical procedures which can be performed in a given facility or the number of staff which may be employed. Criteria for 
licencing a new facility may take into account indicators such as existing capacity, distance 
between health facilities and types of medical procedure provided, population size and age 
structure, as well as transport infrastructure, to name a few.  
2.17.  Some regulatory measures may also focus on the minimum size of individual hospitals, 
e.g. by stipulating a minimum number of beds. The operation of health facilities benefits from 
economies of scale associated with, inter alia, specialized personnel and use of heavy equipment; hence, for a given treatment, the average cost per patient may be lower in a bigger hospital. 
Minimum size regulation may thus contribute to controlling health costs. 
2.18.  Capital investment in health facilities is ve ry high and returns on investment tend to be low. 
Various types of financial incentives exist in the health sector, with the purpose of ensuring 
                                               
3 The rationale behind this type of regulation is that, in systems where risks are pooled, society at large 
ends up paying for additional beds. S/WPDR/W/48/Add.1 
 
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  universal access health care, in particular to remote or poor areas. Financial incentives include a 
wide array of instruments, such as government loans at low interest, government guarantees for borrowing on private markets, tax waivers and exemptions, direct government subsidies or bonuses to operate in underserved areas. 
2.19.  Establishment of health facilities can also be hampered by poor and inadequate regulatory 
frameworks. Inadequate needs assessments – which may lead to excess supply – and deficient enforcement of quality standards, as well as an ov erall lack of transparency and predictability in 
healthcare policy may adversely affect the establishment and viability of new health facilities. 
2.20.  Regulation may affect patients' choice, e.g. by limiting their options in selecting 
practitioners or medical establishment, but also  by restricting or ruling out reimbursement of 
treatment undertaken abroad (so-called medical tourism). 
2.4  Telemedecine 
2.21.  Telemedicine transactions can take plac e between two health practitioners or between a 
health practitioner and a patient. When these transactions take place cross-border, with suppliers 
and consumers in different jurisdictions, complex regulatory issues arise.  
2.22.  First, it is necessary to have guarantees regarding the quality of the service provided and to 
ensure that safety is maintained. This also raises the issues of verification of licensing and 
qualifications of practitioners, and liability in case of malpractice. Patient's data and privacy needs 
to be preserved. Finally, there are questions linked to the reimbursement of costs (will local 
insurance reimburse health practitioners abroad?) and tax issues. Some governments have started to regulate telemedicine delivered within national borders. However, information regarding 
regulation of cross-border telemedicine is sca rce. Absence of, or uncertainties surrounding, 
reimbursement is reported to be a barrier to the wider adoption of telemedicine. 
2.5  Possible questions for further discussion 
2.23.  Members may want to consider the following questions: 
a. With respect to the regulation of the he alth services sector, where are the most 
significant problems from a trade perspective and how might disciplines under VI:4 help 
to address them? 
b. Could it be useful to exchange information on  Members' national regulatory practices in 
the health services sector, or specific segments, and review possible GATS implications? 
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MAIN SOURCES USED IN THE PREPARATION OF THIS NOTE 
Busse R., N. Hafez-Afifi and A. Harding, Regulation of Health Services , in "Private Participation in 
Health Services", by Harding, A. and A. Preker (Eds), World Bank, Washington DC, 2003 
 
Chanda R., Constraints to Foreign Direct Investments in Indian Hospitals , Journal of International 
Commerce, Economics and Policy, Vol. 1, No. 1, 2010 
 
International Council of Nurses, The Role and Identity of the Regulator: An International 
Comparative Study , ICN Regulation Studies, 2009 
 
Rowe A. and M. Garcia-Barbero, Regulation and licensing of physicians in the WHO European 
Region , WHO, 2005 
 
Tangsharoensathien et al., Regulation of Health Service Delivery in Private Sector: Challenges and 
Opportunities , International Health Policy Program – Thailand, 2008 
 
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