Last Updated: June 2, 2014

Medical Remuneration Receivables1
I.

Medical Remuneration Claims

1. Outline of Medical Remuneration Claims
When an insurance medical institution gives medical cares to insured individuals and to theirdependents, the medical institution has a claim on the Health Insurance Claims Review &Reimbursement Services or a National Health Insurance Organization (hereinafter collectively called “theClaims Review Organizations.”) for payment of the medical remunerations from the Claims Review
Organizations as compensation of the medical care services. This claim is referred to as a “medical
remuneration claim”.
The medical institution sends certificates of medical remunerations (hereinafter called “receipt”) to
the Claims Review Organizations until the 10th day of the next month of having provided medical careservices and then makes a claim on the Claims Review Organizations for the medical fees excluding
those paid individually by insured individuals at their own cost. The Claims Review Organizations
examine whether the receipts, by which the medical institution has made a claim for the medical fees, arevalid and appropriate in compliance with the rules on insurance medical institutions and persons incharge of medical cares (hereinafter called “rules on insurance medical persons in charge of medical
cares”) as stipulated in Article 70 and 72 of the Health Insurance Law, and then requests the insurers to
pay the medical fees. The insurers themselves also examine the receipts to determine the payment amountand then pay the medical remunerations to the Claims Review Organizations with insurance premiums as
resources. The medical remunerations paid by the insurers to the Claims Review Organizations aretransferred to the medical institution by the Claims Review Organizations.
As described above, payments of medical remunerations by the Claims Review Organizations to
medical institutions take form of medical remuneration revenues from the insurers as resources, thereby
raising a problem on who is the debtor of medical remuneration claims. In this context, the Supreme
Court made the following judgment on December 20, 1973: When an insurer entrusts the Health
Insurance Claims Review & Reimbursement Services with payments of medical remunerations, it
undertakes the legal obligations to pay them to persons in charge of insurance medical cares in its own
name and based on its own examinations; and when an insurer entrusts a National Health Insurance
Organizations with examinations and payments of medical remunerations, it also undertakes theobligations to pay them to medical institutions in charge of insurance medical cares. The judgment madeit clear that the Claims Review Organizations are the debtors of medical remuneration claims and1

The same concept basically applies to the credit rating of dispensing remuneration claims. For benefit claims fornursing-care costs, see the reference report under the title of “Problems of the Securitization of Benefit Claims for
Nursing-care Costs”.
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dispensing remuneration claims.
Figure1: Flows of medical remuneration claims, examinations, and payments
Claims for
MedicalInstitutions medical

remunerations
by receipts

Acceptance
Medical institutions submit receipts
by insurer to the Claims Review
Organizations

Return ofreceipts withany omissionof entries

Operations checking andexamination operations
Checking of receipts one by one(Confirmation of any omission of
entries and checking of scores)

Return ofreceipts
raising any
doubtsInsured Individuals

The Claims Review Organizations

Examination● The examination committee
examines receipts by medical
institution● Receipts raising any doubts in theoperations checking is reexamined.

Request for
payment

Payment of
medicalremunerations

Payment of
medicalremunerations

Addition andsubtraction
based on the
results ofreexamination

Reflection of
the results ofreexamination

Request for
reexamination

Reexamination● Confirmations and interviews
with medical institutions● Reexamination by thereexamination committee

Examination● Confirmation ofqualifications● Vertical andhorizontal checking ofreceipts● Examination of thecontent of medical
treatment

Determination of
payment amount

Request for
reexamination

2. Creditworthiness of the medical remuneration examination and payment bodies andcreditworthiness of medical remuneration claims(1) The Health Insurance Claims Review & Reimbursement Services[Profile]
The Health Insurance Claims Review & Reimbursement Services (hereinafter called “HICRRS”)

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is a special public corporation. It was established in 1948 following the enactment of the Law on
Health Insurance Claims Review & Reimbursement Services. Based on the entrustment by individual
insurers except for those of the National Health Insurance, HICRRS makes examinations and paymentsof medical remunerations as applied for by insurance medical institutions. Since October 2003 at
which time the law on HICRRS was partially revised, HICRRS has been changed to a private
corporation.
[Organization and Examination System]HICRRS has its Headquarters in Tokyo and establishes the executive board, the members ofwhich include no more than 17 board members (sixteen representatives from the insurers, insured
individuals, persons in charge of medical cares, and public-interest persons with four representatives
from each interest group as of November 2013). HICRRS also places its branches in all the prefectures.
Each branch establishes the administration board to discuss its operations management. Like theexecutive board, the administration board is comprised of the representatives from the insurers, insured
individuals, and persons in charge of medical cares, as well as the public-interest representatives withthe same number of members from each interest group (two from each).
In order to examine the certificate of medical remunerations (receipt), a “special examinationcommittee” is organized in the Headquarters, while the “examination committee” is established in eachbranch. The examination committee of each branch is composed of the representatives from threegroups of the persons in charge of medical cares, insurers, and academic experts with the same numberof members from each group. One representative’s term of office is two years. Under its control, theexamination committee organizes the management committee as well as the examination specializedcommittee, reexamination committee, dispensing examination committee, etc. There is a scheme inwhich the receipts marking high scores equal to or more than certain scores, among others, areexamined by the examination specialized committee. (The special examination committee of the
Headquarters examines the receipts marking 400,000 scores or more and those of dental treatment fees
marking 200,000 scores.)[Examination Results]
HICRRS achieved the following examination results for fiscal 2012 (period from May 2012 toApril 2013) on a definite basis: The total number of examinations was 639,180,000 (a year-on-yearincrease of 2.3%). Out of 639,180,000 examinations, the number of examinations of medical treatment
remunerations was 522,430,000 (a year-on-year increase of 2.2%).
[Evaluation of Creditworthiness of Medical Remuneration Claims]
HICRRS pays medical remunerations to each medical institution with the medical remunerations
from the insurers as resources, and so the solvency of HICRRS entirely depends on the conditions of
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medical remunerations received from the insurers. The receipt percentage of medical remunerations
from the mutual aid associations or the health insurance associations during a receipt period is in thelatter half of nineties staying at a high level. HICRRS takes responses to any delay of payment of
medical remunerations by an insurer in such a manner that HICRRS makes a withdrawal from the trust
money as received preliminarily from the insurer and from the basic fund.
(2) National Health Insurance Organizations[Profile]
A National Health Insurance Organization (hereinafter called “NHIO”) is a public corporation
jointly established by the insurers (cities, towns and villages as well as national health insurance
associations) based on the provisions of Article 83 of the National Health Insurance Law. There is one
NHIO in each prefecture. Each NHIO is obliged to obtain the approval of its establishment from thegovernor of each prefecture and to submit its budgets, account settlements, etc. to the governor that has
the supervisory authority on NHIO.
If two thirds or more of the member insurers in a district (city, town, or village) participate in
NHIO, all the rest of the insurers also become the members of NHIO in that district. The medical
remuneration examination committee is to be organized under NHIO.
[Examination Procedures and Financial Resources]
Each prefecture independently manages NHIO. Just like HICRRS, also in the case of NHIO, theexamination committee composed of the three groups (the persons in charge of medical cares, insurers,
and academic experts) is required to hold discussions on examinations of receipts. HICRRS and NHIO
of each prefecture have many other common points. There were 557,000,000 definite payments ofmedical remunerations by NHIOs in the fiscal year 2012.
High-value receipts are examined by the special examination committee as organized by the
All-Japan Federation of National Health Insurance Organizations, which is comprised of NHIO as its
members.
[Evaluation of Creditworthiness of Medical Remuneration Claims]
Like HICRRS, in the case of each NHIO, there is also a scheme in which payments of medical
remunerations to each medical institution entirely depends on the conditions of medical remunerations
received from the insurers, namely, national health insurances of municipality and national healthinsurance associations. The receipt percentage of medical remunerations received from the insurers has
declined year by year. If any insurer delays its payment of medical remunerations, each NHIO gets aloan from financial institutions in response to that case.

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[Overall Evaluation]
There are requests to the deregulation committee, etc. for enhancement of the insurers’ functions
including permission of their examinations of receipts. However, it is not easy to construct anorganizational system that ensures smooth and efficient processing of more than 1,000 million
examinations and payments of medical remunerations on a yearly basis by the two examination bodies(HICRRS and NHIO) as described above.
In Japan, the universal health insurance system is a given fact, and so it is expected that the
medical remuneration scheme based on the current social insurance system will be maintained.
Judging from these points in a comprehensive manner, HICRRS and NHIO being two medical
remunerations examination and payment bodies are deemed to have quasi-creditworthiness of theJapanese government.
II. Risks of Medical Remuneration Claims
1. Current Claim and Future ClaimWith attention focused on the process of medical treatment/care (a) claim for medical remuneration,
medical remuneration claims are classified into the following three types.
A current claim of Type (b) produces a cash flow to the highest degree of certainty and a future
claim of Type (c) produces a cash flow to the lowest degree of certainty.
(a) Current claims (in the case where medical cares have already been provided and claims for the
medical remunerations have already been made) (the yellow-colored part of the table below)(b) Claims yet to be made in the case where medical cares have already been provided (thelight-green-colored part of the table below)(c) Future claims (in the case where medical cares are yet to be provided) (the white-colored part of
the table below)

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Figure 2: Relation between “Elapse of Time” and “Medical Remuneration Claims”
Medical Cares
provided in March

Medical Cares
provided in April

End of
March

April
10th

April
15th

Medical Cares
provided in May

May
10th

End of
April

Medical Cares
provided in June

End of
May

June
10th

End of
June

July
10th

End ofJuly

Claims have already been made for the
remunerations for medical cares provided in
February. (Claimed on March 10th to receive
the remunerations during a period from April
22nd to the end of April.)

Medical cares havealready been provided,
but claims are yet to be
made.

Claims have already been made for the
remunerations for medical cares provided in
March. (Claimed on April 10th to receive
the remunerations during a period from May
22nd to the end of May.)

Medical cares havealready been provided,
but claims are yet to be
made.

Medical cares yet to
be provided

Medical cares yet to be provided.

Claims have already been made for the
remunerations for medical cares provided in
April. (Claimed on May 10th to receive theremunerations during a period from June
22nd to the end of June.

Medical cares havealready been provided,
but claims are yet to be
made.

Claims have already been made for the remunerations for
medical cares provided in May. (Claimed on June 10th
to receive the remunerations during a period from July
22nd to the end of July.)

Medical cares havealready been provided,
but claims are yet to be
made.

Medical cares yet to be provided.

Claims have alreadybeen made for the
remunerations for
medical cares provided
in June.

Composition
April
15th

2. Risks of Medical Remuneration Claims (Current Claims)(1) False Claims
If any false claims including claims for medical remunerations in excess of the actual medical fees
are detected in any medical institution being the originator, there is a risk that the Claims Review
Organizations may decrease the payment amount of medical remunerations as a setoff for the overpaid
amount due to the false claim. Regardless of whether or not the medical remuneration claims
transferred to the securitization vehicle are based on false claims, it is impossible to completely avoid
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the risk that the payment amount of medical remunerations may decrease, unless the Claims Review
Organizations give their consent with no objection to the transfer of the claims.
The enforcement regulations of the Medical Care Law stipulate a standard number of medical
doctors and that of nurses corresponding to an average number of patients for one day and a number ofallowable hospital beds. However, many hospitals are unable to secure the standard number of medical
doctors as required. The medical remuneration unit price is determined according to the number of
medical doctors as notified by a hospital. If the number of medical doctors on the active list is less than
60% of the standard number of medical doctors, any hospital should reduce medical remunerations andshould make a claim for the balance amount of medical remunerations after the reduction. Any hospitalthat has notified a number of medical doctors in excess of those on the active list has accordingly madea false claim for medical remunerations (even though such notification was not intended to make aclaim for medical remunerations in excess of the actual medical fees).
As the result of an on-site inspection (audit) of a hospital conducted by the social insurance officeestablished in each prefecture, if a fact of any false claim is confirmed, a claim for the return of
dishonestly received medical remunerations will be made against the hospital. If a malicious claim is
made, its designation as an insurance medical institution will be cancelled and so the hospital will betaken over by a new management body or it does nothing but close down2.
Even when a fact of any false claim is confirmed, the Claims Review Organizations will notsuddenly decrease the amount of medical remunerations payable to the securitization vehicle in thenext month as a setoff for the overpaid amount due to the false claim in a usual case. First of all, aclaim for the return of dishonestly claimed and received medical remunerations will be made against
the hospital. Even when a decision is made to cancel its designation as an insurance medical institution,a grace period of one month is often set before actual cancellation of its designation as an insurance
medical hospital and before finding of any hospital(s) to which the hospitalized patients will betransferred and finding of a new business manager. A medical corporation will not become bankrupt
immediately after the decision is made to cancel its designation as an insurance medical institution. In
the case where a medical corporation becomes bankrupt and the medical institution has no financial
resources to refund the falsely claimed and received medical remunerations, there remains thepossibility that the amount of medical remunerations payable to the securitization vehicle may be
reduced as a setoff for the overpaid amount due to the false claim. If the amount of falsely claimed
medical remunerations is not covered by the reduction of medical remunerations to be paid later as asetoff for that amount of money, there is a possibility that the Claims Review Organizations may claim
against the securitization vehicle a restitution of undue profits on the medical remunerations, which the
Claims Review Organizations have already paid to it, based on the civil code (theoretically speaking).
2

In an over-bed region where the number of actual hospital beds exceeds the number of necessary hospital beds as
stipulated in the Medical Care Law, it is prohibited for a different business manager to take over the management ofany medical institution whose designation as an insurance medical institution has been cancelled as a general rule, andso the medical institution will close down after the transfer of hospitalized patients to any other hospital(s).
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(2) Dilution
Regarding medical remunerations, the following cases occur constantly: Medical remunerations
are returned, if there are any clerical errors in the content of receipts including omissions of entries,
errors in the entries (different insurer, different insurance card number, etc.) and if there are any
descriptive errors in the content of medical cares; and the payment amount (score) of medical
remunerations is reduced as the result of their examination by the Claims Review Organizations incompliance with the rules on insurance medical persons in charge of medical cares. Besides, if theexamination results of some receipts are not notified before the end of the next month of having
claimed medical remunerations (the medial remunerations will be paid in the month after the next
month or even later), the medical remunerations will be diluted because the previous payment amountof medical remunerations to be decreased due to the insurer’s request for the reexamination will be set
off against the payment amount of medical remunerations, etc. for the current month. (The insurer canlater make a request for the reexamination of receipts, the payment of which the insurer has alreadycompleted, if they have any doubts. If the reduction of the payment amount of medical remunerations
is approved, the payment amount to be decreased will be set off against the payment amount of
medical remunerations for the current month.)III. Framework of Credit Rating
1. Securitization Scheme on which this thesis is premised:
The following figure illustrates an ordinary securitization scheme. The simplest trust method is taken
as an example.
Figure3: Scheme Chart of Trust Method
Medical Corporation
Claims Review(a) Claim for medical
remunerations

Organizations

Hospital(f) Payment of medical
remunerations(b) Medical remunerations in trust
Insured individuals(a) Medical Action(patients)(c) Preferred and subordinatedbeneficiary rights

Hospital

and their dependents(a) Burden of charges(Part of medical fees)

Trust Bank(e) Transfer proceeds(g) Redemptionof subordinatedbeneficiary rights

Hospital(d) Preferred beneficiaryrights8/15
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proceeds

Investors(g) Redemption of preferredbeneficiary rights

(a) A medical corporation (hospital) provides insurance medical cares to insured individuals and theirdependants. It collects their burden charges (part of the medical fees) at the window. It sends thereceipt to the Claims Review Organizations to make a claim for the balance amount of the medical
remunerations subject to the insurance.
(b) The medical corporation transfers its holding medical remuneration claims in trust to a trust bank.
(c) Each time the medical corporation makes a claim on the Claims Review Organizations for

medical remunerations every month, the trust bank issues preferred beneficiary rights andsubordinated beneficiary rights for that month3.
(d) The preferred beneficiary rights are transferred to investors and the subordinated beneficiaryrights are retained by the medical corporation.
(e) The medical corporation receives the transfer proceeds of the preferred beneficiary rights paid by

the investors.
(f) On the due date of a medical remuneration claim, the Claims Review Organizations pay directly

to the trust bank the amount of medical remunerations (after deduction of the amount of medical
remunerations to be returned due to the examination).
(g) The principals of preferred beneficiary rights are delivered to the investors and the balance

amount is appropriated for the redemption of subordinated beneficiary rights.
In addition to the above, in a scheme where a SPC is used as a securitization vehicle instead of atrust, a medical corporation assigns its medical remuneration claims to the SPC. Each time when the
medical corporation makes a claim on the Claims Review Organizations to pay for the medical services
every month, the SPC takes out an asset-backed loan backed by these receivables.
Since securitization of medical remuneration receivables is conducted repeatedly and continuouslywith the same content for both trust method and SPC method (securitization program), in the case of arating for securitization of medical remuneration receivables, JCR in principle assigns a rating tosecuritization programs under which securitization products can be issued for a certain period (program
rating). When assigning a program rating, it is necessary that conditions including period of program,maximum amount, subordination ratio to be set, representations and warranties for accuracy of materials
to be received by JCR, etc. be specified in the securitization related agreements.

3

Medical remuneration claims for one to three years are collectively transferred to the trust bank for convenience offulfilling the opposing requirements. Transfer of preferred beneficiary rights often takes form as follows: Each timethe medical corporation (hospital) makes a claim on the Claims Review Organizations for medical remunerations forthe current month and the amount of the medical remuneration claim is determined, the preferred beneficiary rights
are transferred to investors on a monthly basis.
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2. Framework of Credit Rating of Claims yet to be made for remunerations for medical cares thathave already been provided(1) Certainty of payment of medical remuneration claims
As described in Paragraph 2 of Section I, above, the Claims Review Organizations serving as the
medical remuneration examination and payment bodies are deemed to have quasi-creditworthiness of
the Japanese government. It is therefore possible to give an equivalent credit rating to securitization
products of medical remuneration claims.
(2) Screening of medical corporations
Any medical remuneration claim bears the biggest risk of a false claim. For this reason, if
necessary, due diligence of the following points (see the “Major Due Diligence Items” at the end of thisthesis) is conducted by an accounting office or an audit corporation. Medical remuneration claims
subject to the credit rating are limited to those of the medial corporations serving as an originator withno problem reported by them.
·

A medical corporation has an appropriate operations system.

·

A medical corporation satisfies the medical facility criteria.

·

A medical corporation has not fallen into any credit uncertainty and any cash-flow problem.
The medical remuneration claims of a medical corporation serving as an originator that is deemed

to have problems in view of the points as described above are likely to be treated as claims unsuitable
for the credit rating in some cases. Even when a credit rating is given to such claims, it may sometime
be a low credit rating. In the following scheme, however, the screening requirements can be eased on
the condition that money amounts of medical remuneration claims by originator are dispersed: Many
originators transfer their medial remuneration claims to one securitization vehicle with subordinatedbeneficiary rights and subordinated beneficiary interests shared by and between the originators.
(3) Responses to dilution risk
There is a risk that by a setoff against medical remunerations due to returns, point-deduction,
continued examination, and a claim for restitution of overpayment by an insurer, the credit transfer ofor the credit amount of medical remuneration claims being resources for the redemption of preferredbeneficiary rights may be delayed or deducted in part on the redemption date. Responses are taken tothis risk in such a manner that a stress test is conducted on the basis of historical data, according to theresult of which excess collateral suitable for the credit rating is provided.
In case that JCR evaluates the credit rating of preferred beneficiary rights as “J-1+” equivalent tothe creditworthiness of the Claims Review Organizations, a stress magnification is applied and a credit
enhancement level is set according to the percentage of the amount of money yet to be received(uncollected money) in relation to the claim amount of medical remunerations on a monthly basis(taking into account all the dilutive factors including returns, decreases in the amount of money, etc.,
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the respective percentages are calculated for the Health Insurance Claims Review & Reimbursement
Services and for a National Health Insurance Organization). A stress magnification is set with threefold
as a minimum level and in consideration of the following items, the final level of excess collateral isdetermined: volatility of historical data; dispersion degree of securitization claims (the number ofhospitals and a percentage of the amount of money by each hospital); the number of claims, financial
condition or operational ability of each medical corporation; large returns or no large returns; and otheritems as confirmed at the due diligence meeting.
Certainty of the timely redemption of the principals of and the timely payment of dividends ofprofits on preferred beneficiary rights is the main factor that determines the credit rating of short-term
trust beneficiary rights. If the credit amount of money has significantly decreased this month, thetimely payment (redemption) cannot be maintained. In the case of one facility, if the amount of money
yet to be received (uncollected money) has greatly increased this month, it is impossible to cover thelack of money by cash flows of other facilities. In this context, for the calculation of an excess
collateral ratio, it is important to take into consideration the number of relevant facilities and thedispersion degree of the amount of money.
(4) Other Points of Contention(a) Duplicated Transfer of Claims and Fulfillment of Opposing Requirements

In a normal case of transfer of medical remuneration claims, a medial institution, which is an
assignor of the claims, prepares a notification directed to the Claims Review Organizations
pursuant to Article 467, Paragraph 1 of the civil code and has on the notification the transfer dateaffixed by a notary public as the officially-attested date of transfer. It notifies the Claims Review
Organizations of the transfer of the claims with the notification as a deed bearing an
officially-attested date pursuant to Article 467, Paragraph 2 of the civil code. If the same claims
have already been transferred or offered as collateral to a third party and the opposing requirements
have been fulfilled by notification, these facts will be detected at the time of confirming the transferof the claims with the Claims Review Organizations (before payment).
(b) Denegation

The necessary denegation conditions are limited by the revised bankruptcy law and the revised
civil rehabilitation law as implemented on May 1, 2005. Any transfer of claims in trust and any
transfer of beneficiary rights are not subject to the denegation, regardless of the time of the transfer,based on the premise that the transfer value is appropriate, unless the consignor has an intention to
decrease the absolute value of assets, for which it is responsible, by consuming and concealing thetransfer value, etc. and the investors as well as their representatives are aware of that intention of
the consignor.

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3. Claims yet to be made in the case where medical cares have already been provided
Taking a look at the point in time on April 15th in Figure 2, there are three types of claims for the
remunerations for medical cares that have already been provided: i) claims made on March 10th for the
remunerations for medical cares provided in February; ii) claims made on April 10th for the
remunerations for medical cares provided in March; and iii) claims yet to be made for the remunerations
for medical cares provided until April 15th. Based on the premise that claims yet to be made for the
remunerations for medical cares that have already been provided are treated as current claims4, if claims
for medical remunerations are liquidated every month beginning the first securitization scheduled forApril 15th, it is possible to deem that there are always current claims for a period of at least one monthand half on and after April 15th , even excluding those for the remunerations for medical cares provided in
February with a residual period of 15 days only.
In the case of securitization of claims for medical remunerations including those yet to be made in
the case where medical cares have already been provided, the following requirements in additions to thepoints of contention as described in Paragraph 2 of Section III must be fulfilled for assigning a credit
rating. In the following scheme, however, even when the amount of collected money is zero (0) from theclaims as concerned with one originator, it is possible to secure the resources for the redemption of theprincipals of securitization products subject to the credit rating with the collected money from the claims
as concerned with other originators: Many originators transfer their medial remuneration claims to one
securitization vehicle with subordinated beneficiary rights and subordinated beneficiary interests sharedby and between the originators. For this reason, it is possible to ease the following requirements, whenmoney amounts of medical remuneration claims by originator are dispersed and if it is admitted that theappropriate setting of the levels of subordinated beneficiary rights and subordinated beneficiary interests
covers the risk inherent in claims yet to be made in the case where medical cares have already been
provided.
·

It is required to obtain a written legal opinion to the effect that any medical remuneration claim isunderstood to take effective form at the point in time when medical actions have been taken.

·

In order to prevent any fraud aimed at the providers of funds including a claim for medical
remunerations in excess of actual medical fees, it is required to add items to the representations
and warranties, and to make the screening criteria more rigorous.

·

In case that any claim for medical remunerations is not made by a medical corporation due to its
bankruptcy, it is required to arrange a backup servicer, a business agent to make claims for4

For the judgment of when any medical remuneration claim arises, the judgment made on March 23, 1981 by the
Osaka District Court states as follows: A medical remuneration claim as retained by an insurance medical institution
is understood to have the same nature of a claim for the remuneration for the consigned operations and accordingly
the claim for the remuneration for the consigned operations arises when the consignee has implemented theoperations in compliance with the consignment purpose. Meanwhile, the judgment made on May 27, 1983 by the
Osaka Supreme Court states as follows: When a medical institution has implemented the operations in compliancewith the consignment purpose as described earlier, so to speak, when it has provided medical cares in conformity withthe applicable laws and regulations, the medical remuneration claim arises accordingly.
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medical remunerations on behalf of the medical corporation. Besides, in consideration of thetime lag until the backup servicer starts the operation, it is required to set a tail period (time lag)of one to two months between the scheduled maturity and the final maturity of the redemption oftrust beneficiary rights.
·

Based on the assumption (i) that there arise some receipts in a certain amount of money, bywhich a claim for medical remunerations will not be made in the next month and (ii) that it is
impossible to obtain detailed symptoms of doctors in the case of bankruptcy of an medical
corporation, it is required to set the excess collateral for a second-month claim for medical
remunerations at a high level.

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[Main Materials JCR Requests for Rating]1.

Historical Data

2.

Complete Set of Final Tax Return Forms (Attached table, Financial statements, Itemized statement)

3.

Results of On-site Inspection (Results of on-site inspection in accordance with Article 25 of Medical
Service Law)

4.

·

Table of facilities·

Reports on on-site inspection findings and improvement (plan)

Certificate of Tax Payment or Statement of Payment (Corporate tax, Corporate prefectural andmunicipal tax, Corporate enterprise tax, and Consumption tax)

5.

Notification of Designation of Medical Institutions Authorized to Treat Patients with Health Insurance
Coverage

6.

Hospital Report (Patient questionnaire)

7.

Hospital Report (Medical care professional questionnaire)

8.

Record on the Number of Necessary Medical Care Professionals

9.

Source Material for Calculation of Number of Days Spent in Hospital by Medical Institutions

10. Organizational Chart
11. Data on Monthly Amount Claimed and Paid Amount (by NHIO and HICRRS)[Major Due Diligence Items]
1.

Facility Criteria· Conditions of satisfaction of doctors (confirmation of real existence of doctors)· Conditions of satisfaction of nurses (confirmation of real existence of nurses)· Conditions of satisfaction of facility criteria

2.

Historical Data
· Correctness and accuracy of a claimed/credited amount of money, etc.
· Causes of and responses to a large sum of returns and causes of sharp increases and decreases in themoney amount of claims· Reconciliation (matching) of receipts, etc. with a list of claims for medical remunerations by patient(or any quasi data)· Existence/nonexistence pf high-value medical cares· Relationship with a medical association and a faculty of medicine· Effects of the revision of medical remunerations

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3.

Organization of Medical Professions Division· The number of personnel, years of experience, job turnover ratio, and external entrusted company inthe medical professions division· Years of experience, etc. of personnel to input receipts, personnel in charge of checking receipts, andpersonnel responsible for the medical professions division· Training program and frequency· Existence of a medical remunerations claim manual· Cause analysis of and responses to returns and deductions of points· Effects of the most recent revision of medial remunerations on the operations of making a claim for
medical remunerations

4.

Financial Conditions and Management Results· Conditions of management and conditions of tax payments· Companies and individuals to which money is lent, and those from which money is borrowed· Relationship with the president, a medical service corporation, etc.

5.

Other Items· Conditions of preventive measures for medical accidents (existence and nonexistence of a safety
management committee, organization of the committee if any, existence and nonexistence of
personnel in charge of safety management, and responses to in-hospital infection)· Results of the most recent on-site inspection (Article 25 of the Medical Care Law) and conditions ofimprovements· Compliance program with various kinds of laws and regulations (training conditions, training
frequency, etc.)· Conditions of getting a certification from the Japan Council for Quality Health Care and from ISO.

Because of the possibility of human or mechanical error as well as other factors in the information herein, JCR makes no representation or
warranty, express or implied, as to accuracy, results, adequacy, timeliness, completeness or merchantability, or fitness for any particular purpose,with respect to any such information, and is not responsible for any errors or omissions, or for results obtained from the use of such information.
Under no circumstances will JCR be liable for any special, indirect, incidental or consequential damages of any kind caused by the use of any suchinformation, including but not limited to, lost opportunity or lost money, whether in contract, tort, strict liability or otherwise, and whether suchdamages are foreseeable or unforeseeable. Information herein is statements of opinion, and not statements of fact as to credit risk decisions or
recommendations regarding decisions to purchase, sell or hold any securities such as individual bonds or commercial paper. JCR retains all rights
pertaining to this document. Any reproduction, adaptation, alteration, etc. of this document, is prohibited, whether or not wholly or partly, without
prior consent of JCR.

Japan Credit Rating Agency, Ltd.
Jiji Press Building, 5-15-8 Ginza,
Chuo-ku, Tokyo 104-0061, Japan
Tel. +81 3 3544 7013, Fax. +81 3 3544 7026

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