1
PRE-LOI

Key Things to Look for in Your Next Healthcare Target.

READ MORE
EXPERTS WEIGH IN

Key items to validate before you submit your LOI for a physician practice management company.

WATCH NOW

Get ahead of these four key tax issues for healthcare companies.

READ MORE
QUESTIONS TO ASK

Acquiring a physician practice?

DISCOVER

Know the entity type and consult your tax advisor before you submit your LOI—your transaction structure is HIGHLY dependent on this and may require late structure changes if not properly planned.

Deregulation in Healthcare Industry Results in New Opportunities

READ MORE
QUESTIONS TO ASK

Do you know where providers are currently being compensated in comparison to national averages and local averages?

DISCOVER

These may be roadblocks to recruiting and retaining and should drive your valuation considerations.

QUESTIONS TO ASK

When you begin evaluating a healthcare organization, it’s important to learn about its cybersecurity compliance posture. Click to see what questions you should ask.

DISCOVER
  1. Is there a culture of compliance?
  2. How is compliance enforced?
  3. How does the organization promote compliance and cyber awareness?
BEWARE:

Myths about Data Security and HIPAA Compliance

READ MORE
EXPERTS WEIGH IN

Why is it important to complete a coding and compliance check before the LOI?

WATCH NOW
QUESTIONS TO ASK

Does the target maintain an internal compliance program?

DISCOVER

Medicare and other governmental payors require that a compliance plan be developed and implemented if the healthcare entity is filing claims with same. An effective compliance program can bring more value to the targeted entity during the diligence process and negate/reduce potential post-close risk/penalties.

2
DILIGENCE PROCESS

Need confidence in your healthcare M&A process? Ask these 10 questions.

READ MORE
QUESTIONS TO ASK

Will your anticipated compensation model work based on actual target performance?

DISCOVER

If you have a standard compensation model, your anticipated results during pre-LOI valuation may not materialize. If midlevel productivity is less than expected, provider compensation reductions may not be achieved. Ensure that appropriate cost reductions are considered in definitions. Miscommunication around provider compensation is often a cause of deal failure.

What should be considered when it comes to payroll taxes for independent contractors or part-time staff?

READ MORE
EXPERTS WEIGH IN

How are you assessing compliance with Stark and AKS?

WATCH NOW

An example of a valuation consideration for a practice valuation

READ MORE
QUESTIONS TO ASK

Why is it important to look at the entity’s HIPAA compliance program when making a healthcare acquisition?

DISCOVER

Whether the target entity is a provider, covered entity, payor, or business associate, the target should have a robust HIPAA program in place in order to avoid compliance issues post-transaction.

QUESTIONS TO ASK

Always ask the company being acquired, “How many security breaches have you reported to CMS in the last year?”

DISCOVER

Every single provider should have reported at least one breach, because incidental breaches of data happen nearly every day. If the entity’s answer is “none,” that could be a red flag that its cybersecurity and compliance program is inadequate.

Five key coding and compliance areas to spotlight when working on deals involving healthcare providers

READ MORE
QUESTIONS TO ASK

Consider systems integration plan—is the target’s system better suited than current?

DISCOVER

Consider an enhanced MSO platform to provide a stable, scalable plan for growth. Invest early on to provide a consistent support system for future additions, which is an appealing feature for targets.

3
DEAL EVALUATION

Key Financial Considerations in Physician Practice Transactions

READ MORE
QUESTIONS TO ASK

What are two items to consider during the deal evaluation stage of an M&A transaction?

DISCOVER
  1. Be sure to consider payor mix changes, provider churn, and potential compliance issues.
  2. Think about structuring the deal to facilitate longer escrow/indemnity periods and potential rollover equity at risk.
EXPERTS WEIGH IN

Getting step-up and dealing with common issues for physician sellers

WATCH NOW
QUESTIONS TO ASK

Do you understand the compensation referral arrangement?

DISCOVER

Caution: In September 2019, the Department of Justice (DOJ) announced a $21.35 million settlement with compounding pharmacy Patient Care America after alleging that the private equity firm took on a management role and then knew and approved of an illegal referral arrangement.

It’s important to protect prescribers and companies by ensuring that transactions are commercially reasonable and FMV (fair market value) compliant.

READ MORE
QUESTIONS TO ASK

How does an entity’s cybersecurity posture impact deal evaluation?

DISCOVER

Knowing the risk profile in advance will help the buyer make informed decisions about the deal value, terms, the expected cost of remediation of security weaknesses or breach response, return on investment of the acquisition, and profitability and cost of future litigation resulting from a breach.

QUESTIONS TO ASK

What are three potential data breach-related risks that may impact a deal?

DISCOVER

A PE firm must evaluate three potential breach risks as part of its valuation:

  1. Has the organization been breached before the purchase?
  2. Will it be breached during the acquisition process?
  3. Are there weaknesses in the entity’s program that could expose it to future breaches?
QUESTIONS TO ASK

Have you considered escrow/indemnification provisions to address any potential compliance issues?

DISCOVER

Compliance issues identified during the late stages of diligence are very difficult to negotiate at closing, as most compliance reviews do not utilize a statistically valid sample. Given this limitation, an extrapolation may not fully determine the extent of the financial impact from these compliance issues.

EXPERTS WEIGH IN

What happens during the deal evaluation from a coding and compliance standpoint?

WATCH NOW
4
CLOSING
QUESTIONS TO ASK

What should I keep in mind during the closing of a healthcare transaction?

DISCOVER

Healthcare transactions lend themselves to pro forma adjustments within diligence given the commonality of provider turnover, opening of new locations, and payor rate changes. It is important to monitor performance and production for the period between diligence and close. Verify such changes are consistent with assumptions used in diligence calculations.

Tips for Pushing Your Deal Across the Goal Line

READ MORE
QUESTIONS TO ASK

Does the tax basis of fixed assets matter when purchasing non-clinical assets from an MSO?

DISCOVER

Consider the assigned values to equipment, as gains from the sale of non-clinical assets can be recaptured as ordinary income. Evaluate these assigned values and value the practice with the remaining amounts. This can help make the deal more tax efficient for sellers, while allocating value to appropriate categories.

The impact of contingent consideration during the deal process

READ MORE
QUESTIONS TO ASK

What are the three items to consider during the exit?

DISCOVER
  1. Exit readiness analysis/fair value accounting compliance
  2. ESOP valuation
  3. Fairness opinions
HEALTHCARE SECURITY:

5 Ways to Safeguard PHI Data

READ MORE
QUESTIONS TO ASK

How should you protect your new investment through the acquisition process?

DISCOVER

There are many moving parts of an acquisition that are dynamic and complex. Leadership should design a plan that can take advantage of each company’s strengths and close any identified gaps.

QUESTIONS TO ASK

What IT solutions are in place, and which will become the “platform” solution on a post-close basis?

DISCOVER

Having a central, cloud-based, single data-based IT solution (PM/EMR/Communications) will provide the portfolio company with a scalable solution so the organization can experience growth in a consistent fashion. Reporting and monitoring are much more efficient and effective if one solution is utilized across the organization.

QUESTIONS TO ASK

Will/does the platform have scalable MSO services in place for growth?

DISCOVER

Engaging MSO services provides access to laser-focused professionals performing back-office functions so the entity can focus on physician/provider recruitment, clinical quality, and other strategic initiatives.

5
FIRST 90 DAYS
QUESTIONS TO ASK

What should you think about 90 days after close?

DISCOVER

Update opening balance sheet healthcare receivables as part of net working capital settlements utilizing similar methodology as diligence—if collections lag after transaction, understand the root cause and ensure estimated future collections are reasonable and reflect appropriate reserves to ensure sellers are not overpaid in this settlement.

The first 100 days after an acquisition are crucial for a successful integration of a new business.

READ MORE
QUESTIONS TO ASK

Healthcare companies need to consider certain tax elections and methods when assessing NEWCO tax returns.

DISCOVER
  • Consider the use of Nonaccrual Experience Method to deduct bad debts.
  • If eligible for cash basis tax reporting, consider whether to file using the cash or accrual method. If you have formed an MSO, consider the impact accrued management fees would have on practice and management entity tax returns.
QUESTIONS TO ASK

What should be considered when valuing licenses/contracts in a corporate practice of medicine state?

DISCOVER

In states where corporate practice of medicine is prohibited, the practice will remain its own independent entity owned by physicians. Clinical decision making remains with practice management, while non-clinical functions are handled by an MSO. These management services need to be clearly defined and provided at a fair market rate.

What are the best ways to avoid overpayment to physicians?

READ MORE

4 Steps for Effective Information Technology

READ MORE

What do I need to know about PCI compliance for healthcare organizations?

READ MORE
EXPERTS WEIGH IN

Andrew McDonald “The Benefits of an MSO”

WATCH NOW
QUESTIONS TO ASK

Are billing activity and productivity being monitored?

DISCOVER

Billing and productivity monitoring should be assessed and built into compensation agreements. The overall financial impact of these items can result in significant differences from diligence and budgets if not monitored. Compliance issues and related risks may arise if not identified via monitoring and dealt with in an appropriate manner.