After extensive research and careful deliberation, you have finally made the exciting but daunting decision to purchase a healthcare practice. You know that in the next couple of months you are going to need to examine the practice from a different perspective—that of a future owner. You also recognize that in order to facilitate the process, you are going to need to hire sophisticated legal and accounting teams able to help negotiate the transaction and memorialize the parties’ mutual understanding in fair and definitive documents. But what else should you expect in the upcoming months with respect to acquiring your future practice? How can you prepare?
Explore this issue:September 2016
Much of the diligence, documentation, and negotiation in healthcare transactions resemble those required for other types of transactions; however, healthcare-specific transactions also present unique, complex issues and requirements. Knowing what to expect and how to navigate through the transaction process will not only help curtail your legal fees, but will also help alleviate some of the stress that is inevitable in such transactions. While there are a wide variety of issues that may present themselves during a healthcare transaction, below are a few crucial matters that often need to be addressed.
When purchasing any business, it is critical to become familiar with its financial strengths and weaknesses by analyzing financial statements, books, and records. This analysis is important not only to understand the value of the business, which will help determine the purchase price, but also to understand the future growth potential of the business and whether purchasing it would be a lucrative investment.
One financial area that is specific to healthcare transactions, and may be worth having an expert examine, is the history of payments made by payers. Understanding whether the practice has been billing insurance payers appropriately, or, alternatively, whether the payers have been paying the practice correctly, is critical for a potential buyer because of the possible ramifications of overbilling. For example, in some transactions, such as stock deals, a buyer is responsible for the company’s liabilities, some of which the buyer may not have known about during the transaction. If a medical practice has been overbilling its payers and the buyer purchases the practice in a stock deal, the reimbursement of those payers would generally be the buyer’s responsibility after the transaction is closed. Therefore, it is critical to understand whether the practice has been billing timely and appropriately, and whether the payments have been made to the practice.