Purchasing a healthcare company is an exciting prospect and one for which Richards Rodriguez & Skeith has helped guide numerous investor clients. The healthcare field is critical to all Americans and it has been experiencing significant growth over the years with an expected 5% growth in spending through 2023.
With an increased focus on developing smart healthcare ecosystems, companies are innovating in the areas of value-based care, new models of care, data interoperability, and alternative employment structures to manage change and uncertainty. Due to increasing demand and innovation in the sector, there is a wide variety of companies to invest in including MedTech, specialized medical practices, and cosmetic service providers.
Know the Company’s Greatest Assets and How to Protect Them
The first thing to know is the company’s core assets. For a MedTech or devices company, the IP and patents behind the technology are its greatest underlying assets. For a medical practice, it may be the reputation of the practitioners and patient relationships the doctors have built over the years.
It is important to investigate these priority assets and how they have supported the company and will continue to support the company moving forward. Make sure that the most critical assets and their support structures carry over into the final contract.
Ask Whether It Will Scale
Early in the exploration stage, speak with company leadership, and envision how the new company’s model will work with your portfolio. If you intend to take over the company with an existing brand, visualize if/how their model will blend with yours. If Electronic Medical Records are involved, have an IT specialist review how much it will cost to merge and maintain incoming records. Evaluate if the new company’s operations model will scale and what it would cost to make it scalable in the next few years.
Affirm All Compliance Is Met
All M&A deals require significant due diligence procedures for financial and legal reasons, but most businesses in the healthcare field require in-depth compliance measures as they pertain to state and federal medical laws and regulations like the Health Insurance Portability and Accountability Act (HIPAA), the Hospital Readmissions Reduction Program (HRRP), and Patient Safety and Quality Improvement Act (PSQIA). There is also a significant amount of work that goes into license maintenance for staff practitioners and the business itself in addition to any requirements the DEA may have. Review all staff and company licenses to see if any have lapsed, been revoked, or are due to expire soon.
There are also many billing and coding standards that medical practices must adhere to in order to comply with the various state and federal licensing bodies, ensure the company’s staff and practices comply and are up to date. It is often best to have an industry expert walk you through this process.
Complete Financial Due Diligence
Request the financial records and tax statements for the past three years or the lifetime of the company. Examine the company’s current working relationships. Review liabilities including any pending legal actions or other major financial liabilities.
With proper planning detailed analysis, it is possible to buy a healthcare company and meet regulatory and compliance requirements, all while continuing to do great work for the company’s patients.
To speak with experienced healthcare M&A lawyers who understand how to negotiate and plan for the purchase of a healthcare company or medical practice, contact us today.