Joseph Rugg's Health Law Blog

Step 3 – Identify the governmental agencies that have authority over the deal

• Are there any notices or approvals required?
• What are the licensing requirements?
• Will a change in control occur?
• Is a new provider application/number needed?
• Is a CON needed?  An inspection?
• What effects will the deal have on any accreditation needed by the parties?
• What is the timing of agency requirements vs. closing the deal?

Step 4 – Identify the third party payors that will be involved

• Are the services to be performed as a result of the deal reimbursed by Medicare?
• Medicaid?
• Other federal or state programs?
• Commercial payors?
• What credentialing/provider applications are needed?
• Do any payors have special requirements that must be satisfied before closing the deal?

Step 5 – Identify the due diligence requirements

Remember that a healthcare deal starts like any other deal, and the parties must do their basic due diligence about each other

• Entity organization and ownership
• Legal authority
• Financial statements, assets and liabilities, liens
• Contracts and commitments, leases
• Employees and benefit plans
• Taxes
• Insurance
• Litigation

Step 6 – Identify the healthcare due diligence requirements

• Licenses and requirements applying to transaction
• Equipment and inventories
• Cost reports, inspections, regulatory correspondence
• Quality of care, malpractice claims/insurance
• Patients records, EHR compatibility, billing software
• Managed care/provider agreements, liability, assignability
• Subcontractors/suppliers
• Stae law requirements
• Fair market value
• Commercial reasonablenessFair market value and Commercial Reasonableness — These are the critical underpinnings of every healthcare deal.  What is being given, what is being received, and is it commercially reasonable?Get an opinion from a qualified healthcare valuation expert to support the FMV.

Step 7 – Document the Deal

• Documentation is a critical step in protecting the parties, achieving the goals of the deal, and meeting compliance requirements.  Stark Exceptions and Anti-Kickback Safe Harbors impose specific requirements on deal documentation.
• Should the parties enter into a nonbinding letter of intent/memorandum of understanding?
• Pros – helps the parties determine whether there has been a meeting of the minds prior to devoting substantial time and expense and helps manage expectations and reduce surprises.
• Cons – can consume an inordinate amount of time prior to due diligence being completed and lock the parties into unrealistic positions.

Next time — How to screw up the deal that everyone wants.