Mergers and Acquisitions Assistance and Due Diligence Review

Due Diligence Review Services

Mergers and Acquisition (M&A) Regulatory Due Diligence

There is a strong trend for increases in acute care hospital M&A activity and hospital/physician transactions. According to the 2010 Hospital Mergers & Acquisitions Survey, this trend is likely to continue.Health care reform and the Affordable Care Act (ACA) will likely result in more consolidation and integration among hospitals and physician practices.

In most industries, there are two common types of due diligence, financial and legal. Due to the highly regulated nature of the health care industry, it requires a third type, regulatory due diligence.

Health care reform led to increased oversight and enforcement by the HHS Office of Inspector General (OIG), Department of Justice and FBI, and the Centers for Medicare & Medicaid Services (CMS) through its Program Integrity activities. For example, CMS has been employing a number of program integrity contractors, including RACs, ZPICs, MACs, MICs, and others to increase this effort. The anticipated or actual outcome of program integrity and oversight activities and being subject to government audit is a compliance risk that must be properly accounted for in any M&A transaction.

If you have questions or would like to discuss M&A regulatory due diligence with a specialist, then get in touch with us today. You can call us at (703) 683-9600 or fill out our online contact form.

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Financial and Legal Due Diligence

Due diligence reviews provide a vital tool to help companies assess the potential liabilities in mergers and acquisitions (M&A). In most industries M&A due diligence focuses on financial accountability and legal liabilities. In the former, an independent accounting firm focuses on reviewing and evaluating the balance sheets, income statements, audit reports, and cash flow statements and projections. In short, the objective is measuring financial viability.

For a Legal Due Diligence, the focus is on examining the entity’s structure; business permits and/or approvals; employment and labor law compliance; environmental law approvals, permits and compliance; contractual rights and obligations; intellectual property rights and obligations; real property law compliance; securities and financing regulatory compliance; tax exposure risks; consumer protection law and exposure risks; international trade and export permits and/or licenses; previous and/or current litigation; media reports; and external consultants and/or advisors.

Regulatory Due Diligence

M&A is more complicated in the health care sector due to the heavily regulated environment. As such, there is significant risk that a purchaser can inherit serious regulatory liabilities. The traditional financial and legal due diligence work does not often focus on this exposure. For this type of due diligence, it is important to have health care compliance experts conduct a review, examining regulatory high-risk areas. Many of these are identified in the various compliance program guidance documents released by the US Department of Health and Human Services Office of Inspector General (OIG).

Strategic Management conducts these types of due diligent reviews prior to a transaction and post transaction, as necessary. A potential seller should try to resolve problems that would deter buyers. A potential buyer should “clean up the house” to raise chances of completing the transaction. Strategic Management is prepared to assist in identifying problems that can be remediated and alleviate the problems that arise during a deal.

Why Strategic Management

Strategic Management has built a team of health care compliance consultants that are unmatched in the industry. These include a number of former government executives who focused on regulatory and legal issues, including the former Inspector General; former Regional Inspectors Generals; former Director of Management Operations for the OIG; former Appellate Judge for the Medicare Appeals Board; executives from the Office of Counsel to the Inspector General; officials from CMS, DOJ, U.S. Department of Labor; and others. Key staff members include many credentialed attorneys, CPAs, MPHs, MPAs, and PHDs. Collectively these individuals have coupled their government regulatory and enforcement credentials with many years as consultants to the commercial health care sector and hence are able to quantify the levels of vulnerability and risk.

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Strategic Management has developed time-tested review protocols that can quickly identify areas of risk and vulnerability and provide proactive solutions. These include examining the effectiveness of the compliance program, evaluation of internal monitoring of high-risk areas, claims audits and extrapolations, and the ongoing internal auditing processes of the health care organization.

If you have any questions about the ways we can help your organization, then please click here to contact us today.


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