Private equity firms, physician practices, and hospital systems have long been relying on healthcare mergers and acquisitions (M&A) as a key aspect of their operations. Nonetheless, the completion of such transactions can be hindered by numerous factors such as intricate reimbursement structures, extensive data pools, and stringent accounting standards. To address these issues, healthcare transaction advisory teams are available to provide guidance and to help shape strategic decisions. They can offer professional activities related to regulatory and reimbursement, primary market research, strategy, data analytics, and compliance.

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Integration Planning

The complexity of healthcare transactions necessitates a holistic approach to guarantee the successful completion of the merger. A healthcare transaction advisory provides the insight needed to identify and tackle the integration planning issues that may arise. This can include assessing the impact of the merger on existing organizational cultures and ways to bridge the differences. Developing a plan to manage and measure integration progress post-close is also essential. The plan may include a framework for monitoring the performance of the functional workstreams and leadership, as well as a mechanism for tracking and validating integration targets and value drivers. Furthermore, an advisor can set up a governance structure to support effective decision-making and a reliable way to address issues that arise.

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Due Diligence

In M&A; transactions, due diligence is of paramount importance, particularly in the healthcare industry. It can reveal liabilities, compliance issues, and possible synergies that will make the integration process smoother. To illustrate, a PE-backed MSO may want to acquire physician practices, and must make sure that the employment agreements don’t breach Stark laws. By performing a professional due diligence, both parties can avoid costly penalties, such as self-disclosure or settling violations with the federal government as a precondition for closure. A professional due diligence team can discover operational redundancies, compliance risks, debts and liabilities, competition concerns, and IT vulnerabilities that need to be resolved. Additionally, the seller can obtain a higher selling value by evaluating the transaction’s financial, tax, post-merger operational and systems integration, and technology facets.

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Valuation

A healthcare transaction advisor understands the complex nuances of the healthcare sector. This includes the unique intricacies associated with physician medical group deals, compensation arrangements that balance physician incentivization with revenue stability and care quality, and electronic prior authorization solutions that reduce information transparency burdens on a reporting system. Financial due diligence is a comprehensive investigation into a company’s financial health that may be considered for acquisition or investment. This typically includes reviewing historical financial statements, cash flow projections, and tax records. Valuation is a critical component of the healthcare M&A process. This often involves comparing contracted reimbursement rates with payers, which can substantially impact pre- and post-deal earnings potential. A healthcare transaction advisory expert can help ensure these comparisons are performed consistently and thoroughly to establish FMVs.

Legal Issues

When conducting a healthcare transaction, a transaction advisor should provide legal guidance to both parties involved in the deal to ensure compliance with all relevant laws. This is especially important to consider in the healthcare industry, which is seeing a trend towards consolidation. A healthcare service business must be aware of government payment program requirements, or they could face serious legal repercussions. Additionally, an advisor should be knowledgeable about antitrust and corporate laws to prevent the creation of monopolies and maintain fair competition. Violations of these laws could lead to demands for repayment or accusations of overpayment.

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