Material Risks in a Healthcare Merger

Intro: [00:00:01] Broadcasting from the studios of Business RadioX, it’s time for Advisory Insights, brought to you by Oberman Law Firm, serving clients nationwide with tailored service and exceptional results. Now, here’s your host.

Stuart Oberman: [00:00:21] Welcome everyone to Advisory Insights. This is Stuart Oberman as your host. I would say I want to talk about mergers and acquisitions in health care. I will tell you, last year was an absolute blistering year in the industry. And I’ll tell you, for us, Oberman Law Firm, it was amazing last year what we did, how we did it, especially in the fourth quarter.

Stuart Oberman: [00:00:45] So, a substantial part of what we did on the mergers and acquisitions was health care related. But I want to talk about some items in general. A little background. Last year we did I think the numbers were about 135 transactions, I think maybe a little bit plus or minus. And I believe the number was a total of about $350 million worth of transactions. So, we saw a lot, a lot of things in healthcare transactions. I want to talk about a couple of things in particular.

Stuart Oberman: [00:01:17] So, first and foremost, for those that are in a highly regulated industry, especially in health care, you’ve got to be careful when you do diligence. So when you are doing a healthcare transaction, an acquisition, it should never be overlooked that what you’re doing is and has to be heavily regulated. So, one of the things that we look for is we want our buyers to sift through sellers’ records to ensure that that seller is in compliance with state and federal law, especially on the reps and warranties. That’s a whole other topic we may cover for another day.

Stuart Oberman: [00:02:07] But if you are in a healthcare-related transaction and you are the buyer, I cannot stress enough on your due diligence, do not, do not leave off compliance. So, especially – I want to talk especially about this area. If you are buying a business, whether it is a medical practice, whether it is a particular practice area in different industries, you have to be extremely careful if that buyer, or if that seller, participates in the Federal Health Care Programs. Acronym FHCP. That has to be scrutinized in every single healthcare transaction.

Stuart Oberman: [00:02:59] So, let me tell you if it is an FHCP practice or business and they get government reimbursement, there are extremely stringent provisions for participation in that particular payment structure, if you will, in how they submit claims. You have to audit how they submit claims because that is a material risk, a due that you will inherit if it is not done correctly. Once you purchase that business, you run the risk of being a successor to liability.

Stuart Oberman: [00:03:42] So, what happens is if they don’t, if the seller has not met stringent – I can’t stress this enough – stringent requirements, they are facing substantial civil fines and penalties. And also you cannot overlook the potential of clawbacks, allegations of overpayment, and in some cases, False Claims Act, FCA, liability. That is critical that you have to understand the requirements of governmental reimbursement and how they relate to any industry – I mean, excuse me, how they relate to any business in health care.

Stuart Oberman: [00:04:24] Now, what I’ll tell you is we’re seeing this a huge clampdown – the DOJ, strikeforce, regions throughout the country – fraud and abuse. Fraud and abuse under the FHCPs is rampant. Absolutely rampant. If you look at the advisory notices, the takedowns under the DOJ communications, you’re going to look at a couple of things. You’ve got to look at the Anti-Kickback Statute, AKS. If you don’t know what that is and you’re buying a business that is subsidized by governmental reimbursement, you have to get assistance with that transaction. Stark law, Physicians Self-Referral prohibition. You have to look under the criminal and civil False Claims Act.

Stuart Oberman: [00:05:20] Those under fraud and abuse will take you down financially quickly if you purchase a particular healthcare business and you’re not fully aware of this. One thing that we see a lot that is overlooked is licensures. So, depending on what business you are purchasing, every healthcare business requires certain licensure, no matter what it is. In some cases, they’re very specific. They could be generic. You have to do your due diligence under the licensure requirements in healthcare transactions because if you purchase a business and then you overlook the proper licenses, you are looking at potential disaster on a very, very expensive investment.

Stuart Oberman: [00:06:09] So, those are a couple of things. Again, I can probably speak for three hours regarding governmental reimbursement, FHCP programs, fraud and abuse. The Anti-Kickback Statute is a three-hour lecture in and of itself. Stark is a whole different world. That’s another – you know, you could easily talk an hour or 2 hours in Stark and not even hit half the topics. But I would strongly encourage you to know exactly what the False Claims Acts are and how they relate to you in the transaction.

Stuart Oberman: [00:06:42] So, folks, that’s a very, very short summary of a very complex matter. If you have a healthcare transaction, it does not have to be a large hospital. It could be a dermatology practice, dental practice, healthcare practice. It doesn’t matter. Anything that is regulated by the government in health care, especially if they take Federal Health Care Program subsidies, reimbursements, critical, folks.

Stuart Oberman: [00:07:13] Folks, that’s a very, very short topic for a long, long conversation.

Stuart Oberman: [00:07:17] I want to welcome – and thank you for joining Advisory Insights. Stuart Oberman here. Please feel free to give us a call at 770-554 – excuse me, 770-886-2400. Again, 770-886-2400. Or feel free to reach out, email, stuart, S-T-U-A-R-T, @obermanlaw.com. Folk, thanks for joining us again. We appreciate you joining us and have a fantastic day.

Outro: [00:07:45] Thank you for joining us on Advisory Insights. This show is brought to you by Oberman Law Firm, a business-centric law firm representing local, regional, and national clients in a wide range of practice areas, including healthcare mergers and acquisitions, corporate transactions, and regulatory compliance.