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Material Risks in a Healthcare Merger

November 4, 2022 by John Ray

Advisory Insights Podcast

Material Risks in a Healthcare Merger

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Material Risks in a Healthcare Merger (Advisory Insights Podcast, Episode 16)

On this episode of Advisory Insights, Stuart Oberman of Oberman Law offered due diligence tips when purchasing a healthcare practice. He discussed the material risks and potential pitfalls of buying a healthcare business without fully understanding the requirements of governmental reimbursement, the importance of being knowledgeable about laws like the Anti-Kickback Statute, the Stark Law, the False Claims Act, and more.

Advisory Insights is presented by Oberman Law Firm and produced by the North Fulton studio of Business RadioX®. The series can be found on all the major podcast apps. You can find the complete show archive here.

TRANSCRIPT

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.

About Advisory Insights Podcast

Presented by Oberman Law Firm, Advisory Insights Podcast covers legal, business, HR, and other topics of vital concern to healthcare practices and other business owners. This show series can be found here as well as on all the major podcast apps.

Stuart Oberman, Oberman Law Firm

Stuart Oberman is the founder and President of Oberman Law Firm. Mr. Oberman graduated from Urbana University and received his law degree from John Marshall Law School. Mr. Oberman has been practicing law for over 25 years, and before going into private practice, Mr. Oberman was in-house counsel for a Fortune 500 Company. Mr. Oberman is widely regarded as the go-to attorney in the area of Dental Law, which includes DSO formation, corporate business structures, mergers and acquisitions, regulatory compliance, advertising regulations, HIPAA, Compliance, and employment law regulations that affect dental practices.

In addition, Mr. Oberman’s expertise in the healthcare industry includes advising clients in the complex regulatory landscape as it relates to telehealth and telemedicine, including compliance of corporate structures, third-party reimbursement, contract negotiations, technology, health care fraud, and abuse law (Anti-Kickback Statute and the State Law), professional liability risk management, federal and state regulations.

As the long-term care industry evolves, Mr. Oberman has the knowledge and experience to guide clients in the long-term care sector with respect to corporate and regulatory matters, assisted living facilities, continuing care retirement communities (CCRCs). In addition, Mr. Oberman’s practice also focuses on health care facility acquisitions and other changes of ownership, as well as related licensure and Medicare/Medicaid certification matters, CCRC registrations, long-term care/skilled nursing facility management, operating agreements, assisted living licensure matters, and health care joint ventures.

In addition to his expertise in the health care industry, Mr. Oberman has a nationwide practice that focuses on all facets of contractual disputes, including corporate governance, fiduciary duty, trade secrets, unfair competition, covenants not to compete, trademark and copyright infringement, fraud, and deceptive trade practices, and other business-related matters. Mr. Oberman also represents clients throughout the United States in a wide range of practice areas, including mergers & acquisitions, partnership agreements, commercial real estate, entity formation, employment law, commercial leasing, intellectual property, and HIPAA/OSHA compliance.

Mr. Oberman is a national lecturer and has published articles in the U.S. and Canada.

Oberman Law Firm

Oberman Law Firm has a long history of civic service, noted national, regional, and local clients, and stands among the Southeast’s eminent and fast-growing full-service law firms. Oberman Law Firm’s areas of practice include Business Planning, Commercial & Technology Transactions, Corporate, Employment & Labor, Estate Planning, Health Care, Intellectual Property, Litigation, Privacy & Data Security, and Real Estate.

By meeting their client’s goals and becoming a trusted partner and advocate for our clients, their attorneys are recognized as legal go-getters who provide value-added service. Their attorneys understand that in a rapidly changing legal market, clients have new expectations, constantly evolving choices, and operate in an environment of heightened reputational and commercial risk.

Oberman Law Firm’s strength is its ability to solve complex legal problems by collaborating across borders and practice areas.

Connect with Oberman Law Firm:

Company website | LinkedIn | Twitter

IT Due Diligence in a Merger

October 28, 2022 by John Ray

Advisory Insights Podcast

IT Due Diligence in a Merger

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IT Due Diligence in a Merger (Advisory Insights Podcast, Episode 15)

In this episode of Advisory Insights, Stuart Oberman with Oberman Law Firm discussed the importance of cybersecurity in today’s business world. He stressed the need for businesses to do their due diligence in evaluating potential acquisition targets, why he recommends a cybersecurity risk assessment, and cautioned IT and HR professionals to be aware of the risks involved in handling sensitive information.

TRANSCRIPT

Outro: [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] Hello, everyone. Stuart Oberman here for Advisory Insights, your host. Hey, I want to talk about a couple of things here in mergers and acquisitions. In a previous podcast, we covered material risks that involved governmental reimbursement, fraud and abuse, and licensure. But I want to sort of digress a little bit. So, I mentioned before in some of our podcasts that we had really a 2021 extraordinary year, mergers and acquisitions, that we did about 135 acquisitions and probably $330 million worth of revenue in those acquisitions.

Stuart Oberman: [00:00:59] So, one, as I digress and looked at some of those acquisitions that we are involved in, some of them are fairly big. One of the items that was, I could tell you, significantly overlooked is I.T. and what due diligence is required in a merger and acquisition for I.T. So, look, when you get – the first thing you can do is you ask for financials, then you ask for account receivables and you ask for the customer database, then you ask for the products and services. Then, you ask for facilities. What we don’t see a lot of requests for is I.T. Now, I.T. is sort of one of those things where, “Well, I’m not worried about I.T. Everyone knows I.T. I got an I.T. guy.” Your I.T. guy will send you right down the river if you don’t understand some of this stuff.

Stuart Oberman: [00:01:47] So, let me tell you. I want to take a look at a couple of things, a couple of bullet points. If you’re contemplating a merger and acquisition, big or small, does it matter? I.T. I want to know how their sensitive data is stored. I want to know that. I want a specific outline of how that occurs. I want to know all their software licenses. I want to know what I’m paying for. I want to know what I’m committing to. I want to know what I’m assigning myself to. I want to know what’s being purchased. I want to know what can be canceled.

Stuart Oberman: [00:02:16] So, another thing I want to look at is, is my equipment I’m going to purchase out of date? Is it end of its life cycle? Is it ready for the big waste bin in the sky? Is my Windows application up to date? Or is my license up to date?

Stuart Oberman: [00:02:36] Also, we talked previously in a podcast regarding health care. Health care. Health care. If you’ve got a – if you had – well, first you want to do is ask that particular seller, “Have you ever had a breach?” And, if they have and they are a health care industry, you want to go, “Are you under investigation? Have you received notice from HHS or any other state or federal agency?” So, otherwise, you really don’t know if there has been a breach or if there’s still a breach you’re ready to purchase and you don’t even know about it.

Stuart Oberman: [00:03:16] One thing you want to take a look at is, have your I.T. person as well versed in this area, see if there’s been a breach before with the software. I would always recommend a complete cybersecurity risk assessment. The last thing you need is a hack. And all of a sudden you’re asked to go to the nearest Bitcoin station and transfer $25,000 in Bitcoin. What is the risk, especially in health care? What is the due diligence? Is there an annual risk assessment which is required under HIPAA?

Stuart Oberman: [00:03:54] Another thing we see as grossly overlooked, I want to know about your firewalls. I want to know about your backups. Do you back up by taking a flash drive home every night? Are you backed up to your computer? What if someone steals your computer? Are you backed up to the server? Are you backed up to the cloud? How secure is a cloud? Does your Uncle Vinnie control the cloud? What are the securities? You got to know these things.

Stuart Oberman: [00:04:22] “Well, my buddy has a great server. He stores all my I.T.” Well, that’s great, but what’s – let me know the buddy’s protocols. What’s the IP address? There’s a floating. I want to know how your data is backed up. Again, is it backed up to a flash drive? Is it backed up to the computer? Or you have no backup, whatever it is. I want to know what cybersecurity protocols and procedures you implemented in the last 12, 24 months. “Well, I haven’t really done anything. Everything’s secure.” You’ve got a problem. You better know what’s been upgraded. You better know what the security protocols are. You better know what you’re purchasing and you better know if they’ve had a breach of cybersecurity, period.

Stuart Oberman: [00:05:13] So, let’s take a look at a couple of other things that we’ve been looking at. Again, I think there’s a laundry list here. But again, I could probably talk for two hours on this one subject, but we just have a very limited time. I want to take a look at whether or not they have cybersecurity insurance. It is becoming very difficult to obtain cybersecurity insurance. There are only a few players in the market. And what are the coverages? What is the non-coverage? What are they making you do and what are you certifying that you have done and maintained in relation for that coverage? So, you’re going to get a checklist probably from the cybersecurity insurance company. It’s going to outline certain things that you’ve done, that you haven’t done or that you need to do. And I would venture to say that if you put something false and misleading on that particular application and they find out you have no coverage, which is horrible, especially when some of these big hacks.

Stuart Oberman: [00:06:18] So, I want to know what your I.T. guy is doing or if you have hired or going to hire a third party to do a vulnerability screen. I want to know what your vulnerabilities are. I want to know how to fix it. I want to know what patches I need. I want to see when the last time you’ve patched. Are you getting constant upgrades? Are you outdated on Windows? You know, are you in Windows 6? I’m going to – for those of you that are a little bit older, I’m going to use the term DOS. We have clients that are still working on DOS. Yes, DOS. I can’t stress that enough. We have members of practices, businesses that they’re running two systems, DOS. And then, for the younger guys, of course, the Windows and Macs.

Stuart Oberman: [00:07:12] So, I want to make sure your information technology person understands what’s going on. What are their qualifications? Do they simply do your backups, or are they a legit, legit down and dirty cybersecurity company?

Stuart Oberman: [00:07:29] So, again, in evaluating every business that you’re going to acquire – and let me go so far as this. If you’re a business, period, you’ve got to look at cybersecurity policies. You got to look at protocols, procedures. You should do your due diligence as if you’re purchasing your own business. Are you doing it? Are you doing a security risk analysis? Are you doing the assessments? Take a look at all these things.

Stuart Oberman: [00:07:53] Cybersecurity is no longer an option. It’s absolutely mandated with everything that goes on your systems, payments, history, Social Security numbers. It’s amazing what will end up on the black market, if you will, on information.

Stuart Oberman: [00:08:11] Folks, I tell you, again, that’s a three-hour conversation. I just want to hit some highlights. I want to hit some bullet points whether or not you’re looking to buy a business, whether or not you’re owning, you have owned a business, or you’re an I.T. guy, or you’re actually an H.R. person. Are you taking a look at all these things that you need to do on a daily basis especially to be secure?

Stuart Oberman: [00:08:33] Folks, we’re going to wrap it up for today. Stuart Obermann here, your host on Advisory Insights. Thanks for joining us. Hope you took away one or two things which will make you an absolute success.

Stuart Oberman: [00:08:43] If you want to reach us, please feel free to give us a call, 770-886-2400. Or myself, stuart, S-T-U-A-R-T, @obermanlaw.com. Thanks for joining us and we’ll see you on the next podcast.

Outro: [00:08:58] 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.

About Advisory Insights Podcast

Stuart Oberman, Oberman Law Firm

Mr. Oberman is a national lecturer and has published articles in the U.S. and Canada.

Oberman Law Firm

Oberman Law Firm’s strength is its ability to solve complex legal problems by collaborating across borders and practice areas.

Connect with Oberman Law Firm:

Company website | LinkedIn | Twitter

E5 Preparing to Sell Your Business with Lisa Riley

June 3, 2020 by Karen

Phoenix Business Radio

E5 Preparing to Sell Your Business with Lisa Riley

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E5 Preparing to Sell Your Business with Lisa Riley

There are so many aspects of prepping for and selling a business that most business owners do not think about or do anything about. Lisa very clearly outlined in this episode some key things that business owners need to think about so that they are ready to exit their business on their terms.

If you have any desire to sell your business at some point in the future, you won’t want to miss the advice that Lisa gives in this episode. A few easy things to implement that will help you to be prepared to exit on your terms and for top dollar.

Delta Business Advisors is a boutique firm focused on assisting business owners of privately held businesses with the sale or acquisition of a business. Their advisors specialize in business sales transactions, predominantly in Arizona, however, they have experience and contacts throughout the US and the world.

Selling or buying a business is time-consuming and very difficult at times. They provide insight on valuations, market conditions, and manage the due diligence process. This helps to remove the stress and anxiety for the business owner and allows them to keep successfully operating their businesses.

Lisa Riley is the Principal of Delta Business Advisors. She & her team assist sellers and buyers on the sale and purchase of their business.

She earned the prestigious designations of Certified Business Intermediary from the IBBA, Certified Mergers & Acquisitions Professional from Coles College of Business and PhD from Notre Dame. She was awarded the prestigious Tom West Award.

Lisa and her team stay up to date on industry trends. Her industry knowledge and large network of business owners and brokers ensures business owners get maximum exposure when it comes time to purchase or sell a business. With thousands of main street businesses in the Phoenix metro, Lisa has access to a broad spectrum of business types and sizes.

As a current and former business owner, Lisa understands the demands and freedoms of both one’s business and moving into the next phase in life.

Connect with Lisa on LinkedIn and Facebook and follow Delta Business Advisors on Twitter and Instagram.

About the Show

Tycoons of Small Biz spotlights the true backbone of the American economy, the true tycoons of business in America… the owners, founders and CEO’s of small businesses. Join hosts, Austin L Peterson, Landon Mance and the featured tycoons LIVE every Tuesday at 1 pm, right here on Business RadioX and your favorite podcast platform.

About Your Hosts

Austin Peterson is a Comprehensive Financial Planner and owner of Backbone Financial in Scottsdale, AZ. Austin is a registered rep and investment advisor representative with Lincoln Financial Advisors. Prior to joining Lincoln Financial Advisors, Austin worked in a variety of roles in the financial services industry.

He began his career in financial services in the year 2000 as a personal financial advisor with Independent Capital Management in Santa Ana, CA. Austin then joined Pacific Life Insurance Company as an internal wholesaler for their variable annuity and mutual fund products. After Pacific Life, Austin formed his own financial planning company in Southern California that he built and ran for 6 years and eventually sold when he moved his family to Salt Lake City to pursue his MBA. After he completed his MBA, Austin joined Crump Life Insurance where he filled a couple of different sales roles and eventually a management role throughout the five years he was with Crump. Most recently before joining Lincoln Financial Advisors in February 2015, Austin spent 2 years as a life insurance field wholesaler with Symetra Life Insurance Company. Austin is a Certified Financial Planner Professional and Chartered Life Underwriter.

Austin and his wife of 21 years, Robin, have two children, AJ (19) and Ella (16) and they reside in Gilbert, Arizona. He is a graduate of California State University, Fullerton with a Bachelor of Arts in French and of Brigham Young University’s Marriott School of Management with a Master of Business Administration with an emphasis in sales and entrepreneurship.

Connect with Austin on LinkedIn, Facebook, Twitter, and Instagram.

Landon Mance is a Financial Planner and founder of YourFuture Planning Partners out of Las Vegas, Nevada. His firm came to life in 2020 after operating as Mance Wealth Management since 2015 when Landon broke off from a major bank and started his own “shop.”

Landon comes from a family of successful entrepreneurs and has a passion and excitement for serving the business community. This passion is what brought about the growth of YourFuture Planning Partners to help business owners and their families. At YourFuture, we believe small business owners’ personal and business goals are intertwined, so we work with our clients to design a financial plan to support all aspects of their lives.

In 2019, Landon obtained the Certified Exit Planning Advisor (CEPA) designation through the Exit Planning Institute. With this certification, YourFuture Planning Partners assists business owners through an ownership transition while focusing on a positive outcome for their employees and meeting the business owner’s goals. Landon is also a member of the Business Intelligence Institute (BII) which is a collaborative group that shares tools, resources and personnel, and offers advanced level training and technical support to specifically serve business owners.

Landon enjoys spending time with his beautiful wife, stepson, and new baby twins. He grew up in sunny San Diego and loves visiting his family, playing a round of golf with friends, and many other outdoor activities. Landon tries make a difference in the lives of children in Las Vegas as a part of the leadership team for a local non-profit. He regularly visits the children that we work with to remind himself of why it’s so important to, “be the change that you wish to see in the world.”

Landon received his B.S. from California State University Long Beach in business marketing and gets the rest of his education through the school of hard knocks via his business owner clients.

Connect with Landon on LinkedIn.

About The Tycoons of Small Biz Sponsors

Whether you’re an established local company, or a brand new start-up, you can count on GBS to be a part of your family. We’re not just any benefits consulting firm, we’re GBS. We have nearly 30 years of experience in group benefits, a strong sense of purpose and it shows.

Paylocity is a leading provider of cloud-based HR and payroll software solutions headquartered in Schaumburg, IL. Paylocity offers an intuitive, easy-to-use product suite that helps businesses tackle today’s challenges while moving them toward the promise of tomorrow.

Known for its unique culture and consistently recognized as one of the best places to work, Paylocity accompanies its clients on the journey to create great workplaces and help people achieve their best through automation, data-driven insights, and engagement.

Austin Peterson and Landon Mance are registered representatives of Lincoln Financial Advisors Corp. Securities and investment advisory services offered through Lincoln Financial Advisors Corp., a broker/dealer (member SIPC) and registered investment advisor. Insurance offered through Lincoln affiliates and other fine companies. Backbone Financial and Your Future Planning Partners are marketing names for business conducted through Lincoln Financial Advisors Corp. CRN-3110407-060220

Lincoln Financial Advisors Corp. and its representatives do not provide legal or tax advice. You may want to consult a legal or tax advisor regarding any legal or tax information as it relates to your personal circumstances.

The content presented is for informational and educational purposes. The information covered and posted are views and opinions of the guests and not necessarily those of Lincoln Financial Advisors Corp.

Business Radio X is a separate entity not affiliated with Lincoln Financial Advisors Corp.