Healthcare is constantly changing, and the M&A environment is ripe for deals. But the regulatory hurdles are high. Due diligence is critical to protect against operational redundancies, competition risks, information systems vulnerabilities, and more. It can also reveal opportunities to improve profitability and grow your business.

Due Diligence

Due diligence is standard in any transaction, but healthcare M&A requires special skills and experience. Due to the heavy regulations and unique risk areas, a healthcare buyer must conduct thorough due diligence to identify and avoid potential liabilities in any deal. Professional investigations by a healthcare transaction advisory team enabled the deal to achieve its high selling value. A thorough investigation also helps a buying company determine operational redundancies, legal pitfalls, and law compliance issues in any healthcare deal. For instance, a healthcare due diligence investigation might reveal physician contracts that violate Stark laws or other federal regulations. This would be a significant liability the buying company could not afford to take on. The due diligence process is an opportunity for a buying healthcare firm to avoid surprises that can erode deal momentum. It is also an opportunity to make sure the buyer’s IT systems are ready to integrate new data from the target company.

Strategic Planning

Strategic planning is a systematic and organized process that creates a plan for an organization to progress from its current situation to a desired future state. Critical information is collected and analyzed during this process to ensure that decisions are made with the most accurate and complete data available. Healthcare institutions often use strategic planning to develop and communicate their vision and establish strategic goals. These goals are then used to identify resources and plan their achievement. This allows organizations to increase their performance and improve their ability to meet their financial objectives. Regardless of the size of a healthcare organization, every department should have its strategic plan, which should be aligned with the higher-level strategic plans. This will help ensure that the strategies implemented are focused on the goals of each specific area of the organization. It also ensures that information is passed down from the top down and that everyone knows how their activities contribute to the larger strategic plan.

Mergers & Acquisitions

Mergers and acquisitions are crucial to the healthcare industry’s ability to thrive in current care models and meet the growing needs of patients. These transactions offer the scale, resources, and flexibility needed to compete in a global economy. In addition to cost savings, M&A can also increase efficiency. For example, merging hospital systems can cut back-office billing operations and eliminate redundant roles. This enables staff to spend more time treating patients and improving patient outcomes. However, a merger may face regulatory agencies and public outcry challenges, requiring careful consideration of its impact on competition and the quality of healthcare services. This includes analyzing potential changes in market concentration and addressing antitrust concerns. Additionally, healthcare organizations must understand and be prepared for evolving physician compensation models based on value and performance. This will require strategic planning and a team of expert consultants.

Business Valuation

Valuing a company in any industry is complex, but the valuation process can become even more challenging for healthcare companies. This is because the value of a medical practice depends on a wide range of factors, including patient volume trends and local competition. Additionally, private medical practices often have significant tangible assets that must be included in the valuation. For these reasons, it is essential to have a professional who understands the unique intricacies of valuing healthcare entities and arrangements.