HPE Miami 2023 | Buyer Beware: The Importance of Due Diligence in Healthcare Transactions - McDermott Will & Emery

HPE Miami 2023 | Buyer Beware: The Importance of Due Diligence in Healthcare Transactions


In this session, McDermott partners Matt Friendly and Ann Marie Brodarick moderated a panel discussion highlighting current considerations for buyers conducting legal and financial due diligence in healthcare M&A.

This session featured insights from the following panelists:

  • Philip Pfrang, Partner, Deloitte
  • Monica Wallace, Partner, McDermott Will & Emery

In Depth

Key takeaways included:

  1. Data processing speed has removed significant roadblocks for acquirers examining healthcare targets. There is no excuse to overlook billing practices, risk factor adjustments and estimation risk when evaluating targets.
  2. Lawyers and accountants should collaborate to ensure that revenue at healthcare targets is clean from a regulatory perspective. The large amount of government dollars poured into the healthcare sector in recent years makes it ripe for regulatory scrutiny.
  3. Some of the main healthcare regulatory risks facing healthcare targets include fraud and abuse compliance which takes into account state and federal self-referral, kickback and false claims laws; license, CON and corporate practice HIPAA; COVID waivers/flexibilities compliance and upcoming end of the public health emergency; and proper use of COVID-19 government funding.
  4. From a financial diligence and tax perspective, it is critical to align on the tax structure of a deal before reaching a finalized letter of intent.
  5. Instead of siloing specialists, buyers should encourage lawyers, accountants, tax advisors and healthcare-specific advisors to collaborate—for example, by conducting group calls among the various diligence providers.
  6. Human relations and a healthcare target’s ability to attract and retain top talent has become a primary issue in healthcare diligence.