Healthcare Private Equity Frequently Asked Questions
What should healthcare private equity due diligence examine beyond Quality of Earnings?
Due diligence should also evaluate coding and documentation, medical necessity, provider compensation, revenue cycle performance, regulatory compliance, cybersecurity, information technology, tax, real estate, and business value. Reviewing these areas together helps investors understand risks that may not appear in the financial statements but could affect the transaction, operating model, or post-close priorities.
What should be planned before post-close integration begins?
The integration plan should define priorities, decision-making authority, accountable owners, and the operating changes required after closing. It should also address policies and procedures, technology and electronic medical record transitions, accounting practices, internal controls, management support, and purchase price allocation so that financial, operational, and compliance work can move forward in a coordinated manner.
What should investors evaluate in a provider compensation model?
Investors should assess whether compensation is supportable, commercially reasonable, aligned with the written plan, and financially sustainable. The review should consider productivity measures, income distribution methods, reimbursement changes, work relative value unit assumptions, plan documentation, and how the model may need to change after the transaction.
How can investors evaluate market opportunity and capacity before committing capital?
Market demand and capacity analysis can help determine whether the target has room to grow, where service gaps may exist, and whether current resources can support expansion. Financial feasibility analysis and capital planning can then test the investment required, expected operating needs, and whether the opportunity is supportable under realistic assumptions.
Which financial and compliance functions should be stabilized after closing?
Post-close priorities may include strengthening the compliance program, improving revenue cycle performance, establishing reliable accounting and reporting processes, implementing internal controls, completing purchase price allocation, and addressing federal, state, and local tax requirements. These functions help the acquired organization transition into consistent financial, operational, and compliance processes.
