Dec. 2011/Jan. 2012 / Features
Don’t Let Regulatory Issues Derail A Healthcare Deal
Regulatory issues arising during healthcare industry transactions can cause major problems. Even minor violations of healthcare laws can kill a deal, significantly alter the economic expectations of the parties or lead to settlements or judgments in the millions of dollars.
One of the strictest of applicable statutes is the Stark Law, regarding physician self-referral. The Stark Law mandates strict liability, meaning innocent violations can trigger penalties. Even inadvertently failing to renew a lease or overlooking a signature on an agreement could result in Stark liability. Another federal law, commonly known as the Anti-kickback Statute, makes it a criminal offense to knowingly offer, pay, solicit, or receive any remuneration to induce or reward referrals of items or services reimbursable by a federal health care program.
A health care company looking to merge, sell, go public, or solicit new investment should conduct internal due diligence before proceeding. This may include a compliance audit, consisting of an audit of the company’s coding and billing practices, and an analysis of financial relationships with physicians or other referral sources. If a health care regulatory issue does arise during a deal, the laws and facts should be checked carefully to determine if there is in fact a violation. If there clearly is a need to repay a federal health care program, consider the available disclosure alternatives. With careful planning, healthcare companies can minimize the chances of a deal being derailed by a healthcare regulatory issue.
