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What should I know before buying or selling a home health agency?

On Behalf of | Jan 23, 2024 | Home Health Agencies |

Whether looking to buy or sell a home health agency, hospice, or health business, understanding the legal landscape and employing best practices are essential for a successful transaction. This post provides practical advice for both buyers and sellers to help better ensure a smooth transaction.

For sellers: Preparing for a successful exit

Understanding the value of your home health agency is paramount. Engage a professional with experience in healthcare valuations to consider factors such as cash flow, market trends, and regulatory compliance. Next, take time to get affairs in order. Ensure that your agency’s documentation, including licenses, contracts, and employee records, is complete, current, and in compliance with all regulations. This due diligence will be attractive to potential buyers.

It is also important to stay up-to-date with state and federal regulations, including Medicare and Medicaid compliance, to avoid any legal issues that could derail the sale.

Once these steps are taken, it can help to work with a broker or advisor who has a proven track record in the healthcare sector. They can help you find qualified buyers and market your agency effectively.

For buyers: Conducting due diligence

Although national demand is high, one of the first steps for a potential buyer is to understand the local demand for home health services, competition, and reimbursement rates. This will inform your decision on whether to buy an existing agency or start a new one.

For those who choose to purchase an existing facility, it is important to investigate a prospective agency’s financial performance, legal compliance, and operational efficiency. Review all contracts, employment agreements, and patient care records. Ensure that the agency is in compliance with all healthcare regulations, including state licensure and Medicare certification. Non-compliance can result in penalties and jeopardize future reimbursement.

Once these boxes are checked, it is helpful to develop a transition plan to retain key staff and maintain continuity of care for patients. This will help preserve the value of the agency post-acquisition.

For both parties: Closing the deal

Both parties should negotiate terms that reflect the agency’s value and future potential. This includes purchase price, payment terms, and contingencies. It is generally wise to have legal counsel review transaction documents that may include the purchase agreement, non-compete clauses, and any representations and warranties.

After closing, sellers should ensure a smooth handoff of the business. Buyers should focus on integrating operations and maintaining quality care.

Buying or selling a home health agency involves navigating a complex web of legal, financial, and regulatory challenges. The steps discussed above provide a starting point. Those interested in moving forward are wise to engage experienced professionals to help achieve their objectives and ensure the continued delivery of quality home health care services.

Attorney John Rivas is responsible for this communication.

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