Investments in this market are not only financial decisions but also carry significant legal implications. Before moving forward with what looks like a good deal in the healthcare arena, it is important to ask two questions. The answers to these questions can help you decide if the investment is worth pursuing or if it is better to wait for an alternative option.
#1: What is the underlying cause of the struggle?
The first step is to look into the reason for the struggle. Many small to mid size healthcare facilities are struggling, often due to the end of federal funding related to the COVID-19 pandemic. Another common cause: the fact that reimbursement rates from the United States Centers for Medicare and Medicaid Services (CMS) have not kept up with inflation.
Reviewing the potential investment and getting to the root of the cause of the struggle can help you move on to the next important question.
#2: Is it worth it?
There were high levels of consolidation in healthcare market in recent years which may make due diligence more important now than ever before. Review a target acquisition or investment opportunity carefully. Is it a fixer upper that can benefit from collaborative opportunities with nearby facilities? Do the demographics in the area make sense for future growth opportunities? Review these possibilities, as well as potential legal implications of each, before moving forward.
When it comes to opportunities for growth what may look like a collaborative opportunity that would benefit the facility as well as patients could run afoul of federal regulations like the Anti Kickback Statute. An attorney experienced in the application of this and other regulations can review a proposed investment opportunity and discuss the possibility of this or other potential legal liabilities.
Investing in a struggling healthcare business carries potential for both profit and positive community impact. However, the importance of understanding the legal landscape cannot be overstated. Failure to adhere to regulations can lead to significant liabilities.
