Regulatory Red Flags in High-Value Medical Transactions
Regulations are a difficult thing to manage at times, especially when dealing with high-value medical transactions. These acquisitions often include arrangements like large equipment purchases, joint ventures, or mergers and acquisitions. Recognizing potential red flags can help you avoid problems when engaging in medical transactions. Let an experienced attorney help you identify potential problems with your transaction.
The healthcare mergers and acquisitions attorneys at Daniels, Porco & Lusardi, LLP know what red flags to look for and avoid in your high-value medical transactions. Let us guide you through this process to ensure a smooth and successful transaction.
What You Need to Know About the Stark Law and Anti-Kickback Statute
The Stark Law requires doctors to self-refer for specific health services that Medicare or Medicaid covers. The Anti-Kickback Statute (AKS) makes it illegal to exchange payment for referrals related to federal healthcare programs.
Red flags you should watch for include:
- Improper financial relationships between referring physicians and entities receiving referrals.
- Value compensation for services, leases, or equipment that does not meet fair market value.
- If contingent payments are somehow linked to referral volume or value
- Missing written contractors that document a legitimate business purpose
Transactions that involve physician-owned entities, management service organizations (MSOs), or joint ventures need careful planning to avoid triggering these statutes.
Do Your Due Diligence and Focus on Documentation
If you fail to conduct thorough due diligence, this can expose you to liabilities, regulatory fines, and even risk damaging your practice’s reputation.
Red flags you should look for include:
- Lack of or old compliance policies, fraud prevention protocols, or HIPAA compliance strategies
- Unresolved audits from state or federal agencies
- Litigation that was not disclosed
- Whistleblower claims under the False Claims Act
- Lack of information about accreditation or licensure for doctors or your facilities
A strong due diligence process should include legal, financial, operational, and clinical reviews. This is especially important when acquiring or merging with multi-site healthcare organizations.
Improper Valuation of Assets and Services
Errors with asset valuation can cause you regulatory violations. This is especially true if your transaction involves doctor compensation, goodwill, or intellectual property rights.
Red flags to look out for in your transaction include:
- Valuations that seem inflated by third-party appraisals
- Price structures that are bundled to avoid assessing individual value of assets
- Projections that seem unrealistic to justify the suggested purchase price
- Failure to provide documentation for fair market value of equipment or other valuable goods or services
Understanding Data Privacy Risks and HIPAA
Many of these transactions involve protected health information, or PHI. This will trigger HIPAA regulation compliance in your high-value medical transactions.
Common issues you might face include:
- Parties gaining access to PHI without authorization
- Inadequate contracts or agreements to handle protecting PHI
- Insufficient cybersecurity to protect your patient’s medical information
- Lack of a risk assessment before you move data
Violations can lead to civil penalties, breach notifications, and damage to reputation. Data privacy needs to be a top priority in any healthcare transaction.
State-Level Licensing and Corporate Practice of Medicine (CPOM)
Many states limit non-physician entities from owning or controlling medical practices. Transactions with MSOs, private equity firms, or hospital systems must follow CPOM laws and licensing requirements.
Red flags you need to consider include:
- Non-compliant ownership structures that violate CPOM prohibitions.
- Improper delegation of clinical decision-making to non-licensed personnel.
- Failure to register or license entities with state medical boards or health departments.
- Overreliance on management agreements to circumvent CPOM restrictions.
Get Help with High-Value Medical Transactions
Making a major purchase or sale can be nerve-wracking at the best of time. When it comes to medical regulatory hurdles, it is a true minefield. Knowing the red flags and how to ensure compliance is the job of a skilled medical transaction attorney. Consult with the dedicated healthcare transaction attorneys at Daniels, Porco & Lusardi, LLP for help with your case. Contact us today for a consultation.