As behavioral health organizations remain attractive to investors, it can also be a high-risk proposition. A thorough due diligence will determine the success or failure of an acquisition. As with any investment, financial stability, current revenue/EBIDTA, and growth opportunities are the top priorities. The next box that will be checked before a purchase is Compliance. The historical compliance efforts and current practices can impact performance, ongoing growth struggles, morale, and ultimately a significant financial hit to a recently acquired organization.
The goal during the Compliance due diligence is to identify strengths and risks associated with the organization. The global areas reviewed are licensing, accreditation, state and federal registrations, payer partnerships, revenue cycle management practices, pending litigation, human resource practices, clinical programming, and a culture of Compliance.
Documentation, leadership interviews, and organizational performance metric reviews will provide a good picture of how Compliance has played a role in the organization and areas that may be of concern.
The Compliance Box Items May Include:
Leadership and Organizational comprehensive KPI review
Reporting practices and performance overview
Policy and Procedures
Marketing Practices, patient acquisition, and vendor partnerships
HR Practices and Pending Litigation/EEOC
Staff Satisfaction Surveys
Litigation, worker's compensation, and EEOC matters
Open Regulatory Investigations
Licensing and Accreditation Status and Notification Requirements
Current accreditation and License Status
Ongoing corrective actions
Pending Survey Dates
Revenue Cycle Management Practices
Payer contractual partnerships and notification requirements
Coding and auditing policies
Recognition of revenue and A/R
Open Payer Audits or take-backs
Clinical and Program Oversight
Level of Care Appropriateness
Documentation met as required
Policy and Procedure Adherence
Organizations that are responsible for providing compliance due diligence should have experience in facility management, management service organization experience, clinical background, and regulatory expertise.
Alan Goodstat, LCSW has over 30 years of experience working in various leadership roles in privately held organizations and private equity portfolio companies. Alan has a proven track record of providing compliance and corporate growth management services to small and mid-size organizations, start-ups, and pre-exit organizations. He currently serves as the Founder and Senior Advisor for Behavioral Healthcare Advisors and sits on the Advisory Board of Simplifyance, Board of Pneuma Behavioral Health in Charlotte, NC, and Lantana Recovery in Charleston, SC.