Due diligence

Editorial approval scope: The team checked current source fidelity, scope boundaries, dates, arithmetic, reader usefulness, practical workflow, and general-information limitations.

Diligence tests evidence behind the deal story

The SBA growth guide places valuation, a sale agreement, ownership transfer, registrations, licenses, tax identities, and other operational steps within merger and acquisition planning. Its business-purchase guidance recommends an objective investigation and professional legal and accounting help, including review of contracts, leases, financial statements, tax returns, the sale agreement, and purchase-price adjustments.

For an ABA practice, a data-room file answers little until the team confirms its source, population, time period, completeness, and relationship to the proposed structure. A management statement, contract schedule, report export, primary record, payer response, and regulator record carry different evidentiary weight. Preserve both the claim and the evidence used to test it.

Set scope before opening the data room

Start with the proposed buyer, seller, legal entities, owners, sites, assets, liabilities, services, states, employees, contractors, records, payer arrangements, and intended closing date. Then assign qualified owners to distinct workstreams:

Each request needs a purpose, source owner, due date, review owner, applicable entity and period, status, exception, and decision effect. Use specialists within their authority. Operations can coordinate evidence; qualified clinicians interpret clinical evidence; counsel handles legal conclusions; the CPA handles accounting and tax analysis.

Lock the financial and revenue-cycle cohorts

Reconcile financial statements to bank, payroll, tax, billing, remittance, and general-ledger evidence. Define adjustments and trace each one to support. Separate cash collected from revenue recognized, charges from claims, authorization from coverage, payer acknowledgment from adjudication, and adjudicated payment from bank receipt.

For every metric, define the cohort-entry event, service dates, payer and product, entity, location, maturity window, numerator, denominator, exclusions, and cutoff. Keep holds, rejected claims, denials, refunds, recoupments, credit balances, and aged accounts visible. A sample result describes the sample selected; it cannot establish the condition of untested records.

Healthcare compliance needs its own investigation

The HHS OIG General Compliance Program Guidance is voluntary and nonbinding. It identifies federal fraud-and-abuse laws, seven compliance-program elements, risk assessment, auditing, corrective action, quality, ownership, and financial incentives as areas healthcare organizations should consider. Use it as a risk prompt rather than a transaction safe harbor or complete ABA checklist.

Test billing and coding controls, medical-necessity and documentation evidence, overpayment handling, referral and compensation arrangements, complaints, audits, investigations, corrective actions, and government-program participation. The OIG exclusion resource explains that OIG maintains the List of Excluded Individuals/Entities and describes the payment consequences of exclusion. Screen the relevant entities and people under current federal, state, and payer rules, verify possible matches, and preserve dated evidence.

Enrollment must be examined by program and route. The current CMS provider-enrollment guide shows that Medicare enrollment information is maintained through PECOS or applicable forms and identifies ownership changes as reportable within 30 days for the providers and suppliers in its scope. That federal example cannot establish an ABA target's state Medicaid, managed-care, or commercial-payer status.

Protect clients and health information during review

Create a care-continuity workstream for qualified staffing, supervision, communication and AAC access, essential health and safety information, open authorizations, appointments, records, client rights, complaints, and a safe transition if closing assumptions fail.

For HIPAA covered entities, 45 CFR 164.501 includes specified transaction-related due diligence within health care operations when the sale, transfer, merger, or consolidation involves another covered entity or an entity that will become one. That definition has conditions and covers neither every buyer nor every data disclosure. Privacy counsel should classify the parties, data, purpose, permitted route, access limits, safeguards, retention, and post-close custody under HIPAA and other applicable law before information is shared.

Findings should lead to explicit decisions

Maintain an exception register with the fact, evidence, affected cohort, materiality, owner, proposed response, deadline, and decision-maker. Possible responses include additional testing, price or working-capital changes, a closing condition, consent, escrow, indemnity, representation, remediation, transition service, hold, or withdrawal from the deal. Counsel must draft and assess contractual protections; a disclosure schedule never repairs an unlawful operation or guarantees recovery.

There is no universal diligence completion percentage. A single unresolved license, ownership, payer, data, safety, or cash issue may control the decision. Mark each critical gate separately from lower-risk follow-up work.

A fictional ABA diligence review

A fictional buyer defines 24 critical findings due for decision before signing a definitive agreement. By the review date, 18 are verified and clear, four are verified exceptions with approved deal responses, and two remain unresolved. Decision coverage is 22 of 24, or 91.7%. The unresolved payer-assignment question and unverified facility approval remain in the denominator.

The 91.7% result does not authorize signing or closing. Counsel places the payer and facility issues on hold, the CPA revises the cash forecast for a delayed operational start, and the clinical and operating leaders prepare continuity options for affected clients. The buyer reaches a decision only after the named decision-makers address both critical exceptions through verified evidence or an approved deal path.