Due Diligence & Transaction Support

If you are contemplating a merger or affiliation, your organization will require a comprehensive, thorough understanding of the other party(ies). Due diligence is best performed by those who are expert in healthcare strategic, financial, regulatory, and operational analyses, and who have day-to-day knowledge and experience with what is happening in healthcare now.

sec-op can support your organization through all aspects of due diligence. We have extensive experience in completion of robust due diligence reviews of many types of healthcare organizations, from both a “buy side” and “sell side” position.

This experience is bolstered by deep, cross-functional expertise in healthcare strategy and finance; we have performed meticulous financial analyses in support of thousands of valuation, feasibility, and business planning engagements and have facilitated challenging, transformational planning efforts.

We draw on all of our knowledge and skill to ensure that our clients’ due diligence needs are fully met, that we provide actionable guidance, and that the work is completed with the degree of meticulousness and rigor that our clients have depended on us to provide for more than 20 years.

sec-op’s due diligence reviews are structured to achieve several important objectives:

  • Identify “deal breakers” and “red flags” that may warrant reconsideration of the transaction or adjustment to structure, terms, or commitments before the Definitive Agreement is executed
  • Understand and evaluate threats to “deal value” and their potential impact on the feasibility of the transaction
  • Lay the groundwork for a successful future, by engaging both parties in the due diligence review and identification of potential integration and post-transaction planning priorities.

Hospital Due Diligence

When the due diligence process uncovers “surprises” that have the potential to impact transaction proceedings, we have the communication skills to surface these issues effectively and the practical knowledge to address them without derailing the transaction.

Key aspects of the due diligence assessment include:

  • Organization, leadership, and management, including organizational background, leadership, governance and management structure and efficacy, past and current joint ventures and other partnerships and arrangements, and track record in prior partnerships, including the extent to which the organization kept to capital and other commitments and the degree to which they were able to achieve intended benefits
  • Financial performance and position, including financial statement and budget analysis; ratio and benchmarking analyses; quality of earnings review; assessment of debt and debt-like obligations; and evaluation of capital requirements and funding sources, among other considerations
  • Reimbursement, including matters such as Medicare and Medicaid status, contracting functions, third-party reimbursement changes, revenue cycle matters and performance, and participation and performance in value-based contracts
  • Tax matters, including state and federal tax status across all corporate entities, review of IRS filings and 501(r) compliance, and potential issues related to current or future tax exemption
  • Operations, quality, and patient safety,including a broad understanding of operational performance, strengths, and challenges, as well as analysis of volume and utilization trends, efficiency, service line performance, quality and patient safety performance, and patient satisfaction
  • Medical staff relations and physician alignment,including medical staff structure and governance, evaluation of the medical staff composition, existing physician alignment strategies, and medical staff development plans and initiatives
  • Employed physician performance, including productivity, financial performance, quality indicators, billing and collections, compensation, and non-physician staffing
  • Corporate and regulatory matters,including structure and efficacy of corporate compliance program and associated functions, previous and ongoing compliance-related issues and investigations, and key corporate and regulatory compliance risk areas
  • Human resources, including employee compensation and benefits structure, employee recruitment and retention, compliance with state and federal labor/employment regulations, and a general consideration of risks related to employee relations
  • Facilities, property and equipment, including understanding of owned and leased property and equipment, their condition, major infrastructure issues, capital plans and funding sources, and adequacy of any capital commitments in the transaction. sec-op’s strategic facilities partner can provide additional depth if required
  • Information technology, including, among others factors, IT infrastructure and systems across departments, disaster recovery and security measures, compatibility of systems with those of partner organization, and capital needs, including implications for capital commitments

In addition to due diligence, sec-op commonly supports other elements of transaction and partnership evaluation and execution, including:

  • Support of regulatory filings and notifications and other pre-close work streams
  • Black box analyses, involving comparison of reimbursement and/or cost rate information, conducted, summarized, and shared under the guidance of legal counsel, to allow for a more informed assessment of financial impact
  • Prospective financial estimates for the target entity and preparation of detailed financial projections incorporating impact of changes in ownership, physician compensation levels, value-based payment programs, re-pricing analyses and what-if scenarios
  • Valuation of business entities/ ownership interests and service arrangements
  • Post-close balance sheet and purchase price allocation to support post-close financial reporting

Whatever the due diligence or transaction support services needed, sec-op will assess the transaction and organization through all lenses, considering the financial, strategic, and environmental situation of both organizations