Bass, Berry & Sims attorney David Cox was interviewed for an article in Hospice News about factors that could potentially derail a hospice M&A deal. While deal volume in the hospice, home care and home health are down somewhat in Q1 of 2023 compared to earlier years, industry insiders expect an increase in the latter part of the year. With this expected uptick, David talked about two key compliance issues that could halt a transaction:
- Discrepancies and high error rates in billing and coding audits that could jeopardize hospice eligibility.
“It essentially comes down to error rate and whether or not the billing and coding audit shows that the seller is documenting and substantiating and verifying all of the necessary elements for payment for hospice services from Medicare,” David told Hospice News. “That can be as specific as the appropriate signatures from physicians to very specific disclosures that have to be made to patients.”
David added, “It starts with having appropriate documentation to show that eligibility has been assessed and met, and then, to some extent, that eligibility has to be assessed on an ongoing basis. So all the things that go under a bucket of assessing billing, and coding for payment — underlying all of that is really documenting patient eligibility.”
- The hospice payment cap limiting the amount of reimbursement a hospice can collect from Medicare for a single patient in a single fiscal year.
“If you take a transaction that closes mid-year, the seller is responsible for the operations up until closing, but the buyer is responsible after closing, and then a full-year period is assessed,” David explained. “So things that the buyer does after closing can actually have an impact on the entire year of hospice cap liability.”
“You’ve got a buyer trying to assess where you’re at in the year and what hospice cap liability trend looks like. And a seller — even if they recognize that they potentially should be responsible for the hospice cap — may have concerns that the liability could ultimately be larger, depending on things that happen outside of its control, post-closing,” David added. “So trying to assess what that liability is and who could be who should be responsible for it all gets thrown into the discussion. And to the extent that you can’t get a meeting of the mind on that, or if a buyer determines that the potential exposure is too large, or too unknown, that can impact a transaction.”
The full article, “2 Ways Hospice Compliance Issues Can Sink an M&A Deal,” was published on July 14 by Hospice News and is available online.