Bass, Berry & Sims attorney Kris Kemp was quoted in a Risk & Insurance article discussing how representations and warranties (R&W) insurance can protect buyers from liabilities following the purchase of a healthcare company.

Due to the healthcare industry’s highly regulated nature, the purchase of any party participating in the healthcare delivery system (whether as a facility or a service provider) comes with some risk as newly acquired companies may face licensure issues, enforcement actions, or healthcare fraud claims. R&W insurance helps participants in the healthcare marketplace appeal to buyers because it protects buyer from future liability stemming from previous problems. “Health care exposures are a combination of statutory penalties and prosecutorial discretion,” Kris explained. To avoid this significant liability in today’s hyperactive health care M&A market, private equity firms and other buyers are placing greater value on including R&W insurance into a their deals.

Still, R&W insurance is designed to supplement rather than replace due diligence during acquisitions, and insurance underwriters expect buyers to do their homework. Medicare and Medicaid billing and HIPAA violations are the most worrisome risks for insurance carriers. “And those risks represent a large portion of the issues a buyer will be concerned about,” added Kris.

The full article, “Due Diligence and Health Care R&W Coverage” was published by Risk & Insurance on September 28, 2018, and is available online.