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  4.  → Looking at a merger and acquisition deal in healthcare? This mistake could cost millions.

Looking at a merger and acquisition deal in healthcare? This mistake could cost millions.

Merger and acquisition deals are big in the healthcare industry. Whether looking to combine forces to provide higher quality care or outsource more administrative tasks, these deals can be advantageous to everyone involved.

Unfortunately, a single misstep can mean an otherwise lucrative deal costs the acquiring group millions.

How can the acquiring group end up owing millions?

In a recent example out of Texas, a dermatology surgical center and pathology lab deal resulted in allegations of violations of the Stark law and Anti-Kickback Statute.

A prominent dermatology group, U.S. Dermatology Partners, acquired several other derm groups throughout Texas from 2013 through 2015. The group states it became aware of a deal between a senior manager promising a higher purchase prices of a derm group if the group agreed to use an affiliate entity for future medical services. The derm group agreed, used the services, and billed Medicare. When presented with the evidence, the government argued that the move was a clear violation of both laws because use of the affiliate group was likely motivated by financial gain instead of the patient’s best interests.

It is important to point out that this case was the result of self-disclosure. The dermatology group reported the conduct to the federal government. The move likely resulted in more favorable terms during negotiations. Ultimately, the group chose to pay almost $9 million to settle the matter.

What can other groups looking to invest in the healthcare industry learn from this case?

The case is not an uncommon one. Groups need to conduct proper due diligence including careful review of agreements when putting together and merger and acquisition deals to ensure that there are no potential violations of federal regulations like the Stark Law or Anti-Kickback Statute. As this case demonstrates, an error can be costly.

Attorney John Rivas is responsible for this communication.