Resources

Client Alerts, News Articles, Blog Posts, & Multimedia

Everything you need to know about BMD and the industry.

Healthcare Acquisitions and Divestitures During the COVID-19 Pandemic

Client Alert

It seems as though all aspects of our personal and professional lives have been impacted in one way or another by the COVID-19 public health emergency. Healthcare acquisitions and divestitures are no exception. Although the ramifications depend on the specific circumstances of each transaction, we are noticing certain common threads woven among recently closed and currently in progress transactions in the healthcare industry. Here are a few of the questions that often arise as we work with clients to navigate the current business landscape both during and after the COVID epidemic. 

  • Valuations. It’s no secret that numerous businesses are experiencing financial distress. Some of the country’s largest financial institutions are ramping up hiring in their bankruptcy and distressed credit divisions, indicating the players in the best position to know believe that rates of financial distress and delinquencies will continue to rise in the near term. How should the financial performance of the business during the pandemic (which may include recent business interruption, decline in revenue or increase in costs) be taken into consideration when determining the overall value of the business? How should buyers price in the risk created by COVID-induced uncertainty? Most commentators note that the COVID-19 pandemic has shifted deal dynamics in favor of buyers, creating a buyers’ market. How should buyers and sellers change their “deal playbook” and/or negotiation strategy in response to these market forces? 
  • Earnouts. It’s important to each transaction party that it ultimately receives the benefit of its bargain. What is the likelihood that the seller will receive the earnout in whole or in part? Are the earnout targets based upon pre-pandemic figures and economic assumptions? Should more of the purchase price be shifted to the earnout to mitigate risk for the buyer? Can the earnout measurement period be extended in an effort to mitigate the impact to the seller of a potential future short-term economic decline?  
  • Escrow. The parties may be aware of certain contingent liabilities attributable to pandemic-related contractual disputes, litigation or regulatory non-compliance. How much of the purchase price should be placed in escrow given potential COVID-19 related risks identified in diligence?  
  • Employment Law Considerations. It’s been a busy year for employment attorneys and businesses implementing related compliance requirements. Are there potential governmental enforcement actions or employee lawsuits on the horizon for the seller? Has the seller complied with recent employment law changes and cumbersome but crucial workplace health and safety requirements? Have members of the seller’s workforce tested positive for COVID-19? 
  • Litigation and Other Disputes. It is no secret that the public health emergency has resulted in substantial supply chain disruption and payment defaults. If applicable, what is the seller’s likelihood of success under force majeure, termination and other key contractual provisions.  Has the pandemic resulted in current or potential litigation with landlords, vendors, insurers, customers, lenders, employees or others?  
  • Compliance Requirements. The federal government has made it clear that certain recipients of SBA PPP loans and HHS Provider Relief Fund payments will be subject to governmental audit and scrutiny. Has the seller received SBA loans or grants or Provider Relief Funds?  If so, is the seller complying with the related attestation, documentation and forgiveness requirements? Does the seller have the proper Provider Relief Fund policies and procedures in place?  
  • Cybersecurity. Governmental authorities have identified increased cybersecurity risks to businesses during the pandemic. Does the seller have an active and robust data privacy and security program? Has the seller experienced any recent breaches and, if so, were they addressed appropriately?  
  • Purchased Assets and Assumed Contracts. What will happen if the pandemic results in a material adverse change in the seller’s business between the date when the purchase agreement is signed and the date of the closing? What if the business isn’t operating in the ordinary course in accordance with past practice and/or historical financial results?  Is the buyer required to proceed with the closing? Will there be an adjustment to the purchase price? Is the seller in compliance with all of its representations, warranties, covenants and other obligations in the primary transaction agreement(s)? Will the seller be liable for related damages?  
  • Representations and Warranties Insurance. Having comprehensive representation and warranty insurance in place can benefit both parties to the transaction. Will the insurer exclude representation and warranty claims related to the COVID-19 pandemic from the insurance coverage? It may be important for buyers to reach out to several insurers and compare the coverage available.

As the pace of deal activity within the health care space continues to increase, our firm’s attorneys are working daily with clients to further develop and adjust their strategies to respond to changes and uncertainty in today’s environment. Please let us know if we may assist you to brainstorm potential transaction structures and “best practices” to mitigate business and regulatory risk during this time, while maximizing transaction value. We’d be delighted to discuss with you further. For additional information, please contact Kate Hickner at kehickner@bmdllc.com or Kevin Saunders at rksaunders@bmdllc.com. 


Telehealth Flexibility Updates: HIPAA, DEA, and CMS

The Covid-19 Public Health Emergency (PHE) officially ended on May 11, 2023. But what does that mean for telehealth, a field that expanded exponentially during the PHE? Fortunately, many of the flexibilities will remain intact, at least temporarily. This client alert presents a brief overview of the timelines that providers need to follow, but for a more comprehensive review of telehealth flexibilities and when they will end

WEBINAR SERIES RECAP | Ending the Public Health Emergency + Post-Pandemic Check-Up

Some may take the position that the rest of the country already returned to a new “normal” following the COVID-19 pandemic.  But healthcare providers continue to implement COVID protocols and navigate the ever-changing healthcare regulations at both the federal and state levels.  It is important for healthcare providers to take time for a “Healthcare Check-Up” with the start of 2023 and the ending of the Public Health Emergency (“PHE”).

Sharp Rise in False Claims Act Cases - Navigating the FCA Waters

Recently, on April 18, 2023, the United States Supreme Court heard arguments regarding the FCA’s scienter, or mental state, requirement. To prove violation of the FCA, the statute requires that a defendant “knowingly” file false claims for payment. The term “knowingly” is defined within the statute to mean a person that acts with actual knowledge, deliberate ignorance, or reckless disregard. Circuit courts are split on how to interpret and apply the knowledge element of the FCA, and based on the Supreme Court’s decision, there will be a large impact on healthcare defendants and their businesses as well as anyone who contracts with, or receives money from, a federal program. A broader interpretation of the FCA would unnecessarily target and stifle healthcare, and other businesses, for simple errors in daily operations. This goes against the intended application of the FCA, which was to prevent fraudulent activity.

Areas of Opportunity in Columbus: Highlights from the Columbus Opportunity Summit

On April 27, 2023 Columbus Business First held its annual Columbus Opportunity Summit, bringing together business and economic development leaders to provide an update on how Central Ohio is preparing for expected growth in the coming years, an issue heightened by the arrival of Intel at its 1,000 acre site in Licking County, just outside of Columbus. The site will be home to two new chip factories with room to grow to a total of eight factories and is a $20 Billion investment.

BREAKING: Biden Administration Has Officially Ended the Two Remaining COVID Vaccine Mandates

As of May 1, 2023, the Biden Administration has officially ended the two remaining COVID vaccine mandates: (1) the Federal Contractor Mandate, and (2) the CMS Healthcare Provider Vaccine Mandate.