With nearly one out of every five dollars spent on health care and essentially inelastic demand, there are plenty of business reasons to get into the health care space. The industry, however, is littered with unique dynamics and regulations which, to the uninitiated, may seem alien or just plain crazy. Our health care regulatory and transactions team will go over the areas that set health care transactions apart and what new and veteran players in the business should be on the lookout for when working in this space.

1. Business Law Training | The Art of the
[Health Care] Deal: Just like any other
deal… NOT!
Christopher Dang
christopher.dang@quarles.com
602-230-5530
Nicholas Meza
nicholas.meza@quarles.com
602-229-5439

2. Why Health Care?
• Nearly 1 out of every 5 dollars is spent on health care
• Inelastic demand (to a point)
• Steady growth predicated on broad and diverse needs
• Resilient in downturns
• Strong financials seen in core institutions/business lines
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3. Challenges
• Traditional hard science innovation rooted in R&D = $$$$
• Insurance reimbursement = cost control
• Limit on price/demand when cash is involved
• Regulatory landscape has elements resistant/slow to change and
others that are dynamic
• "Uber of Healthcare" innovation meets very old structures
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4. Who, What, Where, When and
Why?
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5. Who?
Who are the players?
• Buyer
• experienced & inexperienced
• Seller
• experienced and, scary
enough . . . Inexperienced
• Private Equity
• experienced and, you
guessed it, inexperienced
• Lender
• experienced and, of course,
inexperienced
• Insurers
• take a guess
• Education/Research Institutions
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6. What?
What is being bought/sold?
• Health Care Provider or Supplier: Hospital, pharmacy, practice,
clinic, lab, LTC, SNF, ASC, DMEPOS
• Vendor: Drug or device manufacturer, wholesaler, records
service, billing agency, staffing agency
• Other: Insurers, PBMs, technology/patents, provider network
• Entire business, line of business, asset, files
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7. What?
What type of deal is it?
• Stock
• Asset
• Merger
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8. Where?
Where is the business located?
• Physical location
• Nonresident or other foreign jurisdictions where it does business
• Federal business
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9. When?
Deal Timeline
• LOI/NDA/Exclusivity
• Sign
• Pre-close tasks/Notices
• Close
• Transition/Integration
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10. Why?
Why is this deal important to the client?
• Expansion/Consolidation
• New Line of Business/Divesting
• Market/Asset
• People/Clientele
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11. Deal Mechanics
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12. Deal Mechanics
• Confidentiality
• Diligence
• Agreements
• Change of Ownership/Transition
• Integration
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13. Deal Mechanics: Confidentiality
• Public/Private
• Deal Names
• LOI, Exclusivity, NDA
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14. Deal Mechanics: Diligence
• Diligence Request Lists and Updates
• Importance of a SME
• Data Room (VDR)
• The right features can save both sides $$$
• Type and Scope depend on the Who/What
• Division of labor, management, and communication is key
• Diligence Report
• Ultimate audience/use
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15. Deal Mechanics: Diligence
• Diligence Phase:
• Business Review
• Financial Review
• Contract Review
• Regulatory Review
• Licensure Review
• Lessons Learned
• Find the ghosts, manage them or walk away
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16. Deal Mechanics: Diligence
• Business Review
• Lay of the land
• People
• Sense of the business history, operations, and potential
• Financial Review
• Fiscal health/sustainability
• Compliance
• Valuation
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17. Deal Mechanics: Diligence
• Contract Review
• Where the money is coming from and going to
• Clients, vendors, people, tangibles, IP, real estate
• Complaint?
• Contractual, Stark/AKS, conditions of participation,
obligations to third parties?
• Sustainable?
• Outs?
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18. Deal Mechanics: Diligence
• Regulatory Review
• Know the regulatory topography
• Practice/Operations
• Business Development/Marketing
• Third party obligations (governmental and private)
• Compliant with incumbent regulations?
• SME Consultants and Auditors
• IP, FDA, DEA, FWA, Certification/Accreditation, etc.
• SME Area Legal Counsel
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19. Deal Mechanics: Diligence
• Licensure Review
• Your license and registration please
• Federal: DEA, FDA
• State: Facility, professional, business/tax
• Local: Occupancy, zoning, business/tax
• Other: Environmental, CON, Accreditation, Certification,
Liquor, Lottery
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20. Deal Mechanics: Diligence
• Lessons Learned
• People problems...
• Fuzzy math...
• You did what?!?
• Breaches
• Stark, AKS, and FWA
• Practice compliance
• Medicare/Medicaid gaps
• You know there's a license for that...
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21. Deal Mechanics: CHOW TIME
• Change of Ownership (CHOW) analysis starts ASAP
• Closing Conditions and CHOW (chicken and the egg)
• Impact on timeline
• Impact on continuity of operations
• Coordination may need to be addressed in purchase agreement
• Communication is Key
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22. Deal Mechanics: Agreements
• The Agreement
• Scope and carve outs
• Everyone's favorite topic: $$$$
• Lookback and Survival
• Reps and Warranties
• Indemnity
• Caps/Baskets
• Closing Conditions
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23. Deal Mechanics: Closing Time
• Making and list, checking it twice
• Insurance and financing
• Licenses
• Contracts/Medicare/Medicaid
• Continuity of operations
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24. Deal Mechanics: Post-Close
• Deal Binder
• Clean up tasks:
• People
• Policy and procedures
• Licensure and Certification
• Contracts
• Medicare/Medicaid
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25. Deal Mechanics: Integration
• All tied together:
• Diligence
• CHOW
• Purchase Agreement
• The Close
• Post-Close Transition
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26. Questions?
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© 2019 Quarles & Brady LLP - This document provides information of a general nature. None of the information contained
herein is intended as legal advice or opinion relative to specific matters, facts, situations or issues. Additional facts and
information or future developments may affect the subjects addressed in this document. You should consult with a lawyer about
your particular circumstances before acting on any of this information because it may not be applicable to you or your situation.
Christopher Dang
christopher.dang@quarles.com
602-230-5530
Nicholas Meza
nicholas.meza@quarles.com
602-229-5439