Due diligence is a critical phase of a lot of business transactions, especially when it comes to mergers and acquisitions. Of course, due diligence investigations are also of tremendous importance in the healthcare sector, as the associated transactions are quite often of enormous value. Although the due diligence process really should not vary too drastically from one sector to the next, certain industries do have specific ways of doing things. Here are some tips on how to do due diligence for healthcare:

Start Early

Given the complexity of the healthcare industry, it is always a good idea to embark on the due diligence process as early as feasible. Although many firms believe they must wait until there is a formal letter of intent or some kind of deal in the works, that is not actually the case. There is no reason that companies should wait for the formalities to kick in to begin researching the other party. Granted, it may not be appropriate to begin requesting sensitive information, such as corporate records and financial documents, but getting the conversation going on operational matters and the like is totally doable. In addition to allowing for more time for the overall process and likely avoiding any scrambling down the line, this may actually shed light on some serious issues in need of addressing before getting too far into the deal.

Follow a Checklist

We cannot stress enough the importance of using a due diligence checklist. The only way to keep track of all of the information that is being exchanged and to determine what might be missing is by relying on a detailed checklist. Ideally, the one used for a healthcare transaction will specifically delineate every piece of data that should be reviewed. However, in the event that there is not a healthcare-oriented one available or that seems applicable to the transaction at hand, it certainly doesn't hurt to use a more general due diligence guideline. Ultimately, there has to be a running list of the documentation that will need to be reviewed.

Understand the Regulations

As plenty of people know, the healthcare industry is very, very heavily regulated. When it comes to healthcare, there are more applicable laws than we could possibly mention here, but HIPAA is obviously one of the more well known beasts. Whether your transaction relates to life sciences, biotechnology, pharmaceuticals, hospital administration, or anything else, it is absolutely imperative to ensure that a seasoned expert participates in the due diligence process. There will no doubt be pages and pages of pertinent statutes in need of perusing to ensure that the targeted entity is operating legally and in compliance with all relevant healthcare rules and regulations. The consequences of overlooking these laws could be absolutely devastating to all parties involved.

Recognize the Risks

Of course, with so many applicable rules and regulations, there are also a lot of risks associated with transactions in the healthcare sphere. There will likely be privacy issues, confidentiality matters, and intellectual property protections at play, among other potential issues. Regardless of which side of the transaction you are on, there are a lot of inherent risks with which to contend. This may seem so daunting that a deal is not even worth pursuing, but it really comes down to a due diligence process that incorporates proper preparation, meticulous research, intense document scrutiny, and asking as many questions as necessary to fully understand what may be at stake.

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