Healthcare M&A: Major Due Diligence Issues That Buyers Should Not Ignore

Monday, July 20th, 2026

Healthcare M&A transactions involve far more than reviewing financial statements and negotiating purchase agreements. Unlike acquisitions in many other industries, healthcare transactions present unique regulatory, operational, and liability risks that demand careful scrutiny before closing. Thorough due diligence helps buyers identify potential liabilities before closing, negotiate appropriate protections in the purchase agreement, and determine whether the purchase price accurately reflects the risks associated with the target business. When due diligence is rushed or incomplete, deals stall, valuations drop, or transactions collapse entirely. The following are four major diligence areas that frequently have the greatest impact on healthcare M&A transactions.

1. Regulatory and Licensing Gaps: Regulatory compliance is often the most significant area of diligence in a healthcare transaction because deficiencies can expose a buyer to substantial post-closing liability. Buyers should evaluate whether the target has complied with applicable federal and state healthcare laws, including licensing requirements, Medicare and Medicaid enrollment rules, and other regulatory obligations. They should also determine whether key licenses, permits, certifications, and accreditations will survive the transaction or require new approvals after closing. Identified compliance issues frequently affect valuation and may lead buyers to negotiate purchase price adjustments, special indemnities, or closing conditions requiring corrective action before the transaction is completed.

2. Reimbursement and Billing Compliance: Government and payor relationships are among the most valuable assets in a healthcare deal, and it is no surprise that they are among the most scrutinized during due diligence. Diligence in this area typically focuses on billing and coding practices, payor contracts, Medicare and Medicaid reimbursement rates, denial trends, overpayment risks, and prior payor audits. If revenue depends on aggressive coding practices or reimbursement methodologies that may not withstand regulatory scrutiny, buyers may discount projected earnings or require additional protections in the purchase agreement. Unresolved billing compliance issues can also expose buyers to post-closing recoupment demands from government payors, making this one of the areas where pre-closing diligence has the most direct impact on deal economics.

3. Fraud and Abuse Exposure: Healthcare fraud and abuse laws, including the Stark Law, the Anti-Kickback Statute, and the False Claims Act, present unique risks that can significantly impact a transaction. Seller’s existing arrangements that haven’t been reviewed for compliance can become inherited liability that may expose buyer to government investigations, repayment obligations, civil penalties, and costly litigation after the acquisition has closed. Buyers should closely examine physician compensation arrangements, referral relationships, management agreements, and other financial arrangements to assess whether they comply with applicable law. Where appropriate, buyers negotiate enhanced representations and warranties and specific indemnification provisions to allocate these risks.

4. Government Investigations and Litigation: Healthcare businesses frequently interact with governmental agencies and third-party payors and the nature of those interactions can create litigation or investigation risk. Buyers need to determine whether the target has been the subject of audits, investigations, civil investigative demands, licensing actions, whistleblower claims, or other regulatory enforcement proceedings, as well as evaluate any significant commercial litigation. Even matters that have not resulted in formal enforcement may signal underlying compliance concerns or future financial exposure. Thorough representations and warranties, carefully negotiated indemnification obligations, and robust disclosure schedules are essential tools for managing this risk and protecting buyers after the deal closes.

Healthcare M&A due diligence is not simply a financial exercise, but a comprehensive assessment of whether the business being acquired can deliver the value the buyer expects, and on what terms. Identifying issues early allows buyers to make informed investment decisions while giving sellers the opportunity to resolve concerns before they become obstacles to closing. Experienced healthcare counsel can help both parties navigate these issues efficiently and position the transaction for a successful closing.

To learn more, connect with John Hinders, JD for legal guidance on business transactions and corporate governance matters. A shareholder in the corporate and transactions group at Brown & Fortunato, John represents clients in the purchase and sale of pharmacies, DME suppliers, and home health agencies, as well as non-healthcare businesses. Reach out at (806) 345-6305 or jhinders@bf-law.com to learn how he can help support your business.

This article is for informational purposes only and does not constitute legal advice or establish an attorney-client relationship. This article was prepared on a specific date, and the law may have changed since it was written. You should contact your attorney to obtain advice with respect to your specific legal issue and needs.