We live in a world where agency consolidation happens a whole lot. An agency that was present last year may be part of a large integrated system now. Or, some agencies decide to no longer do business due to regulation constraints. If you want to purchase an agency as opposed to starting from scratch, then here is why you need a due diligence first.
What Is A Due Diligence?
A due diligence is an independent person(s) who evaluate the agency from A-Z. If you attempt to complete it yourself, then you may miss crucial items in the evaluation process. Most administrators are skilled in several portions of the agency. It may be finance and clinical. Or, you may be great in operations, but have no clue in deciphering the clinical competency of the agency. Therefore, the objective look at an agency is so critical. Hiring someone to complete the due diligence will accomplish all you need to make an informed decision. It isn’t just about financials. You will have the operations including efficiencies, regulation compliance, finance, and personnel records evaluated. The reporting will compare the fiscal and clinical with that of state and national averages for performance.
It’s A Deeper Dive:
If you don’t complete a deep dive into accounting, then you don’t know how accurate the financials are. How is revenue recorded? Does that comply with Medicare on how it should be done for cost reporting? How far out is AR? Do write-offs come from an incompetence from within? What costs are going to overhead? Are they legitimate costs? How does administration track clinical productivity? How are referrals tracked? Who are the referral sources and how many are there? If the agency just shows you financials, then how will you know details? You also want to make sure you aren’t paying more for the agency than its fair market value.
What About Clinical Due Diligence?
You can’t just look at number of admissions and average payment per episode. You must dig deep here. If you aren’t sure, then a due diligence will complete that. The objective reviewer will look at clinical competence. Does documentation support the care plan and diagnoses billed? Are the number of skilled visits justified? What is the agency flow from referral to submission of RAP? If you don’t know, then operations can really be a problem. It may be that the agency thinks they are doing everything correctly, but the reviewer sees some big compliance problems.This could lead to financial loss for you after purchase if you don’t know it.
Let Us Help!
At Kenyon Homecare Consulting, we have senior consultants who work across the country completing due diligence evalutions prior to purchase. Call us at 206-721-5091 or contact us online to talk about what specific things can be determined from the investment in a due diligence. If you aren’t sure, then let us help walk you through the process!
This article, "Are You Looking To Buy A Home Care Agency? Complete A Due Diligence First! You May Find It Is A Great Idea Or A Really Bad One!" first appeared in Kenyon HomeCare Consulting blog.
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