Changes of Ownership in Healthcare Businesses

healthcare business change in ownershipBy: Jacqueline Bain

The amount of regulation imposed upon those entering into the healthcare business arena can be staggering even for a highly experienced businessman. In the business world, buying and selling businesses is often accompanied by lawyers, documents and consultants.  In the healthcare business world, buying into and selling healthcare businesses, or any portion of health care businesses, requires all of that support and much more.

Diving into a healthcare business requires many considerations that are unique to other areas of business. First, appropriate licensing bodies must be notified and/or approve any such purchase or sale. For instance, in the State of Florida:

  • the Department of Children and Families must be notified every time a new owner becomes a part of a licensed substance abuse treatment center and prior to taking ownership, must either submit to a level 2 background screen or provide proof of compliance with the level 2 background screening requirements.
  • the Agency for Health Care Administration must be notified sixty days prior to any change in ownership and will run a background check on new owners.
  • the Agency for Health Care Administration must be notified every time a new owner is added to an entity holding a Health Care Clinic License. Additionally, AHCA must approve any owner of more than 5% of the Health Care Clinic prior to such person becoming an owner.

In any purchase or sale of a healthcare business, it is important for all involved to make sure that the licensing and regulatory authorities are given proper notice prior to effectuating any change in ownership.  When a healthcare business does not report a change in ownership to the appropriate licensing body, regulators look upon that business as operating without a license. Perpetrators may be sanctioned and/or disciplined.

Second, relationships among the buyer, seller, and any of their businesses must be scrutinized in order to satisfy all parties that the buyer’s ownership is permissible under the law.  For instance, in the State of Florida: physicians cannot own in a separate MRI business and refer patients to that business; or dentists cannot own a separate clinical laboratory and also refer specimens for analysis to that laboratory. Additionally, State and Federal Kickback Laws proscribe that, if one health care entity sells to another health care entity, the sale must be scrutinized to determine whether the sale price might actually be considered a kickback under the Federal Anti-Kickback Statute in exchange for future business referrals.

The regulations are designed to incorporate the human component of healthcare – providing quality services to persons in need of them. Thus, the regulators believe delivering quality healthcare while building and maintaining a thriving business sometimes requires regulatory oversight. So, while deals may be struck, all parties to a transaction in a healthcare business should be aware that transacting business in the healthcare space routinely requires more than just transfers of interests and finances.

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