For healthcare providers and practice owners, buying or selling a medical practice presents both opportunity and complexity. These transactions involve intricate legal and regulatory considerations, requiring careful planning to avoid financial losses, penalties, or reputational damage. Key legal concerns include the False Claims Act (FCA), Anti-Kickback Statute (AKS), Stark Law, HIPAA, and employment agreements. Unlike standard business sales, medical practice transactions must comply with extensive healthcare regulations. Proper legal due diligence ensures both parties mitigate post-transaction liabilities and compliance violations.

The False Claims Act (FCA) penalizes fraudulent claims submitted to government healthcare programs, with severe consequences such as treble damages and fines. Buyers should conduct billing audits to identify improper Medicare/Medicaid claims and assess the seller’s compliance program strength. Sellers should ensure clean billing records and disclose any prior FCA settlements. Stark Law prohibits physician self-referrals for Medicare/Medicaid patients, while the AKS criminalizes referral-based compensation. To ensure compliance, both parties should obtain an independent fair market valuation, review all compensation structures, and utilize established safe harbors to reduce legal exposure.

HIPAA mandates strict protections for patient information, and improper handling during a sale can result in significant violations. Best practices include securely transferring patient data with proper Business Associate Agreements (BAAs), notifying patients of provider changes, and ensuring Electronic Health Records (EHR) systems are compliant. Physician employment contracts often contain restrictive covenants that impact post-sale operations. Buyers should retain key personnel for continuity of care and revenue stability while reviewing non-compete clauses to ensure enforceability. Sellers should negotiate fair exit terms and verify non-compete agreement compliance with state laws.

Accurate valuation is essential when determining fair market price, using methods such as cash flow analysis, benchmarking, EBITDA multiples, and asset-based valuation. Before closing, both parties must resolve outstanding legal or regulatory issues such as unresolved lawsuits, government audits, or vendor disputes.

To ensure a smooth and compliant transaction, both parties should conduct thorough due diligence, with buyers reviewing billing, contracts, and financials, and sellers organizing records and resolving compliance gaps. Engaging experienced healthcare legal counsel is crucial to ensure regulatory compliance and sound agreements. Additionally, parties should plan regulatory transitions, maintain transparency by disclosing past legal or compliance issues upfront, and implement enhanced compliance programs post-sale to minimize risks.

In conclusion, buying or selling a medical practice demands careful attention to legal and regulatory details. Prioritizing FCA compliance, addressing Stark Law and AKS concerns, ensuring HIPAA adherence, and reviewing employment agreements are essential. Engaging expert legal counsel and conducting thorough due diligence will safeguard both parties, ensuring a successful transition in today’s evolving healthcare landscape.