Why is it important to work with the Watkins Firm when managing healthcare mergers and acquisitions?  It’s not something that one would perhaps not immediately perceive as a factor in mergers and acquisitions. However, in California and elsewhere there is a connection between the mandates of the Affordable Care Act (ACA)  and proper planning for mergers and acquisitions. A buying company, for example, must look at the healthcare coverages provided by the business being acquired, and evaluate the economic impact of absorbing or modifying an existing benefits program on the purchaser’s bottom line.

Companies with over 50 full-time employees are covered by the ACA and must meet its minimum standards. Thus, small companies will want to determine the economic impact, for example, of merging with another small company, which might then put the numbers above 50 and create a new entity that must comply with the ACA. This may require managing healthcare mergers and acquisitions to ensure the new strategy doesn’t change the ground the ground rules and make the merger or acquisition cost-prohibitive in some instances.

The decision, however, may also be influenced by other factors, such as the corporate value system that motivates the purchasing company. If a corporate culture prides itself on upgraded employee working conditions and benefits in order to find a special “partnership” with employees, then the acquiring or merging company may see the issue in a more can-do perspective. Additionally, the innovative power of the company may be exponentially increased by developing a business component consisting of employees who are creative, secure and loyal in going forward.

For larger corporations and Management Service Organizations or MSOs contemplating a merger or acquisition, the issues will be a little different. The buyer in an acquisition will want to know the other company’s history of healthcare options and benefits provided to employees. It will want to analyze whether the other company’s history and practices could be made compatible with the buyer’s model, and the economic impact of doing it.

There’s really no reason why the ACA mandates for employers should limit the continuing vibrancy of mergers and acquisitions in California. The leadership of affected companies may find increased profit potential in unexpected ways. For one thing, an invigorated employee base that sees itself as secure and protected from economic and emotional challenges associated with the pandemic can be freed emotionally to engage enthusiastically in the shared visions of the business. A vibrant corporate plan that puts into practice the idea of a mutually-supportive corporate dynamic is thought to be a modern model for success.

Pro-Tip: “A Professional Corporation in California is most often their only business vehicle. Healthcare providers can’t be limited liability companies. They can’t be these other types of entities. They can be general partners, which is severe liability, or they can be professional healthcare corporations, which shields them from personal liability. To some extent, although a licensed doctor, a licensed lawyer, the one who’s doing the work is always going to be personally liable. That’s why they have to spend so much money on a malpractice insurance, but it also is a vehicle where you can bring in other shareholders who qualify.

And there are a list of exceptions. Usually most of the owners of a professional corporation providing healthcare have to be licensed healthcare personnel, but there’s a list of exceptions to that law, but it is what doctors use to do business. They have these complicated shareholder agreements they can enter into managed service agreements are called MSOs.

A Management Services Organization can enter into agreements with other corporations or other service providers. They can buy their own ancillary service providers as long as they comply with all the requirements for that too. So a sole medical practice through their medical corporation can branch out into other forms of business if they know how to do it. And if they can find an experienced lawyer, they can write it up so that they’re in compliance with Medicare and also their licensed rules and regulations for the state they’re in.” – Dan Watkins, Founding Partner

Learn more about the medical and healthcare related legal services provided by the Watkins Firm including the creation of MSOs and reviewing healthcare mergers and acquisitions.  We invite you to review our podcast Episode 7 – Medical Practices and Healthcare Law as well as the strong recommendations of our clients and contact the Watkins Firm or call 858-535-1511 for a complimentary consultation today.