Healthcare Business Purchase
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5 Legal Mistakes to Avoid When Buying a Medical Practice

Buying a medical practice is an exciting career step. But, it has big legal risks. A single oversight can lead to compliance violations, financial losses, or operational setbacks. Avoiding these Five Legal Mistakes when buying a medical practice will make sure you don’t encounter any of these setbacks.

1. Skipping Comprehensive Legal Due Diligence

A key step when buying a medical practice is to do thorough legal due diligence. While financial reviews are essential, they only tell part of the story. You also need to examine the practice’s legal health.

  • Are there unresolved lawsuits that could become your problem?
  • Do employment contracts comply with state and federal regulations?
  • Are vendor agreements transferable?

Not spotting these issues can hide liabilities, like fines or lawsuits. Partnering with a healthcare attorney ensures compliance before you finalize the deal. They will review contracts, certifications, and licenses.

2. Overpaying for the Practice

Overpaying for a medical practice isn’t just a bad financial decision—it’s also a legal risk. Buyers often overlook key legal details. This can inflate valuations. Issues include incomplete billing records and inaccurate profit statements.

For example, unresolved billing issues could lead to audits or fines. They could hurt the practice’s profits. An experienced attorney can help you. They can assess the seller’s valuation. They can identify any liabilities that could hurt your ROI.

3. Neglecting Transition Agreements

Transition agreements play a crucial role in ensuring continuity after the purchase. Without clear legal terms, you could face challenges retaining patients and staff.

  • Is the seller required to assist with patient introductions for a set period?
  • Are existing staff members bound by enforceable non-compete or confidentiality agreements?

A bad agreement could expose you to disruptions or patient loss. Work with a lawyer to negotiate a transition agreement. It must bind the seller to support a smooth handover.

4. Ignoring Compliance Risks

Healthcare practices must navigate a maze of rules, like HIPAA, Stark Law, and anti-kickback laws. Buyers often overlook if the practice complies with these rules. This leaves them vulnerable to penalties.

For example, improper billing or coding could lead to federal investigations, fines, or audits after the purchase. This could not only damage your reputation but also disrupt operations. A pre-purchase legal audit can find these risks. It can help renegotiate the deal’s terms.

Read more about Compliance Laws here and how you can plan ahead

5. Failing to Evaluate the Local Market

Legal risks are often tied to local market conditions. For example, could non-compete agreements limit your ability to attract new patients? Are referral sources legally secured, or could they disappear after the purchase?

Avoiding these 5 Legal Mistakes when buying a medical practice will ensure that your purchase will have a long and lasting success. Understanding these market-related legal factors ensures you can operate freely and competitively post-purchase. Navigating the legal complexities of purchasing a medical practice requires expert guidance. At Dike Law Group, we specialize in healthcare acquisitions, providing comprehensive legal support to ensure a smooth and compliant transition. Schedule a meeting or Book a Free 15-minute Intake Discussion with us today!

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