The durable medical equipment and supply distribution industry has seen renewed interest from both financial and strategic investors. Several regulatory and business forces are driving increased consolidation in the sector. Although the industry has attractive dynamics, a deep due diligence review is recommended for any investor to avoid post-closing cash flow interruption and hidden liabilities.
McGuireWoods attorneys recently authored this article which was published in the BNA Medical Devices Law and Industry Report. The article reviews the following 10 key issues that should be the focus of any due diligence review an investment in a durable medical equipment and supply distributor:
- Compliance with Medicare DMEPOS Supplier Standards.
- Billing and Coding Documentation
- Exposure to False Claims Act Litigation
- Positioning within the Competitive Bidding Process
- Relationships with Commercial Payers
- Referral Source Relationship Compliance
- Compliance with Privacy and Security Laws
- State Licenses and Permits and Ability to Undergo Change of Control Transactions
- State Medicaid Program Limitations
- Potential for Increased FDA Regulation
Of course, every investment is unique and the variations in types of DMEPOS distributors varies widely. Distributors may focus on certain segments (ie, powered wheelchairs) that present higher exposures on certain issues. We hope that you find the article helpful as a starting point to your efforts in reviewing potential investments in this sector.