Buyer guide
Medical Practice Due Diligence: A Checklist for Buyers
Most post-closing surprises in medical practice deals come from billing, payer contracts and regulatory issues. Here is what to review before you sign.
Short answer
Due diligence on a medical practice covers the usual business checks plus healthcare-specific risks: billing and coding compliance, payer contracts that may need consent to transfer, Medicare enrollment changes, exclusion screening of providers and staff, licensure, HIPAA and fraud-and-abuse exposure. Medicare requires an ownership change to be reported within 30 days.
1. Financials
- Three years of tax returns, P&Ls and balance sheets, reconciled to each other.
- Collections trends, accounts receivable aging and claim denial rates.
- Payer mix and concentration: how much revenue depends on one payer or one referral source.
- Every adjustment used to calculate the earnings you are paying for. Nixon Peabody lists EBITDA normalization adjustments as a core diligence item.
- For larger deals, a quality of earnings review. On an SBA 7(a) loan for an initial acquisition, the lender must get one when the purchase price is $3 million or more.
2. Billing, coding and compliance
- A sample coding audit against documentation.
- Any payer audits, recoupments or overpayment refunds.
- Exclusion screening of every provider and staff member against the OIG exclusion list. OIG has advised checking monthly.
- HIPAA policies, risk assessment and any breaches.
- Arrangements with referral sources that could raise Stark or Anti-Kickback concerns.
Brown & Fortunato lists billing and coding, HIPAA, licensure, DEA registration, Medicare and Medicaid compliance, credentialing, payer recoupments and fraud-and-abuse exposure as the risk areas buyers and insurers probe.
3. Payer contracts and enrollment
- Whether each commercial contract can be assigned, needs consent, or lets the payer terminate on a change of control.
- Medicare and Medicaid enrollment: under 42 CFR 424.516, a change of ownership must be reported to Medicare within 30 days.
- Credentialing timelines for you and any new providers, and the cash-flow gap while it happens.
4. People
- Provider and staff contracts, pay, benefits and tenure.
- Non-competes and whether they are enforceable in your state.
- Who is likely to stay after the sale, especially other clinicians.
- The seller's transition role and how long they will stay.
5. Facility, equipment and records
- The lease: term, rent, renewal and whether it can transfer.
- Equipment age, ownership versus leases, and deferred maintenance.
- EHR system, data access and how patient records will transfer.
6. Legal and structure
- Asset or entity purchase: an entity purchase brings its history, including liabilities.
- Malpractice: claims history and who covers the seller's past claims (tail or prior-acts coverage).
- State rules: corporate practice of medicine, fee-splitting and any healthcare transaction notice requirements.
- Escrow or holdback: Brown & Fortunato, citing SRS Acquiom data, reports 88% of private-target deals included one.
Use a healthcare attorney and an accountant who know medical practices. Next: financing the purchase.
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Join the Buyer ListCommon questions
How long does due diligence on a medical practice take?
It depends on size and complexity. Allow enough time for coding review, payer contract consents and Medicare enrollment changes, which are often the slowest pieces.
Do payer contracts transfer when you buy a medical practice?
Not automatically. Many commercial contracts require consent to assignment or let the payer renegotiate on a change of control.
What healthcare-specific risks should a practice buyer check?
Billing and coding compliance, payer recoupments, exclusion screening, HIPAA, licensure, DEA registration, Medicare and Medicaid compliance, and Stark and Anti-Kickback exposure.
Related reading
Sources
Figures are attributed to their source and date. Ranges are published estimates, not a valuation of any practice.
- Nixon Peabody, "Preparing your medical practice for a private equity transaction," March 6, 2026. Link
- Brown & Fortunato, "Five Deal-Term Trends Healthcare M&A Participants Should Watch in 2026," August 21, 2026. Link
- 42 CFR 424.516(e), Medicare enrollment reporting requirements (Electronic Code of Federal Regulations). Link
- HHS Office of Inspector General, Special Advisory Bulletin on the effect of exclusion, May 8, 2013 (as summarized by Wiggin and Dana). Link
- U.S. Small Business Administration, SOP 50 10 8.1 (with Technical Policy Updates), "Lender and Development Company Loan Programs," Appendix 15: 7(a) Changes of Ownership, effective October 1, 2026. Link