The healthcare field uses technology for many parts of patient care, billing, rules, and day-to-day work. Electronic health records (EHRs), patient management systems, telehealth platforms, cybersecurity measures, and billing software are all important types of technology. When two healthcare groups join or one buys another, not understanding the technology can lead to extra costs, delays, breaking rules, and missing the benefits of the deal.
John C. Stiffler, Senior Managing Director at FTI Consulting, says that checking health technology well is very important to avoid risks and surprises in these deals. He adds that only a few buyers do this thoroughly, even though investment in health technology has grown fast. From 2016 to 2021, global investments in this area rose from $19 billion to $75 billion. This shows technology is more important in healthcare business deals.
Good health tech due diligence helps buyers see IT risks, guess how much fixes will cost, and know what investments are needed to grow and work well with the new setup. It helps decide if the technology fits the goals of the buy. For medical managers and IT staff, knowing the state of IT before buying lets them plan budgets and transitions better.
Health tech due diligence is a careful review of many parts of the target’s technology setup. Some key areas to watch are:
It is important to understand how current IT systems are built. This means looking at hardware, network setup, software, cloud computing use, and how different systems work together. Reviewers should find any old systems that are costly to keep or hard to connect with new technology.
For example, many healthcare groups still use old EHR systems that may not work with cloud services or have modern security. Check if the system can meet current and future needs, like handling more patients or advanced data analysis.
Healthcare data includes sensitive patient details protected by laws like HIPAA. Due diligence must look at data privacy, cybersecurity, past breaches, and rules for protecting health information.
Medical groups and buyers must confirm that rules like HIPAA, Stark Law, and Anti-Kickback Statute are followed. Breaking these can lead to fines, legal trouble, and losing government program participation.
Checking financial controls around IT finds hidden costs. This means reviewing software licenses, vendor contracts, ongoing support fees, and costs like hardware upgrades or cloud moves.
After merging, groups may face one-time investments like setting up new resource planning systems or ongoing costs like software fees and tech support staff that affect budgets.
M&A often changes workflows, system setups, and staff roles. Due diligence should point out possible work interruptions, lack of resources, and timing for IT changes. Good teamwork between IT and business leaders is needed to reduce downtime and resistance.
Buyers should also check if there is enough support for training, communication, and adoption of new systems and rules.
Healthcare groups often have many software systems doing similar jobs. A careful check finds duplicate applications that can be combined to save money and simplify IT.
Also, check data storage and record keeping to make sure information is easy to find, safe, and follows rules on how long to keep records.
Before finishing a deal, buyers need to understand the operational, financial, and technical risks of their investment. This includes hidden costs, system ability to grow, and if temporary help is needed to keep things working. Temporary Transition Service Agreements (TSAs) can fill gaps between systems or teams until integration is done, but should be managed carefully to avoid long-term extra costs.
After closing, efforts focus on fixing inefficiencies and duplicate systems found during due diligence. This can mean moving to cloud systems to be more flexible and reduce upkeep, consolidating data centers, and aligning IT with long-term plans.
Besides IT setup, following regulations and checking environmental risks are also important during healthcare deals. Lawyers and compliance staff often work with IT and admin teams to review records about HIPAA violations, fraud, and contract rules.
Environmental checks look at risks like healthcare building conditions, safe handling of hazardous waste, asbestos, and impact on public safety. Ignoring these can lead to costly fixes and fines after the deal.
Healthcare lawyer David Holt from Holt Law, LLC, warns that not doing this well can cause big money losses and harm a group’s reputation. This is very serious in highly regulated areas like medical practices and licensed health centers.
Artificial intelligence (AI) and workflow automation are changing healthcare work and M&A processes. Smart tools help with data analysis, risk checks, and managing IT after the merger. These tools reduce manual work for IT and admin teams.
AI platforms can quickly check lots of data, such as EHR records, contracts, security logs, and compliance papers. They find problems, spot cybersecurity gaps, and flag risks that people might miss. AI speeds up due diligence and makes it more accurate.
Automation helps with routine tasks like setting up user accounts, managing software licenses, and reporting problems. During integration, automation makes onboarding new staff faster, system changes smoother, and improves communication between IT and clinical areas.
For example, Simbo AI works on front-office phone automation and answering services using AI. Using such tools can make patient communication better and reduce admin work during integration, helping healthcare groups keep services running well through changes.
Healthcare M&A teams in the US—such as medical practice managers, owners, and IT staff—should keep these tips in mind when getting ready for health tech due diligence:
As healthcare changes quickly in the US, the success of mergers and acquisitions greatly depends on careful technology review and management. Doing good due diligence makes sure investments meet goals, lower risks, and support steady operations and patient care. Adding AI and automation helps by making workflows easier and supporting data-based decisions. This helps healthcare groups handle growth and joining together more smoothly.
Health tech due diligence is critical for understanding IT risks, costs to remediate, and necessary investments before finalizing a deal. It helps ensure that strategic benefits of mergers or acquisitions are achieved.
IT enables synergies, supports operational and strategic goals, drives growth, and enhances service delivery, ultimately adding enterprise value.
Acquirers must understand IT risks, hidden costs, resource gaps, timelines, data protection measures, and scalability of systems that can impact future growth.
Post-merger value creation often stems from addressing inefficiencies, optimizing IT processes, and achieving synergies like shared overhead and operational integration.
Focus areas include architecture, asset management, business continuity, change management, contracting, technology licensing, and data protection.
Key actions include involving IT early, designing IT for future strategy, planning for unexpected costs, and ensuring effective communication between IT and business leaders.
Buyers need to assess IT-related risks and unknown costs, including one-time integration expenses and the impact of acquisitions on recurring IT costs.
Factors include application setup, cloud solution considerations, network connectivity, data segregation, and security during transitions.
Best practices include early IT involvement, planning for unforeseen costs, implementing strong data management controls, and understanding third-party contracts and supplier relationships.
Experts help assess current-state IT risks, ensure alignment with M&A objectives, and navigate complexities that can impact deal success.
Simbo is using AI agents to automate all phone related workflows. Connect now to know more.
Schedule AI Agents Demo Now© Since 2019, Simbo AI.
