Any buyer or seller of a health care related business has had to deal with the federal law known as HIPAA. Indeed, a buyer of a health care business typically devotes a significant amount of time to determine a seller’s compliance with HIPAA. Exactly what is HIPAA and exactly what should a buyer investigate regarding a seller’s compliance with HIPAA?
HIPAA consists primarily of a rule known as the “Privacy Rule”. Simply put, the Privacy Rule protects, regulates and restricts the communication of protected health information by a covered entity or its business associate. A covered entity includes a health care provider and a health care clearinghouse, which is an entity that receives and processes health care information from a covered entity, such as a company providing billing services to a health care provider. A business associate is an entity that provides services to a covered entity that involve the use or disclosure of protected health information, such as claims processing, data analysis, utilization review and billing.
In any merger or acquisition of a health care related business, the below list of HIPAA requirements a) informs a seller what it needs to have in place to be ready for a buyer’s HIPAA due diligence, and b) provides a road map for the buyer to conduct due diligence regarding the seller’s HIPAA compliance. To comply with HIPAA, a covered entity must do the following:
- Develop and implement policies and procedures to reasonably limit uses and disclosures of protected health information to the minimum extent necessary;
- Provide notice of its privacy practices (including electronically on any website) and make efforts to obtain acknowledgement from patients of their receipt of the notice;
- Designate a privacy official who is responsible for compliance with HIPAA;
- Train workforce members on privacy policies and procedures;
- Maintain reasonable and appropriate administrative, technical and physical safeguards to prevent intentional or unintentional use or disclosure of protected health information;
- Maintain procedures for individuals to complain about a covered entity’s compliance with HIPAA;
- Enter into business associate agreements with business associates; and
- Maintain, for six years, the privacy policies and procedures, privacy practices notices, disposition of complaints and other activities that the Privacy Rule requires to be documented.
A subset of the Privacy Rule, the “Security Rule”, will be discussed in the next M & A nugget.
If you have any questions about this or any other M&A issue,
please contact Glenn Solomon at firstname.lastname@example.org or 443-738-1522.
ABOUT GLENN D. SOLOMON
email@example.com | 443-738-1522
Glenn D. Solomon is a principal at Offit Kurman and has provided counsel to businesses and business owners for more than twenty-five years. He has extensive experience in the purchase and sale of businesses, structuring ownership agreements, and advising companies in financial distress.
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