Compliance and Billing: What Diligence Uncovers

When a buyer gets serious about your practice, it will review how you document care and bill for it. This is often the most detailed part of diligence. It is also where surprises tend to show up.

A billing problem found late can lower your price, change your deal terms or end the deal. The better approach is to look first, before a buyer does. Here is what reviewers typically examine.

What reviewers examine

Clinical documentation

Buyers want to see that your notes support what you billed. A reviewer will usually pull a sample of patient charts and compare them to the claims.

Common questions include:

Do initial evaluations establish medical necessity?
Do plans of care include goals, frequency and duration?
Are plans of care certified and recertified as each payer requires?
Do daily notes support the services and units billed?
Are notes signed and completed on time?

Missing signatures or late notes may seem minor in daily practice. In diligence, they raise questions about the rest of your records.

Coding patterns

Reviewers look at how you code across all patients, not just one chart. They want to see whether your patterns are consistent and defensible.

That can include how often certain codes appear, how units are counted for timed services and how modifiers are used. They may compare clinicians within your practice to see if one person codes very differently. An unusual pattern is not proof of a problem. It is a question you should be ready to answer.

Denial rates and collections

Your denial and collection data tell a buyer how healthy your revenue cycle is. High or rising denials can point to documentation gaps, front-desk errors or payer issues. Old, unworked receivables raise similar concerns.

Pull a report of denials by payer and reason for the past year. Look for repeat causes you can fix at the source. Clean up aged receivables and write off what will not be collected, with your CPA's input.

Open audits and payer issues

Buyers will ask whether any payer audits, record requests or repayment demands are open or recent. They will also ask about refunds you have made for overpayments. Leaving these out is not an option, and it would create far bigger problems later.

If you have an open matter, know its status and expected resolution. A buyer may still proceed, but it will want protection. That can mean holding back part of the price or adding specific terms to the purchase agreement.

Why asset sales still care

In an asset sale, the buyer purchases your clinic's assets rather than your company. Some owners assume that means past billing issues stay behind. Buyers still care for several reasons.

Your billing history is evidence of how the practice really runs. If your earnings rely on billing that would not hold up, the buyer is paying for earnings that will shrink. Expect promises and protections in the purchase agreement tied to past billing. Your attorney should explain exactly what you are agreeing to.

Fix it before you go to market

The time to find problems is a year or more before you sell. That gives you time to correct processes and build a clean track record.

A practical sequence:

Hire a healthcare compliance professional to run an independent chart and coding review.
Fix the root causes they find, such as templates, training or front-desk workflows.
Re-audit a fresh sample a few months later to confirm the fixes held.
Keep the reports so you can show a buyer what you found and fixed.

If a review turns up possible overpayments, do not try to handle it alone. Work with your healthcare compliance professional and attorney on how to address it. The right path depends on the facts and the payers involved.

We are not compliance advisors and do not give billing or legal advice. Our role is to help you prepare for the questions buyers ask and present your practice clearly.

Your next step

Pull ten recent charts at random and read them as if you were a buyer. If you find gaps, schedule an outside compliance review now, while you still have time to fix what it finds.