Buy-side regulatory due diligence is a review of a healthcare target's licenses, accreditation decisions and survey history, read against the standards and rules behind each, before a buyer signs or closes. Integral Healthcare Solutions (IHS) does this for buyers of pharmacies, DME suppliers, behavioral health providers and other accredited organizations: IHS reads a target's accreditation and licensing record and tells the buyer what keeping them would take.

IHS is a healthcare consulting firm, not a law firm. This page is not legal advice, and IHS does not give opinions on the Stark Law or the Anti-Kickback Statute.

What is regulatory due diligence on an accredited healthcare target?

There is no single governing program. The governing texts are the target's own licenses, accreditation decisions and survey reports, each read against the standards and state rules that apply to it. For a Medicare-enrolled target, federal ownership-change rules apply on top of those.

42 CFR 424.550(a) prohibits selling a Medicare billing number or privileges as such. For a provider undergoing a change of ownership under 42 CFR part 489, subpart A, 424.550(b) requires the current owner and the prospective new owner each to submit an enrollment application before the change of ownership is completed, and lets CMS deactivate the billing number if the new owner has not submitted within 30 days of the change. For suppliers not covered by part 489, 424.550(c) requires the change to be reported within 30 days. How a given deal is structured is a question for transaction counsel (42 CFR 424.550).

For home health agencies and hospices, 42 CFR 424.550(b)(1) adds a timing rule: if there is a change in majority ownership by sale "within 36 months after the effective date of the HHA's or hospice's initial enrollment in Medicare or within 36 months after the HHA's or hospice's most recent change in majority ownership, the provider agreement and Medicare billing privileges do not convey to the new owner" (42 CFR 424.550(b)(1)). The prospective owner must instead enroll as a new HHA or hospice under 424.510 and obtain a State survey or an accreditation from an approved accreditation organization (424.550(b)(1)(i)-(ii)). The rule covers "asset sales, stock transfers, mergers, and consolidations," and 424.550(b)(2) lists exceptions.

Accreditors set their own ownership-change rules. The Accreditation Commission for Health Care (ACHC) "requires organizations to provide written notification for any change of ownership or ownership information change of 5% or greater. Failure to notify ACHC within 30 days of the change may result in a gap in accreditation" (ACHC [325] Ownership Change or Ownership Information Change Packet, revised 09/04/2024). The Community Health Accreditation Program (CHAP) states that accredited organizations "must notify CHAP within 30 calendar days of the effective date of a Change of Ownership (CHOW)" and that "accreditation is not transferable to a new entity, but it does not automatically lapse when an ownership change occurs" (CHAP, Change of Ownership (CHOW)).

Who needs it and what triggers it

A buyer needs this review when the value of the target depends on licenses, Medicare enrollment or accreditation that must survive the transaction. The sourced triggers are:

• A change of ownership or control of a Medicare-enrolled provider or supplier. For providers and suppliers not covered by a specific paragraph, 42 CFR 424.516(e)(1) requires reporting a change of ownership or control within 30 days. Physician and practitioner organizations are covered by 424.516(d) (also 30 days), DMEPOS suppliers by 424.57(c)(2), and IDTFs by 42 CFR 410.33(g)(2). For a provider CHOW under part 489, 424.550(b) requires both owners' enrollment applications before the change is completed, so the 30-day figure is not the whole timeline (42 CFR 424.516; 42 CFR 424.550).
• A DMEPOS supplier target. "The supplier must report to CMS any changes in information supplied on the application within 30 days of the change" (42 CFR 424.57(c)(2)).
• A home health or hospice target inside the 36-month window under 42 CFR 424.550(b)(1).
• An ACHC- or CHAP-accredited target, where a 30-day notice period runs from the change. ACHC states that it "will determine if accreditation may continue without interruption. The decision will be pending until the Medicare Administrative Contractor (MAC) issues a final decision on the transaction" (ACHC [325]).

URAC, Joint Commission and NABP also accredit healthcare organizations; their ownership-change policies were not part of the sources reviewed for this page, so the review reads each from the accreditor's current document during the engagement. State licensing change-of-ownership rules vary by state and are read the same way.

How IHS helps

IHS reads a target's accreditation and licensing record and tells the buyer what keeping them would take. The work runs in this order:

1. Data-room request list. IHS issues a list of the licenses, accreditation decisions, survey reports, corrective action plans and policies it needs to see.
2. Gap assessment against the governing text. IHS reviews accreditation status, open corrective action plans, expiry dates, licenses and survey history, and reads the policy set against the standards the target holds.
3. Document and evidence mapping. Each exposure is tied to the document and the standard or rule it comes from.
4. Findings memo. IHS ranks each exposure and the post-close fix it would need.
5. Optional post-close readiness plan. Where the buyer wants it, IHS drafts the plan for bringing the policy set and records up to the standards the organization holds.

What the buyer supplies: data-room access, the deal timeline, counsel's questions, and management interviews where the seller allows them.

The limit: this is not a legal opinion, a billing or coding audit, or a financial review. IHS sees only what the seller produces. Ownership-change notices to CMS or to an accreditor are filed by the parties; IHS does not file them and does not contact CMS or the accreditor.

What to have ready

A buyer, or its counsel, can shorten the review by assembling these items from the data room:

• Every current accreditation decision letter, with program names and expiry dates.
• The most recent survey reports and any open corrective action plans for each accreditation.
• An ownership chart showing each percentage that changes at closing, measured against ACHC's "5% or greater" notice threshold where ACHC accredits the target (ACHC [325], revised 09/04/2024).
• The planned closing date, so the 30-day notice periods under ACHC [325] and CHAP's CHOW policy, the Medicare reporting periods under 42 CFR 424.516, and the enrollment applications that 42 CFR 424.550(b) requires before a provider change of ownership is completed can be placed on the deal calendar (42 CFR 424.516; 42 CFR 424.550).
• For a home health agency or hospice, the effective date of initial Medicare enrollment and of the most recent change in majority ownership (42 CFR 424.550(b)(1)).
• Confirmation of how billing will work after closing, since a provider or supplier may not sell or let another entity use its Medicare billing number (42 CFR 424.550(a)).
• For a DMEPOS supplier, the enrollment application information that will change at closing (42 CFR 424.57(c)(2)).
• For a CHAP-accredited target, the planned effective date of the change of ownership (CHAP, Change of Ownership (CHOW)).
• State licenses for each site, with expiry dates.
• The current policy and procedure set, with approval dates.
• Counsel's written questions and the deal timeline.

With these in hand, the introductory call can set scope against the deal timeline.

How it compares

An accreditation and licensing read is one workstream in a transaction. It sits beside, and does not replace, the others a buyer may run.

What it costs

We found no published fee for an ownership-change review or a buyer's diligence review on the pages we reviewed. ACHC's ownership-change packet states: "If ACHC or CMS determines a survey is necessary, the customary unannounced scheduling process and fee schedule will apply" (ACHC [325]); the packet does not state an amount, so verify current fees with ACHC. CHAP's change-of-ownership page does not state a fee. URAC, Joint Commission and NABP ownership-change documents were not reviewed. IHS scopes each engagement after a free introductory call.

What this is not

• This is not a legal opinion, and IHS is not a law firm. IHS gives no opinion on the Stark Law or the Anti-Kickback Statute.
• This is not a billing or coding audit or a financial review.
• IHS does not file ownership-change notices and does not contact CMS, a state agency or an accreditor for either party. The findings depend on what the seller produces.

Frequently asked questions

What should regulatory due diligence cover when buying a pharmacy, DME supplier or behavioral health provider?

It should cover accreditation status, open corrective action plans, expiry dates, licenses and survey history, and whether the policy set meets the standards the target holds. For a Medicare-enrolled target it also covers the federal ownership-change rules, including 42 CFR 424.550 and 424.516.

Does accreditation transfer to a new owner after an acquisition?

It depends on the accreditor. CHAP states that accreditation is not transferable to a new entity but does not automatically lapse when an ownership change occurs. ACHC reviews the documentation, decides whether accreditation may continue without interruption, and holds that decision pending until the Medicare Administrative Contractor issues a final decision on the transaction.

How soon must the buyer or seller tell the accreditor about a change of ownership?

ACHC requires written notification for any change of ownership or ownership information change of 5% or greater, and states that failure to notify within 30 days of the change may result in a gap in accreditation. CHAP requires notice within 30 calendar days of the effective date. Other accreditors set their own periods, which are read from their current documents.

How soon must a change of ownership be reported to Medicare?

For providers and suppliers not covered by a specific paragraph, 42 CFR 424.516(e)(1) requires reporting a change of ownership or control within 30 days. Physician and practitioner organizations are covered by 424.516(d) (also 30 days), DMEPOS suppliers by 42 CFR 424.57(c)(2), and IDTFs by 42 CFR 410.33(g)(2). For a provider change of ownership under 42 CFR part 489, 424.550(b) requires both owners' enrollment applications before the change is completed, so the 30-day figure is not the whole timeline.

What is the Medicare 36-month rule for home health and hospice sales?

Under 42 CFR 424.550(b)(1), if majority ownership of a home health agency or hospice changes by sale within 36 months after initial Medicare enrollment or after the most recent change in majority ownership, the provider agreement and billing privileges do not convey to the new owner. The prospective owner must instead enroll as a new HHA or hospice under 424.510 and obtain a State survey or an accreditation from an approved accreditation organization (424.550(b)(1)(i)-(ii)). Section 424.550(b)(2) lists exceptions.

Can a buyer use the seller's Medicare billing number?

42 CFR 424.550(a) prohibits a provider or supplier from selling its Medicare billing number or privileges, or allowing another individual or entity to use its billing number. For a provider change of ownership under 42 CFR part 489, subpart A, 424.550(b) sets the enrollment path: the current owner and the prospective new owner each submit an enrollment application before the change of ownership is completed. How a specific transaction is structured is a question for transaction counsel.

What accreditation documents should be in the data room?

Current decision letters with expiry dates, recent survey reports, open corrective action plans, the policy and procedure set with approval dates, state licenses for each site, and an ownership chart showing what changes at closing.

Is regulatory due diligence the same as a legal opinion or a billing audit?

No. The IHS review reads the accreditation and licensing record against the standards behind it. It is not a legal opinion, a billing or coding audit, or a financial review, and IHS is not a law firm.

What happens if the target's policies do not meet the standards it is accredited under?

The findings memo ranks each gap and the post-close fix it would need. If the buyer wants it, IHS drafts a post-close readiness plan for bringing the policy set up to the standards the organization holds.