Healthcare mergers and acquisitions (M&A) are bouncing back. A Jefferies survey revealed that 72% of healthcare executives and investors expect higher M&A levels in 2025. Moreover, private equity firms are ramping up activity. By mid-2024, buyouts in North America were already higher than all of 2023, showing renewed momentum despite tighter regulations.
As your healthcare organization navigates this boom, you’re likely balancing growth opportunities with significant challenges, such as liability risks, cybersecurity gaps, and regulatory hurdles. To stay ahead, focus on more than just damage control. A strong insurance plan and forward-thinking risk management puts you in control and ready for anything.
M&A transactions often bring hidden insurance complexities. Merging businesses with different policies can create coverage gaps, overlaps, or disputes that lead to unexpected liabilities. By addressing these issues upfront, you can avoid costly surprises and protect your organization.
Tail coverage, which extends malpractice insurance to cover claims made after a policy ends, is a common pain point in healthcare M&A. The cost of this coverage is frequently underestimated, leading to financial strain post-acquisition. This issue is particularly pronounced in smaller practices with high physician turnover.
How to stay ahead:
Being proactive about tail coverage can prevent disputes and safeguard your financial stability.
Disparate insurance policies are a common challenge in M&A, often leaving critical exposures uncovered.
Smaller practices may lack essential coverage, such as cyber liability insurance to protect against data breaches and Directors and Officers (D&O) liability insurance to shield leadership from legal claims.
Ways to proactively approach policy discrepancies:
Streamlining your insurance coverage not only reduces liability risks but also makes managing claims more efficient.
Cybersecurity is another major concern during M&A. IT systems from different entities often lack integration, creating vulnerabilities that cybercriminals can exploit. Smaller practices with limited resources are particularly at risk, as they may lack robust cybersecurity measures.
Mitigation strategies:
Taking these steps early in the process can help you avoid the fallout from costly breaches.
Healthcare M&A often triggers staffing challenges. Physician turnover and shifting workforce preferences—such as the rise of 1099 or per diem arrangements—can lead to higher recruitment costs and hidden liabilities. These disruptions can affect both the quality of care and the financial success of the merger.
How to mitigate these challenges:
Planning for workforce changes ensures smoother operations and protects your investment.
The healthcare sector is under increasing regulatory scrutiny, with regulators closely examining M&A deals for antitrust concerns and their impact on patient care. This scrutiny makes compliance an important focus area during due diligence and integration planning.
Organizations often inherit compliance risks from the entities they acquire. Failing to uncover these liabilities during due diligence can lead to fines, reputational damage, or operational setbacks.
Focus areas for due diligence:
Thorough due diligence reduces the likelihood of costly surprises after the deal closes.
Multi-state acquisitions introduce varying regulatory requirements, from tax laws to patient care standards. These differences can complicate operations and increase the risk of regulatory penalties.
Here are some best practices:
By addressing these challenges head-on, you can avoid regulatory pitfalls and focus on successful integration.
Liability risks are among the most significant challenges in healthcare M&A. From malpractice disputes to rising nuclear verdicts, these risks can derail deals and threaten your organization’s financial health.
For example, unresolved tail coverage responsibilities often lead to post-merger disputes, while hidden malpractice claims from acquired practices can surface unexpectedly.
Ways to manage liability risks:
By proactively managing liability risks, you can ensure smoother transactions and avoid unexpected costs.
Generic insurance plans rarely address the unique risks of healthcare M&A. Tailored solutions provide focused protection, making transitions smoother and more secure.
Key benefits of tailored insurance solutions include:
Partnering with brokers experienced in healthcare M&A ensures your insurance coverage aligns with your strategic goals.
Healthcare M&A presents significant growth opportunities, but success requires proactively managing risks. By addressing liability exposures, strengthening cybersecurity, and prioritizing compliance, a customized insurance strategy can turn M&A challenges into long-term success.
Connect with the Risk Strategies Healthcare team at healthcare@risk-strategies.com