Nuances are the Norm: Acquisitions of IDD Providers

Intellectual and developmental disabilities (IDD) providers fill a critical need in our communities and around the country.  Given the vulnerable population served by these providers, regulating agencies have implemented stringent and often unique requirements that make transactions in the space nuanced, and attention to detail is critical.  Included below is a listing of select nuances with an overview of what potential acquirers should consider in the early stages of an IDD transaction.

• “Waiving” Typical Medicaid Goodbye: Many IDD providers are reimbursed through state Medicaid waiver programs, which means there can be significant variability state-to-state and even waiver-to-waiver. Medicaid waivers are designed to provide states with flexibility in how they set up certain Medicaid programs, so the variability is a built-in benefit of using waivers.  The variability makes it critical that potential IDD acquirers understand a state’s waiver programs, if applicable, from an enrollment, reimbursement, and operations standpoint.
• Managing Enrollment through Managed Care: An increasing number of states are using managed care organizations (MCOs) to develop and implement their Medicaid programs, and that is especially true in the IDD space. While there are benefits to such utilization, MCOs often complicate the provider enrollment process by increasing the number of applications required—and therefore approvals needed—to complete a transaction.  For example, in North Carolina, there are close to ten (10) separate MCOs involved in IDD programs.
• Needing “Know-How”: The population served by IDD providers is vulnerable, and experienced care is critical. This means that when IDD regulatory agencies review a potential acquirer during a proposed transaction, the focus is on the provider’s background in IDD.  Acquirers should expect to be asked to provide evidence of experience in the form of contracts for service in other states, resumes of individuals overseeing and providing care, and extensive background checks.  If an IDD agency decides the acquirer does not have the experience necessary, the agency may bar the acquirer from effecting a part or all of a transaction.
• Policing Policies and Procedures: The first step in becoming an IDD provider (and really a healthcare provider of any kind) is ensuring awareness of all sources of regulatory requirements. This can be more complicated for IDD providers than other provider types because of the significant number of sources.  For example, a provider may need to be aware of and fully comply with requirements stemming from licensure, Medicaid and Medicaid waiver, certificate of need, accreditation, managed care, and special local permitting (as well as other sources).  Each of these sources may have separate statutes, regulations, policy manuals, guidance, handbooks, and intra-agency policy.  A potential IDD acquirer must be aware of and able to comply with all of the sources and requirements.

In summary, individuals and entities interested in an acquisition in the IDD space should expect nuances to be the norm.  Every state or local program will have its own distinct processes and requirements, and it can be difficult to find commonalities between acquisitions in different states.  Potential acquirers should familiarize themselves with unique state requirements early in any transaction in order to ensure enrollment runs smoothly, the deal is closed in a timely manner, and excellent care is provided from day one.

For more information, please contact Alexander B. Foster.