Clinic Insurance Contracts

January 02, 2025

by a searcher from University of Utah in Denver, CO, USA

Question for those familiar with purchasing any sort of healthcare company that bills to insurances:

I am looking to purchase an OT and speech therapy clinic in an asset sale (a new entity will be created with a NEW name, not the current name of the clinic). Will the insurance contracts that are in place with payors be affected in any way? The clinic is in network with several payors others in the area are not in network with (which is part of the value of the deal) - what do I need to know to ensure those remain?

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Reply by a professional
in Granbury, TX, USA

Great question. Since you’re purchasing the clinic in an asset sale and creating a new entity with a new name, insurance contracts will be affected. Most payor contracts are tied to the specific legal entity, not just the clinic's operations or brand. Here’s what to know: First, contract assignment isn’t automatic. Payors typically don’t allow contracts to transfer in an asset sale, so you’ll likely need to re-credential the new entity. To maintain continuity, start the re-credentialing process as soon as possible. Some payors may fast-track the process if the clinic’s staff, services, and patient base remain consistent. Second, reach out to key payors where being in-network offers a competitive advantage. They can provide details on their specific requirements and timelines. Lastly, since claims may be processed out-of-network during re-credentialing, plan for temporary cash flow impacts. Working with a healthcare consultant or legal advisor familiar with payor contracts can help ensure the transition goes smoothly.

Reply by a searcher
from University of Maryland at College Park in Tysons, VA, USA

Consult a healthcare lawyer / read through the contracts, there will be a clause about assignment of the contract - but I believe that they will often not transfer to the new entity and you'd have to recontract with the insurance payor.

The payor will also likely not offer the exisiting rates that the clinic has and offer the default rack rates - note these could be higher if the clinic has bad contracts, but will likely be lower if the clinic has been successful at getting rate increases.

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