Insights From McGuireWoods Healthcare Growth & Operations Conference: Part 1 — Managing Risk to Preserve Value

1. Value Creation Via Proactive Risk Management. Industry leaders emphasized the importance of viewing compliance and diligence efforts not merely as regulatory obligations or procedural checklists, but as strategic value drivers in healthcare investments. They encouraged investors to approach the diligence process as an opportunity to better understand a target company’s culture, risk profile and operational realities. This approach involves early engagement with advisors and a proactive posture toward diligence and risk management throughout the investment lifecycle. Engaging compliance and legal advisors at the outset allows investors to identify and address potential issues before they escalate rather than reacting to problems at the closing or post-closing stages. This proactive approach is particularly important in areas such as compensation models and billing practices, which often carry heightened risk. By exploring and addressing these areas early, investors can structure deals more effectively, mitigate risks and ensure a smoother post-closing integration. 

This approach involves looking beyond written policies and procedures and assessing whether compliance is genuinely embedded in daily practices. By proactively identifying and addressing potential risks early in the investment process, investors can avoid costly post-acquisition issues and foster a culture of compliance that supports long-term value creation.

2. Building a Strong Foundation. Even when no substantive diligence issues are discovered, or all such issues have been adequately addressed at the outset, a healthcare investor’s focus on diligence and compliance must continue as the organization scales. Savvy investors ensure that they have the right leaders, infrastructure and culture of compliance in place to establish a strong foundation of operational hygiene that enables smart and rapid growth from the beginning.

This includes proactively deploying robust, well-documented and appropriately scaled compliance programs tailored to the size and complexity of the organization: large enough to be effective but not so bureaucratic as to hinder operations. Best practices include clear documentation, regular audits, ongoing updates to policies and procedures, elevating the role of the chief compliance officer, ensuring direct reporting lines to senior leadership, and maintaining board-level oversight. Such measures not only help prevent and detect issues but also demonstrate a genuine commitment to compliance, which regulators closely consider.

3. Regulatory Actions Serve as Learning and Operational Opportunities. By paying close attention to regulatory actions and commentary, healthcare investors and operators can better understand what programs, policies and procedures can be incorporated into their organizations and how they can be documented, implemented, audited and updated sufficiently. Monitoring regulatory actions and commentary also provides insight into how organizations should handle issues that are identified.

For example, industry leaders noted the DOJ’s increasing emphasis on encouraging voluntary disclosure of compliance issues companies discover during the diligence process or in post-closing reviews. This shift is evidenced by the recent rollout of the DOJ’s “Mergers & Acquisitions Safe Harbor” policy, which provides a safe harbor for acquiring companies to disclose misconduct discovered during transaction diligence up to approximately six months post-closing and remediate violative conduct within the first year or so after discovery of the issue (with the appropriate and specific time frames determined by the DOJ on a case-by-case basis). For acquiring entities that follow the guidelines, DOJ guidance provides for deferred prosecution agreements or even declinations to prosecute altogether. This approach encourages investors to be transparent and proactive in identifying and addressing compliance concerns, reducing legal risks and fostering a more collaborative relationship with regulators.

4. Integrating Compliance With Business Strategy for Sustainable Growth. Industry leaders also noted the importance of integrating compliance efforts with broader business strategies to achieve regulatory and investor objectives. Effective collaboration between business leaders and compliance teams is essential, with compliance professionals positioned as enablers of business growth rather than obstacles. Adopting a proactive, risk-based approach allows organizations to focus limited resources on the most critical areas, such as leveraging technology and automation to enhance compliance monitoring and reporting. Regular cross-functional discussions about upcoming business initiatives and risk areas help ensure that compliance considerations are embedded in strategic planning, which supports sustainable growth and helps protect the long-term value of investments.