Acquisitions of health care companies need not turn bad, yet some do. No matter what your company paid for the acquisition, a certain amount of money should come back to you if you prepared properly for the acquisition, and the plan was executed properly. There are hidden assets, accounts receivable writeoffs, and they are easy to acquire, and to collect.

When the acquisition is negotiated, the acquired company usually wants to keep the accounts receivable, or to get credit for them. But those receivables that were written off were written off because they are not collectible, so there is no reason to give credit for those. THESE ARE HIDDEN ASSETS, AND THEY ARE COLLECTIBLE. NOT ALL OF THEM, BUT ENOUGH OF THEM THAT CAN BE COLLECTED SO THAT THE ACQUISITION BECOMES REALLY DESIRABLE.

Certainly, where accounts are written off because of "usual and customary" we have seen in prior newsletters that some of those can be collected. But other accounts can be collected. We recently collected $100,000 on a CANCER claim which had been denied because the treatment was allegedly "experimental." But many states have enacted legislation that requires payment to be made for a drug which does not have FDA approval if the FDA has approved of the drug for another type of cancer.

Every writeoff of over $20,000 should be examined by a knowledgeable person to see if it can be collected. This is especially true in an acquisition. But in an acquisition, there are many things going on all at once, and these assets are overlooked. They should not be. In fact, some acquiring companies can't wait to fire existing personnel, or make things so unpleasant that everyone looks for a new job. Then they can show profits from downsizing. But that kind of profit is very expensive if the person in charge of the claims leaves and will not assist in collecting the written off accounts.

Before an acquisition is negotiated, an executive should be assigned to focus on written off assets. Thus the acquisition contract should provide for all writeoffs to be a part of the assets transferred. They should be inventoried, the files located, and taken possession of as soon as the acquisition is consummated. The person who handled these files should not be regarded as redundant. They must assist in the collection of these receivables. If there is even one account that was incorrectly written off for $100,000, that will pay for that employee for over a year. Yet there may be more writeoffs collected.

One of the problems facing acquiring companies is that they cannot locate the files of the written off claims. That should not be a problem if the person in charge of those claims is kept on. And they will bring into the company funds far in excess of their salary. Of course that will also be true if the acquiring company bought the current accounts receivable.

At the very least the acquiring company must immediately take control of all the files, and must be sure that the following documents are in the files:

1. All invoices and explanations of benefit.
2. All assignments and treatment agreements
3. Verifications sheets
4. All managed care agreements
5. Records of all telephone conversations
6. All nurses notes
7. All doctors certificates of medical necessity, and all doctors orders and plans of treatment
8. All correspondence with:
   • doctors.
   • insurers and medicare.
   • patients and families.
   • hospitals
9. All employees' comments about the facts in the case, the treatment of patients, the attempts to deal with the insurers and patients.

When the larger claims are sorted out, you should not be discouraged by notations from the reimbursement people or the collection agency that an account is "uncollectible", or that the insurance company paid" usual and customary", or that the lifetime maximum has been reached, or that there was no prior approval, or that the treatment was not medically necessary. A knowledgeable law firm collects these cases. In fact, every one of the cases we have collected during the past 10 years had one of the above notations on the file.

These hidden assets can be converted into cash. Doing so will turn a doubtful acquisition into a profitable one.