AI Meets M&A: The Case for AI Support in Diligence Efforts for Healthcare Mergers and Acquisitions

According to statnews.com, there have been at least 100 hospital mergers and acquisitions annually since 2014. It’s a trend that’s sure to continue as hospitals look to gain efficiencies of scale and gain control over the entire continuum of care through acquisition of physician groups and ancillary services like home health.

This efficiency drive is resulting in larger and more complex transactions. In 2017 alone, there were more than 10 transactions with a deal value of $1 billion or greater. The ability to quickly understand the contractual risk that each entity holds is imperative for a thorough diligence effort.

AI can help

Artificial intelligence can assist your contract evaluation efforts and drive value to your organization by:

  • Providing unparalleled visibility and transparency into the contract asset
  • Providing speed to value – allowing the stakeholders to focus on the contracts that need additional attention or review (a quicker path in evaluating and mitigating risk)
  • Identifying opportunities for contract overlap/consolidation and optimization of contractual terms and conditions

Artificial intelligence in diligence efforts enables both the buyer and the seller to efficiently answer the business questions necessary to determine the viability of an acquisition. One healthcare transactional attorney estimated that for every successful acquisition, the acquiring entity would have evaluated ten other hospitals or health systems before selecting the final target.

Freeing up your legal resources

In addition to the need to move quickly through diligence efforts, acquiring entities today also face resource challenges. With shrinking margins, hospitals and health systems no longer have the luxury of hiring teams of attorneys to complete the diligence efforts.

Artificial intelligence can help flip the 80/20 rule and allow your valuable legal resources (both internal and external) to spend 80% of their time on the contracts that matter and need attention. It cannot be stressed enough that artificial intelligence will never replace the expertise that legal counsel will provide in your diligence efforts – it simply allows for efficient use of your legal team’s limited time.

The TractManager Artificial Intelligence solution provides you an incredible head start on your diligence efforts. Within hours, the solution can query the contract database and provide a spreadsheet of terms that are important in every acquisition – assignment provisions, length of term, the presence of without cause termination rights, etc.

Looking for agreements

AI can flag agreements that reference the need for a Business Associate Agreement or Addendum where one is not present in the data room. The solution can also help you capture all agreements with a particular physician or physician practice, allowing you to ensure there are no “stacking of compensation” issues with referral sources.

TractManager understands hospital data needs – we enjoy relationships with 40% of all hospitals in the United States. Our solutions are purposefully built for the challenges facing the healthcare industry. In addition to diligence efforts when you are the acquiring entity, we also provide contract review for those organizations that may be acquired in the coming months.

Attracting suitors

TractManager can assist you in “cleaning out the closet” to make your organization’s contract assets more attractive for potential suitors.

Schedule an introductory call with our Chief Data Officer to discuss how Artificial Intelligence-enabled advanced contract analytics could benefit your organization.

Kimberly Hartsfield, Chief Data Officer

Kimberly Hartsfield became Chief Data Officer for TractManager in June 2017.

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