Lexology – New policy guidance may require assumption of “all liabilities” by new providers after a change of ownership, merger, or acquisition

Policy guidance (the Policy) announced on March 1, 2010, by the North Carolina Department of Health and Human Services (DHHS) may have wide-ranging and possibly unintended effects on successor liability in transactions involving Medicaid providers. The Policy appears to require that all new providers resulting from a change of ownership, merger or acquisition agree in writing to assume “all liability” of the former provider if they wish to be enrolled in the North Carolina Medicaid program.    

The ability of DHHS to affect successor liability in healthcare transactions by this Policy raises several legal issues and concerns. Although the Policy may have been intended solely to assist DHHS in protecting its recovery of Medicaid recoupments, the “all liability” breadth of the Policy should be a concern for North Carolina Medicaid providers.

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