Senior Care Due Diligence Checklist for Buyers

Define what the buyer is actually acquiring

Write a one-page transaction outline before sending a document request. Identify each selling entity, site, business name, property interest and proposed buyer entity. State whether the discussion concerns assets, ownership interests or a combination. Record which debts, receivables, deposits and contracts the parties currently expect to include. Mark undecided items clearly so reviewers do not analyze different transactions.

Ask what must be true on the first day of ownership. The answer should cover responsible management, permitted services, access to premises, workforce coverage, billing administration and the ability to pay operating expenses. A plan that assumes a seller continues performing essential work needs a defined role, term and cost.

Keep the outline aligned with the letter of intent. When the perimeter changes, identify which completed reviews need updating. Adding real estate, excluding receivables or retaining a seller entity can change several workstreams at once.

Build a checklist that produces decisions

Use a request register with a question, requested evidence, responsible reviewer, access restrictions, status and decision date. A useful status describes the work: requested, received, under review, exception open or decision documented. Uploading a file should not automatically close the question.

Agree on a single request coordinator. Several advisers can review different subjects, but conflicting versions of the same request waste seller time and obscure which response controls. Keep the written question close to its supporting files in the data room.

Trace reported revenue to activity and receipts

Select periods that expose current operations, seasonality and recent changes. Ask the accountant to reconcile the ledger to financial statements and explain the accounting basis. Then connect revenue to the appropriate service record: visits, hours, occupied units, resident agreements or completed placement work. A bank deposit alone does not identify the service period or establish that all related obligations have been recorded.

The IRS explains that supporting documents substantiate business income and expenses. For transaction review, the practical extension is to make each material accounting explanation traceable to appropriate underlying evidence. The reconciliation approach here is editorial analysis, not an IRS acquisition checklist. (Source: IRS supporting records)

Separate timing differences from doubtful collections. Follow opening receivables, new charges, receipts, adjustments and closing receivables through the same period. Investigate credits issued after the reporting date and balances that remain unpaid. Use AR aging by payer to distinguish who owes money and how the aging was calculated.

Test earnings adjustments against the operating plan

Obtain a schedule connecting reported profit to the proposed earnings measure. Each earnings add-back needs an amount, source account, transaction evidence and explanation of why the cost would disappear or change. Keep disputed items visible. A seller's label is a starting point for review, not an accepted adjustment.

For a fictional example, suppose reported earnings include a $30,000 owner expense that the seller proposes to remove. If the buyer needs $22,000 of replacement support for that same work, the identified net improvement is $8,000 before other adjustments. Do not add back the full expense and omit the replacement cost. These figures illustrate one reconciliation, not typical care-business compensation.

Distinguish historical normalization from a buyer's future initiatives. New pricing, fewer managers or a larger referral pipeline belong in a forecast with their assumptions and implementation costs. They do not become proven historical earnings because the buyer intends to achieve them.

Map authority separately from contractual consent

Prepare an inventory of operating licenses, certifications, payer enrollments, program contracts and material commercial agreements. Identify the entity and site associated with each item. Ask counsel which parts of the proposed structure trigger an application, notice, consent or another review. Record the authority for the answer and the evidence needed to establish completion.

A payer relationship, state license and landlord consent answer different questions. Avoid allowing a positive answer in one category to stand in for the others. The same issue applies when a business operates several care models under related entities: review each relevant permission and agreement against the actual deal.

The licensing overview introduces these distinctions. State-specific and segment-specific guides can help frame the questions, but the transaction team needs current requirements for the exact location, service model and ownership history before committing to a closing sequence.

Examine staffing through the services being promised

Compare schedules, payroll and agency invoices with the work being delivered. Identify vacancies, overtime, leave coverage, training, supervision and responsibilities carried by the owner. Determine whether a recent margin improvement reflects a durable operating change or temporary understaffing that the buyer must correct.

Review qualifications and required roles with the appropriate operational or clinical specialist. Protect employee information through the agreed process. A list of job titles cannot establish whether the team has the qualifications, availability and supervision needed for the services the business offers.

Ask how the business responds when a key worker is absent. The answer should identify an actual backup arrangement and cost. Connect retention discussions to the first 90 days after buying, including who will approve schedules, support staff and resolve problems while ownership responsibilities change.

Connect quality findings with corrective work

Review applicable surveys, complaints, incidents, audits, claims and plans of correction through an authorized process. Determine whether a finding is historical and resolved, still open or recurring. Ask what evidence shows that corrective work was implemented and maintained. An action plan and a completed action are different pieces of evidence.

Estimate the operating implications with qualified advisers. A remedy might require management attention, additional training, equipment, staffing or a different service scope. Carry those implications into the financial plan instead of leaving them in a separate compliance folder.

Do not summarize a business as free of risk because one public database shows no recent item. Public information has scope and timing limits. Compare it with the seller's records and the review required for the particular provider model.

Review premises, equipment and capital needs

For leased operations, examine the lease term, renewal rights, permitted use, assignment provisions, expenses and relevant landlord communications. For owned property, organize title, financing, condition and use questions with the proper property advisers. Confirm which entity owns major equipment and whether any items are leased, financed or shared with another business.

Separate ongoing maintenance from immediate remediation and planned improvements. Ask who prepared each estimate, what it includes and when the work must occur. A recent cosmetic renovation does not establish the condition of building systems or the adequacy of operational equipment.

If the buyer will rent property from the seller, evaluate the proposed lease alongside business earnings. The OpCo/PropCo guide helps separate operating-company economics from property obligations without counting the same benefit twice.

Protect information while enabling a useful review

Begin with summaries that answer commercial questions without exposing unnecessary personal information. HHS describes specific methods for de-identification; deleting names alone is not sufficient to assume that a file meets those standards. Where protected health information is involved, have the responsible adviser determine the permitted basis and applicable safeguards. (Source: HHS de-identification guidance)

HHS's minimum-necessary guidance has a defined scope and exceptions; it should not be described as an identical rule for every disclosure. FTC business guidance separately supports limiting access to sensitive information. Neither source certifies the software chosen for a transaction. (Sources: HHS, FTC)

Keep a restricted question unresolved when the evidence cannot yet be lawfully supplied. The next step may be an approved specialist review or an alternative summary, rather than distributing a larger export to every bidder.

Choose the appropriate segment workstream

The core checklist organizes the transaction. Use the relevant detailed checklist to select the operating evidence that matters for the care model. A mixed business may require more than one review, with shared costs and entity relationships reconciled between them.

Close issues and refresh the evidence before closing

For every material exception, write the disputed fact, evidence received, remaining uncertainty and proposed response. Responses may include a verified correction, adjusted economics, a contractual protection, a funded transition task or a decision not to proceed. Counsel should assess whether a proposed contractual solution actually addresses the risk. Some operating or approval gaps require resolution before closing.

Refresh the records that can change during the transaction: current trading, workforce coverage, claims, material contracts, receivables and approval status. Mark the date through which each reviewer has assessed the evidence. A conclusion about an earlier period should not silently become an assurance about closing day.

SBA's purchase guidance encourages examining business records and using qualified advisers. This checklist turns that principle into a decision process; it does not replace their engagement scope. Use the red-flags guide when evidence contradicts the seller's explanation or the proposed operating plan. (Source: SBA)