Adult Day Services Due Diligence Checklist

Confirm the service and legal perimeter

Identify the operating entity, locations, program categories and assets included in the sale. Review any associated home-care, transport or other services separately. Shared revenue and expenses need a defensible allocation before a buyer can understand the standalone program.

California's CDSS licenses and monitors Adult Day Programs, while DHCS describes CBAS within a separate benefit framework. Apply those examples only to the appropriate setting. Other jurisdictions need their own licensing and service analysis. (Source: CDSS, DHCS)

Reconcile the participant roster with actual activity

Define active enrollment and identify duplicate, inactive or historical records. Compare the roster with attendance frequency, scheduled services and actual program days. Explain how temporary absences and partial attendance are recorded.

Use consistent periods and units. A monthly count of unique participants cannot be multiplied by a daily rate without evidence of attended, billable days. Reconcile the activity used in the sale presentation to the underlying records before relying on it for value.

Verify eligibility and service authorizations

Examine the applicable service approvals, dates, units, provider conditions and changes. Review renewal responsibility and unresolved authorizations. Qualified program staff should explain the process; the transaction team should not make a clinical eligibility determination.

CDA's CBAS resources separately identify eligibility tools, individual planning and participation documents. Use the target's actual records to establish what applies. A generic program form or approved capacity does not prove every participant's attendance is payable. (Source: CDA)

Follow attendance through billing and collections

Select service periods covering ordinary activity, month-end adjustments and known exceptions. Trace attended services into claims, payer responses, adjustments and bank receipts. Identify the record linking each stage and the staff responsible for resolving differences.

Separate unbilled work, pending claims, disputed balances and amounts considered uncollectible. The AR aging explanation helps organize these categories. Do not assume a later large receipt proves that all recent service was paid.

Rebuild revenue using consistent definitions

Identify rates, billable-unit rules, included services and any separately paid transportation. Review concessions, refunds, recoupments and adjustments. Explain whether the financial statements use cash or accrual accounting and reconcile material timing differences.

For a fictional example, 500 supported billable days at $85 produce $42,500 of earned service revenue before other adjustments. If only $35,000 has been collected, the difference requires explanation; it is not automatically a bad debt or immediate cash. These are invented teaching inputs, not current program rates.

Examine transportation at the route level

Obtain vehicle titles or leases, maintenance records, insurance, route schedules and staffing arrangements. Identify costs for drivers, any required assistance, fuel, repairs and backup. Determine whether the seller provides informal coverage that must be replaced.

Compare routes with pickup windows, accessibility needs, program hours and actual attendance. Have qualified operators assess practical capacity and service suitability. A financial model should not assume additional attendance can fit existing routes without review.

Test staffing and owner replacement

List each necessary role and its qualifications, schedule, compensation and backup. Review direct-service, professional, administrative, food-service and transportation work. Check the beginning and end of the day, when transport or preparation responsibilities may differ from the main program schedule.

Use the replacement-cost definition to evaluate the seller's work. Show how earnings change if the buyer hires management or provides some services personally. A title on an organization chart does not prove that all duties have funded coverage.

Review participant commitments and applicable HCBS conditions

Compare service descriptions and agreements with actual practices. Identify assessment, planning and communication responsibilities. Qualified reviewers should determine whether the proposed operation supports participants' needs and applicable requirements.

Where the HCBS settings rule applies, review community access, choice, privacy, dignity and person-centered planning. These requirements remain distinct from the license and should not be inferred from a brochure. (Source: 42 CFR 441.301)

Inspect premises and equipment obligations

Review property rights, permitted use, occupancy conditions, assignment, renewal and responsibilities for improvements. Obtain appropriate building, accessibility and life-safety assessments. Identify shared space or equipment and how access will continue after closing.

Create a funded schedule for repairs, replacements and required changes. Consider whether the work would interrupt programming or attendance. Separate the sale price from capital and operating cash needs so the buyer can evaluate the complete investment.

Establish the ownership-change pathway

For California CBAS, CDA's application materials direct change packets to CDA first for program review, followed by CDPH licensing review. The page identifies ownership, shareholder and other changes separately. Confirm the packet and current requirements for the actual structure. (Source: CDA application materials)

Keep managed-care or other payer contracts in a separate approval schedule. Do not assume a license change automatically preserves contracts or participant authorizations. An initial-certification timetable is not a supported estimate for every acquisition.

Audit systems and documentation requirements

Map scheduling, participant records, payroll, billing and financial reporting. Identify administrators, export capabilities, vendor agreements and correction histories. Establish how the buyer will obtain authorized access and how historical records remain available.

Federal in-home EVV scope should not be applied automatically to every adult day visit. Examine the actual service and state or payer requirements. A center offering additional in-home services may have multiple documentation workstreams. (Source: Medicaid.gov)

Preserve records and control disclosure

Use aggregate information first when it answers the diligence question. More detailed protected information requires a lawful purpose, appropriate authority and safeguards. HHS's minimum-necessary guidance applies within its covered situations and exceptions; an NDA does not replace that analysis. (Source: HHS)

Assign historical custody, access and retention responsibilities. The HIPAA Privacy Rule does not itself establish a general medical-record retention period, so review applicable state, program, contract and legal-hold requirements. (Source: HHS retention FAQ)

Model cash and concentration together

Review payer and referral concentration separately from participant activity. Test the effect of a contract interruption, attendance decline, transport disruption or key-person absence. Identify which expenses continue and the cash needed to maintain service.

Coordinate the working-capital terms with receivables ownership and responsibility for unresolved billing. Do not count the same receivable as purchase consideration, transferred cash and future operating cash without a reconciliation.

Produce a decision-ready issue register

For each significant finding, record the source, status, responsible adviser, financial effect and evidence needed for resolution. Distinguish matters that change the forecast from those that prevent operation or payment. A contract provision can allocate responsibilities without granting agency approval.

Walk through the first operating week with the proposed team: transport, attendance, professional coverage, payroll, meals, records, participant/caregiver communication and escalation. The adult-day overview places those checks within the wider business model. The final acquisition decision should reflect both documented earnings and a credible plan to deliver the services.