Adult Day Services Due Diligence Checklist

Confirm the legal entity and service model

List each site, legal entity, care model and asset in the proposed sale. Review related home-care or transport businesses on their own. Explain shared staff, costs and contracts so the buyer can assess the center's own budget. The adult day services overview develops the broader care model.

Read the actual licenses, program approvals, service descriptions and signed client agreements. California CDSS Adult Day Programs and the DHCS CBAS benefit follow separate rules. (Sources: CDSS, DHCS) Neither example defines a national license or proves that the target qualifies for a program.

Match the documents to the entity and address in the offer. List services that rely on outside staff or vendors, with the contracts for that work. A brochure may describe a planned service. It does not prove that the center has the authority, staff or budget to provide it.

Trace a service sample from approval to payment

Define active enrollment and reconcile the roster with scheduled and actual attendance. Flag inactive names, duplicate records, partial days and cancellations. Use service dates and units that match the payer's rules. Unique people, visits, hours and participant-days should not be interchanged in a revenue model.

CDA's CBAS resources distinguish eligibility assessment, care planning and participation documents. (Source: CDA eligibility and authorization) Obtain the evidence needed for the reviewed services through a lawful process. A generic form, open slot or approved capacity does not prove a particular day was billable.

Select samples with the billing and program reviewers in charge. Include adjustments and interrupted periods, not only clean claims. Expand the scope when exceptions suggest a larger issue. Document what the sample can support and avoid calling it a complete claims audit when it is not one.

Reconcile earned fees, cash and remaining balances

Compare service records, payer rates, claims, credits, remittances and bank evidence. Track corrections without counting the original and replacement claim twice. Separate the service month from the cash-receipt date. The AR aging guide helps distinguish older balances from their actual collection risk.

Consider a fictional completed service month with 500 supported billable participant-days at $85 each. Assume no credits, denials or other revenue adjustments for this example. All $35,000 of receipts described here apply to those same earned fees by the review cutoff, with no receipts from another period included.

Earned fees are 500 × $85 = $42,500. The remaining receivable is $42,500 − $35,000 = $7,500. That unpaid balance is not automatically bad debt or guaranteed future cash. Investigate its claim status and later receipts before deciding how much is collectible.

This illustration is not profit, a bank balance or a rate benchmark. It excludes service costs, deposits and cash from other periods. Identify ownership of old receivables and responsibility for corrections under the actual deal. Keep those deal terms separate from payer authority and the cash needed to run the center.

Verify the incoming operator's approval path

List every change created by the deal, including ownership, shareholders, location, capacity and key roles where relevant. CDA directs named CBAS change applications through its program review before CDPH licensing review. (Source: CDA application materials) Obtain the packet and current instructions for the specific change.

Track the license, program status, payer enrollment and managed-care requirements in separate rows. Record submission, requests for more information and actual decisions. Do not assume one agency's action completes every step or that the buyer can use the seller's billing access. Confirm the proposed entity's authority through the agency or payer.

The adult-day transfer exercise follows four fictional California records. Program review and a licensing-office receipt are separate steps. So are a date field and an unanswered contract request. The table promises no approval date. Check the actual decisions and the date field's limited purpose before the buyer relies on that file.

Tie those required steps to the closing and funding dates. A submitted application is not a guaranteed approval date. Identify carrying costs if a required step takes longer and what happens under the proposed agreement. Counsel and the relevant agencies should address unresolved authority before the operating plan relies on it.

Test staff coverage and owner replacement

Compare role descriptions, schedules, payroll, contractor invoices and actual work. Identify qualified program and clinical roles, direct support, meals, activities, transport, billing and management. Ask the professionals in charge to assess the fit with the needs of people served and the rules that apply. The buyer’s budget should include the costs of that plan.

List the owner's duties separately, including work outside normal center hours. The owner replacement guide helps price necessary work without assuming an add-back removes it. Plan relief for absences and any role that requires a credential, approval or experience the proposed replacement does not yet have.

Review open positions, agency usage, turnover and training duties. Avoid a staffing ratio borrowed from another care model or state. If the forecast reduces coverage, require a supported explanation of how services will be run. Retention promises and lower projected payroll do not establish that the incoming team can deliver the agreed services.

Review the routes and premises needed for service

Obtain route schedules, driver arrangements, vehicle titles or leases, insurance, maintenance records and backup terms. Compare the planned service with passenger needs, actual travel time and staff duties. Ask qualified reviewers about suitability. A financial model should not infer safe capacity from the number of seats alone.

Reconcile transport costs across payroll, fuel, leases, repairs and vendor invoices. Check for both missing costs and overlap. If routes are outsourced, establish which tasks remain with the center and how a disruption is handled. An inexpensive contract is not enough without a sound plan to run the routes.

Review premises, lease assignment, renewal, permitted use and necessary improvements with qualified advisers. Price capital work separately from recurring cost and list any effect on attendance. A temporary move, reduced room use or vehicle outage can affect services and receipts while major fixed costs continue.

Examine program duties, referrals and unused capacity

For applicable HCBS waiver services, review community access, each person’s choice, dignity and privacy within the rules that apply. (Source: 42 CFR 441.301) Keep the rule's provider-controlled residential provisions separate from the requirements for the actual day setting.

Federal EVV scope concerns specified Medicaid services requiring in-home visits. (Source: Medicaid.gov EVV) Assess any additional state, contract or associated home-service duties separately. Neither an EVV system nor its absence settles the entire center's compliance or payment status.

Review referral concentration separately from payer mix. Investigate unused authorizations and vacancies through evidence of each person’s choice, staff, transport and program conditions. Keep a proposed growth case apart from historical earnings. A waiting list or unused approval does not guarantee added billable service.

Establish lawful access to records

Pre-NDA outreach excludes financials and identifying owner, center, location, participant, staff, vendor and referral details. Later commercial diligence needs authorization and controlled access. Small groups of people or coded records may still identify people. Assess the combined information before describing it as anonymous.

An NDA does not create authority to disclose care records. Apply relevant safeguards and minimum necessary where required, with proper de-identification review when used. (Sources: HHS minimum necessary, HHS de-identification) Keep the commercial review distinct from clinical access decisions.

The HHS retention FAQ supplies no general medical-record retention term. (Source: HHS retention FAQ) Identify state, program, contract and legal-hold requirements. The records custody guide helps assign storage, access, corrections and ongoing requests, including the response if the transaction fails.

Connect findings to terms and working capital

Record each finding with its source, open questions, reviewer, effect on cost and cash, and next action. Separate an unsupported debt owed to the center, an ongoing staff cost, one-time building work and a missing approval. Their effects differ. One price discount does not resolve every barrier to service or payment.

The adult day earnings exercise turns supported activity into a defined operating contribution. It tests lower attendance and an added route and staffing cost. Use those distinctions before carrying a diligence finding into the value discussion.

Build a dated cash schedule around payroll, transport, food, rent and expected receipts. The working-capital guide explains how collection timing differs from earnings and a negotiated closing balance. Test major delays without assuming resident or participant obligations are available purchase funds.

Use the letter-of-intent guide to connect evidence with proposed conditions. State which issues must be resolved before closing and which duties can carry forward under a plan reviewed by the relevant advisers. Do not assume private deal terms bind a regulator, payer or other third party.

Rehearse the service handoff before closing

Walk through a normal program day using fictional information. Confirm who schedules attendance, arranges transport, covers a staff absence, handles meals, corrects records and submits supported billing. Check required permissions and backup contacts. Keep this exercise separate from clinical review and from any real claim submission.

Prepare required communications with accurate contacts and service information. Respect each person’s choice and notice duties that apply. Do not promise that every person or employee will remain after the sale. Assign the staff responsible for questions, changes and unresolved concerns during the handoff.

Refresh key findings near closing and verify the actual approval status, staffing plan and cash position. Carry agreed duties into the first 90 days plan. The final report should show what the evidence supports and what still needs action. Explain how the buyer will fund and run the center.

Use the adult day buyer exercise to test the center without its proposed added service. The seller’s access exercise then helps choose evidence for review. Plan each fictional walkthrough, property inspection or live visit separately. One useful rehearsal does not settle the permissions needed for every later request.