Placement and Care Management Due Diligence

Define the work and the transaction perimeter

List each service the business delivers and identify the client, payer, referring party and receiving provider where relevant. Distinguish housing information, paid placement referrals, professional assessment, coordination, monitoring and other work. ALCA's care-management description provides context, not proof of the target's qualifications. (Source: ALCA)

Obtain the entity chart and asset list, including domains, telephone numbers, systems, agreement rights and excluded affiliates. Establish which activities the purchaser intends to continue. An operating description should be clear before the financial statements are combined.

Map legal and professional requirements

Identify jurisdictions, service scope, applicable licenses, disclosures, privacy duties and professional commitments. Have qualified advisers assess the actual business. Washington's RCW 18.330 defines paid referral agencies and exemptions and supplies a scoped example of duties that may affect diligence. (Source: Washington Legislature)

Review ALCA's standards separately where relevant to the people and practice. They prohibit specified referral-compensation arrangements and address independent operation of related referral-fee businesses. Do not treat these association standards as a universal placement-agency law. (Source: ALCA standards 21–23)

Separate and reconcile revenue streams

Obtain monthly schedules for placement fees, assessments, hourly services, retainers and other receipts. Reconcile them to the ledger, bank activity and financial statements over consistent periods. Identify accounting-basis changes, unusual receipts and amounts owed for future work.

Allocate shared staff, marketing, technology and administrative costs using an explained method. Determine whether any proposed combination of services is supportable before relying on combined margin or integration savings. Historical consolidated revenue is different from revenue the buyer can continue under its intended structure.

Sample placement files through the full payment cycle

Select cases across providers, agreement types, inquiry sources, completed placements, disputes and early departures. Match intake and disclosure evidence to the relevant contract, referral, qualifying event, invoice, receipt and adjustments. Use limited authorized access to private information.

Record why exceptions occurred and whether they suggest a wider problem. A duplicate-fee dispute or missing acknowledgment can require a broader review of similar cases. Keep unresolved amounts visible rather than including them without qualification in collectible revenue or a closing balance.

Test disclosures, provider information and client choice

Request the forms and procedures actually used, then examine case evidence. Determine whether service scope, payment, relationships, options and applicable rights were explained at the required stage. Review how staff verify provider information and update records.

Washington's act addresses disclosure before referral, ownership interests, nonexclusivity and provider-status checks. Review the target's compliance within that scope, including the evidence and timing. A standard provider agreement alone does not establish that every referral duty was performed. (Source: RCW 18.330.020, .050 and .070)

Reconcile refund and payment exposure

Collect refund requests, credits, complaints, disputed balances and subsequent payments. Identify contractual and statutory bases, the payer and the party responsible after closing. Ask counsel to assess uncertain amounts and the implications for the offer.

Washington's first-thirty-day rule applies to specified supportive-housing events and requires proration under its terms; a separate provision concerns Medicaid-related referral remuneration. Do not infer that every early departure requires a full refund or that an ordinary private agreement makes every payment permissible. (Source: RCW 18.330.090 and .130)

Rebuild professional-service economics

For care-management work, compare signed scope, recorded time, travel, coordination, invoicing and collection. Identify nonbillable responsibilities, urgent availability, supervision and administrative work. A stated hourly price cannot be applied to all paid staff time without justification.

In a fictional example, 120 supported billable hours at $140 produce $16,800 before adjustments. If related collections are $15,400, the $1,400 difference needs investigation; it is not automatically a write-off. These are invented teaching inputs, not rates or a recommended caseload. Reconcile timing and remaining balances with the accountant.

Evaluate founder duties and qualified coverage

Interview the founder about recurring work and compare the explanation with schedules, billing, staffing and case responsibilities. Identify professional tasks separately from business management, sales and bookkeeping. Review relevant qualifications and permitted scope for each person who will continue the work.

Use the owner-replacement-cost guide to model a buyer who performs some duties and one who hires coverage. Include leave, backup and work outside normal hours where necessary. Avoid treating personal credentials as assets a buyer receives automatically with the business name.

Inspect marketing and system ownership

Verify control of domains, telephone numbers, advertising accounts, websites, software subscriptions and data exports. Review assignment, cancellation and usage restrictions. Determine which tools or accounts belong to the founder personally or an excluded affiliate.

Reconcile channel inquiries to completed services and collections, removing duplicates from the analysis where supported. Check whether a large lead list contains current, appropriate and lawfully usable information. Separate the right to access a system from permission to reuse every contact for a new purpose.

Test concentration and relationship continuity

Group referrals and completed work by source organization, provider and responsible professional. Several contacts may represent one dependency. The referral-concentration definition helps preserve these distinctions instead of treating the number of names as diversification.

Assess what would happen if the founder or a major source became unavailable. Identify introductions, documented processes and qualified replacements that can support continuity. These measures cannot guarantee clients' or providers' decisions. Keep retention assumptions separate from confirmed historical results.

Plan records custody and access

Identify the information held, its legal basis, consent or authorization needs, retention obligations and vendor arrangements. Establish an appropriate purpose and safeguards for diligence. HHS de-identification guidance applies within its covered framework; it does not make every noncovered record unrestricted. (Source: HHS)

Washington's referral statute separately requires covered records to be retained for six years and addresses certain client-identifying health information. Review that rule only within its scope. Assign responsibility for current service access, historical records, corrections and disposal without presuming that copying the entire system resolves custody. (Source: RCW 18.330.040)

Reconcile closing cash and unfinished work

Review receivables, unearned retainers, refunds, payroll, vendor bills and obligations for ongoing cases. Determine who receives payment for pre-closing work and who finishes pending tasks. Reconcile the proposed purchase terms to the actual service and payment periods.

Prepare a cash forecast that funds qualified coverage and existing commitments while collections arrive. SBA recommends financial and operating investigation with suitable professional assistance when buying a business. Its guidance supplies no universal placement multiple or working-capital allowance. (Source: SBA)

Confirm readiness and document the decision

Walk the proposed team through pending referrals, scheduled services, billing, communication and urgent response. Test a key-person absence or system interruption and identify the backup arrangement. Record responsibilities and unresolved dependencies before the handoff date is selected.

The segment overview explains the broader business models. This diligence record should state what was verified, what remains uncertain and how each material issue affects price, funding, conditions or the decision to proceed. Client choice and qualified service continuity remain part of the acquisition analysis, alongside sustainable earnings.