Navigating Workforce Transitions in Healthcare M&A

This post is part of Mooradian Law’s ongoing Healthcare Transactions Series, where we explore legal, operational, and strategic issues that matter most to providers, investors, and entrepreneurs navigating the healthcare business.

In this week’s installment, we examine why ensuring a smooth transition for clinical and administrative staff in healthcare M&A is essential to preserving business value and achieving a successful integration. Thoughtful handling of workforce issues helps protect your business from financial, legal, and regulatory risks.

Pre-Diligence: Assessing Cultural Fit

At the outset of the transaction, buyers should assess the target organization’s culture to ensure compatibility before moving forward with costly diligence. They should spend time to understand the target company’s leadership style, communication practices, and operational culture. If the buyer’s vision for the organization is too different fromexisting practices, the acquired business may face staff turnover, disruptions to patient care, and lost revenue after closing.

Due Diligence: Key Employment-Related Risks

Due diligence is your chance to uncover workforce issues that could impact deal success. Pay particular attention to:

Wage and Hour Compliance: Verify compliance with federal and state wage and hour laws, including proper employee/independent contractor classification, and consistent PTO and sick leave policies

Restrictive Covenants: Assess non-compete and non-solicit agreements for enforceability and potentialantitrust risks

Clinician Agreements: Review clinician contracts for fair market value (FMV) and commercial reasonableness (CR). Compensation arrangements with the effect of inducing referrals may lead to exposure under the Stark Law and/or Anti-Kickback Statute (read our post on FMV and CR)

The Definitive Agreement: Employment Provisions

The definitive agreement should clearly address key workforce-related issues:

Key Employee Retention: Outline provisions for keeping key clinical and administrative staff, such as employment agreements and/or retention bonuses

Representations and Warranties: Require comprehensive disclosures regarding:

Compliance with employment and labor laws
Employee benefit programs
Employment/independent contractor agreements with clinicians
Active or threatened employment litigation

Ensure these representations trigger adequate remedies if inaccurate or incomplete (read our guide to Representations and Warranties).

Post-Closing Integration: Managing the Workforce

The transaction does not end at closing—successful integration requires strategic planning and clear communication. Failure to plan for workforce transitions can lead to lost productivity, recruitment costs, and operational instability.

Common Pitfalls

Dramatic Policy Changes: Differing retirement, health, and PTO policies and/or plans can frustrate staff and fuel attrition
Poor Communication: Uncertainty about roles, leadership, and benefits breeds anxiety and disengagement

Best Practices

Align Benefits and Employment Terms: Quickly implement post-closing policies to foster trust and stability
Implement a Detailed Communication Plan: Address employees’ common questions clearly and proactively

Bottom Line

Managing workforce transitions effectively is foundational to achieving deal objectives and maintaining regulatory compliance. At Mooradian Law, we guide healthcare organizations through these complex transitions at every phase of the transaction life cycle—preserving deal value and supporting long-term success.

Email: info@mooradian.law

Phone: (734) 219-4890

About the Author

Serj Mooradian is a healthcare attorney and the founder of Mooradian Law. With over a decade of experience at top national law firms, Serj is recognized for his deep expertise in healthcare transactions and regulatory compliance. He helps clients navigate federal and state laws with a practical, business-minded approach.