Author: Richard Hornby
Healthcare payers and regulators are using increasingly sophisticated tools to scrutinize reimbursement practices. As scrutiny intensifies, healthcare investors should consider how healthcare operations, disciplined billing and coding diligence and representations and warranties insurance (RWI) work together to identify and mitigate transaction risk. Reimbursement-related exposures may influence diligence findings, underwriting outcomes and post-closing risk throughout the transaction lifecycle.
Increasing Reimbursement Scrutiny Is Reshaping Healthcare Transaction Risk
The current push for greater reimbursement accountability predates the latest wave of artificial intelligence adoption. In 2025, the Centers for Medicare & Medicaid Services (CMS) announced plans to expand its Risk Adjustment Data Validation (RADV) program and increase audit resources, reflecting a broader trend toward increased reimbursement scrutiny across the healthcare sector.1 At the same time, healthcare organizations continue to face growing financial exposure associated with billing and coding audits and reimbursement reviews.
The immediate assumption may be that artificial intelligence will simply generate more audits and greater billing and coding risk. However, the reality is likely more nuanced. While AI may improve the speed and precision of claims analysis and document review, identifying a potential issue is only the beginning of the process. Complex reimbursement reviews still require coding expertise, clinical context, access to medical records and defensible conclusions. Identifying an anomaly isn't the same as establishing noncompliance.
For buyers, the more meaningful development may be that reimbursement risks are being identified and evaluated with greater efficiency, influencing diligence discussions, underwriting reviews and broader assessments of transaction risk. Payers and regulators are examining these issues more routinely, particularly in physician practice, primary care, value-based care and Medicare-focused investments.
Strong Diligence Remains Essential
Disciplined healthcare diligence remains critical. Billing and coding reviews, legal and regulatory diligence and operational assessments help buyers identify potential exposures and better understand transaction risk. The goal isn't simply to uncover historical concerns, but to assess how a target organization may perform in a reimbursement environment that continues to evolve.
In addition, evaluating a target's documentation, coding and claims-management practices is an important part of assessing reimbursement-related risk. Across healthcare transactions supported by Gallagher, operational consistency is often as significant as identifying historical compliance issues. Stronger documentation, coding and claims-management practices can help organizations withstand increasing scrutiny, while inconsistent processes may create additional concerns for future owners.
However, evaluating reimbursement risk often requires more than diligence alone. As reimbursement scrutiny becomes more sophisticated, buyers may benefit from engaging advisors who understand the interplay between healthcare operations, regulatory compliance, transaction diligence, underwriting and representations and warranties insurance, regulatory compliance, transaction diligence, underwriting and representations and warranties insurance. Bringing those perspectives together early in the deal process can help investors better evaluate exposures, understand the implications of diligence findings and determine how transactional risk solutions may fit within the broader transaction strategy.
Where Representations and Warranties Insurance Fits
This is where representations and warranties insurance (RWI) can play an important role. Rather than replacing diligence, RWI helps bridge the gap between reasonable diligence and certain unknown historical risks that may not be identified during the transaction process. Subject to policy terms and conditions, coverage may respond to reimbursement-related noncompliance, investigation and defense costs, as well as resulting financial loss, including impacts to enterprise value.
Effective diligence and RWI aren't substitutes for one another. They are complementary tools that help buyers evaluate, allocate and manage transaction risk.
Importantly, the growing use of AI-powered reimbursement review tools generally has not fundamentally changed how insurers evaluate healthcare transactions. Broad healthcare regulatory and reimbursement compliance representations generally remain insurable when supported by appropriately scoped billing and coding, legal and regulatory diligence. In many cases, the quality and scope of that diligence continue to influence underwriting outcomes.
Based on Gallagher's healthcare RWI claims experience, reimbursement compliance matters remain a significant source of healthcare claims activity. Early coordination can help buyers identify potential underwriting considerations, address issues before deal terms are finalized and position transactions for a more efficient underwriting process.
Bringing Healthcare and Transaction Expertise Together
As the healthcare reimbursement landscape continues to evolve, healthcare buyers face a more interconnected set of considerations. Reimbursement compliance, operational readiness, transaction diligence, underwriting and insurance are no longer separate workstreams. Each can influence how risk is identified, evaluated and managed throughout the deal process.
For healthcare investors, the challenge is understanding how regulatory compliance, operational readiness, transactional diligence and risk-transfer solutions intersect throughout the deal lifecycle.
Gallagher's Healthcare Practice and M&A and Private Equity Portfolio Solutions (GMAPS) team work together to help clients navigate these interconnected risks. By combining healthcare sector expertise with transaction-focused advisory and RWI capabilities, Gallagher helps clients assess risks, evaluate diligence findings and make more informed decisions before and after closing.
