Reduce Investment Risk in Healthcare with an Operational Due Diligence
Introduction
Over the last number of years, the Irish healthcare sector has attracted a lot of interest and funding from a range of international investors. In particular the nursing home market has seen a significant consolidation of nursing home operations in Ireland as several specialist European operators entered the Irish market and acquired existing Irish-based groups. In a report published by CBRE (2023), they note that eight of the 15 dominant nursing home group operators in Ireland are internationally owned, four are French-owned, while one each are German, Spanish, Dutch and Chinese-owned respectively.
As demand for nursing homes, and healthcare in general, continues to grow, it is likely that we will continue to see an increase in international investment. In such a highly regulated industry, it is crucial that investors conduct Due Diligence to thoroughly understand the quality and safety of the care provided prior to an investment. This ensures that any potential strategic risks are identified and helps investors make informed decisions.
Once you do invest, you have a legal and social responsibility to ensure that the correct infrastructure and systems are in place to deliver safe, high-quality services. Strong clinical governance, a focus on quality and a drive to improve services is crucial to safeguard your investment and your reputation.
In this blog we discuss the key areas HCI focus on when conducting an Operational Due Diligence and outline why a comprehensive report from an independent provider in healthcare, such as HCI, offers assurance to investors and increases the chance of a successful investment.
What is an Operational Due Diligence?
An Operational Due Diligence of a health or social care organisation is an extensive review of the quality and safety of the service prior to any sort of investment or business transaction. It focuses on the operational aspect of the service, to identify the levels of compliance with applicable regulations, the Governance Systems in place and any red flags that may result in enforcement action from a regulatory body. A thorough assessment consists of document reviews, onsite process observations and staff interviews.
Considerations for Conducting an Effective Operational Due Diligence
At HCI we have conducted many Operational Due Diligence for healthcare investors and below are five of the key areas we recommend focusing on to ensure that you get a real understanding of the quality and safety of the services you are looking to invest in.
- Governance System: The Governance System is crucial to the overall quality and safety of the service. HIQA often comment on the correlation between good governance and positive outcomes for service users. When reviewing the governance systems in place it is important to look at the governance structure, the organisational chart, teams and committees’ charts, terms of references for the Management Team, agendas and minutes of Management Team meetings, job descriptions and Key Performance Indicators (KPIs).
- Regulatory Reports: One of the first documents to be reviewed as part of a Due Diligence is the inspection reports completed by the relevant regulatory authority, such as the Heath Information and Quality Authority (HIQA), the Regulation and Quality Improvement Authority (RQIA) or the Care Quality Commission (CQC). Ratings and the findings in these inspection reports should give a sense of the quality and safety of the service and indicate any potential areas of concern.
- Document Reviews: Although it is important to review regulatory reports, it is also essential to review internal documentation from the service to get an understanding of the operational and strategic risks. Key documents to review include internal audits, incidents, and complaints, KPIs, policies and procedures, risk registers, statement of purpose, job descriptions, training matrix and Governance documents such as agendas and minutes of meetings.
- Staff Interviews: Staff interviews should be held with key staff members involved in the governance to provide an in-depth understanding of the existing governance structures, both clinical and corporate, in the organisation, and any opportunities for development or improvement within the current structure. Key people to consider interviewing include the CEO, COO, Director of Nursing, Person in Charge, Quality / Risk Manager and the Financial Controller. Within these interviews it is important to consider discussing roles and responsibilities, communication pathways, the oversight and accountability, the support offered to front line staff and the quality and safety of the service. Interviews should also be held with frontline staff members, to provide an in-depth understanding of the existing processes, issues, service user records, staff records and management in the organisation and potential opportunities for development or improvement.
- Process Observation: An onsite audit should be carried out to observe the care in practice. Information can be gathered from observing processes being implemented to ensure they are line with standards, regulations and policies and procedures. Engage in one-to-one discussions with staff and service users and conduct a review of onsite documents such as staff records, care plans, service user records etc. Discuss with staff whether they know what to do when things go wrong and do they know the escalation process?
Once the review is completed, a detailed report should be developed outlining the findings and highlighting any areas of potential concern for the investment.
How can HCI help?
Conducing an effective Operational Due Diligence requires quality and safety experience and regulatory knowledge to really understand the quality of the care being provided. HCI is an independent and trusted partner in healthcare. We have both the experience and knowledge to ensure you get a comprehensive understanding of the quality and safety of the service.
Following an extensive review by HCI, of the organisation’s Governance and Quality and Safety Management System (QSMS), HCI will provide you with a set of Operational Due Diligence Reports. The reports identify areas of good practice and provide a detailed evaluation of the areas of regulatory non-compliance. For each of the regulatory non-compliances, HCI will allocate a risk rating flag system to reflect how the identified issues may impact on any potential investment. As part of this, a concise red flag report is provided to clearly detail the main areas of concern identified as part of the review. This level of detail allows you to clearly understand the potential strategic risks and make an informed decision.
Why work with HCI?
- Increases the chance of a successful investment.
- The Operational Due Diligence provides you with assurances prior to investing in the healthcare organisation.
- Reduces the risk to the investment and your reputation.
- HCI offer flexibility in meeting a short timeframe to conduct the Operational Due Diligence.
- HCI offer a comprehensive and independent review of the Quality and Safety Management System.
- Concise reporting utilising a risk rating flag system which clearly identifies the issues that either need to be resolved prior to investment or could potentially have a negative judgement enforcement action from a regulatory body.
- A more extensive, detailed report is provided against the relevant regulations and standards.
- Provides a baseline assessment of the current quality and safety of the service.
- HCI have extensive regulatory, quality and safety knowledge and can provide an expert opinion on an organisation’s quality and safety processes to determine if they are in line with regulatory and best practice requirements.
Conclusion
The Operational Due Diligence process is not one to be overlooked when investing in healthcare. It is an essential step to ensuring a successful investment for both the investor, staff and service users.
HCI works with healthcare investors to conduct Operational Due Diligence. This is a highly valued component of the acquisition process, providing investors with a clear understanding of the governance systems in place, the quality and safety of the service and any potential regulatory compliance issues. We can also support investors in ensuring that there is ongoing effective clinical oversight of the service along with well-developed Quality and Safety Management Systems.
For more information contact HCI at 01 629 2559 or info@hci.care.