By Dagmar Llaudy, Esq. · Llaudy Law · Miami, Florida
The asset purchase is the buyer’s oldest protection. Pick the assets, leave the liabilities, and the seller’s history stays with the seller. It works in almost every industry, which is exactly why it is trusted in the one where it works least. Successor liability medical practice buyers face in Florida does not follow that pattern, because the largest exposures do not travel through the common law of successor liability at all. They travel through statutes and regulations that attach to the change of ownership itself and never ask how the transaction was documented.
That produces a specific and avoidable failure: a buyer who negotiated the structure carefully, obtained a clean set of representations, and still acquired the seller’s regulatory position in full. The structure was not wrong. It was aimed at the wrong mechanism.
What Successor Liability Means in an Ordinary Business Sale
The default rule favours the asset buyer
In a conventional asset sale, the buyer takes the assets and does not assume the seller’s obligations except those it agrees to assume. Exceptions exist — express assumption, de facto merger, mere continuation, fraudulent transfer — but they are exceptions, they are argued case by case, and a well-drafted transaction with genuine consideration and a real change in the business usually stays outside all four of them.
The protection is contractual and judicial
It works because the parties allocated the liabilities and because a court will respect that allocation absent one of the recognized exceptions. Both halves depend on the dispute being between the buyer and a private claimant.
That is the assumption the health care answer breaks
When the claimant is an agency acting under a statute, the allocation between buyer and seller is not the operative document. The statute is, and it does not incorporate the purchase agreement by reference.
Why Successor Liability Medical Practice Buyers Face Is Different
The exposures are program exposures, not tort claims
Overpayments, administrative fines, unenforceable charges and plans of correction are creatures of statute and regulation. They do not arrive as a lawsuit against a legal entity; they arrive as a determination against a provider, addressed to whoever holds that status on the day it is issued.
The trigger is the change of ownership, not the deal structure
Section 409.907(6), Florida Statutes attaches consequences to a change of ownership “of any facility, association, partnership, or other entity named as the provider in the provider agreement.” It does not distinguish between an asset sale and a share sale, and it does not ask which liabilities the parties agreed to move.
The other side of the coin is equally uncomfortable
Structuring to avoid a change of ownership does not avoid the history either. If the provider entity survives the transaction, everything attached to that entity survives with it. You can leave the entity behind or you can keep it, and either way the regulatory record finds a way through.
The Three Doors Liability Comes Through
Keeping these apart is the whole analysis, because only one of them is the door the asset structure closes.
Door one: the Florida Medicaid statute
Under § 409.907(6)(a), “The transferee is also liable to the agency for all outstanding overpayments identified by the agency on or before the effective date of the change of ownership.” Under § 409.907(6)(b), if the required notice is not given, “the transferor and transferee are jointly and severally liable for all overpayments, administrative fines, and other moneys due to the agency, regardless of whether the agency identified the overpayments, administrative fines, or other moneys before or after the effective date of the change.”
This door does not close. It is statutory, it is direct, and it operates whatever the purchase agreement says. The Medicaid change of ownership analysis works through what falls inside it.
Door two: the assigned Medicare provider agreement
Under 42 C.F.R. § 489.18, where there is a change of ownership the existing provider agreement is automatically assigned to the new owner, and the assigned agreement remains subject to all applicable statutes and regulations and to the terms of the original agreement, including any plan of correction in place.
This door can be closed, at a price. A buyer may reject the assignment and enroll as a new provider, which separates the buyer from the seller’s Medicare compliance history and also interrupts the ability to bill. The Medicare change of ownership rules set out the trade.
Door three: the surviving entity
If the transaction is a purchase of equity, or a merger of another corporation into the provider corporation, nothing is assigned because nothing moved. The entity that generated the history is the entity you now own. Nothing about that is successor liability in the technical sense, and the practical result is identical: the audit exposure, the enrollment record and the billing history all continue undisturbed, in the hands of a new owner who did not create any of them.
And a fourth thing that is not a door but behaves like one
Section 400.9935, Florida Statutes provides that a charge made by or on behalf of a clinic required to be licensed but not licensed is “an unlawful charge and is noncompensable and unenforceable.” That is not a liability transferred to the buyer. It is a defect in the receivable itself, and a buyer who paid for those receivables paid for something that cannot be collected.
Step 1: Map the Liability Before You Choose the Structure
List the exposures by mechanism, not by amount
For each one, write down how it would reach you: by statute, by assignment, by owning the entity, or by ordinary contract. Only the last category is the one the structure controls, and it is usually the smallest of the four by value.
Size the ones that are statutory
Identified overpayments are knowable during diligence and belong in the price. Open audits are not yet identified and belong in escrow. Healthcare due diligence in Florida is where both categories get built.
The distinction is worth holding onto, because the two behave differently in a negotiation. A known number is a price conversation the seller can concede without conceding anything about conduct. A range is an argument about probability, and it usually ends in an escrow precisely because neither party can win it.
Test the receivables you are buying
If any part of the purchase price is attributable to accounts receivable, confirm that those claims were billable. A receivable that is unenforceable is not a discounted asset. It is not an asset.
That test is separate from ageing and separate from payor mix. It asks whether the entity was entitled to make the charge at the moment it was made, which depends on licensure, enrollment and credentialing at that date rather than on anything about the patient or the service.
Do this before the letter of intent, not after
The structure question is downstream of this map. Choosing first and mapping later means discovering that the chosen structure addresses the smallest of the three doors.
Step 2: Decide Which Door You Can Actually Close
The Medicare door, by rejecting the assignment
Available, costly, and the only one of the three where the buyer has a genuine election. The cost is billing continuity, and whether that is affordable is a cash-flow question rather than a legal one.
The ordinary contract door, by structuring
Trade payables, equipment leases, employment obligations and commercial claims behave normally, and the ordinary exceptions to successor liability apply in the ordinary way. An asset structure does what it always does here, and this is the category where careful drafting genuinely pays for itself.
The Medicaid door, not at all
There is no structural answer to § 409.907(6)(a). The only variable within the buyer’s control is compliance with the notice, which keeps the exposure bounded by what had been identified rather than open-ended.
That is worth stating plainly to a client who expects a structuring answer, because the instinct in a transaction is to keep looking for one. There is no entity form, no assumption schedule and no exclusion of liabilities that reaches this subsection. What there is instead is diligence, a price that reflects it, an escrow for the timing risk, and a notice sent on time.
The surviving entity door, by not buying the entity
Which returns you to the Medicare and Medicaid analysis, because leaving the entity behind is what creates the change of ownership in the first place. Every route out of one door opens another. The exercise is choosing which one you can afford to walk through.
Step 3: Build the Protection Around What You Cannot Close
Put the known number in the price
Identified overpayments are not an indemnity item. They are a purchase price adjustment, because the buyer will pay the agency first and pursue the seller afterwards, if at all.
Escrow the timing risk
Open audits, unresolved plans of correction and pending records requests are contingencies with a plausible range. An escrow with a defined release schedule handles them better than a general indemnity basket.
Keep that mechanism separate from the price adjustment. Identified overpayments reduce the price; open audits fund the escrow. Keeping the two apart keeps the negotiation honest, because a seller can accept a price adjustment for a number that already exists far more easily than an escrow against a number that might.
Make the notice a closing condition
The difference between § 409.907(6)(a) exposure and § 409.907(6)(b) exposure is entirely within the parties’ control. Conditioning closing on proof that the notice went out at least 60 days earlier converts a statutory risk into a contractual mechanic.
Draft it as a condition rather than as a covenant. A covenant to give notice is breached after the fact and remedied in damages, which is exactly the wrong shape for a liability that becomes joint and several. A condition to closing simply prevents the transaction from completing until the proof exists, and it gives both parties a reason to attend to it early.
Test the indemnity against who will be left
An indemnity from an entity that will be dissolved after distribution is a document rather than a remedy. If it matters, it needs a holdback, a guarantee from someone with assets, or an escrow that outlives the seller.
What an Asset Purchase Still Does Not Solve
It does not reach the statutory transfer of overpayment liability
Section 409.907(6)(a) attaches to the change of ownership. The asset structure is what creates the change of ownership.
It does not repair a defective receivable
An unenforceable charge under § 400.9935 was defective when it was created. Buying the asset does not cure it, and excluding it from the purchase does not recover what the seller already collected.
It does not resolve the licensure position
A Florida licence does not transfer, and an exclusion from clinic licensure depends on who owns the entity. An asset purchase that changes the ownership may end an exclusion the seller relied on, which is a forward-looking problem the structure creates rather than solves. The clinic licensure analysis is where that gets tested.
There is a symmetry here worth noticing. The structures that reduce inherited liability tend to increase forward licensure work, and the structures that preserve continuity tend to preserve exposure along with it. That trade is the real content of the structuring decision, and it is obscured whenever the conversation is framed as asset versus equity rather than as which mechanism you are trying to interrupt.
It does not shorten the timeline
A structure chosen to limit liability usually requires new licensure and new enrollment, and those run on the 60-day notices under § 408.807 and § 409.907(6)(b). Protection bought with time is still bought.
That cost is easy to underweight during negotiation, because it does not appear in the purchase price. It appears in working capital, in the length of the transition services arrangement, and in the period during which the seller remains responsible for an operation it has already sold. All three are real, and all three should be modelled before the structure is described as the safer one.
How the Three Doors Interact in a Real Transaction
Reading them separately is how the analysis is built. Watching them interact is how a structure gets chosen, because closing one door usually opens another.
Leaving the entity behind opens the statutory doors
An asset purchase avoids inheriting the entity, and in doing so it creates the change of ownership that triggers § 409.907(6)(a) and, in Medicare, the automatic assignment. The protection and the exposure are produced by the same act.
Keeping the entity closes those doors and keeps everything else
An equity purchase avoids the change of ownership entirely under the Medicare definition, which means nothing is assigned. It also means the billing history, the audit exposure, the enrollment record and the corrective plans stay exactly where they are, because you now own the thing that generated them.
The only door that closes cleanly costs cash flow
Rejecting the Medicare assignment genuinely separates the buyer from the seller’s compliance history on that program. It costs the ability to bill until a new enrollment is complete, and for most going concerns that cost is the binding constraint rather than a preference.
Which is why the notice is the highest-value step in the transaction
It is the one action that reduces exposure without costing anything. Complying with the 60-day requirement keeps the Medicaid exposure bounded by what diligence could find. Missing it removes the boundary and reaches findings the agency has not made yet. No structure buys that. Only the calendar does.
Common Mistakes That Leave a Buyer Exposed
Treating the asset structure as the answer to everything
It answers one of three doors. Assuming otherwise is the single most expensive error in this area.
Negotiating indemnity caps instead of the notice date
The cap is a negotiation with the seller. The notice is a negotiation with the statute, and only one of those has a fixed answer.
Buying receivables without testing entitlement
The question is not collectability. It is whether the charge was lawful when it was made, and a receivable that fails that test does not improve with collection effort. It is worth nothing, and any part of the purchase price allocated to it was allocated to nothing.
Choosing the structure for tax and discovering the regulatory result afterwards
Both matter. The order in which they are considered decides which one wins, and the regulatory result is usually the more expensive of the two to be wrong about.
Four questions worth asking before the structure is fixed. Which mechanism does each material exposure travel through. Which of those can this structure actually close. What does closing it cost in billing continuity or in time. And if the notice were missed, who is left to pay.
Expected Outcome: A Structure Chosen for the Right Reason
The markers of a transaction that got this right
A written map of exposures by mechanism rather than by amount. A documented decision on the Medicare assignment with the cash-flow model behind it. Identified overpayments reflected in the price rather than in an indemnity. An escrow sized to the open audits with release conditions. A closing condition tied to the 60-day notices, with proof. And a receivables schedule that was tested for entitlement rather than for age.
What it prevents
It also produces a better negotiation, because a buyer who can explain which exposure travels by which mechanism is asking the seller for specific protections rather than for general comfort. Specific requests get answered. General ones get resisted, and then get papered in language that does not do anything.
It prevents the conversation that begins “but this was an asset purchase.” That sentence is a correct statement of the structure and an incorrect statement of the exposure, and it is usually said after the money has moved.
The practical rule is simple: structure controls the liabilities that travel by contract, and nothing else. Map the mechanisms first, close the doors you can afford to close, and price the ones you cannot. The full acquisition picture puts that decision alongside the licensure and enrollment calendars it has to share a closing date with.
Frequently Asked Questions
Does an asset purchase protect a buyer from the seller’s Medicaid overpayments?
No. Section 409.907(6)(a) makes the transferee liable to the agency for outstanding overpayments identified on or before the effective date of the change of ownership, and the subsection does not depend on how the transaction was structured.
Is buying the entity safer than buying the assets?
It is different rather than safer. Nothing is assigned because nothing moved, but the entity that generated the billing history is the entity you now own, along with its audit exposure and its enrollment record.
Can a buyer avoid the seller’s Medicare compliance history?
Only by rejecting the automatic assignment of the provider agreement and enrolling as a new provider, which also interrupts the ability to bill the program until the new enrollment is complete.
What happens to receivables billed by a clinic that should have been licensed?
Section 400.9935 makes such a charge unlawful, noncompensable and unenforceable, regardless of whether the service was rendered or the claim was paid, so those receivables are defective rather than merely doubtful.
Does an indemnity solve the problem?
It allocates loss between the parties. It does not change who the agency looks to first, and it is only as good as the assets standing behind the party that gave it.
What is the single most valuable protective step?
Complying with the 60-day notice. It is the one variable entirely within the parties’ control, and it is the difference between exposure bounded by what diligence found and exposure that reaches findings made after closing.
About the author. Dagmar Llaudy is a trial lawyer at Llaudy Law in Miami, Florida, practicing in health law, corporate transactions and general litigation. She has been a member of The Florida Bar since 2000 and is admitted in the Southern and Middle Districts of Florida. She practices in English and Spanish. More on the firm’s health care law work is on the practice page.
This article is general information about successor liability and regulatory exposure in Florida health care transactions. It is not legal, tax or accounting advice, and it does not describe any particular provider, structure or transaction. Reading it, or contacting us through this site, does not create an attorney-client relationship. Statutes and regulations are amended and their application depends on the provider type, the payor mix and the form of the transaction. If you are choosing a structure for a health care acquisition in Florida, speak with a licensed attorney before you commit to one.
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Llaudy Law is a boutique law firm in Miami, Florida, handling health care law, real estate closings and title work, corporate and business transactions, estate planning, civil litigation and Chapter 7 bankruptcy. If you are choosing a structure for a health care acquisition, we will tell you which exposures it actually reaches before you sign.
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