Private Equity and DME: Understanding New Challenges and Opportunities

On July 4, 2025, President Trump signed into law the One Big Beautiful Bill (“Bill”). The 870-page bill covers almost ever component of the economy and extends many of the taxpayer-friendly provisions of the Tax Cuts and Jobs Act , passed in President Trump’s first term. The Bill significantly alters Medicaid by, among other provisions, reducing federal Medicaid spending by an estimated $911 billion over 10 years, largely through coverage losses. A result is a projected additional 11.8 million Americans becoming uninsured by 2034. The Bill includes provisions that will likely make it more difficult to enroll and maintain Medicaid coverage. Additionally, the Bill makes it more difficult for states to raise Medicaid funds through provider taxes. The anticipated cuts in Medicaid funding will (i) directly affect DME suppliers that serve Medicaid patients and (ii) indirectly affect all DME suppliers. This program will (i) summarize the elements of the Bill and (ii) then pivot to discussing the provisions of the Bill that impact state Medicaid programs. The program will focus on how the Bill will (i) directly impact DME suppliers that serve Medicaid patients and (ii) indirectly impact all DME suppliers. Lastly, the program will discuss steps that DME suppliers can take to operate within the confines of the Bill.

Learning Objectives:

• Understand the provisions of the Bill that apply to state Medicaid programs.
• Recognize how the Bill will impact state Medicaid programs and DME suppliers.
• Learn the steps DME suppliers can take to prepare for cuts in Medicaid spending.

The determination of fair market value (“FMV”) is critical for the protection of the DME supplier. For example, if a referral source (physician, hospital, long term care facility, etc.) refers federal health care program (“FHCP”) patients to the supplier, and the supplier desires to compensate the referral source for legitimate services, the arrangement needs to comply with the Personal Services and Management Contracts (“PSMC”) safe harbor to the federal anti-kickback statute (“AKS”). An important element of the safe harbor is for the compensation to be the FMV equivalent of the referral source’s services. The PSMC is also applicable when a DME supplier desires to compensate a 1099 independent contractor for marketing services. If a DME supplier desires to contract with a referring physician to be the supplier’s Medical Director, the arrangement must comply with the Personal Services exception to the federal physician self-referral statute (“Stark”). This exception contains the FMV requirement. As a final example, the concept of FMV enters the picture when an owner of a DME supplier is preparing the company for sale. This program will discuss the multiple ways that an FMV analysis can (i) protect a DME supplier from allegations of fraud and (ii) provide valuable information to the parties to a sale transaction. Equally as important, this program will discuss, in a “nuts and bolts” format, how FMV can be calculated.

When engaging in mergers and acquisitions (M&A) in the healthcare sector, careful attention to regulatory compliance is essential to avoid enforcement actions. Key considerations include thorough due diligence to uncover potential violations of healthcare laws such as the Anti-Kickback Statute, Stark Law, and HIPAA. Parties must evaluate the target’s billing practices, licensure status, and any history of audits or investigations. Ensuring compliance with federal and state fraud and abuse laws is critical, as even inadvertent violations can lead to significant penalties, transaction delays, and materially impact valuation. Awareness of emerging state disclosure requirements for private equity investments is becoming increasingly important. Structuring deals to address identified risks—such as through indemnifications or compliance plans—is also recommended. Post-closing integration should include alignment of compliance programs and staff training. Involving legal and compliance professionals early helps mitigate risk and supports a smoother transition. Ultimately, proactive regulatory planning throughout the M&A process protects both the acquiring and acquired entities from potential enforcement exposure and ensures long-term operational success.