Definition
A survival period is the timeframe after your practice is sold during which you, the seller, are still financially responsible for the accuracy of statements you made in the sale agreement. Think of it as a warranty period for the business promises you made to the buyer.
These promises, known as Representations and Warranties, cover the condition of your practice—from billing compliance to employee contracts. If a buyer discovers a promise was untrue during this period, they can make a claim against you. The typical survival period for general business matters is 12 to 24 months.
Why This Matters to Healthcare Providers
For you as a selling physician, the survival period defines your window of post-closing risk. An unknown billing error or compliance issue that surfaces after the sale but within this period can directly reduce your final take-home proceeds, often through claims against a portion of the purchase price held in an Indemnification Escrow.
Example in Healthcare M&A
Scenario: A two-physician dermatology practice is sold to a private equity firm. In the sale agreement, the owners represent that the practice has been fully compliant with all federal healthcare laws. The agreement includes a 24-month survival period for this representation.
Application: Sixteen months after the closing, the new owner conducts a routine audit and discovers a pattern of improper use of billing modifiers that occurred under the previous owners. This constitutes a breach of the compliance representation.
Outcome: Because the breach was discovered within the 24-month survival period, the private equity firm can file an Indemnification claim. The selling physicians are now liable for the costs associated with the old billing errors, including government repayments and fines. This amount is typically deducted from the escrow fund that was set aside from their sale proceeds.
Related Terms
Preparing properly for buyer due diligence can prevent unexpected issues. Request a Due Diligence Preparation Session →
About the SovDoc M&A Glossary
Hand-curated by our deal-makers and analysts, the SovDoc glossary turns complex mergers-and-acquisitions jargon into clear, plain-English definitions.
Want to learn more? Explore the rest of our glossary or reach out to our team for deeper insights.
Frequently Asked Questions
What is a survival period in the context of selling a medical practice?
A survival period is the timeframe after your practice is sold during which you, the seller, remain financially responsible for the accuracy of statements made in the sale agreement. It acts like a warranty period for the business promises made to the buyer.
Why is the survival period important for healthcare providers selling their practice?
The survival period defines the window of post-closing risk for selling physicians. If issues like billing errors or compliance problems surface during this period, they can reduce the seller’s final proceeds through claims against an indemnification escrow.
How long is the typical survival period for general business matters in healthcare M&A?
The typical survival period for general business matters, including healthcare M&A, is usually between 12 to 24 months.
What happens if a breach of representation is discovered during the survival period?
If a breach, such as non-compliance or billing errors, is discovered within the survival period, the buyer can file an indemnification claim against the seller. The costs related to the breach, including repayments and fines, are often deducted from an escrow fund set aside from the seller’s proceeds.
Can you provide an example of how the survival period works in a healthcare M&A deal?
For instance, a dermatology practice sold with a 24-month survival period had a billing compliance breach discovered 16 months after closing. The buyer filed an indemnification claim, making the sellers liable for costs linked to the billing errors, which were deducted from their escrow funds.