Quality of Earnings

VMG Health has created a specialized Suite of Services related to Quality of Earnings.


  • Revenue Recognition
    • Review revenue recognition policies and significant accounting estimates, including: methods for estimating accrual revenue, reserving for bad debts or uncollectible amounts, and inquires of any changes to these policies during the historical period reviewed
  • Revenue Proof — Revenue to Cash Reconciliations
    • Reconcile key source data to confirm internal consistency across a business’ various reporting avenues (i.e., reported financial statement revenue, federal tax returns, operating reports, cash waterfall schedules etc.) and investigate discrepancies
  • Revenue Mixes & Trends
    • Review and analyze the historical revenue and volume mixes on a payor and modality basis and discuss identified trends with business management
    • Review and discuss with business management any specific payor contract information, including any changes to contracts during the historical periods reviewed and any contracts recently added or terminated (i.e., run-rate adjustments)
  • Revenue Accrual Basis Estimate
    • Perform a cash waterfall analysis, reviewing cash collections based on date of service and date of collection, typically at the entity level and/or by major payors
    • Analyze historical cash collection distribution and extrapolate the findings to determine the estimated revenues for the trailing twelve month (“TTM”) period
    • Revenue is adjusted and presented on an accrual basis based on VMG’s findings
  • Other Revenue Considerations
    • Through discussions with business management, observed trends, and our expert knowledge of the changes occurring within the healthcare industry, VMG will address the impact of other revenue related concerns (e.g., meaningful use payments, subsidy revenue, one-time revenue, run-rate adjustments)


  • Expense Recognition
    • Review expense recognition policies and significant accounting estimates, including period-end accounting adjustments, capitalization policies, etc., and inquire of any changes to these policies during the historical period reviewed
  • Expense Line Items Review
    • Review and evaluate specific direct expense and general and administrative expense line items
    • Perform a trend analysis to identify changes over time, helping to recognize any out of period expenses and distinguish between one-time expenses and continued expense levels
    • Reconcile staff payroll reports and facility rent terms to the related expense recognized in the financial statements
    • Expenses are adjusted according to VMG’s findings


  • Working Capital
    • Review, discuss, and evaluate cash management processes and policies
    • Review the accounts receivable aging by month (if available) and reconcile to general ledger, including a review of allowable charges ultimately collected and write-offs
    • Compare the accounts receivable balance to operational reports for receivables, including the cash run-out analysis to determine the distribution of collections by month following date of service
    • Review and evaluate other current asset balances, including other receivables and prepaid expenses
    • Analyze the balances of accounts payable, accrued liabilities, and current portion of long-term debt
    • Analyze working capital trends to understand the normalized level of working capital investment
  • Fixed Assets
    • Review property, plant, and equipment, including a detailed review of the business’ criteria for asset capitalization to analyze any major capital expenditures or disposals and understand historical capital investments for maintenance versus growth
  • Liabilities
    • Discuss liabilities with business management, including long-term debt terms and compliance with any related covenants and inquiring of any contingent or off balance sheet liabilities