What Counts? How On-Site Inventory Benefits Valuations  

June 27, 2024

Written by Joel Gomez, ASA

Before you begin the process of selling your medical practice, it is always in your best interest to ensure your practice’s value is accurately represented. Most buyers of medical practices, including healthcare systems and hospitals, begin the transaction process with a fair market value analysis of the business revenues to determine the purchase price. Unfortunately, many practices in the position of selling are in a break-even or negative cash–flow scenario. In these instances, the value of the practice may be most accurately represented by the fair market value of personal property and real property.

Some buyers opt to have personal property valued on a “desktop” scope of work, relying on data in the form of a depreciation schedule or practice inventory as the basis of the fair market value analysis. While acceptable for fair market value purposes, this approach may not capture all owned personal property.

Identifying Personal Property Through Accounting Documents

The first approach for identifying personal property through accounting documents is the use of a depreciation schedule or fixed asset listing (FAL). While real property is easily identifiable (the space is either owned or rented), personal property listings are often less maintained, reliant on an accountant’s tracking of capitalized assets, and may not fully reflect what is owned.  When preparing a valuation, an appraiser is always subject to the quality of available data. FALs maintained by an accountant only display equipment that meets the predetermined capitalization cost threshold determined by that accountant. Additionally, some capitalized assets are removed from the FAL once it has fully depreciated according to accounting standards. Providing an equipment appraiser, a FAL as the basis of their appraisal could mean valuable practice assets are not captured.

An on-site inspection and asset inventory by an appraiser allows them to capture all assets on a room-by-room basis, regardless of original purchase cost or visibility on the FAL.

Practice Staff Identifying Personal Property

Another alternative to an appraiser performing an on-site inspection is to have a practice employee create the inventory. While this may sound like a good approach initially, information captured by someone other than an appraisal expert tends to be inconsistent. Items captured in one room are missed in the next, and inconsistent asset descriptions will lead to follow-up information requests, requiring the selling practice to invest more work hours.

The VMG Health Solution

Hiring an appraisal expert to complete an on-site inventory and inspection of the practice’s tangible personal property ensures personal property listings are maintained, fully reflect what is owned, and include consistent asset descriptions from room to room. VMG Health reviewed a sampling of projects over the past 18 months, across several practice specialties, and noted that when completing a site visit as part of our valuation process, the fair market value conclusion of exam rooms was roughly 60%–70% higher on a per-room basis compared to relying on practice data/inventories.

VMG Health’s qualified equipment appraisers have the knowledge and experience to complete a discrete and comprehensive inventory, gathering all necessary data during the visit and minimizing interruptions to the practice operations and patient flow.

VMG Health’s team of equipment appraisers has over 55 years of experience in the equipment appraisal field across all sectors of the healthcare industry and includes three accredited senior appraisers with the American Society of Appraisers. Since 1995, VMG Health has earned the trust of our clients with extensive expertise in navigating the dynamic factors that influence value. If you are in the process of valuing your practice, use VMG Health’s equipment appraisers to complete an on-site inspection, inventory, and valuation of your personal property.

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It’s OK Not to Be OK: Leading Your Healthcare Organization with Authenticity  

June 26, 2024

Written by Christa Shephard

Even in today’s ever-evolving world of leadership, there remains a belief that admitting vulnerability is a sign of weakness. However, in the latest episode of Coachify Over Coffee, Laura Baldwin and Savory Turman, leadership development coaches, challenge this misconception head on by diving into and emphasizing the importance of authenticity and its transformative power in leadership. 

The fourth episode of Coachify Over Coffee, It’s OK Not to Be OK, addresses a common misconception among leaders in healthcare and across all industries: the fear that admitting they’re not okay diminishes their credibility. Our coaches discuss how authenticity breeds trust and connection, strengthening teams and organizations. They highlight lying about one’s well-being can undermine trust far quicker than acknowledging vulnerabilities. 

It’s important to define what “fine” really means in different contexts. Rather than accepting superficial answers, Baldwin and Turman encourage leaders to dig deeper. When leaders ask probing questions and foster genuine conversations, they uncover the truth behind their team’s well-being. Recognizing signs of burnout early on can help leaders and teams address stress before it escalates, preventing the negative impacts of prolonged stress. 

The conversation extends beyond individual leadership and acknowledges organizational culture. Baldwin and Turman share how fostering authenticity can positively impact employee morale and organizational trust. According to a recent survey by the Society of Human Resource Management, a significant percentage of organizations may claim to prioritize employee mental health, but many fail to implement meaningful strategies. Missing substantive opportunities to support employee mental health only reinforces the need for genuine, actionable steps toward creating supportive work environments. 

Baldwin and Turman leave listeners and leaders with practical advice: Regularly self-assess and reflect, asking ourselves, “What do I need in this moment?” Though it may seem like a simple question, its answers may be complicated, which can inspire deep self-discovery and a more balanced approach to leadership. When leaders own and address their personal struggles, they both enhance their own credibility and create environments where others feel empowered to do the same. 

If you’re looking to improve your leadership effectiveness and have a greater impact on your practice, Coachify Over Coffee offers valuable insights and actionable strategies. Learn to shift your mindset, view daily problems through a different lens, and apply a new approach to your leadership with the help of Laura Baldwin and Savory Turman, two certified coaches dedicated to sharing their expertise with listeners like you. 

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Revolutionizing Compliance & Efficiency: Empower Your Practice with Compliance Risk Analyzer 

June 20, 2024

Written by Christa Shephard

As new tools come to the forefront of healthcare delivery, staying compliant with updated billing and coding policies is crucial. VMG Health’s Compliance Risk Analyzer (CRA) is designed to help health systems and practices navigate the shifting healthcare landscape with ease, ensuring they remain compliant and avoid small mistakes that can lead to big consequences, like audits. Additionally, the financial returns from the undercoding of E&M codes and the potential FTE savings through improved efficiency, resource reduction, and cost-effectiveness underscore the value of implementing CRA. 

The Analytical Edge in Healthcare Compliance 

Analytics are increasingly driving healthcare and its delivery. Government agencies and private payors use advanced statistical models to identify improper claims and target providers for audits. To balance the scales, healthcare managers need a fundamental understanding of these statistical practices. A manager does not need to be an expert statistician, but a foundational understanding of statistics is critical to properly coding, billing, and understanding common mistakes. A fundamental understanding of trending analysis, time series, confidence intervals, and other factors empowers providers and managers to maximize the benefits of CRA’s data analytics. 

Health systems and practices should closely monitor their billing and coding processes. It is crucial to efficiently perform internal, risk-based audits that produce accurate results that mimic how the government audits. Catching and addressing mistakes early is key. 

How CRA Levels the Playing Field 

CRA employs artificial intelligence to simplify the compliance process. Instead of requiring managers to become statisticians, CRA handles the heavy lifting. Through its sophisticated algorithms, CRA automates the complicated task of data analysis, allowing healthcare providers to conduct risk-based audits as efficiently and accurately as possible. It also employs predictive analytics to identify which claims or services will be most likely to be audited, allowing providers to take proactive, preventive measures, saving time and money.

Typically, organizations use about 1.3 full-time employees (FTEs) per 1,000 providers just to start identifying audit targets. CRA completely eliminates this step, saving much of the upfront work and boosting the accuracy of risk prediction by reviewing 100% of claims. Creating and implementing an audit plan usually takes 0.8 FTEs per 1,000 providers; CRA handles it in seconds with just one click. Finally, practices usually spend about 20% of their resources just digging through claims within the EHR to choose which claims to audit. CRA automates this process, picking claims based on statistically valid, random samples or non-probability convenience samples. This data-driven, proactive technology allows healthcare organizations to address potential issues before they escalate.

Empowering Healthcare Providers 

Ultimately, CRA is about empowerment. Understanding the basics of statistics and data analytics is vital to fully capitalizing on its services. CRA is designed to help healthcare providers protect themselves from unwarranted audits and compliance issues. By integrating advanced analytics into everyday operations, health systems practices can enhance their compliance strategies and focus on delivering exceptional patient care. 

Stay tuned for more insights on how CRA and other VMG Health solutions are transforming healthcare compliance. 

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Quality of Earnings Analysis: Navigating the Cash-to-Accrual Conversion 

June 13, 2024

Written by Johnny Zizzi, CPA; Lukas Recio, CPA

When considering a new acquisition or transaction, accurate financial reporting is paramount for informed decision making. One significant aspect of financial reporting is the choice of accounting method: cash, accrual, or a hybrid of both. Many companies begin their journey with cash accounting, but as they grow and evolve or are otherwise acquired by a larger entity, they often transition to accrual accounting to meet regulatory requirements or achieve a more comprehensive financial picture.  

This transition is not without its pitfalls and considerations, particularly when understanding its impact on enterprise valuation resulting from the quality of earnings process. Key considerations when converting from cash to accrual accounting include revenue recognition in accordance with ASC 606, expense accrual recognitions, managing changes in working capital, and earnings volatility.  

The Shift from Cash to Accrual Accounting

Cash accounting, also called checkbook accounting, entails recording transactions when cash changes hands, which provides management with a straightforward method for tracking cash flow. Small businesses often prefer this method because the IRS allows it when certain size criteria are met and because it is easier to track money as it moves in and out of bank accounts. Further, there is no need to evaluate accounts receivable or payable to determine income when using cash accounting, simplifying the management of the financial statements as a whole.  

However, for healthcare entities, this simplicity can be misleading, as it does not capture the true financial obligations and revenues tied to patient care and insurance reimbursements. Accrual accounting, on the other hand, records revenues when they are earned and expenses when they are incurred, regardless of when cash is exchanged. While cash accounting may be simpler for small businesses, accrual accounting offers a more accurate representation of a company’s financial health, especially as they grow and become more complex.  

A crucial component of most healthcare services transactions is the quality of earnings analysis, which aims to assess the sustainability and accuracy of historical earnings and the achievability of future earnings, thereby providing potential buyers with a clear understanding of the company’s true earning potential.  

Revenue Recognition

Transitioning from cash-basis accounting to accrual accounting entails significant differences and challenges in revenue recognition. Under cash-basis accounting, revenue is recognized when cash is received, while accrual accounting dictates recognition when revenue is earned, irrespective of cash-flow timing. This shift necessitates adjustments to accurately reflect revenue generated within a given period, especially for long-term contracts or services rendered where cash receipts may occur at different points from when the revenue is earned. Challenges arise in estimating and timing revenue recognition, requiring careful assessment of performance obligations, delivery, and collectability.  

Issues stemming from the diverse revenue streams and payment models prevalent in healthcare, such as fee-for-service, capitation, and bundled payments add an additional layer of complexity when converting from cash to accrual accounting, as each payment model has distinct timing and recognition criteria. Additionally, healthcare entities often engage in complex contractual arrangements with payors and providers, leading to variations in revenue and expense recognition practices. Moreover, healthcare organizations may have unique regulatory requirements and accounting treatments for certain transactions, further complicating conversion efforts.  

Differences in case mix, payor mix, and procedure mix among healthcare entities can also impact revenue recognition as the collectability of outstanding accounts receivable is often different for specific payor and case mixes. Cash waterfalls, zero-balance analyses, and other revenue hindsight analyses are leveraged as part of VMG Health’s comprehensive quality of revenue analysis to ensure revenue recognition is converted from a cash basis to an accrual basis in accordance with ASC 606. Adherence to revenue recognition principles, while requiring meticulous analysis to mitigate misinterpretation and manipulation, is a critical component to a quality of earnings analysis, as it ensures financial statements provide a more comprehensive view of revenue performance, enhancing transparency and comparability. For further detail on quality of revenue analysis, see VMG Health’s previous article: Proceed with Caution: Five Key Considerations in Quality of Revenue Analysis.

Expense Accruals 

Transitioning from cash to accrual accounting presents unique challenges beyond revenue recognition. One significant hurdle lies in accurately accounting for expenses, particularly in healthcare facilities where costs often span various departments and service lines. Accrual accounting requires recognizing expenses when incurred, irrespective of cash outflows, which can be intricate in healthcare settings due to the complex nature of patient care, procurement of medical supplies, and maintenance of facilities. Ensuring accountants properly match expenses to the periods in which they contribute to patient care or administrative functions may require complex allocation and estimation methodologies. 

For instance, the timing and recognition of expenses related to medical supplies and pharmaceuticals can vary based on inventory management practices and rebate arrangements with suppliers. Historical cost of goods sold analysis and margin analysis are two of the most common strategies implemented to understand underlying changes in the business, providing a basis for accurately matching expenses to the relevant accounting periods. In large healthcare systems, these complexities are further amplified by the need to allocate costs accurately across multiple departments and service lines, such as inpatient, outpatient, surgical, and emergency services. Addressing expense accrual challenges necessitates a comprehensive understanding of healthcare operations and collaboration between finance and operational personnel to ensure the accuracy of accrual conversions.  

In the context of a transaction, small businesses may prepay (malpractice insurance) or pay after the fact (common area maintenance charges) for certain expenses, which must be converted to an accrual basis to properly inform a buyer of the business’ financial condition.  

Managing Changes in Working Capital 

Shifting from cash to accrual accounting also affects the management and assessment of working capital. Under cash accounting, working capital appears straightforward, often mirroring the cash flow directly. However, accrual accounting requires a more nuanced view, recognizing accounts receivable, accounts payable, and inventory changes that may not have immediate cash implications but significantly impact liquidity and operational efficiency. Accurate tracking and managing these elements is crucial, as they influence a healthcare organization’s true financial position and operational performance and may have purchase price implications. 

Understanding and converting net working capital on an accrual basis also helps shareholders and potential buyers identify a business’ strengths and potential weaknesses. For healthcare entities, a rise in accounts receivable under accrual accounting indicates future cash inflows but also highlights the importance of effective revenue cycle management, including timely billing and collection processes. Similarly, accounts payable under accrual accounting provide insights into a company’s obligations and upcoming cash outflows, lending toward robust vendor management and procurement practices. Healthcare entities must develop comprehensive systems for monitoring these working capital components to ensure they reflect the actual financial health and to make informed decisions regarding cash management, investment opportunities, and strategic planning. However, there must first be benchmark net working capital to compare future trends.  

Earnings Volatility 

Under cash accounting, earnings may appear more volatile, as revenues and expenses are recorded only when cash transactions occur. However, accrual accounting captures economic events more accurately and consistently. Fluctuations in reported earnings can be caused by timing differences in revenue and expense recognition and can be particularly pronounced in the healthcare sector, where seasonal variations and payor reimbursement lags are common, causing revenue to be recognized in one period and the corresponding expenses in another on a cash basis of accounting. 

For stakeholders and potential investors, understanding the sources and implications of this volatility is crucial for assessing the company’s true financial health. Cash-to-accrual conversions within a quality of earnings analysis help identify and normalize these fluctuations, providing a clearer picture of sustainable earnings and operational performance. By aligning revenue and expense recognition to an accrual basis, stakeholders can benefit from more reliable insights into the company’s financial trajectory, aiding better investment and management decisions. For healthcare entities, this detailed analysis is particularly vital, given the sector’s unique financial dynamics and regulatory landscape. The application of advanced analytical techniques, such as trend analysis and scenario modeling, can further enhance the understanding of earnings volatility and its impact on long-term financial planning and stability. 


Converting from cash accounting to accrual accounting in a quality of earnings analysis offers several positive benefits. Accrual accounting provides a more accurate reflection of a company’s financial performance by matching revenues and expenses to the periods in which they are earned or incurred, offering a clearer picture of the company’s profitability over time. This enables stakeholders to make better-informed decisions regarding operational changes, investment, lending, or acquisition opportunities. Additionally, accrual accounting enhances comparability with industry peers and facilitates benchmarking analysis, as financial statements prepared under an accrual basis are inherently more standardized and comparable. Moreover, accrual accounting can uncover trends and patterns in revenue and expense behaviors, providing deeper insights into the company’s underlying financial health and operational efficiency. Overall, the conversion to accrual accounting strengthens the transparency, reliability, and credibility of earnings analysis, fostering trust among investors, creditors, and other stakeholders.

Categories: Uncategorized

Remember When an Operating Lease Was Just an Expense?

June 4, 2024

Written by Frank Fehribach, MAI, MRICS; Danny Cuellar

There was once a time when no one considered a lease as an asset. It was just an expense to be paid at the end of the month and ignored until the following month. Then ASC 842 came around in 2018 and operating leases became assets—right-of-use assets (ROUs), to be exact. ROU assets had to be put on the balance sheet and depreciated. Then they had to be tested for impairment. Now, for some firms that are downsizing their operations (or downsizing their physician practices), they must be impaired. 

History of Lease Accounting

In the beginning, there was FAS 13, Accounting for Leases. For lessees, leases were either operating or capital leases. Operating leases were expensed and capital leases, if they passed the test, were put on the balance sheet. To be a capital lease, you had to meet one or more of the four criteria: 

  1. The lease transfers ownership of the property to the lessee by the end of the lease term.
  2. The lease contains a bargain purchase option.
  3. The lease term is equal to 75% or more of the estimated economic life of the leased property.
  4. The present value of the minimum lease payments is equal to 90% of the fair value of the leased property.

FAS 13, which came into effect in 1977, became known as ASC 840 under the codification of the accounting standards. ASC 840 would continue until it was replaced by ASC 842 in 2019 for public companies and 2021 for private companies. ASC 842 was developed over nearly a decade and released in 2016. The main difference between the ASC 840 and 842 was that all operating leases greater than 12 months in term would be recognized on the balance sheet as both an ROU asset and a liability.  The Financial Accounting Standards Board had hoped this difference would increase transparency. It certainly had the effect of producing large lease guidance manuals from all the major accounting firms. It also produced a whole new category of assets that potentially need to be tested for impairment, and to be impaired if they failed.

Accounting Firm Guidance

Accounting firm guidance indicates that ROU assets are subject to ASC 360-10 impairment guidance applicable to long-lived assets. ROU assets must be assessed for potential impairment if there is an internal or external indicator, like the decision to vacate a leased space entirely or partially. However, vacating a leased space does not mean that it has been abandoned.  Abandonment accounting would only apply if the space were vacated and not used at all (even for storage) without intent to sublease the space. 

What Does ASC 360 Require?

ASC Topic 360, Property, Plant, and Equipment was issued in August 2001. Because of ASC 842, former operating leases of more than one year are now long-lived assets. These leases are subject to the same asset impairment guidance in ASC 360 that applies to any other property, plant, and equipment assets.   ASC 360-10-35-23 states, “For purposes of recognition and measurement of an impairment loss, a long-lived asset or assets shall be grouped with other assets and liabilities at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities.” 

An ROU asset has identifiable cash flows based on the lease payments. Testing is performed based on an undiscounted cash flow. During normal business operations, leased space is often vacated as operations are right-sized to the current business environment, creating a need to test for impairment. If the undiscounted cash flow is lower than the carrying amount of the asset, ASC 360 requires the owner of that ROU asset to reduce it to its fair value. 

Fair Value of a Right-of-Use Asset

What is the fair value of an ROU asset that is no longer used for the purpose that it was created for through the lease? To answer this question, we must know what market participants would pay for this asset if offered on the market as of the trigger date. For an ROU asset, this would be a sublease and the present value of future sublease payments. Typically, there is a certain period to find a sublease tenant, and then the sublease tenant would occupy the space for the remainder of the primary term. Option periods, that before may have been included in the ROU asset, may be excluded because the landlord may not allow it, or the actual tenant may want to end the lease and not exercise an option. If option periods were included in the ROU asset value originally, the impairment amount would increase. Additionally, the discounting of the sublease payments is done at a market rate not an internal borrowing rate (IBR) used to establish the ROU asset value initially. 

Complete Vacancy vs. Partial Vacancy

During a lease term, an organization’s operations in the leased space can be completely shut down or downsized. Typically, a completely vacated space will fail Step 1 of the testing, as there is no cashflow being generated for the lease space. For a partial vacancy, the Step 1 test becomes even more important, as part of the space is still being utilized. However, our experience is that a partially vacated space will still trigger the need to test for impairment. For a completely vacated lease, there is usually the assumption that the ROU asset must be impaired. 

Navigating the New Lease Accounting Landscape

In this new world of ROU assets, health systems need to be wary of physician practice downsizing in a leased space. Downsizing in a leased space could and should trigger impairment testing and possibly adjustment to fair value. The transition to ASC 842 represents a significant shift toward greater transparency in lease accounting, as the new standards provide a clearer picture of an entity’s financial obligations, though they also require more complex accounting. VMG Health has extensive experience assisting health systems and physician practices with this financial reporting exercise. 

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CRNA Compensation Trends and Why Costs Are on the Rise 

May 22, 2024

Written by Ashleigh Surgeon and Caroline Dean, CVA

In recent years, the anesthesiology market has seen many changes in compensation trends and practice models. With continued provider shortages and a growing demand for anesthesia services, providers in this specialty are becoming increasingly valuable. Specifically, certified registered nurse anesthetists (CRNAs) have become some of the most sought-after advanced practice providers in the industry, leading to significant increases in compensation for these providers. In addition, hospitals and health systems are shifting to expanded CRNA utilization as opposed to physicians due to the ongoing push for cost-effective treatment options. Understanding the factors impacting CRNA compensation trends is crucial to anticipating and addressing potential challenges in the pursuit of CRNA arrangements. 

Overview of CRNA Compensation  

According to Becker’s ASC Review, the anesthesiology market is facing a projected shortage of 12,500 providers by 2033. As basic economic principle rules, a decrease in supply of any healthcare provider drives demand upward, forcing costs of anesthesia services and provider compensation upward as well. In 2023, median compensation for CRNAs in the United States was reported at $221,300, an increase in total cash compensation of 11.3% from 2022.  

Source: Sullivan, Cotter and Associates, Inc. 2019-2023 Physician Compensation and Productivity Survey and 2019-2023 Advanced Practice Provider Compensation and Productivity Survey

This is a significant rise as compared to general physician assistants and nurse practitioners, who saw only a 5% increase on average from 2022 to 2023. This level of compensation is mostly accredited to the additional education and training required for the certification, as well as the increased risk and level of independence associated with their standard practice.

To receive certification from the National Board of Certification and Recertification for Nurse Anesthetists (NBCRNA), a candidate must first complete registered nurse training and the appropriate clinical experience. Then CRNAs complete a Nurse Anesthesia program, which grants the candidate a master’s degree. Program length varies from two to four years and includes a clinical experience requirement in addition to coursework. In total, the process of becoming a certified nurse anesthetist takes at least seven years to complete, surpassing a standard registered nurse by an average of three years in education and experience. As with any advanced degree, CRNAs often receive increased compensation due to a higher level of education and training than a standard practicing registered nurse.  

Because of their advanced training, CRNAs have an increased level of independence in a clinical setting. Though anesthesiologists may manage high-acuity surgeries, CRNAs in many states and facilities may be responsible for primary patient care, including informing the patient, completing examinations, developing pain management plans, prescribing medications, administering and monitoring medications, and responding to adverse reactions or emergencies. A CRNA’s involvement in responsibility for patient care puts the provider in higher-risk scenarios when compared to other registered nurse professions. In 23 states, CRNAs may operate independently without the supervision of a medical doctorate. CRNAs are also typically the sole anesthesia provider in many plastic surgery centers, eye surgery centers, dental surgery centers, and gastrointestinal surgery centers. Additionally, in the U.S., many facilities in rural areas with limited healthcare providers use CRNAs for routine surgical services in the specialties of general surgery, obstetrics, and pain management. According to the American Association of Nurse Anesthesiology, CRNAs comprise over 80% of anesthesia providers in rural areas. 

Drivers of Increased CRNA Compensation 

Though CRNAs’ level of autonomy may vary depending on location, state government regulations and a facility’s scope of services, the importance of CRNAs is often constant across markets. With their ability to operate nearly identically to an anesthesiologist in most general cases, CRNAs also incur the same level of risk as physicians and the increased costs associated with such risk. Increased utilization, higher malpractice insurance expenses, and reimbursement difficulties play a large role in these higher costs for CRNAs, which create a competitive environment amongst healthcare systems when considering compensation in recruitment efforts.  

Historically, anesthesiology services have been provided by a mix of physicians and CRNAs together. However, with continued physician shortages and health systems and facilities seeking more profitable provider options, CRNA-heavy care team models have risen to the forefront. In a care team model, one physician typically supervises between one and four CRNAs, allowing the facilities to rely on CRNAs as opposed to more expensive physician coverage. As CRNA utilization grows, so grows CRNA compensation as facilities are forced to offer more lucrative recruitment packages, inclusive of commencement bonuses and higher-dollar salaries to retain top CRNA talent and stay competitive. In addition, as many U.S. lawmakers are pushing to expand the scope of CRNA independent practice, it is likely CRNA utilization will continue to increase.  

Additionally, according to the Centers of Medicare and Medicaid Services (CMS), average CRNA malpractice insurance in 2024 is $5,968—nearly 50% higher than the average for all other midlevel providers. This is most likely attributed to the large number of CRNAs practicing independently, and therefore solely liable for any case complications. The most common malpractice claims involving CRNAs include subpar performance during procedures, poor patient monitoring and improper positioning. All three of these claims are extremely serious and can result in recovery complications, severe injury, and even death. As a result, CRNAs face higher medical malpractice premiums than providers not solely responsible for a patient’s care. Health systems and facilities must consider this expense when employing CRNAs’ services, whether they reimburse, subsidize, or include the expense in compensation.  

Lastly, anesthesia has seen a downward trend in reimbursement based on the CMS Medicare Physician Fee Schedules as Anesthesia Base Units (ASAs) reimbursement have decreased from $22.27 per unit in 2019 to $20.44 in 2024. In the states where CRNAs can practice independently, CMS will reimburse services provided by CRNAs at these rates. This reduction in reimbursement can impact a provider’s ability to collect sufficient revenue based on professional services alone, often requiring additional compensation or subsidization from a facility to sustain operational costs. This issue is commonly present for providers in a community highly comprised of governmental payors. Public payor rates, such as Medicare and Medicaid, reimburse medical services at a significantly lower rate than private insurance, less than 28% of median commercial rates in 2022. As such, facilities serving a population with a significant amount of governmental insured patients must offer providers a compensation plan not only to offset the practice’s operational costs, but also as an alluring salary serving as incentive to relocate to the market. With a CRNA shortage looming, these underserved areas must stay competitive in compensation offers to recruit and retain the essential services CRNAs provide to the community. This level of competition contributes largely to the upward drive of average CRNA compensation, as majority of the CRNAs are operating in the U.S. in lower-income markets.  

The VMG Health Experience

In summary, the CRNA compensation market will continue to evolve in the coming years, and health systems and facilities must understand and address these changes to capitalize on the benefits associated with CRNA utilization. VMG Health is frequently engaged to provide fair market value and consultative services to ensure CRNA compensation packages are both competitive and compliant with government regulations. Utilizing in-depth analyses of revenue, market data, costs and recruitment expenditures, and expert experience in similar arrangements, VMG Health can assist in navigating the increasingly important CRNA market.  


Becker’s ASC Review. (June 28, 2022). Weathering the storm in Anesthesiology: making the business case and demonstrating the value of Anesthesiology. https://www.beckersasc.com/asc-news/weathering-the-storm-in-anesthesiology-making-the-business-case-and-demonstrating-the-value-of-anesthesiology.html

Sullivan Cotter. 2019-2023 Physician Compensation and Productivity Survey and 2019-2023 Advanced Practice Provider Compensation and Productivity Survey

O’Brien, E. Health eCareers. (January 23, 2023). How Long is CRNA School? https://www.healthecareers.com/career-resources/nurse-credentialing-and-education/how-long-is-crna-school

Munday, R. Nurse Journal. (November 16, 2023). CRNA Supervision Requirements by State. https://nursejournal.org/nurse-anesthetist/crna-supervision-requirements/

AMN Healthcare. (June 23, 2023). CRNAs Practice Updates and Trends. https://www.amnhealthcare.com/blog/physician/locums/crnas-practice-updates-and-trends/

Centers for Medicare & Medicaid Services. 2019-2024 Anesthesia Conversion Factors. https://www.cms.gov/medicare/payment/fee-schedules/physician/anesthesiologists-center

Baxter Pro. (May 6, 2022). The 3 Most Common CRNA Malpractice Claims. https://baxterpro.com/the-3-most-common-crna-malpractice-claims/#:~:text=Do%20CRNAs%20Get%20Sued%20More,the%20benefits%20of%20the%20job

American Society of Anesthesiologists. (December 2022). Anesthesia Payment Basics Series: #3 Payment, Conversion Factors, Modifiers. https://www.asahq.org/quality-and-practice-management/managing-your-practice/timely-topics-in-payment-and-practice-management/anesthesia-payment-basics-series-3-payment-conversion-factors-modifiers#:~:text=In%202022%2C%20the%20Medicare%20anesthesia,conversion%20factor%20survey%20was%20%2478.00.&text=Overall%2C%20Medicare%20was%20paying%20less,commercial%20rates%20in%20that%20year

Liao. C, et. all. Semantic Scholar (2015). Geographical Imbalance of Anesthesia Providers and its Impact on the Uninsured and Vulnerable Populations. https://www.semanticscholar.org/paper/Geographical-Imbalance-of-Anesthesia-Providers-and-Liao-Quraishi/77112f1f7ca09a86142b4f5e7c065ae9a073dec2

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Five Key Analyses for Healthcare Financial Due Diligence

May 20, 2024

Written by Grayson Terrell, CPA

The following article was published bBecker’s Hospital Review.

In today’s complex healthcare environment, mergers and acquisitions (M&A) are proving to be more challenging than ever, with heightened governmental regulations impacting both the operation of an entity and the purchase and sale of an entity.

To successfully navigate a transaction in the healthcare sector, it is paramount that buyers and sellers make informed decisions through all of the tools made available to them. For sellers, this can come in the form of understanding how their business operates, understanding inefficiencies and growth opportunities, and even understanding what their business is worth. For buyers, informed decision making relies heavily upon understanding the markets in which they are investing, including governmental regulations in some states that may impact their ability to invest and operate; understanding the key operating metrics of similar companies in similar industries; and ensuring that they are paying an appropriate amount for the business. This is especially important because, in healthcare transactions, the capital used to purchase is often provided by investors who are counting on timely positive returns. 

Financial due diligence (FDD) is pivotal to the success of any healthcare transaction, as it requires detailed investigation and analysis of a company’s financial information and is used to validate a company’s true run-rate operating potential. With most healthcare M&A transactions, purchase price is based on a multiple of a company’s salable earnings before interest, taxes, depreciation, and amortization (EBITDA). As such, the buyer and seller must perform the appropriate financial due diligence procedures prior to executing a transaction. Below are five vital aspects of the financial due diligence process.

1) Quality of Earnings

The Quality of Earnings (QofE) process consists of making adjustments to the entity’s reported financial statements to normalize EBITDA. The bulk of these adjustments involve adjusting or removing impacts of non-recurring and one-time items from earnings to arrive at an adjusted EBITDA figure that represents a more accurate view of the entity’s true cashflows. This process also gives the FDD team the opportunity to pose pointed questions related to the entity’s operations, finances, and accounting functions, highlighting key information that could negatively or positively impact adjusted earnings. Specific to healthcare transactions, some of the relevant areas of interest with respect to potential EBITDA adjustments are:

  • Cash-to-accrual conversion of revenues and expenses
  • Removal of any non-recurring or out-of-period revenues or expenses
  • Normalization of specific revenue and expense accounts
  • Quality of Revenue analysis

2) Quality of Revenue

The Quality of Revenue (QofR) analysis may be the most important part of the FDD process when it comes to healthcare-related transactions, given the unique characteristics and nuances of healthcare revenue. During this process in many middle-market healthcare deals, the conversion of revenue from cash basis to accrual basis is a fundamental exercise with respect to the QofE analysis. The cash waterfall approach is the gold standard and therefore the most common method for accomplishing the cash-to-accrual conversion. With this method, detailed billing data is obtained from the entity’s revenue cycle management (RCM) system, which includes charges by date of service and payments by date of service and by date of payment. In this analysis, payments are adjusted back to their specific date of service (accrual basis), and outstanding collections on charges billed during the period under analysis are estimated based on historical collection patterns cut by payor, CPT code, or various other means.

3) Pro Forma Considerations

Pro forma adjustments are forward-looking projections on certain aspects of the business, which are layered back in across the historical financial statements. These assumptions can help buyers understand potential areas of future direction and growth opportunities for the company; however, these adjustments should be thoroughly scrutinized during buy-side FDD procedures to ensure the adjusted EBITDA and purchase price are not over- or understated. These estimations tend to lean more in favor of the seller and are often a primary area of focus by the opposing buy-side FDD team. As such, a seller should understand all aspects of the business, especially as they relate to these forward-looking projections, and should be able to support the key inputs utilized to derive these pro forma adjustments. If properly supported, these adjustments often increase the sale price of the business enough to cover the cost of FDD procedures incurred by the seller, if not many times over. Some examples of commonly observed pro forma adjustments in healthcare related QofE reports include:

  • Hiring/ramping of new providers on staff
  • Opening/closing of facilities
  • Renegotiation of payor contracts
  • Implementation/expansion of service lines.

4) Net Working Capital

Another common analysis in FDD procedures is a Net Working Capital analysis, which is used to determine the working capital (current assets less current liabilities, excluding cash and debt) required to operate a business in the post-transaction environment. This subsection of FDD typically involves substantial negotiation between buyers and sellers when approaching the close of a deal, as both parties will view various inputs differently, often striving to set a working capital peg that is more favorable for themselves. As a miscalculation of this peg can cost a seller on a dollar-for-dollar basis if the agreed-upon level of net working capital is not met, it is imperative that management and their advisors are involved and knowledgeable on this calculation.

5) Debt and Debt-Like Items

Most of the time, healthcare transactions occur on a cash-free, debt-free basis. Standard with any cash-basis business, many debt and debt-like items have the potential to be inaccurately reflected within a company’s balance sheet. As such, a Debt and Debt-Like Items analysis can assist buyers and sellers in understanding a company’s debts and liabilities as of the date of sale. These items can include potential tax-related exposures, outstanding litigation and legal settlements, deferred compensation, notes payable, and others.


In closing, FDD is a necessary step in ensuring that sellers have the keys to sell their businesses at the best possible price, and buyers can protect the money of their companies, firms, or investors by making a sound investment in the target company. This proactive approach creates trust between all parties and leads to more lucrative transactions for all.

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Navigating Tax Due Diligence in Healthcare Acquisitions

May 9, 2024

Written by Grayson Terrell, CPA; Joe Scott, CPA; Lukas Recio, CPA; Wayne Prior, CPA; and the Baker Tilly team

The M&A healthcare industry presents a unique set of challenges, and it is important to have the proper M&A professionals involved to assist with identifying potential deal issues. In addition to financial due diligence experts, M&A tax professionals should assist with understanding and identifying the transactional tax consequences, as the identified tax issues may impact the overall deal structure or may be used to negotiate in the purchase agreement. During the M&A due diligence lifecycle, financial and tax due diligence teams must collaborate closely. This collaboration often uncovers synergies between their processes, enhancing completeness and efficiency. As their work is often completed first, the financial due diligence team may act as the first line of defense and can assist with identifying potential exposures earlier in the process. M&A tax advisors can assist with vetting and quantifying these exposures, which can assist with limiting the identified risks during the purchase negotiations. Tax considerations often influence the structure of a sale, determining whether it’s taxable or tax-free, whether assets or equity are bought, and whether taxable gains can be delayed through methods like earn-outs, installment sales, and debt.

The starting point for tax diligence is understanding the tax entity type of the target included in the transaction. Different tax issues may arise depending on how the entity is treated for tax purposes. The common tax entity types are:

S corporation:

  • Though S corporations are flow-through entities—meaning items of income and loss are generally subject to tax, at the federal level, on the shareholders’ individual income tax returns—there is still the possibility of state income/non-income and indirect taxation at the entity level. As such, potential adverse tax implications exist for the buyer. Minor issues that may have flown under the IRS’ radar for years are much more likely to surface during a transaction.


  • While partnerships are flow-through entities—meaning items of income and loss are generally subject to tax on the members’ individual income tax returns, at the federal level—there is still the possibility of state income/non-income and indirect taxation at the entity level. As such, potential adverse tax implications exist for the buyer. Conducting detailed due diligence on a target you’re considering acquiring is a must in today’s complex tax environment.

C corporation:

  • In-depth tax due diligence in a C corporation acquisition is vital. As C corporations pay federal and state income taxes at the entity level, unexpected tax liabilities (including those from before the deal) could remain with the buyer and create very unpleasant surprises.

Common Healthcare Tax Due Diligence Issues

Improper independent contractor classification (applicable to all tax entity types). While some employers misclassify their employees as independent contractors in error, others do it intentionally to avoid paying state and federal payroll taxes by passing that responsibility onto the employee. Employers found to have misclassified their employees are subject to payroll tax and penalties that could succeed to the buyer. During due diligence, it’s important to determine whether independent contractors should be considered full-time employees. A common healthcare tax due diligence issue is the misclassification of certified registered nurse anesthetists (CRNAs), doctors, and other healthcare professionals as independent contractors. It is important to request IRS Form 1099 and understand the services performed by the independent contractors. Depending on the time dedicated to the business, level of pay, direction from the employer, and several other factors, there may be contractors who could be misclassified, resulting in potential payroll tax exposures. The IRS provides a 20-factor test to help make that determination with considerations related to direction and control.

Unclaimed property (applicable to all entity types). Each state has an unclaimed property statute governing when and what types of property must be remitted to it. Examples of unclaimed property include uncashed or unclaimed refund checks, patient overpayments, insurance overpayments, payroll checks, or vendor checks. If unclaimed after a certain period (dormancy period), those checks must be turned over to the state. This is a common issue amongst healthcare providers, as there may be instances where a patient’s insurance covers more than what was originally estimated for an appointment or procedure, resulting in a patient overpayment. In a situation where a healthcare provider sees non-recurring patients, the patients are less likely to use a credit balance toward a future appointment. It is important to review the target’s accounts payable and accounts receivable aging schedules to determine whether there are any balances that give rise to an unclaimed property risk. Financial due diligence teams will likely have access to the target’s financials and can assist with pulling the documentation necessary to evaluate these potential risks. To avoid possible unclaimed property liability, buyers should determine whether the target is properly addressing its escheatable property.

Improper treatment of owner personal expenses (applicable to S and C corporations). Is the S corporation owner using a corporate account for any personal expenses? If so, these payments may be considered compensation and subject to payroll tax. If the employer’s share of payroll tax is unpaid, the buyer could be held liable for the amount owed after the acquisition, including interest and penalties. In parallel, if a C corporation shareholder is conducting similar activities, the IRS or state revenue service may classify these expenses as dividends, which are non-deductible for income tax purposes.

Unreasonable owner compensation (applicable to S and C corporations). Since an S corporation shareholder’s distributive share of income is not subject to self-employment or payroll tax, owners are often motivated to minimize their salary in favor of non-wage distributions. However, if the IRS determines an owner’s salary to be too low based on multiple factors—including profits, business activities, and the shareholder’s involvement in the business—non-wage distributions could be reclassified to wages subject to employment taxes. The buyer may be responsible for this tax if it isn’t resolved before the acquisition. Conversely, if a C corporation shareholder’s salary is too high relative to the available facts, the IRS or state revenue service may deem the compensation to be excessive and reclassify a portion to dividends.

Related-party transactions (applicable to all entity types). A related-party transaction takes place between two parties that hold a pre-existing connection prior to a transaction. There are many types of transactions that can be conducted between related parties, such as sales, asset transfers, leases, lending arrangements, guarantees, and allocations of common costs. These transactions can become problematic when an S corporation utilizes them as a vehicle to get extra cash out of the business. If a shareholder owns both Company A and Company B, and Company A pays the shareholder a below-market salary while also renting a building from Company B (an LLC taxed as flow-through) at inflated rates, it may be considered disguised compensation to avoid payroll taxes. It is important to request copies of the lease agreements and understand the fair market value of the square footage and rent of the property to determine a potential disguised compensation risk as it relates to related-party transactions. Problematic related-party transactions should be addressed during due diligence.

Cash vs. accrual accounting method (applicable to all entity types). The IRS prefers the accrual method, but if a company is on the cash basis of accounting for tax purposes, the buyer should determine whether they meet the requirements to continue using that method. The change in accounting method from cash to accrual may result in additional income that could be recognized in the post-closing period. By identifying the issue and quantifying the potential exposure, the buyer and seller can negotiate who will bear the tax on the additional income.

Pass-through entity tax (PTET) (applicable to S corporations and partnerships). In certain states, eligible S corporations can make PTET elections, whereby the entity is responsible for paying the shareholder’s share of tax at the entity level. States began enacting responses to state and local tax deduction limitation because of the 2017 Tax Cuts and Jobs Act (TCJA), which limited the allowable deduction for state and local taxes on an individual’s tax return to $10,000. The primary benefit is reduction of federal income taxes; however, use caution when evaluating whether benefit exists on state returns. PTET elections may shift the successor liability for state income taxes from the shareholder to the entity. Most of the elections are irrevocable. During due diligence, determine whether the company has made these elections for the states that have enacted these rules. Given the ever-changing PTET rules, companies should maintain a process to review company’s PTET elections.

20 Percent Deduction Under Section 199A (applicable to S corporations and partnerships). Section 199A was enacted as part of the TCJA and provides a deduction for qualified business income (QBI) from a qualified trade or business operated directly or through a pass-through entity. For healthcare providers, the application of Section 199A can be complex due to the nature of healthcare services being classified as a non-qualifying Specified Service Trade or Business (SSTB). However, certain healthcare-related businesses may qualify, such as a dermatology practice’s sales of skincare products or certain laboratories whose tests benefit the healthcare industry but aren’t independently viewed as health services. Additionally, while a doctor, nurse, or dentist is in the field of health, someone who merely endeavors to improve overall well-being, such as a personal trainer or the owner of a health club, is not in the field of health.

Built-in gains tax (applicable to S corporations). When a corporation has converted its status from C corporation to S corporation, or has acquired assets from a C corporation in a tax-free transaction and has a recognition event within five years, it may be subject to a corporate-level, “built-in gains” tax in addition to the tax imposed on its shareholders from the transaction. The buyer can leverage its knowledge of a potential, built-in-gains tax liability, as identified in the due diligence process, to negotiate with the seller such that the buyer would not inherit said liability.

Non-resident withholding (applicable to S corporations and partnerships). State and local governments are permitted to tax the income of their residents and the income of nonresidents if that income is derived from sources within their state or locality. It’s important to ensure that the S corporation or partnership complies with state and local income tax withholding regulations.

Principal Insights

When it comes to healthcare acquisitions, it is important to consider the above items from a tax perspective. Financial and tax due diligence teams should work together to help buyers and sellers avoid tax liabilities, identify unrealized tax savings, and structure the transaction in a tax-efficient manner. Baker Tilly’s M&A tax team can assist in identifying the related risks and opportunities associated with healthcare acquisitions, all in an effort to maximize value. If you have any questions or would like additional information, please contact:

Baker Tilly Team

Michael O’Connor, Partner Emeritus: Michael.OConnor@bakertilly.com

Michael DeRose, Senior Manager: Michael.DeRose@bakertilly.com

Peter Dewan, Manager: Pete.Dewan@bakertilly.com

Kendra Nowak, Senior Associate: Kendra.Nowak@bakertilly.com

Categories: Uncategorized

How to Optimize the Value of Advanced Practice Providers: Workflow, Coding, & Compliance 

May 8, 2024

Written by Christa Shephard, Maureen Regan

Physician assistants (PAs) and advanced practice registered nurses (APRNs), like nurse practitioners (NPs), midwives, CRNAs, and clinical nurse specialists, have been around for decades. The first class of PAs graduated from Duke University in1967, and in 1965, the first training program for NPs began at the University of Colorado. Since then, for many reasons, both professions have become integral to the quality delivery of healthcare. Through advanced practice nonphysician provider (APP) integration, patients experience increased access to the healthcare services they need, and they are more satisfied with the care they receive. Physicians experience greater job satisfaction, as APP integration helps to alleviate the burden on overburdened work schedules. Through these benefits, APP integration leads to better patient retention, physician satisfaction, and stronger financial health for practices and health systems overall.  

The Centers for Medicare & Medicaid Services (CMS) certainly plays a role in the practice and reimbursement environment of PAs and APRNs; however, most of the legislative and regulatory environment for practice is determined at the state level. Due to the evolution of each profession and the historical and ongoing shortage of physicians, it’s important for health systems and practices to stay abreast of primary source legislative and regulatory guidance changes regarding scope, documentation, and billing compliance. These factors are also important to ensure an employer is capturing maximum reimbursement for clinical work done by both professions while minimizing their risk of an audit and resulting penalties. Systems and practices must uphold an ongoing, longitudinal review of Medical Staff Bylaws, delineation of privileges, policies, and processes.  

Mastering Billing and Coding 

CMS recognizes qualified billing providers to render services independently and establishes billing and coding rules for APPs to ensure accurate reimbursement and quality care delivery within the Medicare program. These rules outline the scope of practice and reimbursement guidelines for nurse practitioners, physician assistants, certified nurse-midwives, clinical nurse specialists, and certified registered nurse anesthetists. APPs must adhere to specific documentation requirements, including maintaining accurate patient records and submitting claims using appropriate evaluation and management (E/M) codes. Additionally, CMS provides guidance on incident-to billing, which allows certain services provided by APPs to be billed under a supervising physician’s National Provider Identifier (NPI). Understanding and following CMS billing and coding rules are essential for APPs to navigate the complexities of reimbursement and ensure compliance with Medicare regulations. 

Because CMS recognizes APPs as qualified billing providers but not as physicians, APPs fall into a separate reimbursement category. When APPs are billing under their own NPI numbers, the reimbursement level is less than what it would be if the physician were to bill for the same services. Physicians may bill for a service that was rendered by an APP with incident-to services and with split/shared E/M services. 

VMG Health Managing Director and coding and compliance expert Pam D’Apuzzo says, “There are two rules, which are where everybody gets themselves into trouble… Those two rules have specific guidelines, both from a documentation and a billing standpoint. The patient type, the service type—everything needs to be adhered to.”   

To bill for incident-to and split/shared E/M services, practices must meet specific criteria outlined by Medicare. For incident-to services, the criteria include: 

  • The service must be an integral part of the physician’s professional service. 
  • The service must be performed under the physician’s direct supervision. 
  • The physician must be physically present in the office suite and immediately available to provide assistance if needed. 
  • The services must be provided by qualified personnel, such as nurse practitioners or physician assistants, who are employees of the physician or the practice. 

For split/shared E/M services, the criteria include: 

  • The service must be provided by a physician and a qualified nonphysician practitioner (NPP) during the same visit. 
  • The service must meet the requirements for both the physician and the NPP to bill their respective service components. 
  • The documentation must clearly indicate the contributions of both the physician and the NPP to the service provided. 

These criteria ensure that incident-to and split/shared services are billed appropriately and in compliance with Medicare guidelines. Practices must continually educate and train so that they can successfully adhere to these criteria to avoid billing errors and potential audits. Additionally, practices must continuously monitor to ensure all documentation, billing, and coding processes are followed correctly.  

Risk Reduction

There are tools and services that allow for easier monitoring. “We utilize a tool called Compliance Risk Analyzer, which provides us with statistical insight on coding practices,” D’Apuzzo says. “So, we can data mine ourselves and see what’s happening just based on our views. And this is what the payors, specifically, and the government does as well: They can see the [relative value unites] RVUs are for a physician or off the chart, or that a physician has submitted claims for two distinct services at two different locations on the same day.”  

This is more common than you might think.  

“What’s normally happening in those interactions is that [a doctor with two locations] realizes he can’t keep up with all of that patient flow in two places, so they hire a PA and put them at location number two,” D’Apuzzo says. “But now all that billing goes under the doctor, so it flags for Medicare.”  

With VMG Health’s Compliance Risk Analyzer (CRA), practices can see the same data mining and areas of risk, as the program would flag the RVUs as a potential audit risk. This gives practices the opportunity to self-audit and refine their processes to ensure they are billing and coding appropriately. 

VMG Health offers multiple comprehensive services that help health systems and practices implement and follow new procedures like APP utilization without issue, from honoring existing care models to ensuring provider compensation is fair, compliant, and reasonable. 

Cordell Mack, VMG Health Managing Director, says, “We’ve spent a lot of time trying to make sure we get that right, both in terms of the underlying, practice-level agreements as well as the ways in which the compensation model works for both the physician and the APP.” 

Practice Earnings and Patient Enjoyment 

In many practices, physicians struggle to handle their case load, which means their busy schedules can prevent them from seeing existing patients when they need services and from taking on new patients. Bringing APPs into the fold allows physicians to offload some of their patient care so that they can see new patients while APPs see more established patients.  

BSM Consulting (a division of VMG Health) Senior Consultant and subject matter expert Elizabeth Monroe provides an excellent example: “Let’s say we have an orthopedic surgeon who really wants to spend most of their time in surgery. We would want to have that physician in surgery because that’s what their skill set and licensure permits. With a nurse practitioner or physician assistant providing follow-up, post-operative care, that oftentimes is a much better model. It allows the MD to do the surgical cases only they can do, but it also eases patient access to care.” 

This expansion of a physician’s schedule creates an opportunity to provide more patient services, which easily translates to improved patient satisfaction when, without this expansion, they would likely be unable to see their provider when they felt they needed to be seen. While APP-rendered services are reimbursed at 85% instead of 100%, our experts say that missing 15% shouldn’t dissuade practices and health systems from leveraging the APP integration.  

“It’s a very short-sighted approach to just think about, ‘But we could be making 100% instead of 85% if we bill under the doctor,’ because ultimately, we are never able to do that 100% of the time, and it’s a higher risk than it is reward,” says D’Apuzzo. 

Additionally, physicians with packed schedules and no APP support may inadvertently rush through appointments to see each patient scheduled for that day. Patients who feel rushed may leave an appointment feeling unheard and like their problem is unresolved. Alternatively, when a patient calls and asks for services but can’t be seen for multiple weeks or months, they may never make an appointment and instead turn to another provider for help.  

All of this culminates in poor patient retention, which equals a loss of revenue for the practice. Dissatisfied patients will seek better treatment and better outcomes elsewhere. However, when practices and health systems embrace APP support, patients are more likely to be able to schedule appointments when they feel they need to be seen, feel heard in an appointment with an APP who has the time to sit and listen, and even spend less time in the doctor’s office overall, as patient wait times significantly decrease with APP appointments. 

“Practices are better able to meet patient demand, and they’re able to really allow physician assistants, nurses… to add a tremendous value for the patients, offering them outstanding care,” Monroe says.  

Strategic Rollout 

With both patient demand and physician scarcity placing the U.S. health system in crisis, many practices and health systems know they need to integrate APPs into their workflows, but they don’t know how. VMG Health offers strategic advisory services that can guide this implementation to ensure practices are educated, compliant, and working within the care model they prefer. 

“Our team would want to spend time really trying to identify the underlying care model that practices are trying to, you know, work inside of,” says Mack. 

One approach is to assess patient needs and practice capabilities to determine the most effective roles for APPs, such as providing primary care, specialty care, or supporting services like telemedicine. Implementing standardized protocols and workflows can ensure efficient APP utilization while maintaining quality and safety standards.  

Finally, ongoing training, supervision, and quality monitoring are essential to support APPs and ensure their integration into the practice or health system effectively meets patient needs. 

“It starts with getting your appropriate documentation in place… [with] supervisory responsibilities and collaborating physician agreements,” says Mack. “It migrates to, ‘What’s the operational agreement among the APP and the doctor?’ and how cases are presented, or how the physician is consulted. So, it’s getting an underlying clinical service agreement among those professionals.” 

Optimal APP utilization shows up in the numbers. When practices increase patient access to care without overburdening physicians through APP utilization, they can accommodate more patients, leading to increased revenue generation. Moreover, because APPs often bill at a lower rate than physicians, utilizing them efficiently can improve cost-effectiveness, thereby enhancing the overall financial performance of the practice.  

“It should realize an ROI, and that ROI should be something more in terms of duties and tasks that other teammates can’t do,” says Mack. “Meaning, it would be unfortunate if an advanced practice professional is working at such a capacity whereby duties some of the day-to-day responsibilities should probably be done by teammates working at a higher level of their own individual license.” 

Physician Engagement 

Changing existing workflows can be difficult, but the rewards heavily outweigh the risks. Physicians must support APP integration to successfully navigate the transition. Physicians are typically the leaders and decision-makers within medical practices, and their support is essential for implementing any significant changes in workflow or care delivery models. Without physician buy-in, resistance to change may arise, hindering the smooth integration of APPs into the practice. 

Physicians play a vital role in collaborating with APPs and delegating tasks effectively. By endorsing and supporting the integration of APPs, physicians can foster a culture of teamwork and mutual respect within the practice. This collaborative approach promotes a cohesive care team where APPs work alongside physicians to provide high-quality patient care. 

It’s important for physicians to trust that their APPs are qualified and capable of providing excellent patient care. Allowing an APP to care for an established patient does not sever the relationship between the physician and the patient; it can actually enhance the patient’s experience and trust in the practice.  

“We want patients who have had a long-standing relationship with an MD to be able to see that doctor, and then we want to help the doctor know and understand how to appropriately transfer care over to an APP within their system or within their practice,” says Monroe. “So, that provider can be still linked to the doctor, and the doctor can still be linked to the patient.” 

Furthermore, physician buy-in is essential for maintaining continuity of care and ensuring patients feel confident in receiving treatment from both physicians and APPs. When physicians actively endorse the role of APPs and communicate the benefits of team-based care to their patients, it builds trust and acceptance of APP-provided services. 

Physician engagement is critical for the long-term success and sustainability of APP integration initiatives. When physicians recognize the value that APPs bring to the practice, including increased efficiency, expanded access to care, and improved patient outcomes, they are more likely to champion these initiatives and advocate for their continued support and development. 

The Path Forward

The integration of APPs into physician practices and health systems presents a strategic opportunity to optimize patient care delivery and operational efficiency. By expanding access to healthcare services and alleviating the workload of overburdened physicians, APP integration improves patient and employee satisfaction, and enhances patient retention. However, successful integration requires careful attention to regulatory compliance, billing, and coding practices. VMG Health offers comprehensive billing, coding, and strategy advisory services to support practices in navigating the complexities of APP integration, ensuring compliance with Medicare regulations, and maximizing reimbursement while minimizing audit risk. 

Optimal APP utilization yields tangible benefits, including increased patient access to care, improved patient satisfaction, and enhanced financial performance. By leveraging APPs’ unique skill sets, practices can accommodate more patients, reduce wait times, and deliver high-quality care cost-effectively. Physician engagement is essential for the successful implementation of APP integration initiatives, as physicians play a pivotal role in endorsing and supporting APPs within the care team. Through collaborative leadership and effective communication, physicians can foster a culture of teamwork and mutual respect, driving the long-term success and sustainability of APP integration efforts. 

In summary, strategic APP integration presents a transformative opportunity for physician practices and health systems to meet evolving patient needs, enhance operational efficiency, and achieve sustainable growth. By partnering with VMG Health for expert guidance and support, practices can navigate the complexities of APP integration with confidence, realizing the full potential of this innovative care delivery model. 


American Academy of Physician Assistants. (n.d.). History of AAPA. Retrieved from https://www.aapa.org/about/history/  

American Medical Association. (2022). AMA president sounds alarm on national physician shortage. Retrieved from https://www.ama-assn.org/press-center/press-releases/ama-president-sounds-alarm-national-physician-shortage 

Centers for Medicare & Medicaid Services. (2023). Advanced practice nonphysician practitioners. Medicare Physician Fee Schedule. https://www.cms.gov/medicare/payment/fee-schedules/physician-fee-schedule/advanced-practice-nonphysician-practitioners  

Centers for Medicare & Medicaid Services. (2023). Advanced Practice Registered Nurses (APRNs) and Physician Assistants (PAs) in the Medicare Program. Retrieved from https://www.cms.gov/medicare/payment/fee-schedules/physician-fee-schedule/advanced-practice-nonphysician-practitioners 

Centers for Medicare & Medicaid Services. (2023). Incident-to billing. Medicare. https://www.cms.gov/medicare/payment/fee-schedules/physician-fee-schedule/advanced-practice-nonphysician-practitioners  

Mujica-Mota, M. A., Nguyen, L. H., & Stanley, K. (2017). The use of advance care planning in terminal cancer: A systematic review. Palliative & Supportive Care, 15(4), 495-513. https://www.ncbi.nlm.nih.gov/pmc/articles/PMC5594520/ 

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Navigating Value-Based Care: Insights from Nicole Montanaro at the ABA Emerging Issues in Healthcare Law Conference

May 2, 2024

At VMG Health, we’re dedicated to sharing our knowledge. Our experts present at in-person conferences and virtual webinars to bring you the latest compliance, strategy, and transaction insight. Sit down with our in-house experts in this blog series, where we unpack the five key takeaways from our latest speaking engagements.

1. Can you provide a high-level overview of what you spoke about at the American Bar Association Emerging Issues in Healthcare Law Conference? 

I spoke with King and Spalding attorney Kim Roeder on different, hot-button issues that arise when structuring and valuing different value-based arrangements. It started off as a presentation of different case studies and focused on what Roeder has encountered from a legal perspective and what I have encountered from a valuation perspective. We often receive questions when it comes to structure or even value drivers, and we wanted to present solutions to what we saw or clients struggling with so that they could develop a better understanding of them.  

2. What do you think the audience was the most surprised to learn from your presentation?

The focus on the metrics themselves and how carefully they need to be considered seemed to be the most surprising. Recent regulations have been really focused on metrics, and that’s what we get the most questions about. I think our audience was also surprised to learn that Kim had experienced those questions as well, and metrics aren’t just a consideration on the valuation perspective. Both legal and valuation perspectives must carefully consider metrics. 

3. How do you think your presentation helped healthcare leaders better prepare for challenges? 

Our presentation was a very pragmatic way of illustrating six key issues that often come up during valuation. It’s a great resource for healthcare leaders to reference as they go through and check the boxes to ensure they have thought through all of the considerations that we often see as eleventh-hour issues. 

4. What resources would you suggest for those interested in learning more? 

I co-wrote a section of the 2023 Physician Alignment: Tips and Trends Report that discusses quality incentives for providers. It captures key factors to consider, from a valuation perspective, when looking to enter value-based arrangements and where to start.  

5. If someone takes only one message from your presentation, what would you want it to be?  

Value-based arrangements require a very orchestrated balance between legal and compliance, operational champions, and valuation teams. Operational teams should be able to focus on what changes and improvements they want to implement, valuation teams must have an understanding of those goals, and legal and compliance must be involved to ensure the approach is appropriate and compliant. Without cohesion between these three groups, we see those eleventh-hour issues pop up. 

Our team serves as the single source for your valuation, strategic, and compliance needs.  If you would like to learn more about VMG Health, get in touch with our experts, subscribe to our newsletter, and follow us on LinkedIn.  

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