STOCADVISORY
BUY-SIDE DILIGENCE | ADD-ON EXECUTION | HEALTHCARE SERVICES
STOC Advisory provides buy-side Quality of Earnings (QoE) and add-on execution support for PE funds targeting healthcare services platforms. Our healthcare-specialized diligence focuses on provider economics, payor mix analysis, and regulatory compliance—delivering operator-realistic insights that support confident platform investments and repeatable add-on strategies.
PE funds executing healthcare buy-and-build strategies require diligence partners who understand provider compensation models, reimbursement risk, and regulatory complexity. STOC's healthcare-specific QoE process evaluates payor concentration, cash-to-accrual conversions, and provider retention—surfacing operational risks that generic accounting firms miss.
Recent Platform Example: Multi-State Dental MSO
Evaluated $45M platform acquisition across 12 locations. Identified $800K in non-recurring Medicaid revenue, validated provider compensation sustainability at 32% of collections, and flagged lease renewal risk on 3 RPL-owned facilities. Normalized EBITDA $4.2M (from reported $5.1M).
BUY-SIDE QOE
Provider economics, payor mix, reimbursement risk
ADD-ON SUPPORT
Rapid diligence for 5-10+ acquisitions annually
65+
Healthcare Services
Transactions
48-72hrs
Preliminary Findings
Delivery
MSO/ASC
Provider-Led Models
Specialization
$15M-$150M
Platform Revenue
Range
1
Provider Economics & Compensation Models
Evaluate provider mix, compensation structures (% of collections vs. salary), and employment agreements. Assess sustainability of care delivery model and identify post-close optimization opportunities.
2
Payor Mix & Reimbursement Analysis
Analyze payor concentration (Medicare/Medicaid vs. commercial insurance), rate benchmarking, and reimbursement risk. Assess exposure to government program changes and managed care contracts.
3
Revenue Quality & Growth Validation
Analyze billings data, patient volume trends, and cash-to-accrual conversion. Identify risks in revenue sustainability from coding changes, utilization patterns, and seasonal fluctuations.
4
Working Capital & Cash Flow Dynamics
Analyze A/R aging by payor, DSO trends, and bad debt reserves. Assess impact of transaction structure (asset vs. stock) on go-forward working capital requirements.
5
Real Estate & Facility Economics
Analyze facility lease structures, related-party landlord arrangements, and post-close implications. Evaluate opportunities for sale-leaseback or lease renegotiation.
6
Add-On Ready Financial Forecasting
Prepare normalized financial models and integration-ready forecasts that support add-on execution, lender requirements, and portfolio monitoring post-close.
Add-On Example: Home Health Agency Acquisition
Completed rapid diligence on $8M add-on within 3 weeks. Validated Medicare Star Rating sustainability, assessed nurse wage inflation risk (+18% YoY), identified $200K in non-recurring PPP loan forgiveness. Supported integration into existing platform within 60 days.
STOCADVISORY
BUY-SIDE DILIGENCE | ADD-ON EXECUTION | HEALTHCARE SERVICES
Our buy-side financial due diligence services for PE funds include: Quality of Earnings (QoE), quality of revenue (QoR) analysis, working capital assessment, normalized EBITDA adjustments, add-on financial modeling, and integration-ready forecasting. We work directly with deal teams to accelerate diligence cycles and surface operational insights that generic accounting firms overlook.
Operator-Realistic Financial Analysis
PE funds need confidence that target financials reflect sustainable, operator-realistic performance. STOC's healthcare diligence focuses on payor risk, provider economics, regulatory compliance, and growth durability—ensuring alignment between management narratives and underlying financial reality before you close.
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PROVIDER ECONOMICS
Compensation models, retention risk, and care delivery sustainability
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PAYOR RISK
Reimbursement concentration, rate pressure, and regulatory exposure
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GROWTH DURABILITY
Volume trends, patient acquisition, and market positioning
Platform Due Diligence: Behavioral Health Network
$62M platform across 8 locations. Key findings: (1) Identified 23% revenue concentration with single managed care payor at risk of non-renewal, (2) Validated therapist compensation at 38% of collections (sustainable), (3) Uncovered $1.2M deferred maintenance capex requirement, (4) Confirmed Medicaid rate increases would add $400K annual EBITDA. Final normalized EBITDA: $6.8M vs. management's $8.1M.
Comprehensive QoE for platform acquisitions
- Provider-led practices (dermatology, ophthalmology, gastroenterology)
- Medical staffing and locum tenens agencies
- Home health and hospice providers
- Behavioral health and substance abuse treatment
- Ambulatory surgery centers (ASC)
- Urgent care and retail clinics
- Medical device distribution and DME
Rapid diligence for buy-and-build strategies
- Templated diligence request lists for healthcare targets
- 48-72 hour preliminary findings turnaround
- Provider compensation and retention risk assessment
- Payor concentration and reimbursement validation
- Integration planning and financial modeling
- Post-close monitoring and KPI tracking
- Repeatable process for 5-10+ annual add-ons
Representative Healthcare Transactions
Platform: $72M multi-specialty physician group (15 locations), $45M dental MSO network (12 locations), $38M home health platform (6 states)
Add-Ons: $12M dermatology practice (3 providers), $8M urgent care clinic (2 locations), $6M medical staffing agency, $4M DME distributor
Key Diligence Findings: Provider retention risk (15% annual turnover flagged in 2 platforms), Medicare Star Rating sustainability issues (1 home health platform), payor concentration concerns (3 targets had >30% revenue from single payor), lease renewal risk (related-party landlords in 40% of locations)
Why PE Funds Choose STOC for Healthcare: Generic accounting firms treat healthcare like any other services business. STOC's healthcare-specific expertise means we understand provider compensation benchmarks, payor contract structures, regulatory compliance requirements, and the operational realities of scaling provider-led businesses. We deliver QoE reports that highlight the risks and opportunities PE deal teams actually care about—not just GAAP adjustments.