Becker Business Podcast: Navigating Fair Market Value in Healthcare Deals with VMG Health Leaders

Host: Scott Becker
Guests: Chris Ober & Holden Godot, Managing Directors, VMG Health
Date: September 30, 2025

Episode Overview

This episode of the Becker Business Podcast, hosted by Scott Becker, explores the critical topic of navigating fair market value (FMV) in healthcare transactions, with a particular focus on private equity (PE)-backed deals. VMG Health’s Chris Ober and Holden Godot – leading experts in valuation and regulatory compliance – share their perspectives on why accurate FMV opinions are vital, the regulatory and operational consequences of non-compliance, and post-close financial monitoring best practices. Listeners gain expert insights on protecting investments, managing compliance, and strategically positioning for future exits.

Guest Introductions & Credentials

[00:59] Chris Ober:

• Managing Director in VMG Health’s business valuation practice.
• 25 years of valuation experience; past two decades focused on financial reporting and FMV compliance in healthcare and life sciences.
• Specializes in purchase price allocations, goodwill impairment testing, employee stock compensation valuations, and FMV opinions for regulatory compliance, mostly for joint ventures and physician practice acquisitions.

[01:54] Holden Godot:

• Managing Director in VMG Health’s compensation valuation division.
• Since 2013, focuses on valuation and consulting for a broad range of healthcare agreements, specializing in FMV for clinical and management services.
• Assists with regulatory compliance concerning Stark Law, Anti-Kickback, corporate practice of medicine, and fee-splitting prohibitions.

Key Discussion Points & Insights

1. Why Accurate FMV Opinions Matter in Healthcare Deals

[02:40]

• Holden emphasizes that FMV documentation is more crucial than ever due to increasing regulatory scrutiny on PE-backed arrangements.
• Risks for Investors:
  • PE firms can face fines for improper billing/coding and management fees.
  • Regulators are targeting both practices and the investing firms themselves.
• Importance of Documentation:
  • Essential to prove that management fees and physician compensation are set at arm’s length and comply with FMV.
  • Addresses legal concerns: “To avoid any exposure, it’s imperative to make sure that management fee is set at fair market value… or you run the risk of a regulator arguing that a corporation’s running the practice” – Holden [04:11].

[06:04]

• Host Scott Becker underscores the central challenge in PE arrangements: “Is that really a management fee, or does that mean the PE fund is running the practice?”

[06:32]

• Compensation Trends:
  • Historically, less attention was paid to physician compensation in PE deals, but regulatory attention has evolved.
  • FMV on physician comp helps with provider retention and demonstrates compliance.

Notable Quote:

“Showing that physician compensation is set at a fair market value range is very important because it allows for that picture to be painted that the providers are being paid well... and that the providers are still making a reasonable market level of comp for the services they’re providing.” – Holden [07:53]

2. Post-Deal Financial Reporting & Portfolio Oversight

[08:36] Chris Ober:

• Post-close, robust financial reporting supports strategic goals like audit readiness, portfolio oversight, and future exit planning.
• Audit Readiness:
  • Most clients undergo annual or quarterly audits, necessitating purchase price allocations (ASC 805/958-805).
  • Even startups should maintain some allocation methodology to avoid retroactive fixes.

[10:57]

• Transition Challenges:
  • Practices must shift from cash to accrual accounting to satisfy audit requirements, which can be overwhelming if not proactively managed.

Notable Quote:

“It’s much, much easier and efficient to do a purchase price allocation at the close of the deal than it is a year or two later… trying to wrap your arms around what the asset values would have been.” – Chris Ober [09:10]

[12:26]

• Ongoing Monitoring:
  • Annual or periodic assessment of intangible assets (e.g., goodwill, trade names) is recommended to inform exit readiness and operational strategy.
  • Early detection of declining value allows for timely business pivots or exits.

[14:07] Scott Becker:

• Keeping valuations current reduces surprises for investors and supports the PE fund’s reporting obligations.

3. Proactive Risk Management Post-Transaction

[16:46] Holden Godot:

• Compliance remains an ongoing concern throughout the PE hold period (typically 3–5 years).
• Key Post-Close Risks:
  • Losing key revenue-generating physicians and weak compliance programs.
  • Regulators are active: fines have hit PE firms for non-compliant coding and management fees outside FMV.
• Retention Strategies:
  • Income repair, rollover equity, and pathways for junior physicians to obtain equity help tie providers to the business.
  • “By continuously rolling equity in the MSO... they have real financial upside in the success of that practice.” – Holden [18:50]

[19:37] Scott Becker:

• Draws parallels to the failures of 1990s practice management deals, emphasizing today’s continued risks in similar models.

4. Final Thoughts & Recommendations

[20:20] Chris Ober:

• Advises even smaller practices to adopt an allocation methodology for assets and goodwill.
• Lax accounting practices (e.g., recording everything at book value and sweeping the rest into goodwill) can lead to audit challenges and goodwill impairments down the line.

[21:35] Holden Godot:

• Cautions that healthcare investments require specialized regulatory guidance:

  “You really have to be in the know. You have to have the right guidance, the right counsel to help you through a transaction and even... post transaction to ensure that you’re avoiding regulatory scrutiny.”

Notable Quotes & Memorable Moments

• On Regulatory Liability:
  “Investigators are looking to penalize PE firms, not just their investments or practices.” – Holden Godot [03:25]

• On Audit Preparation:
  “It absolutely is...if you have an auditor come in or any outside party...and it’s not kind of buttoned up, it causes a lot of work and probably interferes with the day-to-day running of the practice.” – Chris Ober [11:38]

• On Keeping Providers Engaged:
  “Providers are allowed to roll over a portion of that purchase price into the management company...the providers are anchored to the practice, they’re focused on its growth.” – Holden Godot [18:31]

Timestamps for Key Segments

• 00:59 – Chris Ober intro and areas of expertise
• 01:54 – Holden Godot intro and compensation focus
• 02:40 – 08:36 – Why FMV matters; regulatory environment; PE and physician comp issues
• 08:36 – 16:21 – Post-close monitoring, financial reporting, audits, exit planning
• 16:46 – 19:37 – Post-close risks, provider retention, compliance frameworks
• 20:20 – 21:35 – Final thoughts and practical recommendations

Summary Takeaways

• Accurate FMV is non-negotiable: It's essential for regulatory compliance, investor protection, and defensible transactions in PE-backed healthcare settings.
• Post-close vigilance is key: Regular financial monitoring and compliance reviews ensure audit readiness and strategic agility for future exits.
• Provider retention hinges on smart incentives: Income repair, rollover equity, and clear partnership tracks are critical hooks.
• Proactive compliance frameworks lower risk: Weak compliance can trigger fines and decimate investments—guidance from experts is crucial.
• Practical accounting matters: Don’t skimp on asset allocation and goodwill tracking, even in small practices.
• Healthcare is unique: Specialized regulatory, valuation, and compliance expertise is mandatory for successful transactions and sustained value.

This summary provides a comprehensive look at navigating FMV in healthcare deals, with practical strategies for PE investors and healthcare leaders to ensure compliance and drive long-term value.