Strengthening Healthcare Deals with Financial Diligence and Compliance 9-23-25

Summary

Podcast Episode Summary

Podcast: Becker Business

Host: Scott Becker
Episode: Strengthening Healthcare Deals with Financial Diligence and Compliance
Date: September 23, 2025
Guests: Chad Zoratek (Managing Director, VMG Health), Pam DiApuzzo (Managing Director, VMG Health)

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Episode Overview

In this episode, Scott Becker speaks with Chad Zoratek and Pam DiApuzzo of VMG Health about the critical importance of financial diligence and compliance in healthcare M&A transactions. They explore how regulatory complexity, evolving coding standards, and collaborative diligence approaches can strengthen deal outcomes and minimize risk for investors.

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Key Discussion Points & Insights

1. Unique Challenges in Healthcare Transactions

(02:13 – 03:38)

• Highly Regulated Environment:
  • Pam highlights that healthcare operates under a "very complex framework of both federal and state regulations," including CMS, OIG, HIPAA, and ever-changing commercial payer policies.
  • She emphasizes the direct financial tie between accurate coding and reimbursement, increasing the risk of errors triggering repayment, penalties, or legal consequences.
  • "If the documentation and the coding are inaccurate or not supported, there's opportunity there for potential repayment demands, penalties, even legal exposure." — Pam DiApuzzo, [02:58]
• Constant Regulatory Changes:
  • Frequent updates to CPT and ICD codes, plus increased focus on HCC coding and RADV, demand real-time regulatory expertise.
• Differences from Other Industries:
  • The evolving regulations and direct monetary ties make healthcare diligence distinct and more demanding than in other sectors.

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2. Comprehensive Diligence: Beyond 'Check-the-Box'

(05:27 – 07:03)

• Diligence as a Foundation for Post-Deal Value:
  • Chad urges investors not to use diligence just to confirm history, but to "use the diligence period as a great foundation for the post merger and opportunities to optimize the business." — Chad Zoratek, [05:59]
  • Identifying areas for immediate improvement, especially in revenue cycle management (e.g., reducing Days Sales Outstanding) is key.
• Forward-Looking Perspective:
  • Pam details that diligence should not just be about validating existing coding, but also about finding missed revenue opportunities and operational improvements.
  • "We're not just there to validate the coding... we're also looking for opportunities. So if we're seeing undercoding or missed opportunities... we're reporting that as well." — Pam DiApuzzo, [07:19]

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3. The Power of Integrated Diligence Teams

(08:57 – 11:43)

• Breaking Down Diligence Silos:
  • Traditionally, financial diligence and compliance/coding reviews have been siloed, but integrating the two offers a "360 degree view" of risk and opportunity.
  • "When you're bringing those together, you're kind of seeing that 360 degree view of what's happening in the organization... Ultimately what the potential risk exposure might be." — Pam DiApuzzo, [09:43]
• Tangible Impact Example:
  • Chad calls this the "warm blanket effect," where subject matter experts from different domains collaborate to identify issues, optimize processes, and accurately project the financial impact.
  • For example, diagnosing denied claims with Pam's team leads to direct revenue realization and working capital improvements once fixed.

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4. Future Trends & Excitement in Healthcare Diligence

(12:22 – 14:41)

• Holistic Diligence Platforms:
  • Chad discusses VMG Health's "tremendous squad of valuation experts" that can assess financial projections as part of a holistic diligence process.
  • Technology enhancements, particularly in revenue cycle management, coding, and compliance, are driving new capabilities and client solutions.
• Cutting-Edge Analytic Tools:
  • Pam spotlights VMG’s analytical tool, cra, describing it as a "game changer... really allowing us with much more high precision sampling," improving both audit quality and prospective compliance ([13:56]).
  • The tool also leverages statistical oversight for stronger data integrity.
  • "I think the expansion of those analytic tools will really be quite changing and transformative to our team and to our clients as well." — Pam DiApuzzo, [14:30]

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Notable Quotes & Memorable Moments

• "I sometimes joke that the crystal ball in health care can appear a little bit more like a snow globe with all changes."
  — Chad Zoratek, [04:34]

• "When the due diligence advisors have it easy. So I can often say, you know, congrats on closing the deal, but now the real work starts."
  — Chad Zoratek, [05:56]

• "From a compliance perspective... we are looking with a forward path, like where can we assist these organizations in being able to really improve overall from a financial perspective."
  — Pam DiApuzzo, [08:16]

• "I call it the warm blanket effect... it's so nice having so many different subject matter. Experts view healthcare through their different lenses..."
  — Chad Zoratek, [10:31]

• "Our current analytical tool which is cra. It's really been for us quite revolutionary and a game changer in how we're approaching compliance both from a due diligence standpoint as well as from a prospective standpoint."
  — Pam DiApuzzo, [13:41]

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Timestamps for Key Segments

• [00:40] — Chad Zoratek’s Introduction
• [01:17] — Pam DiApuzzo’s Introduction
• [02:13] — Healthcare Compliance Diligence: What Makes it Unique
• [03:59] — Pain Points and Pitfalls in Healthcare Diligence
• [05:55] — Making Diligence More Comprehensive
• [07:03] — Diligence for Post-Close Optimization
• [08:57] — Integrating Compliance and Financial Diligence Teams
• [10:30] — "Warm Blanket Effect" of cross-disciplinary reviews
• [12:22] — Emerging Trends and 2026 Outlook
• [13:39] — New Analytical Tools Transforming Compliance

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Episode Takeaways

• Healthcare diligence is dramatically more complex than other industries due to regulatory demands and frequent changes.
• Seamless collaboration between financial and compliance/coding teams is essential to understanding both risks and opportunities pre-close.
• Forward-focused, data-driven diligence can reveal hidden value, optimize post-deal operations, and improve investment outcomes.
• Technological advancements, especially in analytics and sampling, are revolutionizing compliance and financial diligence for healthcare transactions.

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For more on this topic, see VMG Health's upcoming webinar on October 14: "How to Invest in Healthcare with Confidence — From Quality of Earnings to Compliance."

Transcript

[A]

This is Scott Becker with this special episode of the Becker Business Podcast and the Becker Private Equity Podcast. We're thrilled today to be joined by two brilliant leaders from VMG Health. We're joined by Managing Director Chad Zoratek and Managing Director Pam d'. Apuzzo. We're going to talk today about comprehensive sort of compliance and diligence for health care deals. The title of the talk is Pre Close. Pre Close Precision Strengthening Healthcare Deals with Financial Diligence Compliance Insights. Chad, Pam, thank you so much for joining us. Let me ask you each to take a moment to introduce yourself and tell us a bit about yourself and about the work you do in VMG Health.

[B]

Yeah, sure. Thanks Scott. I appreciate being here. Nice chatting with you again. I'm Chad Zreddick. As Scott said, I'm Managing Director at BMG Health and I run our transaction Advisory Group. I've got a 30 year, over 30 year background in the M and A space ranging from a decade of diligence at Big 4 Transaction Advisory to CFO Private Equity backed health care companies, to corporate finance functions for public health care companies. And I'm based in Atlanta, Georgia.

[A]

Fantastic. And Pam, could you take a moment to introduce yourself and tell us about what you do and what you do at VMV Health?

[C]

Of course. Thanks again for having us. I have over 30 years of experience in health care. I specialize in healthcare coding and compliance. And my work focuses on helping organizations and providers ensure accurate coding while they're maintaining regulatory compliance and ultimately minimizing audit risk.

[A]

Thank you. And I'll kick us off with a couple discussions about healthcare deals and Pam, I'll start with you and then ask Chad to weigh in as well. So healthcare deals bring a unique set of complexity from a regulatory exposure to clinical and reimbursement risk. All kinds of different challenges. We've seen them over the years. Cyber risks, reimbursement risks, regulatory risks, and a lot more. And Pam, from your perspective, talk about diligence in health care and what makes a little bit different from other industries and why it's so critical to make sure you get it right.

[C]

Sure. I mean, I think the first issue is that it's a highly regulated environment. We're operating under a very complex framework of both federal and state regulations. We've got cms, oig, hipaa, separate commercial payer policies. So it's very stringent, I think much more stringent than other industries. And here there is this direct financial tie to coding so that coding accuracy directly determines reimbursement. And so that's another area where somewhat different. And then there is a potential repayment risk. If the documentation and the coding are inaccurate or not supported, there's opportunity there for potential repayment demands, penalties, even legal exposure. So it's a very different environment. And lastly, from a coding perspective, I think the biggest challenge is the constant changes of the rules. We've got these annual updates for CPT and ICD now we've got a lot more focus on HCC coding and radv. So there's a lot here that requires real regulatory guidance that someone really needs to understand the rules and that they're being applied appropriately. So I feel like this is probably why there's such a distinct difference between the healthcare industry and due diligence than in others.

[A]

Thank you. And Chad, you've been in this like Pam for a good deal of time now. Great, great experience. I'm thrilled I've had a chance to visit with both of you before. Both, both great on this. Talk a little bit about why you see healthcare differently than some other industries and where are some of the particular pain points you got to worry about in healthcare that you got to be most concerned about or top compliance pitfalls?

[B]

Yeah, so I totally agree with what Pam has laid out. Just a lot of change. I mean really the only thing that has certainty in healthcare is the demand we know the demand is going to be. Everything else is a lot of change, whether it's reimbursement, regulatory, even the shifting of the revenue model in a lot of cases toward VBC and even within valley based care changes with how that, how that is measured along with all the new technology that is coming to market. So really, due to all this change, healthcare is one industry where the past is not necessarily a bold predictor of the future. So I sometimes joke that the crystal ball in health care can appear a little bit more like a snow globe with all changes. And so as an investor, they have to really cover their bases to not only diagnose where the business has been, where it is today, and arming themselves with the best knowledge on all these changes that we talked about, where the business will be. So I think I would challenge investors to use the information gathered during health care diligence to also form a thesis on where, what the business could be instead of just what the business was doing.

[A]

Thank you very, very much. And Chad, to follow up on that, there's a lot of people that view diligent as sort of either a check the box red flag exercise to sort of validate histor revenues and Earnings just sort of go through it. But. But how should people really think about diligence in terms of expanding its use? And how can you unlock hidden opportunities to really see what either could be missed or opportunities are? How do you do diligence in a more, in a more comprehensive way or more important way?

[B]

Yeah, I've always kind of joked, Scott, that when the due diligence advisors have it easy. So I can often say, you know, congrats on closing the deal, but now the real work starts. So I would encourage the investors to use the diligence period as a great foundation for the post merger and opportunities to optimize the business. So don't just use those. Check the box to verify what the historical numbers were or to make sure there's no red flags. Use the due diligence to have your day one readiness list pulled together. Design your financial diligence so that the financial results are presented in a fashion that you want to see those financial results post transaction. Use the financial results in diligence to focus on the areas of improvement. Are there any low hanging fruit, especially in the area of revenue cycle management, like for reducing DSOs? And I'll kind of hand the baton over to Pam because I think a lot of that falls in the work that she does.

[C]

Thank you. Our goal here really is to deliver a very comprehensive analysis to our clients so that post close they have what they need as far as a roadmap to support ongoing compliance. And the way that we approach compliance is that we're not just there to validate the coding that we're seeing kind of retrospectively, but we're also looking for opportunities. So if we're seeing undercoding or missed opportunities, services that were being provided and either not coded appropriately or not coded at all, we're reporting that as well. Because from a post close transaction that gives our clients the opportunity. We've identified this potential revenue leakage. There's an opportunity to recoup that and be able to educate the providers, educate the billing and coding staff on the issues that we identified. Also, when we are reviewing this from a compliance perspective, we, we're looking at it operationally, like where can we operationally identify any efficiencies that would help just build a better sustainable coding practice? We will help update their policies and procedures. We are recognizing again, the guidelines as we mentioned here, are changing constantly. And there's been significant changes in the industry over the last couple of years, specifically evaluation and management services, which is a very big part of coding for most organizations and Most providers. So that's just an area where there's opportunity for improvement. Documentation, templates, EMR workflow for the providers, there's so much opportunity. But we are not just focused on validating the coding. We are looking with a forward path, like where can we assist these organizations in being able to really improve overall from a financial perspective.

[A]

Thank you very, very much. And Pam, I'll have you lead on this next question and then have Chad weigh in. Coding and compliance and financial diligence are treated very separately. You know, there's often one team doing quality learnings, a totally different team during reimbursement review, including a compliance review. Can you share an example of why it's beneficial to bring some of these functions together pre close and why that could be useful and powerful in terms of really understanding a business?

[B]

Sure.

[C]

And you're right, they have been traditionally very siloed, like two very complete and distinct areas. Here we take a very collaborative approach and I think that that's obviously to the benefit of our clients because when you're keeping these two distinct areas of diligence separate, it's not allowing the client to see the full picture of the organization. So when you're bringing those together, you're kind of seeing that 360 degree view of what's happening in the organization, what's accurate, what needs attention and ultimately what the potential risk exposure might be. So that opportunity for us to collaborate here gives the client an opportunity to make some smarter decisions regarding the acquisition. It may be a no go for the deal. It may just be a post close opportunity with a. What is a very strong approach for post closing close on how we're going to take some corrective action to improve the overall coding and financial stability of the organization? I don't know. Maybe here, Chad, a couple of things you might want to add to that.

[B]

Yeah, I. Scott, I call it the warm blanket effect. And so it's so nice having so many different subject matter. Experts view healthcare through their different lenses or view the target through different lenses. But case in point, Pam's team could be very focused on figuring out what the heck is causing all these denied claims. Right? Well, they do their work and they figure out the main causes of it. And it could be maybe a biller had the wrong training and so they can help retrain that biller to make those mistakes stop. The financial team can extrapolate, okay, once those errors stop, what does that mean to revenue realization? How greatly is it increased by that? And also what type of working capital optimization will result by being able to fix everything and hopefully recoup or recapture some of those denied claims. So it's really nice to have that cohesive, collaborative perspective on common issues.

[A]

Thank you. And Chad, let me ask you this question. I mean, we've talked a lot about comprehensive diligence. I've seen this upfront and personal where sometimes you see diligence where the right hand doesn't know what the left hand is doing and then the ultimate client, the investor doesn't get as great of clarity at what they're really seeing in the business. And VMG does a wonderful job of pulling these things together so people really know what they're investing in and what they're doing. Take a moment. Any of the thoughts that you'd like to share with us that we didn't touch on today and maybe what you're most focused on and excited about as we finish this year and start into next year.

[B]

I need, I need another hour at least, Scott. But I'll, I'll nutshell it, I think also, you know, at BMG Health we also have a tremendous, tremendous squad of valuation experts. So we often pull them in to help out with the financial projections, even to assess our clients projections to see if there's anything that they would model out differently. So I think when all the three legs of the stool work together, like the coding and compliance, financial diligence team and the valuation team, we can be a very comprehensive solution to kind of give you the best odds at really realizing your investment thesis. I think in terms of excitement on the horizon, we're at bmg, we're extremely excited about some of the technology solutions that we're partnering with and providing to our clients that are helping to solve for some of these challenges encountered by our clients, you know, especially in the revenue cycle management, coding and compliance space.

[A]

Thank you. And Pam, anything you'd like to add there and also anything that you're most focused on and excited about coming into the end of the year.

[C]

I'll echo what Chad said about these new areas that we're moving into from a technology standpoint. But I also want to highlight our current analytical tool which is cra. It's really been for us quite revolutionary and a game changer in how we're approaching compliance both from a due diligence standpoint as well as from a prospective standpoint. It is really allowing us with much more high precision sampling, which from an audit perspective allows us to really drill down into a more meaningful sample. And then we've got our statistician who who is really involved in oversight and the data integrity and the reliability of those analytics. So I think that that's really changed our approach here to compliance, both from due diligence and a prospective approach. So we're excited about what's coming in 2026. I think the expansion of those analytic tools will really be quite changing and transformative to our team and to our clients as well.

[A]

Pam and Chad, what a pleasure to visit with you again. Pam Diapuzzo, Chad Zoratek from VMG Health, you know that VMG also has a webinar coming up on October 14, how to invest in Healthcare with Confidence From Quality of Earnings to Compliance. Again, Pam and Chad, thank you so much for joining us today on the Beker Business Podcast and the Becker Private Equity Podcast. Thank you very much.

[C]

Thanks.

[B]

Thanks a lot, Scott.

[C]

Thank you.