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

Podcast: Becker’s Healthcare Podcast
Episode Title: Navigating Fair Market Value in Healthcare Deals with VMG Health Leaders
Date: September 30, 2025
Host: Scott Becker
Guests: Chris Ober (Managing Director, VMG Health, Business Valuation) & Holden Godot (Managing Director, VMG Health, Compensation Valuation)

Overview

This episode delves into the critical importance of fair market value (FMV) in healthcare transactions, particularly in the context of private equity (PE)-backed deals. Scott Becker interviews Chris Ober and Holden Godot, managing directors from VMG Health, to unpack the legal, compliance, and practical implications of FMV in acquisitions, compensation, post-deal financial reporting, investor risk management, and portfolio oversight.

Key Discussion Points & Insights

1. Introductions and Roles at VMG Health (00:59 – 02:40)

• Chris Ober: Nearly 25 years in valuation, focusing on business and intangible assets for both financial reporting and FMV compliance. Works heavily in ensuring compliance for joint ventures and physician practice acquisitions.
• Holden Godot: Since 2013, has specialized in compensation valuation—determining FMV for contractual services, focusing on compliance with Stark Law, Anti-Kickback Statute, and other healthcare regulations.

2. Why Accurate Fair Market Value Opinions Are Essential (03:04 – 08:36)

Regulatory Scrutiny on PE in Healthcare

• PE-backed healthcare deals face increasing regulatory oversight:
  • Fines for improper billing/coding and improper management fees.
  • Need to show all transactions are at arm’s length to avoid liability.
  • Quote (Holden Godot, 03:16):
    “Investigators are looking to go after and penalize PE firms, not just their investments or not just practices. So there’s obvious liability there.”

Key FMV Focus Areas:

• Management Fees:
  The return vehicle for PE; must be set at FMV to avoid allegations of illegal ownership/control of practices (violations of corporate practice of medicine laws).
  • Quote (Holden Godot, 06:04):
    “That’s the importance of documenting that your management fee … is set at fair market value. Right. It’s a market level return for the services being rendered, but it also serves as that vehicle of return for an investor.”
• Physician Compensation:
  Now under growing scrutiny. Comp must be “FMV-consistent” not only to comply but also to ensure provider retention and avoid appearances of undue corporate influence or coercion.
  • Quote (Holden Godot, 06:55):
    “Showing that, you know, 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, you’re not causing undue coercion as a corporation.”

3. Post-Closing Financial Oversight and Monitoring (08:36 – 16:21)

Audit Readiness & Financial Reporting

• Importance of timely, accurate purchase price allocations (PPA) for both audit and long-term portfolio strategy.
  • Quote (Chris Ober, 09:17):
    “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.”
• For practices used to cash-basis accounting, transitioning to accrual and maintaining strong financial records are vital as they become part of larger, PE-sponsored groups.
  • Quote (Scott Becker, 10:57):
    “The amount of time put on administrative shoulders, if those things are not in better shape at a later date, can become overwhelming to somebody who’s actually trying to run the business.”
• Ongoing monitoring (e.g. annual impairment tests of intangibles and goodwill) is critical to:
  • Track value creation or warning signs of decline.
  • Inform exit readiness and operational pivots.
  • Satisfy investor and bank reporting requirements.

4. Portfolio Oversight & Exit Positioning (14:34 – 16:21)

• Annual or ongoing valuation analysis gives PE sponsors clear visibility over performance and exit timing.
  • Quote (Chris Ober, 15:07):
    “That’s part of the process of doing an annual test … to identify whether or not adjustments need to be made to the operations of the business in order to achieve that exit date or if something has happened fundamentally with the business.”

5. Post-Closing Risks and Compliance (16:21 – 19:37)

Key Post-Close Risks:

• Provider Attrition: Losing physicians—key revenue drivers—can endanger the entire investment.
• Weak Compliance Programs: Weaknesses in coding, documentation, or FMV justification can trigger fines and regulatory action.

Alignment Solutions:

• Provider ‘Hooks’:
  • Income repair, rollover equity, and junior physician equity opportunities help ensure provider retention.
  • Quote (Holden Godot, 16:46):
    “So to combat that risk, what we’ve seen many PE firms seek to do, as I say, is get as many hooks as possible into their providers.”
• Continuous Compliance:
  Regulatory scrutiny is ongoing, not just at deal close—investors must maintain robust FMV documentation and frameworks throughout the hold period.

6. Final Thoughts (20:08 – 22:11)

• Chris Ober cautions on the importance of proper asset allocation on the balance sheet, even in less formal settings, to avoid goodwill impairment surprises.
  • Quote (Chris Ober, 20:20):
    “You have to have some sort of allocation methodology, even if it’s not a formal ASC 805 purchase price allocation.”
• Holden Godot urges diligence and expert guidance in navigating both the transaction and post-close compliance to avoid regulatory pitfalls.
  • Quote (Holden Godot, 21:35):
    “Healthcare is a highly regulated industry … you have to have the right guidance, the right counsel to help you through a transaction and ... a compliant program post transaction.”

Notable Quotes & Timestamps

• Holden Godot [03:16]: “Investigators are looking to go after and penalize PE firms, not just their investments or not just practices. So there’s obvious liability there.”
• Holden Godot [06:04]: “That’s the importance of documenting that your management fee … is set at fair market value.”
• Chris Ober [09:17]: “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.”
• Scott Becker [10:57]: “The amount of time put on administrative shoulders … can become overwhelming to somebody who’s actually trying to run the business.”
• Holden Godot [16:46]: “So to combat that risk, what we’ve seen many PE firms seek to do … is get as many hooks as possible into their providers.”
• Chris Ober [20:20]: “You have to have some sort of allocation methodology, even if it’s not a formal ASC 805 purchase price allocation.”
• Holden Godot [21:35]: “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.”

Important Segments & Timestamps

• Introductions and Experience: 00:59 – 02:40
• Why FMV Matters: 03:04 – 08:36
• PE Transaction Compliance: 06:04 – 08:36
• Audit Readiness & Financial Oversight: 08:36 – 14:34
• Exit Positioning: 14:34 – 16:21
• PE Hold Period Risks & Retention Strategies: 16:21 – 19:37
• Lessons Learned & Closing Thoughts: 20:08 – 22:11

Tone & Language

The conversation is pragmatic, focusing on practical best practices for investors, PE sponsors, and healthcare organizations. Insights are delivered with an emphasis on real-world regulatory and business risks, enriched with anecdotes and expert caution.

Summary Takeaways

• FMV opinions are foundational to mitigating risk and ensuring compliance in healthcare deals, especially under PE ownership.
• Both management fees and physician compensation need robust FMV documentation.
• Post-close financial oversight is crucial for audit readiness, compliance, and maximizing exit opportunities.
• Provider retention and strong compliance frameworks are vital to safeguarding investment value.
• Expert guidance is a must—the regulatory landscape is complex and errors are costly.