Executive Summary
As value-based care reshapes the U.S. healthcare landscape, primary care physician (PCP) practices are increasingly assuming financial risk for patient outcomes. This shift presents both opportunities and challenges for investors. Robust financial due diligence is essential — not only to assess historical performance but also to evaluate sustainability under complex reimbursement models. This article outlines key diligence steps, recent market dynamics, and Ankura's experience supporting successful transactions in the risk-based PCP sector.
Introduction
As the U.S. healthcare system continues its transition from fee-for-service to value-based care, PCP practices are increasingly taking on financial risk tied to patient outcomes. This shift presents both compelling opportunities and significant challenges for investors and stakeholders. Financial due diligence in this space now demands more than a review of traditional financial statements — it requires a deep understanding of care delivery models, reimbursement mechanisms, regulatory dynamics, and the scalability of operations.
In recent years, the financial performance of risk-bearing PCP organizations has been notably volatile. Several high-profile cases of financial distress — including the bankruptcy of CareMax — have highlighted the operational and structural vulnerabilities that can arise under value-based care (VBC) models. These events underscore the importance of rigorous, multidimensional due diligence to assess both financial viability and long-term sustainability.
Despite recent financial turbulence, the risk-based PCP sector continues to attract significant investor interest, driven by demographic tailwinds, regulatory shifts, and the long-term promise of value-based care. Private equity firms, strategic buyers, and corporate health giants are actively consolidating fragmented practices to build scalable platforms capable of managing population health and downside risk.
In 2025 alone, the U.S. physician services industry is projected to reach $438.1 billion, with primary care representing a major growth vertical.1 Investors are targeting practices with strong care management capabilities, tech-enabled infrastructure, and access to Medicare Advantage populations. Recent deals include Revere Medical's acquisition of CareMax's Medicare Shared Savings Program unit, which serves over 80,000 beneficiaries, and Amulet Capital Partners' investment in Theoria Management, a value-based care provider for senior living communities.2
Retail health giants are also deepening their primary care footprint. Walgreens Boots Alliance expanded its stake in VillageMD, while CVS Health plans to embed physicians in hundreds of retail locations.3 These moves reflect a broader strategy to control patient access and reduce downstream costs through integrated, risk-bearing primary care models.
The market remains highly fragmented, with only 6% of physician groups currently PE-backed1, leaving ample room for platform roll-ups and add-on acquisitions. As investors seek to capitalize on the shift to value, the sector offers compelling opportunities for those with the operational discipline and strategic vision to navigate its complexities.
Why Financial Due Diligence Is Mission-Critical
In the risk-based primary care sector, financial due diligence is not just a safeguard; it is a strategic necessity. As practices assume greater accountability for patient outcomes and total cost of care, their financial health becomes tightly intertwined with clinical performance, operational efficiency, and regulatory compliance. Traditional diligence methods fall short in capturing the complexities of value-based reimbursement, capitation models, and downside risk exposure.
A robust diligence process must evaluate not only historical financials but also forward-looking indicators such as patient attribution accuracy, risk adjustment coding integrity, care management return on investment (ROI), and payer contract sustainability. Additionally, starting in 2025, the CMS RADV Audit will audit 100% of Medicare Advantage contracts annually, focusing on the 10% of enrollees with the highest risk and extrapolating results for financial recoupment. This audit push further highlights the need for precise diligence to avoid revenue leakage, compliance penalties, or insolvency—as seen in recent cases like CareMax.
With many PCP organizations operating on thin margins and navigating fragmented data systems, even minor inefficiencies can compound into major financial vulnerabilities. For investors, payers, and strategic acquirers, thorough financial due diligence enables smarter deal structuring, risk mitigation, and post-close value creation. It is the foundation for identifying resilient platforms capable of thriving in a value-based ecosystem.
Detailed Financial Due Diligence Steps in Risk-Based PCP Practices
Conducting financial due diligence in the risk-based primary care sector requires a multidimensional approach that integrates traditional financial analysis with healthcare-specific insights. Below are the essential steps to ensure a comprehensive evaluation:
Quality of Earnings Assessment
- Analyze adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) to isolate recurring earnings from one-time events.
- Identify revenue sources by payer type (Medicare Advantage, MSSP, commercial) and assess sustainability.
- Evaluate the impact of value-based contracts on margins and cash flow.
- Evaluate the risk-sharing arrangements the provider has with payors.
- Analyze incurred versus reported results of the risk-sharing arrangements.
- Analyze net working capital (NWC) trends, including the impact of deficits on payors
Revenue Cycle and Reimbursement Review
- Examine billing practices, coding accuracy, and denial rates.
- Assess risk adjustment factor (RAF) scores and their alignment with clinical documentation.
- Review capitation payments, shared savings distributions, and downside risk exposure.
- Understand the downstream impacts of any CMS RADV Audits of the payer on the shared savings payments.
Understanding the Impact of CMS-HCC V28
- The transition to CMS-HCC Version 28 (V28) introduces significant changes to risk adjustment methodologies, which directly affect revenue forecasting and financial modeling for risk-bearing PCP organizations. V28 reduces the number of hierarchical condition categories and recalibrates coefficients, potentially lowering RAF scores for certain patient populations. As a result, financial due diligence must include a forward-looking analysis of how V28 will impact capitation payments, coding practices, and overall revenue integrity. Ankura helps clients model these changes to ensure accurate valuation and mitigate reimbursement risk.
Payer Contract Analysis
- Evaluate contract terms, including attribution methodology, quality metrics, and financial risk corridors.
- Identify concentration risk with dominant payers and potential renegotiation triggers.
- Model future reimbursement scenarios under changing CMS or state regulations.
Patient Panel and Attribution Validation
- Verify the accuracy of patient attribution and panel size.
- Assess churn rates, patient engagement metrics, and demographic risk profiles.
- Analyze care gaps and utilization patterns to forecast future cost trends.
Operational Efficiency and Scalability
- Benchmark staffing ratios, provider productivity, and visit volumes.
- Review technology infrastructure, including electronic health record (EHR) capabilities and interoperability.
- Evaluate scalability of care management programs and telehealth integration.
Compliance and Regulatory Risk
- Conduct audits for HIPAA compliance, Stark Law, and Anti-Kickback Statute adherence.
- Conduct audits of Risk Adjustment activities to evaluate False Claims Act risks.
- Review licensure and solvency requirements for risk-bearing entities in applicable states.
- Assess exposure to audits, clawbacks, and litigation.
Financial Forecasting and Scenario Modeling
- Build pro forma models incorporating VBC growth, RAF changes, and payer mix shifts.
- Stress-test financials under adverse utilization or reimbursement scenarios.
- Evaluate capital needs for expansion, technology upgrades, or regulatory compliance.
These steps help investors and acquirers uncover hidden risks, validate growth assumptions, and structure deals that align with the realities of value-based care.
Case Study: Supporting a Strategic Acquisition of a Risk-Bearing PCP Platform
Ankura was engaged by a private equity firm evaluating the acquisition of a risk-bearing primary care organization operating in a single state and serving over 50,000 Medicare Advantage lives. The target had built a strong regional presence through capitation contracts and was preparing for operational scale-up. Ankura led a comprehensive financial due diligence process, including a quality of earnings analysis, RAF score validation, and a detailed review of payer contracts and downside risk exposure.
Our team conducted a rigorous analysis of historical earnings quality, focusing on the sustainability of revenue streams under value-based arrangements. We also performed an assessment of reported versus incurred plan financials, identifying timing mismatches and potential exposure areas. In addition, Ankura supported the client with a net working capital analysis to establish an accurate baseline for purchase price adjustments and a quantification of debt and debt-like items, including off-balance sheet liabilities and accrued obligations.
Ankura's insights played a critical role in supporting the client's valuation model and investment decision-making, helping to validate key assumptions in the deal thesis and inform negotiation strategy.
Ankura's Expertise in Risk-Based Primary Care Transactions
Ankura brings deep expertise and a proven track record in supporting financial due diligence across the risk-based primary care landscape. Our team has advised on numerous transactions involving value-based care organizations, including independent PCP groups, Medicare Advantage-focused platforms, and vertically integrated delivery systems. We combine healthcare-specific financial acumen with operational and regulatory insights to deliver a comprehensive diligence approach tailored to the complexities of risk-bearing models.
Ankura also has experts in Risk Adjustment compliance, as well as Certified Risk Adjustment Coders and Nurses who can perform compliance program reviews and evaluate diagnosis codes to validate RAF scores. This specialized capability ensures that risk adjustment factors are accurately assessed and compliance standards are met.
From quality of earnings assessments and payer contract reviews to risk adjustment validation and scenario modeling, Ankura helps investors and strategic acquirers uncover hidden risks, validate growth assumptions, and structure deals for long-term success. Our collaborative, data-driven methodology ensures stakeholders have the clarity and confidence needed to navigate this dynamic sector.
Conclusion and Call to Action
As value-based care continues to evolve, financial due diligence in the risk-based primary care sector must keep pace with regulatory, operational, and reimbursement complexities. Ankura's healthcare transaction advisory team stands ready to support investors and operators with tailored diligence solutions that drive informed decision-making and long-term success.
Footnotes
1. Primary Care and Value-Based Payment | Commonwealth Fund
3. Value-based Payment Models for Primary Care, Risk Adjustment in (Position Paper) | AAFP
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