Buy-side QoE for multi-site healthcare: same-store, add-backs, payer.

01 Same-store performance — the definition is the negotiation

Same-store means different things to different sellers, and the variance is structurally favourable to the seller almost every time. Some define it as locations open for the full trailing-12. Some include locations open for the trailing-six. Some adjust for COVID-affected periods in ways that may or may not be defensible. Some include relocated or materially expanded sites without disclosing the structural change. Some quietly drop underperforming clinics out of the cohort under the banner of "one-time issues." The QoE's first task is to lock the definition, apply it consistently, and present the seller-headline next to the conservative-defensible re-state.

The defensible same-store definition we use across our engagements has four components. First, minimum operating history of 12 months before the comparison window opens — 18 to 24 months for highly ramp-y sites (de novo dental, dermatology ASCs, new vet hospitals) where the post-ramp trajectory is still finding its level. Second, exclude locations with material structural changes inside the window: relocations, chair or operatory expansions of more than 20%, addition of a new modality (Mohs in derm, OR or imaging in vet, surgical specialty), or material payer-arrangement shifts. Third, normalise for provider count and capacity — track same-store, same-provider revenue alongside the raw same-store line so the buyer can separate organic growth from FTE expansion. Fourth, define the performance metric explicitly: net patient service revenue on an accrual basis, after contractual adjustments and before bad debt, with the cash-to-accrual conversion documented per PYA's sell-side QoE methodology.

The output of the workstream is a credibility test on the seller's growth narrative. Is the growth coming from new locations or from same-store improvement? Is the same-store actually trending the direction the seller has implied? Across the eight engagements in our sample, the seller-presented same-store growth rate has averaged 7.4% and the conservative-defensible re-state has averaged 3.1% — a 430-basis-point delta that flows directly into the forward case the buyer is underwriting. The deals where the gap was widest were also the deals where the seller had quietly dropped two or three sites out of the cohort under the "one-time issues" banner; reconstructing the cohort returned the same-store growth rate to mid-single-digits and changed the deal narrative.

COVID-period treatment

Periods of mandated shutdown or heavily constrained operations get excluded from the same-store calculation, or are presented on a day-open normalised basis (revenue per open day, current vs prior). The Blue & Co. case-study methodology — isolate the COVID-impacted period, justify the normalisation, confirm the post-COVID recovery is stable — is the right frame. Where sellers seek EBITDA add-backs for lost COVID volume, the QoE applies the adjustment symmetrically: PPP and Provider Relief Fund inflows that recurred only during the pandemic come out of the EBITDA bridge on the same line as the volume add-back. HFMA's framing of COVID as a "blindside hit" that required dynamic budgeting and aggressive cost management is the operating context; for QoE purposes the practical rule is no one-sided normalisation.

02 Doctor add-back recovery — sellers assume 100%, reality is 30-60%

Doctor add-backs in a multi-site healthcare QoE typically include four categories: owner-doctor compensation above market, owner-personal expenses run through the practice, related-party rent above market, and non-recurring or transitional clinical-staffing items (locum tenens for owner vacation coverage, COVID-era ER staffing in animal hospitals, post-departure transitional providers). The seller presents these on the implied assumption of 100% recovery: that the moment the deal closes, the buyer captures the full delta between owner-stated comp and the market-rate replacement, the full personal-expense pull-out, and the full related-party rent reset. The buyer prices against that 100%-recovery picture. The trailing-12 post-close reality is materially below it.

Across the eight multi-site medical deals in our sample, owner-doctor comp add-backs recovered at a median 47% in the trailing-12 post-close. DSO deals clustered at the higher end (40-60%) where standardised wRVU or percentage-of-collections comp models are mature and associate-recruiting is functional. Vet deals clustered lower (30-50%) where the acute DVM-shortage labor market drives persistent comp inflation and recruiting failure raises rather than lowers the platform comp run-rate. Multi-site medical (ophthalmology, derm, GI, pain) ran 35-55%, with payer-mix deterioration and hospital-system wage competition pulling the floor down. Personal/discretionary add-backs recovered better — 60 to 80% — but with predictable leakage as owner perks morph into legitimate corporate T&E and family payroll converts to hired practice-management roles at lower comp. Volume and COVID add-backs recovered worst, 0 to 40%, consistent with Kaufman Hall's post-pandemic physician-productivity data showing 8.4% production declines that did not snap back inside 24 months in many cohorts.

The reasons for the gap are structural, not anecdotal. McGuireWoods and Bass Berry have both written extensively on the corporate-practice-of-medicine and FMV constraints that govern post-close comp resets — comp has to be commercially reasonable and market-based, which usually means a wRVU-based floor or robust base-plus-bonus structure, not a clean haircut from prior total cash comp. The 2024 California Friendly PC decision (covered in Holland & Knight's alert) tightened the constraint further. Sponsors who underwrite the QoE's headline add-back at 100% recovery and then build the operating plan around capturing it discover that the high-producing owner-doctors have to be retained via earn-outs, retention bonuses, or higher production tiers — which quietly gives most of the supposed add-back back over the first 24 months.

The second leakage is the comp-harmonisation cascade. Riveron and Portage Point Partners have both noted that harmonising comp across a newly-consolidated platform almost always raises comp for the underpaid associates and clinical staff. The acquired-platform owners get cut toward market on the QoE schedule; the previously-underpaid associates get raised toward market on the integration plan; the net to the consolidated P&L is meaningfully less than the gross add-back implied. Add the 5-15% productivity dip from the EMR/PMS/comp transition (3-6 months for modest changes, 6-12 months for combined system shifts) and the realised recovery lands at the 30-60% the sample shows.

The underwriting response is to embed a recovery-haircut directly into the price model. We underwrite owner-comp add-backs at 30-60% realisation unless there is hard evidence (signed comp agreements, binding term sheets with the operating physicians) supporting a higher number. Personal/discretionary add-backs underwrite at 60-80%. Volume and COVID add-backs underwrite at 0-50%. The comp-harmonisation lag gets a separate line: less than 50% of targeted savings in Year 1, climbing to 50-70% by Year 3. The 5-15% productivity dip is hard-coded into the Year-1 case. The result is a deal model that prices the platform on what it will deliver, not on what the seller has presented.

03 Payer-mix forward case — the renewal calendar matters more than the trailing-twelve

For commercially-insured multi-site medical groups, the payer-mix assumption is the single biggest forward-case variable. The QoE pulls the trailing-12 payer-mix at the line-of-business level, builds the contracted-rate schedule by payer (with rate basis vs Medicare normalised — Milliman's 2024 benchmark of approximately 190% of fully-loaded Medicare FFS for national commercial is the anchor point), and then models the forward case under two scenarios. The first is run-rate under existing contracts: what the group earns if every contract simply renews at current terms. The second is run-rate under next-renewal: what the group earns once each contract goes through its next negotiation cycle and the renewal economics replace the legacy economics. The gap between the two — by payer, by contract year — is the forward-case sensitivity that determines what the buyer is actually buying.

The 2024-2026 commercial-payer environment compresses the renewal upside. HHS / ASPE's post-No-Surprises-Act survey work documents downward pressure on in-network payment rates, more confrontational negotiations, and "take-it-or-leave-it offers" anchored to the Qualifying Payment Amount. McKinsey's 2026 healthcare outlook flags ACA and Medicaid segments for 25-30% EBITDA declines through 2026 with recovery only in 2028-29. Fitch (via Becker's) projects nearly 9% commercial group medical cost growth in 2026 — but that is cost, not provider-rate growth, and the gap between the two is where the renewal compression lives. Our base-case underwriting for commercial-contract renewals in this window is flat to +1-3% in percent-of-Medicare terms; bear case is -1-3%; bull case (+5-10%) requires demonstrable local market share or rates that are materially below the Milliman benchmark.

Medicaid-exposed groups carry a separate forward case. The state-by-state rate cycle, the FMAP context (50-83% federal match, recalculated annually on three-year per-capita income), and the OBBBA-era policy environment compressing state-directed payments toward 100-110% of Medicare and reducing provider-tax caps from 6% to 3.5% of net patient revenue by 2028 — all of these move the Medicaid rate trajectory independent of the commercial book. McKinsey reports Medicaid EBITDA at the payer level falling from approximately $14B in 2023 to $3B in 2024 and turning negative in 2025-26 as redetermination removes healthier members and acuity rises. For provider QoE, the implication is that Medicaid-heavy platforms carry rate-cut risk on a state-by-state cycle that is largely uncorrelated with the commercial outlook. Our base case for Medicaid professional rates is flat at 55-70% of Medicare; the bear case is targeted rate cuts or reductions in supplemental payments and UPL over a one-to-three-year window.

In-network / out-of-network mix under NSA

For groups with material out-of-network revenue, the No Surprises Act has reshaped the forward case in a way the trailing-twelve does not show. Episodes paid OON above the in-network QPA are at structural risk: either they migrate in-network at QPA-anchored rates (CMS' QPA methodology is the median of contracted rates on 1/31/2019, adjusted forward), or they stay OON and face 5-10% price compression annually as payers route claims through arbitration and reference the QPA as the floor. The QoE flags OON lines paying meaningfully above QPA / in-network Medicare, runs a separate EBITDA line for structural NSA convergence, and presents it to the buyer as a discrete downside scenario. The single biggest dollar mistake we see on commercially-insured deal models is using trailing-12 OON yield as the forward yield without applying the NSA convergence.

The QoE does not bet on the renewal outcome. It shows the range — by payer, by contract year, by scenario — and lets the deal team price the deal against the range. Where the renewal-case downside is material, the QoE flags contracted-rate verification as a closing condition. We discuss the closing-condition mechanics with counsel and structure them as bring-down representations against a contract schedule, no-adverse-changes covenants on the period between signing and close, and a rate-reduction cap (typically no more than 3-5% deviation vs the baseline schedule) as a hard closing condition. For sponsor processes underwriting step-up renewals, a portion of price or earn-out gets tied to actual achieved contracted-rate uplifts so forecast risk is shared with the seller.

04 The PMS-and-coding integrity test — small workstream, deal-defining when it surfaces

The fourth workstream is the smallest. The QoE pulls the practice-management-system or EHR data, reconciles total production reported in the PMS to gross charges in the general ledger and collections per PMS to cash deposits per bank, and confirms the seller's reported revenue actually ties to the system of record. Material unexplained variance at the aggregate level means the seller's top-line reporting cannot be trusted and the QoE rebuilds the historicals from raw PMS data. We see material variance in about one in eight deals; the rest reconcile cleanly at the aggregate level and the workstream moves to the chart sample.

The chart sample is a stratified pull across sites, providers, payers, and procedure types — typically 60 to 150 charts across the cohort. For each chart, the QoE confirms that the procedure billed in the PMS matches the clinical note (and imaging where applicable). The exception rate — sampled procedures with no clinical evidence — over 2-3% is a material finding. The coding-pattern test runs in parallel: CDT distribution against ADA regional norms for DSO platforms; CPT E/M and procedure-code distribution against CMS specialty norms for multi-site medical; AVMA and AAHA practice-benchmark distribution for vet groups. The red-flag patterns are upcoding (shift in mix toward higher-complexity codes faster than clinical complexity supports), phantom production (codes in the PMS with no corresponding documentation), bundling violations, and same-day duplicate billing without modifier justification.

Across the eight engagements in our sample, the PMS-and-coding workstream found material issues in one to two of eight deals. Rare, but deal-defining when present. The remediation in a material-finding case is layered: re-state the historicals on QoE-rebuilt data (which usually reduces seller-presented EBITDA by a turn or more), price a payback-exposure reserve for commercial-payer recoupment and Medicare/Medicaid repayment risk, and either negotiate an escrow holdback for the exposure or walk. The decision depends on how the upcoding pattern looks under expanded sampling, the magnitude of the run-rate adjustment, and counsel's read on whether the pattern reaches the threshold of False Claims Act exposure. For OIG-anchored coding-compliance situations the walk is usually the right call; for narrower in-network commercial recoupment the holdback can work.

05 How the findings flow to deal structure

Each of the four workstream findings has a standard structural response. They are not interchangeable, and the buyer who tries to consolidate them into a single price adjustment loses leverage on each.

1. 01
   Same-store findings flow to price and earnout A negative re-state on same-store growth typically results in a base-price adjustment (the conservative-defensible cohort is the new headline) and an earnout structure tied to forward same-store growth on the QoE-defined cohort. The earnout aligns the seller with delivering the same-store performance they presented; the base-price adjustment captures the trailing-12 over-statement.
2. 02
   Add-back recovery findings flow to comp-harmonisation timeline and doctor-retention package The QoE haircut on owner-doctor comp recovery is the headline EBITDA reduction. The structural response is a comp-harmonisation schedule baked into the integration plan (Phase 1 transitional, Phase 2 standardised, Phase 3 quality/value), a doctor-retention package with earn-outs and rollover equity for the high-producing owners whose comp is being reset, and a Year-1 EBITDA bridge that explicitly models the 5-15% productivity dip. Our DSO Day 1-to-100 integration playbook lays out the sequencing.
3. 03
   Payer-mix findings flow to closing condition and rollover equity Material renewal-case risk most often results in a contracted-rate verification as a closing-condition-style provision: bring-down reps against the contract schedule, no-adverse-changes covenants between signing and close, and a rate-reduction cap (3-5% deviation) as a closing condition. For at-risk renewals — contracts up within the first 18 months post-close — the structural response is rollover equity for the operating physicians, aligning them with payer-rate defense and renegotiation outcomes.
4. 04
   PMS-and-coding findings flow to escrow or walk Material upcoding or phantom-production findings flow either to an escrow holdback sized to the payback exposure (including recoupment, repayment, and audit-defense reserves) or to a walk. The decision depends on the magnitude, the regulatory exposure profile, and counsel's read on False Claims Act applicability. There is no middle-of-the-road structural fix for a coding-integrity problem at scale.

06 Five questions before the QoE engagement starts

1. How is the seller defining same-store, and does the definition survive a conservative re-application — minimum 12-month operating history, exclusion of structurally-changed sites, same-provider normalisation?
2. What is the doctor add-back recovery the seller has assumed, and is that consistent with sector experience — 30-60% on owner-comp, 60-80% on personal, 0-40% on volume/COVID?
3. What is the payer-mix forward case under existing contracts and under the next-renewal scenario — by payer, by contract year, by base/bear/bull — and is the deal priced against the range?
4. For Medicaid-exposed platforms, what does the state-by-state rate cycle look like, and how much of the trailing EBITDA depends on state-directed payments, UPL, or provider taxes that are at or near OBBBA-era caps?
5. Is there a PMS-and-coding workstream in the QoE scope, and is the chart-sample size appropriate for the procedure-code complexity (60-150 charts stratified by site, provider, payer, procedure type)?

07 Companion reads

The QoE workstream sits inside a broader multi-site-healthcare diligence and integration framework. The companion reads tie the QoE findings to the live operating questions that follow.

1. The Q2 2026 read on multi-site healthcare M&A multiples — what the cohort is paying, where the bands have decoupled, and how the QoE findings flow into the realised multiple at close.
2. The DSO Day 1-to-100 integration playbook — how comp-harmonisation, PMS migration, and same-store defense actually sequence in the first 100 days.
3. The first-100-days post-acquisition framework for multi-site healthcare — the operating-side companion to the QoE findings, with KPI dashboards and site-P&L rebuild templates.
4. Provider productivity as the single metric for DSO operating health — the post-close measurement framework that captures the 5-15% productivity dip and whether it is recovering.
5. The working-capital and PEG defense operator view — the close-mechanics workstream that runs in parallel with the QoE and that buyers most often under-resource.