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· Healthcare roll-up — Gastroenterology practice + ASC
Lakeside GI & Endoscopy, AI Diligence Brief delivered
Target: Lakeside Gastroenterology & Endoscopy, a 5-physician GI practice with an affiliated ambulatory surgery center (ASC). FY revenue $9.2M, adjusted EBITDA $2.1M; 58% of cases run through the physician-owned ASC. Verdict: A strong GI/ASC platform, but the payer-diversification claim is false on the practice's own schedule, the physician-comp add-back rests on a below-market FMV, and a fifth of ASC revenue is out-of-network. Proceed with the items below confirmed before LOI.
Generated from a 5-document data room, 32 pages in total
Every claim below is traced to one of these source documents, and figures are reconciled across them, exactly as a real run reads a full data room.
Confidential Information Memorandum: Lakeside_GI_CIM.pdf · 16p
Financial statements: Lakeside_Financial_Statements.pdf · 6p
Payer & procedure schedule: Lakeside_Payer_and_Procedure_Schedule.pdf · 5p
Physician compensation benchmark (MGMA): GI_Compensation_Benchmark_MGMA.pdf · 3p
Management-call notes: Lakeside_Management_Call_Notes.pdf · 2p
2Verified claims
2Contradictions
4Risks & flags
3Discarded by verifier
No findings match this filter, .
Verified claims
The platform is real and profitable: FY revenue of $9.2M and adjusted EBITDA of $2.1M, with 58% of cases routed through the physician-owned ASC, the high-margin engine. Confirm the practice-vs-ASC revenue split and ASC case-mix before relying on the blended margin.
high confidence
Source: Lakeside_Financial_Statements.pdf · page 4 ✓ verified against source
“FY revenue was $9.20M with adjusted EBITDA of $2.10M; approximately 58% of procedures were performed at the affiliated ambulatory surgery center.”
Scale is meaningful for a single-specialty group: five gastroenterologists plus mid-levels across two sites. The depth matters because it offsets the key-person risk flagged below, request the per-provider procedure and collections detail to confirm how evenly the work is spread.
high confidence
Source: Lakeside_GI_CIM.pdf · page 3 ✓ verified against source
“The group comprises five gastroenterologists and three advanced-practice providers across two clinical sites and one ASC.”
Contradictions flagged
Two passages in the same document that cannot both be true. The brief shows you both, verbatim, and leaves the judgment to you.
critical
contradiction
The “no payer over 25%” claim is contradicted by the practice's own payer schedule
Page 6 states the payer mix is well-diversified with no payer above 25% of net revenue. The payer schedule puts Medicare at $2,852,000 against $9.2M, that is 31.0%, above the stated cap. Medicare reimbursement is rate-set and exposed to policy cuts (notably for GI procedure codes), so a third of revenue carries regulatory rate risk the CIM frames away. Stress-test the model against scheduled Medicare GI fee changes.
Lakeside_GI_CIM.pdf · page 6
✓ verified
“The practice's payer mix is well-diversified; no single payer represents more than 25% of net revenue.”
vs
Lakeside_Payer_and_Procedure_Schedule.pdf · page 2
✓ verified
“Medicare: $2,852,000; BlueCross BlueShield: $1,840,000; Aetna: $1,196,000; UnitedHealthcare: $1,012,000.”
high
contradiction
The physician-comp add-back rests on a fair-market value $130K below the regional median
Page 4 reaches the $2.1M adjusted EBITDA partly by adding back $410,000 of owner-physician compensation, normalizing each physician to a $380,000 fair-market value. The compensation study in the data room puts the regional median for gastroenterology at $510,000. Normalizing to the real market figure removes $130,000 of that add-back, the “above-market” comp is smaller than presented. Defensible EBITDA is correspondingly lower, which moves the price at any multiple.
Lakeside_GI_CIM.pdf · page 4
✓ verified
“Adjusted EBITDA reflects normalization of owner-physician compensation to a fair-market value of $380,000 per physician, an add-back of $410,000.”
vs
GI_Compensation_Benchmark_MGMA.pdf · page 2
✓ verified
“Median total compensation for gastroenterology in the region is $510,000 (MGMA, most recent survey).”
Financial tie-out
A quality-of-earnings first pass: the same figures tied out across the CIM, the financials, and the tax return, and every EBITDA add-back judged on whether it survives a sale. The deltas and the defensible EBITDA are computed, never asserted.
The seller's $2.1M adjusted EBITDA carries $250K of add-backs that may not survive, $130K from a below-market comp FMV and a $120K EMR migration, and revenue is stated $240K higher in the CIM than on the cost report.
mismatch FY net revenue: $240K gap, 2.6%
CIM, p.4 ✓ verified
$9.20M“FY net revenue was $9.20M.”
vs
Medicare cost report / return ✓ verified
$8.96M“Net patient service revenue: $8,960,000.”
The same fiscal figure is $240,000 higher in the CIM than on the cost report. Reconcile before applying any multiple.
EBITDA add-back scrutiny
| $410,000 |
Owner-physician compensation above fair-market value questionable
The FMV used ($380K) is below the $510K regional MGMA median; $130K of this add-back is unsupported and should be reversed.
|
| $90,000 |
Owner personal & discretionary expenses likely
Standard owner personal items, confirmable from the general ledger.
|
| $120,000 |
One-time EMR migration questionable
Survives only if documented as genuinely non-recurring and complete, not an annual platform cost.
|
| Seller's adjusted EBITDA (as presented) | $2.1M |
| Less: add-backs that may not survive a sale | ($250,000) |
| Defensible adjusted EBITDA | $1.85M |
| Implied EBITDA before any add-backs | $1.48M |
The seller presents $2.1M. After haircutting the add-backs that are not clearly defensible, $1.85M is what holds up, a gap that moves the price at any multiple.
Management-call cross-check
What management said on the call, checked against what the documents actually support. Both the spoken statement and the documentary basis are verified to source, so neither side of the comparison can be fabricated.
Two of management's statements are contradicted by the documents, and one is unsupported.
contradicted No payer is more than a quarter of our revenue.
On the call
“no payer's more than a quarter of us, we're diversified”
vs
Documents · page 2 ✓ verified
“Medicare: $2,852,000 (31.0% of net revenue).”
The payer schedule shows Medicare at 31.0% ($2,852,000 of $9.2M).
contradicted We normalized my compensation to fair market.
On the call
“we already normalized my comp to fair market value”
vs
Documents · page 2 ✓ verified
“Median total compensation for gastroenterology in the region is $510,000 (MGMA).”
The add-back uses a $380K FMV; the MGMA regional median for GI is $510K, so $130K of the add-back is unsupported.
unsupported All our providers are employed by the practice.
On the call
“all the docs are our employees”
vs
Documents
No document states provider employment or contractor status; the provider agreements are not in the data room.
supported We did about nine-two in revenue.
On the call
“we did roughly nine-point-two”
vs
Documents · page 4 ✓ verified
“FY net revenue was $9.20M.”
Matches the CIM ($9.20M). Note the cost report shows $8.96M, a separate $240K gap to reconcile.
Risks & items needing documentary support
critical
risk
Provider concentration: the founding physician performs 38% of procedures and is reducing hours
One physician, the founder, personally performs 38% of procedures and intends to reduce clinical hours after close. A buyer is partly buying his personal panel and referral relationships, which do not transfer with the entity. Structure for it: a multi-year clinical commitment, earnout tied to his volume, and a recruiting plan to backfill the procedure capacity.
Source: Lakeside_GI_CIM.pdf · page 7 ✓ verified against source
“The founding physician performs approximately 38% of total procedure volume and intends to reduce clinical hours following a transaction.”
high
missing info
A fifth of ASC facility revenue is out-of-network, exposed to the No Surprises Act
22% of ASC facility revenue is billed out-of-network. OON economics are structurally exposed to the No Surprises Act and to payers narrowing networks, so this slice is less durable than the contracted base. Model the OON revenue separately at a haircut and request the trend in OON share over the last three years.
Source: Lakeside_Payer_and_Procedure_Schedule.pdf · page 9 ✓ verified against source
“Approximately 22% of ASC facility revenue was billed on an out-of-network basis during the period.”
high
missing info
The ASC referral and ownership structure (Stark / anti-kickback) is undocumented
The ASC's volume comes from the affiliated practice's own referrals, and the physicians own the ASC. That is common and can be compliant, but the applicable safe harbors, ownership percentages, and referral arrangements are not in the data room. Unreviewed Stark/anti-kickback structure is a regulatory and indemnity risk. Require a healthcare-regulatory review before LOI.
Source: Lakeside_GI_CIM.pdf · page 11 ✓ verified against source
“The ASC receives substantially all of its case volume from the affiliated practice; the compliance structure is not described in this memorandum.”
medium
risk
ASC real estate is leased from a physician-owned entity (related party)
The ASC occupies space leased from an entity owned by the selling physicians. Test the rent against market and confirm lease continuity and term, a below- or above-market related-party rent distorts EBITDA and the post-close cost base.
Source: Lakeside_GI_CIM.pdf · page 12 ✓ verified against source
“The ASC facility is leased from an entity owned by the selling physicians.”
What to confirm before LOI
- Stress-test the model against scheduled Medicare GI fee changes (31% Medicare).
- Physician-comp normalization to the $510K MGMA median, not the stated $380K FMV.
- Founding-physician clinical commitment, earnout, and a backfill recruiting plan.
- Out-of-network ASC revenue: 3-year trend and a durability haircut.
- Stark / anti-kickback review of the ASC referral and ownership structure.
- Market test of the related-party ASC lease, term and continuity.
- Per-provider procedure and collections detail; provider agreements and non-competes.
- Reconcile the CIM's $9.2M revenue with the $8.96M on the cost report / return.
Verification log, discarded before delivery
The model generated these while drafting. Each was checked against the source, could not be tied to a verbatim passage, and was removed before you saw the brief. This is the part most AI diligence tools never show you.
No document states the providers' employment or contractor status; provider agreements are not in the data room.
Surfaced instead: request all physician and APP employment/contractor agreements and non-competes.
No passage characterizes malpractice or claims history; nothing supports a clean-claims statement.
Surfaced instead: request a 7-year malpractice and claims history and confirm tail coverage.
A forward projection with no committed capacity, staffing, or demand evidence in any document.
Investment-committee memo
The decision capstone, drafted from the verified findings and the tie-out above. Every figure traces to a cited number in this brief, and it is candid that the first pass still wants a formal quality-of-earnings review.
pursue with conditions
Pursue with conditions: a high-margin GI/ASC platform, contingent on resolving the Medicare rate exposure, provider concentration, the out-of-network durability, the ASC compliance structure, and the comp add-back before LOI.
Recommendation
Proceed to a conditional LOI. The ASC engine and procedure base are attractive, but four findings move the price and the structure: Medicare at 31% (contradicting 'no payer over 25%'), a founder doing 38% of procedures and stepping back, 22% out-of-network ASC revenue, and a comp add-back built on a below-market FMV. Anchor valuation to the defensible $1.85M EBITDA, not the seller's $2.1M.
Investment thesis
A five-physician single-specialty GI group with an owned ASC, where procedures are non-discretionary and the ASC captures the high-margin facility fee. Consolidation and recruiting can extend it, subject to the compliance and concentration items below.
Financial summary
FY revenue is $9.2M in the CIM but $8.96M on the cost report, a $240K gap to reconcile. Seller-adjusted EBITDA $2.1M; defensible $1.85M after reversing the $130K FMV overstatement and a questionable $120K EMR add-back; implied EBITDA before add-backs $1.48M.
Key risks
Payer concentration (Medicare 31%) and GI rate risk. Provider key-person (founder at 38% of volume). Out-of-network durability (22% of ASC facility revenue). An undocumented Stark/anti-kickback structure and a related-party ASC lease.
Conditions to close
Reconcile the revenue gap; re-run the comp normalization at the $510K median; secure the founder's clinical commitment and a backfill plan; haircut OON revenue; complete a healthcare-regulatory (Stark) review; market-test the ASC lease; and commission a quality-of-earnings review. This brief is a first pass, not a formal QoE or legal opinion.
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