Audit & Assurance for Healthcare & Wellness

Gross charges mean very little in a practice. What matters is the amount you actually expect to collect, and that number is an estimate.

Under ASC 606, revenue is recorded at the transaction price the practice expects to be entitled to. Contractual adjustments to negotiated payer rates are explicit price concessions, and amounts you never expected to collect from a patient are implicit ones. Both reduce the transaction price rather than sitting below the revenue line as bad debt expense.

We start with the payer contracts themselves: the negotiated fee schedules, how charges are translated into expected reimbursement, and whether the rates loaded in your system still match the rates in the agreement.

Variable consideration is where the judgment concentrates. Self-pay discounts, denials, and payer takebacks all have to be estimated. Bad debt expense survives only in the narrower case where a patient-specific event after the original credit assessment, such as a job loss, causes the shortfall.

We test that estimate the way auditing standards require an accounting estimate to be tested: the method used, the data behind it, the assumptions applied, and any indicators of management bias.

In practice that means testing retrospectively, comparing what a period’s receivables were expected to yield against what those accounts actually collected, then asking why the two diverged.

We also test cut-off around year-end, because visits and procedures posted a few days early or late move both reported revenue and reported receivables.

The result is a net revenue figure documented well enough to survive a lender’s questions, a buyer’s diligence, and a successor auditor’s review.

The exposure in a practice sits at the handoff between clinical work and the books. That handoff is what we walk.

Start with charge capture. A visit, procedure, or ancillary service that never reaches a claim is revenue nothing downstream can recover.

Front-desk cash and card handling is the next exposure. Copays, patient balances, and retail or wellness product sales are collected by people hired to care for patients, not to safeguard receipts.

Then collections and write-offs. The questions are who holds authority to adjust a balance, whether that authority is written down, and whether anyone independent reviews the adjustments that get posted.

Refunds and credit balances get their own procedure, since an unapproved refund is one of the quieter ways money leaves a practice.

Duty separation is assessed across billing, collections, payables, and payroll. Owner-run practices are usually stretched thin across all four.

Where headcount makes separation impossible, we name compensating steps an owner or administrator can complete each month without help.

Everything we find is written up to be acted on rather than filed, and anything reaching the level of a significant deficiency or material weakness is reported in writing as the standards direct.

A buy-in or a buy-out is the highest-stakes transaction most practices ever run, and it rests on financial statements someone independent has stood behind.

The first question is what the agreement actually calls for. A buy-sell commonly specifies the valuation standard and the financial information the valuation will rely on; naming a level of CPA service is a drafting choice rather than a professional requirement. In practice, a number built on internally prepared statements carries less weight with an incoming partner’s advisors than one built on reviewed or audited statements.

The second is what those statements actually say about earnings. Owner compensation, related-party rent, family payroll, and personal expenses run through the practice all distort the profit an incoming partner thinks they are buying into.

We test the balances behind that picture: patient receivables, the price concession and credit loss estimates applied against them, accrued compensation, equipment and leasehold basis, and the debt the practice carries.

Deferred revenue matters in wellness and therapy businesses in particular, where prepaid packages and memberships create an obligation to deliver service that has to be reflected before anyone measures profit.

Lease obligations belong in the picture too, because a right-of-use asset and a lease liability on the balance sheet change the leverage a lender and an incoming partner see.

Where a full audit is more than the deal needs, a review gives the incoming partner limited assurance on the same statements at a smaller scope, and we say up front which of the two the agreement will actually accept.

WhippleWood performs business valuations as well as attest work, and where we also serve as your independent auditor we scope the two engagements so that independence under the AICPA rules is preserved.

Where the records will not support the report the agreement calls for, we say so early, while there is still time to fix the records rather than renegotiate around them.

Almost every practice group we audit is layered, and that layering produces most of the reporting judgment in the engagement.

Scoping comes first. We settle which companies sit inside the reporting entity, which are variable interest entities, and whether the private company election applies to a common-control leasing arrangement so it stays off the consolidated statements.

Elimination follows. Management fees, rent, equipment charges, and notes running among the professional entity, the management company, and the property entity are taken out of the consolidated figures, and whatever survives has to show up in the related-party note.

That note is mandatory and it is the first thing a bank or an incoming partner turns to, because rent set off market by an entity the owners control moves reported results in one direction or the other.

Leases are the third piece. ASC 842 applies to private companies for fiscal years beginning after December 15, 2021, and it put operating leases on the balance sheet as a right-of-use asset carrying a matching lease liability.

The consequence is commercial rather than technical. That liability changes the working capital and leverage figures your covenants are measured on, so the numbers get worked through with you before anything is issued.

Clinical space, imaging and equipment, and shared-suite arrangements each need their classification, discount rate, and term documented, renewal options you are reasonably certain to exercise included.

Standalone statements for one entity are available where a lender on a single site or a single asset asks for them.

Our work here is the accounting and the reporting. Whether a given arrangement is permissible under healthcare regulation is a legal question, and we work alongside your healthcare counsel rather than opining on it ourselves.

A practice usually crosses this line the year after it adds providers or opens a second location.

Whether your plan needs an audit is a Form 5500 question. Large plans have to attach audited financial statements to the return, and small plans do not.

For plan years that began on or after January 1, 2023, a defined contribution plan reaches 100 by counting participants who held an account balance on the first day of the year. Eligible employees with nothing in the plan are no longer counted.

In a practice staffed with part-time clinical people and a front office that turns over, that rewrite matters. Plans that had been filing as large plans often no longer have to.

The 80-120 rule is worth reading before you assume an audit is required, since it lets a plan keep filing in its prior category while the count moves back and forth across the threshold.

Where an audit is required and a qualified institution has certified the investment information, ERISA Section 103(a)(3)(C) narrows our testing over that information. It is not treated as a scope limitation, and the two-part opinion it produces is not an opinion on the financial statements taken as a whole.

Eligibility is the provision practice plans most often miss. Per-diem providers, contracted therapists, and rotating front-office staff make hours tracking harder than the document assumes, and a missed entry date compounds until someone tests it.

Past eligibility we look at contributions and their timing, payouts, participant data, and whether the plan ran the way it is written. Anything that went wrong is raised early enough to be fixed.

Evidence comes from your recordkeeper and trustee, we coordinate with the third-party administrator, and the report is finished in time to go with the Form 5500.