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Read this if you are a business owner or an advisor to business owners.

This article is part one of a three-part series. 

With continued uncertainty in the business environment—driven by shifting economic conditions, market volatility, and evolving tax policy—now may be a good time to utilize trust, gift, and estate strategies in the transfer of privately held business interests. Periods of uncertainty can create an opportunity to free up considerable portions of lifetime gift and estate tax exemption amounts through transfers, particularly as uncertainty and increased risk serve to reduce business valuations.  

An element to consider is the ability to transfer noncontrolling interests in a business. These interests are potentially subject to Discounts for Lack of Control (DLOC) and lack of marketability. This may further reduce the overall value transferred through a given strategy, potentially offloading a larger percentage of ownership in a business while retaining large portions of the gift and estate lifetime exemption. For the first part of this series, we’ll focus on the DLOC.

What is discount for lack of control?

In the context of a hypothetical willing buyer and willing seller, the buyer may place a greater value on an ownership interest with the ability to make changes at their discretion, compared to an alternative ownership interest lacking control. Simply put, buyers like to be in control, and they will pay less for the investment if the interest lacks these characteristics.  

When valuing noncontrolling business interests, there is an inherent discount to full value recognized to reflect the fact that the subject interest does not hold a controlling position. As a result of this discount, the value of a noncontrolling interest in a company will differ from the pro-rata value per share of the entire company. DLOCs alone commonly reduce the value of the transferred interest by 5% to 15%. 

All else being equal, a noncontrolling ownership position is less desirable (valuable) than a controlling position. This is because of the majority owner’s right to control any or all of the following activities:

• Managing the assets or selecting agents for this purpose 
• Controlling major business decisions, asset allocation choices, setting salary levels, admitting new investors, acquiring assets, selling the company, and declaring/paying distributions

Market-based evidence of proxies for DLOCs can be found within the following subscription-based databases, including but not limited to: 

• Control premium studies published in the Mergerstat^® Review series by FactSet Mergerstat/Business Valuation Resources
• Closed-end fund data
• The Partnership Profiles, Inc. Minority Interest Database and Executive Summary Report on Re-Sale Discounts for applicable entity types

In addition to these resources, to fully assess the degree of discount applicable to a subject interest, consider company-specific factors when estimating the DLOC. The degree of control for a subject interest may be impacted by relevant state statutes and the governing documents of the subject company. These factors are analyzed in conjunction with the current operational and financial policies established and implemented in practice by management to establish a comprehensive view on the applicable degree of discount.

Hypothetical business owners are knowledgeable of the facts and circumstances surrounding a business interest. They take a close look at what they are buying before they make an offer. Like most owners, they prefer to be in control and are generally unwilling to pay the pro-rata value for a minority interest in a business that lacks control. To assess an appropriate discount for lack of control, consider resources such as those referred to above, then ensure the selected discounts are appropriate based on the factors specific to the company and interest being valued. 

Key takeaways

• Use periods of uncertainty to consider trust, gift, and estate strategies for transferring privately held business interests. 
• Recognize that noncontrolling interests may qualify for discounts for lack of control, reducing reported transfer value. 
• Define a DLOC as the price reduction buyers apply when an ownership stake cannot influence decisions or change operations. 
• Expect DLOCs alone to commonly reduce transferred-interest value by 5%–15%, making minority value differ from pro‑rata value. 
• Support a DLOC with market evidence (control premium studies, closed-end fund data, minority interest databases) and company-specific factors (state statutes, governing documents, operating policies). 

BerryDunn can help 

BerryDunn’s credentialed business valuation specialists bring clarity to the complexities of valuation while adhering to strict development and reporting standards. We render an independent, objective opinion of your company’s value in a reporting format tailored to meet your needs. If you have questions about your unique situation, or would like more information, please contact the business valuation consulting team. 

Read this if you are a business owner or an advisor to business owners.

This article is part two of a three-part series. 

With continued uncertainty in the business environment—driven by shifting economic conditions, market volatility, and evolving tax policy—now may be a good time to utilize trust, gift, and estate strategies in the transfer of privately held business interests. Periods of uncertainty can create an opportunity to free up considerable portions of lifetime gift and estate tax exemption amounts through transfers, particularly as uncertainty and increased risk serve to reduce business valuations. 

An element to consider is the ability to transfer noncontrolling interests in a business. These interests are potentially subject to discounts for lack of control and lack of marketability. This may further reduce the overall value transferred through a given strategy, potentially offloading a larger percentage of ownership in a business while retaining large portions of the gift and estate lifetime exemption. Part one of this series focused on the discount for lack of control. For part two, we'll focus on the discount for lack of marketability. 

Discount for lack of marketability

In the context of a hypothetical willing buyer and willing seller, the buyer may place a greater value on an ownership interest in an investment that is “marketable.” Marketable investments can be bought and sold easily and offer the ability to extract liquidity compared to an interest where transferability and marketability are limited. 

Simply put, buyers would rather own investments they can sell easily and will pay less for the investment if it lacks this ability. Noncontrolling interests in private businesses lack marketability—few people are interested in investing in a business where control rests in someone else’s hands. Discounts for lack of control commonly reduce the value of the transferred interest by 5% to 15%, while discounts for lack of marketability can drop the value of the business by 25% to 35%. 

Market-based evidence of proxies for discounts for lack of marketability can be found within the following resources, studies, and methods (including but not limited to): 

• Various restricted stock studies 
• The Quantitative Marketability Discount Model (QMDM) developed by Z. Christopher Mercer 
• Various pre-initial public offering studies 
• Option pricing models 
• Other discounted cash flow models 

In addition to these resources, to fully assess the degree of discount applicable to a subject interest, consider company-specific factors when estimating the discount for lack of marketability. The degree of marketability is dependent upon a wide range of factors, such as the payment of dividends, the existence of a pool of prospective buyers, the size of the interest, any restrictions on transfer, and other factors. 

Assessing discount for lack of marketability

To establish a comprehensive view on the applicable degree of discount, here are more things to consider. In a ruling on the case Mandelbaum v. Commissioner¹, Judge David Laro outlined the primary company-specific factors affecting the discount for lack of marketability, including:

1. Restrictions on transferability and withdrawal
2. Financial statement analysis
3. Dividend policy
4. The size and nature of the interest
5. Management decisions
6. Amount of control in the transferred shares

Business owners are knowledgeable of the facts and circumstances surrounding a business interest. They take a close look at what they are buying before they make an offer. Like most owners, they prefer investments they can readily convert into cash and are generally not willing to pay the pro-rata value for a minority interest in a business that lacks marketability. To assess an appropriate discount for lack of marketability, consider resources such as those referred to above, then ensure selected discounts are appropriate based on the factors specific to the company and interest being valued. 

Key takeaways

• Use periods of uncertainty to consider trust, gift, and estate strategies for transferring privately held business interests.  
• Recognize that noncontrolling interests may qualify for discounts for lack of marketability, reducing reported transfer value.  
• Expect marketability discounts to be materially larger than control discounts in many cases, potentially reducing value by roughly 25% to 35%. 
• Reference market-based studies and valuation models when estimating the discount. 
• Evaluate company-specific factors when determining the discount. 

BerryDunn can help 

Our credentialed business valuation specialists bring clarity to the complexities of valuation while adhering to strict development and reporting standards. We render an independent, objective opinion of your company’s value in a reporting format tailored to meet your needs. If you have questions about your unique situation, or would like more information, please contact the business valuation consulting team. 

¹Mandelbaum v. Commissioner, T.C. Memo 1995-255 (June 13, 1995).

Read this if you are a business owner or an advisor to business owners.

This article is part three of a three-part series. 

With continued uncertainty in the business environment—driven by shifting economic conditions, market volatility, and evolving tax policy—now may be a good time to utilize trust, gift, and estate strategies in the transfer of privately held business interests. Periods of uncertainty can create an opportunity to free up considerable portions of lifetime gift and estate tax exemption amounts through transfers, particularly as uncertainty and increased risk serve to reduce business valuations. 

An element to consider is the ability to transfer noncontrolling interests in a business. These interests are potentially subject to discounts for lack of control and lack of marketability. This may further reduce the overall value transferred through a given strategy, potentially offloading a larger percentage of ownership in a business while retaining large portions of the gift and estate lifetime exemption. Part one of this series focused on the discount for lack of control (DLOC) and part two focused on the discount for lack of marketability (DLOM). In part three, we’ll focus on the application of discounts. 

Application of discounts

One area that often challenges those unfamiliar with business valuations is the application of the DLOC and DLOM. These discounts are multiplicative, not additive. The combined effect of a 10% DLOC and a 30% DLOM is not an additive result of 40%, rather a multiplicative result of 37% (mathematically, 1 – [(1 – DLOC) x (1 – DLOM)]). Consider the following example:

A business owner has a 10% minority, nonmarketable interest in a business. The equity of the business is worth $1,000,000. Their interest has a pro-rata value of $100,000 (10% of $1,000,000). They retained a qualified valuation analyst, who estimated that a 10% discount for lack of control and a 30% discount for lack of marketability were appropriate for the valuation of the business owner’s interest. The difference in applying these discounts correctly through a multiplicative process and incorrectly through an additive process is demonstrated in the following chart: 

It does not matter the order in which a DLOC and a DLOM are applied. Because these discounts are multiplicative, applying either one first will not affect the concluded minority, nonmarketable value.

What this means for business owners 

Business owners are knowledgeable of the facts and circumstances surrounding a business interest. They take a close look at what they are buying before they make an offer. Like most owners, they prefer to maintain control and invest in assets that are readily convertible to cash. Therefore, they are generally not willing to pay the pro-rata value for a minority interest in a business that lacks control and marketability. To assess appropriate discounts for lack of control and discounts for lack of marketability, consider resources such as those referred to in part one and part two of this series, then ensure the selected discounts are appropriate based on the factors specific to the company and interest being valued. From there, the application of the DLOC and DLOM is multiplicative, not additive, as noted in the example above. 

Given the current environment, using trust, gift, and estate strategies that take advantage of discounts for lack of control and marketability offers the opportunity to transfer a higher percentage of interest in a privately held company at a lower value. This potentially frees up additional amounts of remaining thresholds of the lifetime gift and estate tax exemptions. 

Key takeaways

• Watch for market and tax uncertainty that can create transfer opportunities. 
• Identify noncontrolling interests that may qualify for valuation discounts. 
• Distinguish discounts for lack of control from discounts for lack of marketability. 
• Apply the two discounts multiplicatively rather than adding the percentages. 

BerryDunn can help 

BerryDunn’s credentialed business valuation specialists bring clarity to the complexities of valuation while adhering to strict development and reporting standards. We render an independent, objective opinion of your company’s value in a reporting format tailored to meet your needs. If you have questions about your unique situation, or would like more information, please contact the business valuation consulting team. 

Veterinary practice owners can miss important financial warning signs even when revenue is growing. This article explains 12 common blind spots, including weak cash flow visibility, outdated pricing, missed charges, labor inefficiencies, and limited long-term planning. Without financial visibility, practices risk lower profitability, greater stress, and diminished long-term value and resilience.

Who this applies to: Veterinary practice owners, managers, and financial directors.

What is a financial blind spot?  

Financial blind spots are operational areas where practice owners: 

• Lack visibility into the true financial health of the business 
• Make decisions without the full financial picture 
• Focus on activity rather than profitability 

These gaps affect more than the bottom line—they can impact profitability, cash flow, business value, and owner stress. 

Why does financial visibility matter to veterinary practices? 

Financial visibility is crucial to the success of a business. While busy teams, growing revenue, and strong client demand might give the appearance of success, many owners are still asking questions that indicate poor visibility: 

• “We’re busier than ever. Where is the money going?” 
• “Why does cash feel tight despite revenue being up?” 
• “I don’t fully understand my financials. What am I missing?” 

Financial visibility gaps and their impact on veterinary practices
 

1. Busy doesn’t always translate to profitability: Common signs for this problem are revenue growth with shrinking margins, longer staff hours with little financial improvement, and growth creating complexity rather than more profit. Activity does not equal profitability. 

2. Profitable on paper while stressed in reality: Profitability on paper can mask cash flow problems, causing stress for veterinary practice owners. This stress often leads to cautious or anxious behaviors that affect decision-making and growth.  

3. Limited financial visibility: Many businesses limit financial reviews to quarterly, tax season, or in response to a problem. Often, the books and records have not been prepared in a clean, consistent fashion that allows for proper analysis and comparisons. Without a regular review of accurate records, owners cannot spot trends early, adjust pricing or costs, and make informed decisions for growth. Monthly reviews are critical. 

4. Pricing that hasn’t kept pace: Don’t underestimate the impact of inflation, rising labor costs, technology expenses, and operational complexity. The result can be eroding margins and declining profits regardless of strong demand. 

5. Revenue leakage through missed charges and excessive discounting: Missed charges often occur during rushed checkouts, handoffs, or emergency cases in veterinary clinics. Leakage lowers staff value, contributes to burnout, and causes financial losses. Addressing leakage requires awareness and disciplined processes—not aggressive price increases. 

6. Revenue mix distortions: Non-core revenue streams can distort financial benchmarks if not separated from core medical income. Segmenting revenue properly reveals true performance trends and reduces confusion in benchmarking. Clarity in revenue mix is necessary for making good strategic decisions. 

7. Misaligned compensation structures: Compensation structures can unintentionally create challenges. For example, problems can occur if pay is not aligned with productivity, incentives reward activity instead of profitability, and ownership compensation is unclear—all of which make growth harder to sustain and adversely affect profitability.

8. Labor growth without clarity on productivity: Increasing staff without improving productivity can reduce overall profitability and operational efficiency. Normalized overtime and full schedules can mask inefficiencies and reveal financial gaps during growth. Careful financial review is essential to align staffing growth with sustainable and value-enhancing results. 

9. Inventory as a hidden cash trap: Overstocking and expiration can lead to drained cash and increased cost of goods sold in veterinary practices. Simultaneous complaints of stockouts and excess supplies highlight poor inventory management systems. When inventory is mismanaged, it ties up working capital, impacting cash flow and profitability. Maintaining awareness of inventory dynamics helps to identify when operational controls require improvement.

10. Don’t ignore the balance sheet: Many practice owners focus on income statements, neglecting balance sheets, which are crucial to financial health. Liquidity, leverage, and equity growth are vital indicators of business resilience and exit readiness. Ignoring the balance sheet limits strategic options and weakens negotiating power during business transitions.

11. Owner draws and hidden value erosion: When an owner treats the business like a personal ATM, it reduces business equity and limits strategic options. If personal lifestyle growth surpasses business earnings, long-term business value declines. Identifying value erosion early helps to preserve business options during expansion and sale. 

12. Lack of long-term financial planning: Many businesses plan for next month or next quarter instead of intentionally building the business over time. It’s important to step back to consider a long-term growth strategy, owner succession, business valuation, and exit planning. 

Key takeaways

• Make financial visibility a priority. 
• Pay attention to profitability, not just revenue. 
• Be strategic with pricing. 
• Ensure compensation structures are aligned. 
• Focus on long-term planning. 

BerryDunn can help 

Do you need help understanding the financial story behind your practice? The veterinary world is uniquely complex. As a veterinary accounting and financial management consulting firm, our proactive approach to client service, ability to anticipate potential problems and tax burdens, use of cutting-edge technology, and focus on industry trends clearly demonstrates our commitment to providing the best quality services for our clients, without geographic limitation. Helping a practice grow and succeed is one of our fundamental strengths. Learn more about our team and services. 

As BerryDunn’s Healthcare Practice Group lead, Lisa Trundy-Whitten is closely attuned to the healthcare industry. From challenges faced by healthcare organizations to the solutions BerryDunn’s experts can provide, Lisa shares thoughtful insights for healthcare leaders.   

We recently hosted the NAVIGATE Healthcare Leadership Summit, our annual virtual event featuring BerryDunn industry experts and four hours of educational sessions on critical issues facing healthcare today. Our team offered strategic insights on:

• Navigating the industry's most pressing challenges 
• Exploring OBBBA and the Rural Healthcare Transformation Program 
• Responding to payer audits and protecting revenue 
• Strengthening AI oversight after implementation

Navigating the now 

We kicked off the summit with a discussion on the state of the industry. From hospitals to senior living and home health and hospice to health centers, we recognize the challenges you face—shrinking margins, rising labor costs, workforce shortages, Medicare and Medicaid reimbursement, increased payer complexity, capital demands (e.g., aging facilities, technology investments), and more. The session offered several best practices, including:

• Staying ahead of CMS Fraud, Waste, and Abuse (FWA) compliance 
• Identifying regulatory risks, planning, and preparing to adapt 
• Focusing on audit readiness 
• Reviewing policies and procedures to align with requirements, revising as needed 
• Prioritizing payer strategy and price transparency and negotiation 
• Verifying the latest requirements online to avoid denied or delayed claims

OBBBA and the Rural Health Transformation Program Insights 

The H.R. 1 One Big Beautiful Bill Act (OBBBA) and Rural Health Transformation Program (RHTP) are important developments for finance and revenue cycle leaders to watch. Key takeaways from this session are:

OBBBA: 

• Automate eligibility checking. 
• Monitor payer mix and model impacts of Medicaid changes. 
• Review policies and procedures, update, and train staff. 
• Strengthen your revenue cycle and compliance programs. 

RHTP: 

• Monitor state rural health website for opportunities. 
• Join CMS and state list services. 
• Find the best opportunity for your organization to participate. 
• Determine populations to serve and services.  
• Identify areas to grow, develop, or partner with another organization. 

Payer audit strategies 

Payer audits continue to evolve across Medicare, Medicaid, and commercial plans, requiring providers to understand audit types, risks, and emerging trends to respond effectively. Our experts recommend the following actions: 

• Assess audit type and intent to guide response strategy. 
• Find out who initiated the audit, what’s being requested, deadlines, and submission requirements. 
• Don’t submit incomplete or excessive documentation because it increases risk rather than strengthening position. 
• Get better outcomes with strong documentation and an organized approach. 
• Evaluate results, address repayment or appeals, and implement corrective actions to reduce future risk. 

AI in the enterprise 

AI adoption in healthcare is quickly moving from experimentation to widespread operational use, but many organizations still lack the governance, controls, and oversight needed to manage associated risks. Here’s some post-implementation guidance: 

• Policy integration and oversight are critical.  
• Key risks include data exposure, bias, cybersecurity threats, over-reliance, and IP violations.  
• Control practices like data classification, human involvement, and traceability are essential. 
• Governance requires defined leadership, policies, and cross-functional involvement.  
• Monitoring, auditing, and reassessment are vital. 

Key takeaways

• Address financial and operational pressure by evaluating margin pressure, labor costs, workforce shortages, reimbursement challenges, payer complexity, and capital needs. 
• Prepare for regulatory and reimbursement changes by monitoring developments tied to OBBBA, Medicaid impacts, and RHTP funding opportunities. 
• Strengthen payer audit response by clarifying audit type, request scope, deadlines, documentation requirements, and follow-up actions. 
• Build stronger compliance and revenue cycle processes by updating policies, training staff, and improving audit readiness. 
• Establish AI governance after implementation by defining oversight, managing risk, and using controls such as data classification, human review, and ongoing monitoring. 

BerryDunn can help 

We’re here to support you. Reach out with questions or for guidance on how to strengthen your operations. I encourage you to learn more about our team and comprehensive services across healthcare.   

Best, 

Lisa Trundy-Whitten 

Read this if you are involved in budgeting, performance, or oversight of FQHC operations.

This article is the third in a three-part series to help Federally Qualified Health Centers understand how site- and program-specific accounting is essential to sustainability.

Site- and program-specific accounting is a powerful tool that gives Federally Qualified Health Centers (FQHCs) the visibility they need to optimize operations for long-term sustainability. Article one explores why that visibility matters—because an organization-wide view can't reveal what's happening at individual locations and within programs. Article two then breaks down how to lay the groundwork for reliable reporting by restructuring the general ledger, modifying payroll data, and aligning the accounting structure with the EHR so results can be reported consistently. 

That leads to the practical question at the core of this article: How do you use months of accumulated site- and program-specific financial data to plan and budget? This article explains how FQHCs can translate location- and service line-level reporting into budgets that reflect real operating conditions, engage site and program leaders, and create accountability by regularly comparing results to budget and monitoring performance trends over time. 

Driving change with site- and program-specific financials 

With systems modified to report on sites and programs, an FQHC can begin tracking monthly financials and using the data to fine-tune planning and budgeting. If reporting shows that a program or site is not performing well, questions arise. Has there been significant turnover at that location? What's the reason behind it? What are other sites doing differently that might lead to better results? 

Without the level of detail provided by site- and program-specific accounting, an underperforming site can adversely impact the financial performance of the entire organization without ever being identified as the problem. However, when systems are modified to report on location or service-line performance, organizations can analyze the data to determine why a site or program is underperforming and take corrective action. Conversely, if the financials indicate a high-performing location with strong provider productivity, key metrics can be reviewed to identify the differentiators. Once identified, those practices can be replicated across locations to achieve similar results. 

Site- and program-specific reporting also creates valuable benchmarking opportunities. Comparing locations and programs allows leadership to identify operational differences, understand why performance varies, and replicate successful practices across the organization. 

If the data points to a patient mix issue at one health center, leadership may determine that the site faces structural challenges that differ from those at other locations. Understanding those factors allows the organization to establish realistic expectations and make informed strategic decisions regarding resource allocation and support.  

However, if the financial reporting shows that a lack of centralized scheduling gives providers too much control and results in fewer appointments than at other sites, the cause is clear. Modifying schedule templates may lead to a substantial increase in provider productivity and potentially additional revenue. Likewise, when the data indicates provider productivity is low and that seeing one additional patient per day will improve financial performance, there's an obvious path to improvement. 

Without reporting by site and by program, results for the entire organization are lumped together without any insight into the root cause. Moving to a more granular level of financial reporting ultimately supports financial stability and sustainability by helping leadership identify issues and address them more effectively. It's no longer a guessing game. 

Budgeting, buy-in, and accountability 

After implementation, budgets can be built by location and program. To create meaningful accountability and organizational alignment, it’s essential that key stakeholders—program and site directors—participate in the budget process. Their involvement helps ensure budget assumptions are realistic, operational priorities are understood, and goals are aligned across the organization. Then, through monthly financial reports and reviews of results, directors are accountable for the performance of their respective site or program. Results could even be tied to their compensation, reinforcing accountability for achieving budget goals. 

Director involvement gives them ownership and a clearer path to achieving goals. If they aren't invited to collaborate, and decisions are instead made at the C-suite level and given as mandates, the likelihood of stakeholder buy-in decreases.  

Not only does accounting by program and location support improved financial results and sustainability, but it also enhances communication at the management and board levels by improving transparency. It facilitates clearer reporting and provides an in-depth understanding of performance. This, in turn, gives leadership the ability to make more strategic decisions around correcting underperformance and replicating successes while strengthening the organization’s long-term financial sustainability through a more accurate understanding of operational performance.

BerryDunn can help  

Faced with rapid changes in an increasingly competitive environment, community health centers rely on our seasoned professionals to refine business strategies, streamline operations, and introduce proven best practices to enhance performance while managing costs. Our team works with a comprehensive range of community health providers, including FQHCs, FQHC Look-Alikes (LALs), and Rural Health Clinics (RHCs). Learn more about our team and the services we provide. 

Medicaid providers need to understand what changes have been implemented in each of the state Medicaid programs in which they participate. This article outlines recent guidance from CMS Administrator Dr. Mehmet Oz directing state Medicaid programs to strengthen provider revalidation efforts, explains why these changes matter for providers, and highlights practical actions organizations can take to prepare for increased scrutiny, tighter timelines, and potential enrollment-related compliance risks.

Who this applies to: Medicaid providers in all 50 states 

Impact of new revalidation requirements on Medicaid providers

The updated CMS requirements add scrutiny and compressed timelines, heightening operational urgency and compliance risk for providers.

• Revalidation requests may occur sooner than expected. 
• Providers may be required to resubmit full enrollment documentation. 
• The traditional five-year revalidation cycle may be interrupted or shortened. 
• Providers identified as high risk may be subject to additional oversight. 

Increased enforcement is linked to a broader federal effort to address Medicaid fraud, waste, and abuse, and compliance risks CMS faces in funding unqualified providers. 

• Revalidation is moving from routine to continuous monitoring as a method for detecting fraud. 
• There will be a tighter review of licensing, staffing, operations, programs, etc. 
• The guidance will vary by state but will have federal oversight. 

Guidance for Medicaid providers 

While each state’s strategy for phased revalidation will vary, now is the time for providers to prepare. 

• Confirm that you have access to your state’s Medicaid provider revalidation portal. 
• Ensure that your organizational contact information is correct. 
• Verify that your enrollment data with your state department of health is accurate. 
• Review your NPPES profile to ensure your taxonomy is accurate. 
• Gather your documentation now to be prepared. 
• Watch for a revalidation notification—delivery method may vary by state. 
• Be timely with your response and thoroughly provide requested documentation. 
• Visit the revalidation portal for additional details. 

Failure to meet deadlines or provide requested documentation could lead to claim denials or termination from state participation. 

Key takeaways

• Prepare for shorter revalidation cycles and earlier requests. 
• Update enrollment data and documentation now. 
• Expect increased scrutiny and ongoing monitoring. 
• Respond quickly to revalidation notices to avoid disruptions. 

BerryDunn can help 

Need help complying with your state’s provider revalidation strategy? BerryDunn’s team of experts understands the challenges that these off-cycle revalidations can have when staffing and workforce are already stretched thin and can help with short-term or longer-term solutions.  

Our firsthand experience as an NCQA-certified CR serving clients across the continuum of care means we offer a variety of strategic credentialing, enrollment, and payer contracting consulting services to meet your organization’s specific needs. With a strong focus on the provider experience, our thought leaders help organizations accelerate onboarding, maintain compliance with state, federal, and payer requirements, and improve revenue cycle performance by minimizing credentialing and enrollment delays and having a sound payer contracting and reimbursement strategy. Learn more about our team and services. 

State Medicaid agencies and Managed Care Organizations (MCOs) are facing growing pressure to better coordinate care across providers, vendors, and different state and federal agencies while reducing administrative complexity for members. Federal and state priorities—including greater focus on behavioral health integration, mental health parity, continuity of coverage, and proactive oversight—are also increasing expectations around coordination, accountability, and operational performance. 

These shifts were reflected in recent industry discussions, including conversations at the 2026 Medicaid Managed Care Conference in San Diego, which reinforced broader trends emerging across Medicaid managed care: stronger coordination across complex care systems, reducing barriers that make it harder for members to access and navigate care, and earlier identification of member needs, service gaps, and challenges. 

While Medicaid managed care programs vary across states, several common operational challenges continue to surface across programs. 

Reducing fragmentation across care delivery systems 

One recurring challenge involves fragmentation across the organizations, vendors, providers, and systems involved in managing member care. 

As Medicaid programs adapt to new federal requirements and continue expanding focus on behavioral health integration, Long-Term services and Supports (LTSS), social determinants of health, and complex care management, states are strengthening coordination across overlapping care delivery systems. Care transitions often require coordination across multiple entities, including state agencies, MCOs, providers, and case workers—each responsible for different aspects of the member experience. 

Without clear expectations around information sharing, accountability, and follow-through across multiple handoffs, coordination breakdowns may occur. As a result, organizations are focused on building more standardized and coordinated operational models through: 

• Clear accountability structures and standardized escalation pathways 
• Shared visibility into care transitions and barriers 
• More integrated care planning approaches 

Together, these approaches reflect growing recognition that fragmentation is as much an operational challenge as a clinical one. For states, this trend is likely to drive greater emphasis on coordination requirements within procurements, contracts, and oversight of health plan activities. 

Addressing administrative complexity, member navigation challenges, and continuity of care 

Members often must navigate multiple administrative care coordination challenges simultaneously in order to maintain coverage and receive care, including: 

• Managing eligibility and coverage renewal requirements 
• Delays and requirements related to service and medication approvals 
• Resolving coverage denials and grievance issues 
• Managing prescription coverage and pharmacy requirements 
• Language and communication barriers 
• Navigating multiple organizations involved in coverage and care 

Recent Medicaid public health emergency unwinding activities and prior state experiences implementing community engagement requirements highlighted how procedural barriers and communication challenges impact continuity of coverage and access to care, particularly for vulnerable populations and individuals with complex needs. Recent KFF analyses of Medicaid unwinding data found that a significant share of Medicaid disenrollments nationally were tied to procedural reasons rather than confirmed ineligibility. 

As states implement new federal Medicaid eligibility and redetermination requirements, many managed care programs may face renewed pressure to strengthen member outreach, communication, and navigation support in order to reduce avoidable coverage disruptions. 

Moving from reactive intervention to proactive, data-driven oversight 

Historically, managed care oversight has focused heavily on retrospective reporting and compliance monitoring. Today, organizations are seeking to identify risks earlier—before they result in avoidable utilization, member dissatisfaction, or coverage disruptions. 

This shift is driving greater focus on: 

• Real-time operational dashboards and integrated reporting across vendors and functions 
• Utilization management and care transition monitoring 
• Predictive analytics and risk stratification 
• Proactive member outreach models 
• Greater visibility into operational “friction points” across the member experience 

This growing emphasis underscores that challenges for members, such as delayed authorizations, communication breakdowns, fragmented transitions, or barriers navigating eligibility, authorization, or care coordination processes, can directly impact program quality, equity, and continuity of care. In response, State Medicaid managed care programs are looking for ways to better connect areas such as member services, utilization management, pharmacy, grievances, and care management to identify barriers and risks earlier in the member journey. 

Creating seamless member experiences 

Medicaid managed care programs continue evolving alongside changing regulatory requirements, member needs, and growing expectations around coordination and accountability. More focus on coordination, greater insight into how systems perform in practice, and earlier identification of risk (not solely whether minimum compliance requirements are being met) can create a better member experience. Streamlining managed care operations requires stronger coordination across systems, vendors, and care coordination activities to support more seamless and member-centered experiences. 

How BerryDunn can help 

We provide key insights to Medicaid agencies seeking opportunities to improve their delivery of services, expand and manage provider networks, and mature provider payment models. We can help you oversee benefits and services through contracted arrangements with MCOs. Learn more about our services and team.  

The Rural Health Transformation Program (RHTP) presents a meaningful opportunity for organizations working to expand access and improve outcomes in rural communities. But with federal funding comes a heightened level of scrutiny. Accounting professionals play a critical role in ensuring grant management activities are set up properly, funds are managed appropriately, compliance requirements are met, and risks are minimized. 

A strong foundation starts with understanding and applying the requirements in 2 CFR 200. Below are five essential areas every RHTP recipient should address to set up the grant management activities properly to support compliance and long-term success. 

1. Build an accounting system that meets federal standards 

Your accounting system should be designed to support clear, accurate grant tracking. At a minimum, it must allow you to: 

• Track RHTP funds separately using unique fund identifiers 
• Monitor budget-to-actual performance by approved cost categories 
• Maintain transaction-level detail with supporting documentation 
• Provide a complete audit trail from financial reports to source documents 
• Align with federal or state reporting requirements for RHTP activities 
• Adequately track grant activities for subrecipients 

Cost classification is a key component of this structure. Direct costs are tied specifically to the grant, such as program staff salaries, supplies, travel, and contracted services. Indirect costs support shared operations like administration, facilities, and IT. 

Organizations must either use a federally negotiated indirect cost rate agreement (NICRA) or elect the 15% de minimis rate if the organization does not have a negotiated rate. 

Personnel expenses require particular attention. Time and effort reporting must reflect actual work performed, include total compensated activity, and be reviewed and approved. For employees working across multiple cost centers or activities, certifications should occur at least twice per year. 

2. Establish internal controls that support compliance with Section 200.303

This starts with a strong control environment. Organizations should have documented financial policies aligned with federal requirements, clearly defined roles and responsibilities, and ongoing staff training. Leadership should actively reinforce the importance of compliance. 

Day-to-day control activities are just as critical. These include: 

• Segregating duties across authorization, custody, and recordkeeping (ARC) 
• Defining clear mitigating controls in instances where the ARC activities cannot be separated  
• Defining approval thresholds and workflows 
• Performing regular reconciliations and management reviews 
• Maintaining organized and complete documentation 
• Retaining records for at least three years from the date of submission of the final financial report, in accordance with 2 CFR 200.334 (longer if required for audit, litigation, or other federal requirements)

If your program includes equipment purchases, you will also need property records and procedures for conducting physical inventories. 

3. Follow procurement standards to ensure fair and open competition 

Federal procurement rules are designed to promote competition and responsible spending. Your policies should align with the thresholds outlined in 2 CFR 200. 

• Micro-purchases up to $10,000 do not require quotes but must be reasonably priced 
• Small purchases up to $250,000 require quotes from multiple qualified sources 
• Larger purchases may require sealed bids or competitive proposals, depending on the situation 
• Sole-source procurement is allowed only in limited circumstances and must be fully justified and documented

Before entering into any covered transaction over $25,000, you must verify that the vendor is not suspended or debarred using SAM.gov. Many organizations extend this practice to all purchases as a risk mitigation step. These checks performed against SAM.gov are also required for any employees being paid under the grant in excess of $25,000. Organizations should have procedures in place to perform these checks on a monthly basis. 

Conflict of interest policies should also be clearly defined. These should address financial interests, family relationships, gifts, and outside employment, along with disclosure requirements and enforcement measures. 

4. Strengthen subrecipient oversight 

If your organization passes funding through to subrecipients, you are responsible for ensuring those subrecipients comply with federal requirements. 

Start by determining whether an entity is a subrecipient or a contractor. Subrecipients carry out program activities and make programmatic decisions. Contractors provide goods or services as part of normal business operations. This distinction affects how you monitor and manage the relationship, so it should be clearly documented. 

• The prime recipient should develop clear grant agreements, terms and conditions, and other grant reporting templates that are in compliance with 2 CFR Part 200 and the specific requirements of the RHT program. These documents should be developed in order to provide the subrecipients with clear guidance and responsibilities under the grant.  
• Before issuing an award, assess subrecipient risk based on factors like prior audit results, experience with federal funding, and internal systems. You will also need to confirm eligibility through SAM.gov and communicate all required award details. 
• Ongoing monitoring should include reviewing financial and performance reports, conducting site visits when appropriate, and obtaining single audits for entities that meet the federal threshold. Any audit findings must be addressed with a formal management decision within six months. 

5. Apply the rules for allowable costs 

Every cost charged to RHTP funding must meet the five tests for allowability. Costs must be reasonable, allocable, consistent, conform to the award terms, and fully documented. 

Some expenses require prior written approval before they can be charged to the grant. These may include pre-award costs beyond 90 days, equipment purchases over $5,000, certain participant support costs, foreign travel, and significant budget changes. 

There are also costs that are always unallowable. These include alcohol, entertainment, fundraising expenses, personal-use items, lobbying, fines, and losses from other awards. Charging these costs can lead to audit findings or repayment requirements. 

Set the foundation early 

Managing RHTP funding successfully requires more than basic accounting. It demands a proactive approach to compliance across systems, processes, and people. 

By strengthening your accounting infrastructure, reinforcing internal controls, aligning procurement practices, developing clear guidance for your subrecipients, actively monitoring subrecipients, and applying allowability rules, you can reduce risk and position your organization for clean audits and successful program outcomes. 

A solid compliance framework does more than protect funding. It allows your organization to stay focused on its mission to improve rural health where it is needed most. 

How BerryDunn can help 

Our experienced consultants have decades of expertise advising rural healthcare providers. We partner with clients to deliver rural healthcare transformation services that are practical, compliant, and sustainable—grounded in firsthand experience with rural delivery models, workforce constraints, and community needs, and aligned with CMS requirements. Learn more about our services and team.