Secure Workflows: Protecting Data in Global Outsourced Operations
18 DECEMBER 2025
Overview
Windy Street was engaged to perform financial due diligence on a highly complex refinancing deal involving a managed care company operating across multiple locations. The client had undergone a series of acquisitions during the historical period (HP), significantly increasing the deal’s complexity and requiring a sophisticated understanding of healthcare revenue models and settlement processes.
Deal Complexity
This refinancing deal posed several financial and operational challenges due to the nature of the healthcare industry and the company’s acquisition history. Key factors that contributed to the complexity included:
The company operated across multiple locations with numerous acquisitions during the historical period. This introduced variability in accounting practices, reporting formats, and integration timelines.
The revenue streams were diverse and intricate, including surplus revenues, capitation fees, incentive payments, and fee-for-service income. Each stream had unique recognition methodologies and associated liabilities.
A significant challenge was the conversion of revenues from a cash to an accrual basis, which was critical for accurate financial representation. This involved estimating key metrics such as:
- Estimated cash collections
- Incurred But Not Reported (IBNR) claims
- Medical Loss Ratio (MLR%)
Complicating this further, cash settlements often lagged by 12 to 18 months, making it difficult to accurately match revenues with corresponding expenses within the same accounting periods.
Windy Street’s Solution
Windy Street managed the end-to-end financial due diligence process, with the entire engagement driven from its India-based team. Our approach included:
Conducting a comprehensive review of the target’s financials, including all underlying adjustments and deal considerations.
Proposing pro forma adjustments to integrate pre-acquisition results on an adjusted basis, ensuring a consistent and fair view of the company’s operational performance over time.
Performing an in-depth analysis of Service Fund Reports used to calculate surplus revenue. Since final settlements for these reports occurred with a 12 to 18-month delay, significant judgment and modeling were required to estimate accurate accruals.
Implementing 41 total adjustments during the diligence process:
- 18 diligence adjustments: These addressed issues identified during the review of historical financials, cash flow analysis, and revenue recognition practices.
- 18 pro forma adjustments: These normalized the financials to reflect the post-acquisition and steady-state performance of the company.
- 5 other considerations: These included adjustments related to working capital, debt-like items, and one-time events.
Preparing and completing two roll-forward analyses for Last Twelve Months (LTM) periods, enabling stakeholders to assess recent performance trends.
Client Testimonial
“Really appreciate the dedication and the caliber of work that the Windy Street team has shown to complete this project. Wanted to thank the team for doing such an exceptional job on this project, knowing how complex it has become.”
Conclusion
This case exemplifies Windy Street’s ability to handle large-scale, complex financial due diligence engagements in specialized sectors like managed care. Our team’s ability to navigate intricate revenue structures, delayed cash flows, and multiple acquisitions ensured that the refinancing deal proceeded with clarity and confidence for all stakeholders involved.
