The gap most diligence packs leave
A healthcare diligence process typically covers financial performance, legal structure, contracts, and clinical and regulatory compliance thoroughly. Each of those is necessary and each requires its own qualified specialist. What is often missing is a straightforward operational judgement: given how this business is actually run, is the growth case in the model deliverable by this team, on this timeline, at this cost?
That question is answered differently by someone who has carried operational accountability. Having led operations across a national network of 236 clinics and telehealth services, and built a patient access organisation of more than 150 people, the things I look at first are rarely the things a data room is organised around.
Eight tests before you buy
- 01
Is the capacity real?
Ask for three numbers separately: contracted or theoretical capacity, capacity actually available after leave, admin time and vacancy, and capacity used. Then ask what utilisation rate the growth plan assumes and whether the business has ever sustained it. Growth cases frequently rest on a utilisation figure that has never been achieved for a full quarter.
- 02
How concentrated is delivery?
Establish what share of revenue and caseload sits with the top few clinicians, and what share of referral flow depends on personal relationships — often the founder's. Then look at attrition history and recruitment lead times in the same specialty and geography. A plan that requires hiring at a pace the business has never achieved is a plan with a hidden dependency.
- 03
Does the front door convert?
Enquiry or referral to booked first appointment, time to first appointment, and first-appointment attendance. If these cannot be produced from the business's own systems, that is itself a finding. Weak conversion is often good news commercially — recoverable growth — but it must be priced as work, not assumed as upside.
- 04
Where does throughput actually break?
Look for pathway-driven bottlenecks rather than resource ones: assessment steps performed by clinicians more senior than necessary, documentation load, sequencing that idles capacity, handoffs that generate rework. These constrain volume regardless of headcount, and they are usually fixable — which makes them valuation-relevant in both directions.
- 05
How mature are the systems and processes?
Whether the CRM and EHR support the pathway or are worked around; how much of daily operation depends on spreadsheets, individual knowledge and goodwill; and what integration or configuration spend is unavoidable after close. Systems immaturity rarely stops a deal, but it reliably delays the growth plan.
- 06
What breaks at 1.5x and 3x?
Stress the operating model deliberately. At 1.5x volume, does the rota structure hold? At 3x, does supervision, billing, scheduling or the access function fail first? Scalability is a property of the model, and naming the first breakpoint is more useful to a board than a general assessment of readiness.
- 07
Can management see their own business?
Ask leadership to answer throughput, conversion and utilisation questions live, from their own reporting. Where the answer needs reconstruction, the business is being steered on lagging financials, and post-close intervention will be slower than the plan assumes.
- 08
What are the first hundred days?
Diligence should end with a sequence, not just a risk register: what to stabilise immediately, which measures must exist from week one, which appointments matter, and which operational improvements deserve capital before scale is attempted.
What this is not
Operational diligence is not clinical governance assurance, regulatory compliance opinion, legal review or financial diligence. Those should be commissioned from appropriately qualified specialists, and an operator's view should never be used as a substitute for them. Its purpose is narrower and complementary: to establish whether the operation behind the numbers can carry the weight of the plan.
Using the findings well
The most valuable outcome is rarely a decision to walk away. It is a sharper thesis: a price or structure that reflects the operational work required, a first hundred days that addresses the real constraint, and measures in place from week one so the board can see performance before it appears in the accounts.
Where the thesis depends on entering a new market, the same discipline applies to the entry plan — US market entry and build vs buy cover that ground. Where it depends on converting more of the demand the business already has, patient access is the line to interrogate first.
Frequently asked questions
- What does operational due diligence add to financial due diligence?
- Financial diligence validates what has already happened. Operational diligence tests whether the same performance is repeatable at higher volume with the current workforce, systems and access pathway — which is what the valuation usually assumes.
- What is the most common overlooked risk in healthcare deals?
- Concentration of delivery in a few individuals. Where a small number of clinicians, or the founder, carry the caseload, referral relationships or clinical credibility, post-close attrition can remove a large share of earnings quickly.
- Does operational diligence replace clinical or regulatory diligence?
- No. Clinical governance assurance and regulatory compliance opinions require appropriately qualified specialists, as do legal and financial diligence. Operational diligence sits alongside them and answers a different question: can the business run at the scale the thesis assumes?
Evaluating a healthcare asset?
A short call is enough to agree which operational questions carry the most valuation risk in this particular deal.