Recover CAM overcharges in acquired leases
Private equity firms running ophthalmology rollups spend hard on diligence. They check revenue cycle, payer mix, doctor contracts, and EHR setup. The leases for 15 to 30 acquired sites pass through as fixed costs. Almost no one audits them. So money sits unclaimed in reconciliation statements nobody read. A reconciliation statement is the yearly bill from the landlord.
CAM overcharges in medical building leases are not rare. CAM means Common Area Maintenance, the shared building costs. These billing errors pile up year after year when no one checks them. A PE-backed group can run CAM diligence after it buys. That recovers the backlog and stops new overcharges. It turns rent cost into a place to find money.
I built CAMAudit so partners and advisors can support ophthalmology teams during acquisition review. The tool checks each landlord's yearly statement against the lease. It flags likely charges that go past what the contract allows for partner review.
CAM Reconciliation Statement: The annual document a commercial landlord sends to each tenant showing the tenant's proportional share of actual building operating expenses for the prior year. The reconciliation compares estimated payments made during the year against actual expenses and either charges additional amounts or issues capacity. Under NNN and modified gross leases, the tenant has contractual audit rights to verify that the reconciliation was calculated according to the lease terms. Ophthalmology practices in medical office buildings receive one reconciliation per location per year; an unaudited reconciliation may contain billing errors that go unchallenged unless the tenant exercises those audit rights.
Why these leases carry more overcharge risk
Medical buildings cost more per square foot than plain office space. BOMA International's Experience Exchange Report shows this gap. The costs come from clinical HVAC built to ASHRAE Standard 62.1, elevator upkeep for patient equipment, and special waste handling.
Higher costs make a bigger base for errors to grow on. Picture a management fee charged on a base it should not touch. The dollar error is bigger when the pool is $200,000 than when it is $1,500. A management fee is the landlord's charge to run the building. Now picture a pro rata share that is too high by 3 percentage points. Pro rata share is the tenant's slice of building costs. That error costs more when costs run $18 per square foot than $9.
Ophthalmology practices also rent smaller suites. These run 2,500 to 4,500 square feet in buildings with many tenants. The landlord may manage 10 to 20 tenants at once. IREM data shows these landlords face less pushback. Big health systems have lease accounting staff who check the math. Small tenants do not. So errors stick around because no one pushed back.
A PE rollup may buy 20 sites from solo ophthalmologists who ran their own leases. Assume most of those leases were never audited.
What a file review may miss
Most diligence treats the lease as a real estate item. It checks the term, time left, renewal options, rent steps, and transfer rules. These matter for the deal model and the value after close.
What diligence rarely checks is the math. Did the landlord figure the yearly CAM bill right under the lease? That check needs three papers in one place. You need the lease, the latest CAM reconciliation statement, and the landlord's worksheets. They rarely sit in the data room together.
MGMA benchmarking data says rent runs 6% to 8% of gross collections for a typical practice. A practice that collects $2 million a year pays $120,000 to $160,000 in rent cost. CAM is about 30% to 40% of that. A 10% error on a $50,000 CAM bill is $5,000 a year. Across 20 sites over a 3-year lookback, that adds up to six figures. The lookback is how far back you can claim.
The real block is capacity. Diligence teams are not staffed to check 20 sites at once. The work is manual and special. So it loses to the revenue and clinical work.
"A CAM bill can hide a deal risk. Check the lease and the bill. Then value the site." - Angel Campa, Founder of CAMAudit
Four lease clauses to check first
Lease clauses do not carry equal risk. When you screen a new portfolio, check four parts of each lease first.
Management fee cap formula
Some leases cap the manager fee. The cap may set both its rate and base. Check the billed base for costs the lease leaves out. A fee above the lease rule is a flag.
The management fee matters because it repeats. The overcharge hits every year the lease runs. Over a 10-year lease, a $2,000 yearly overcharge totals $20,000 at one site. Across 20 sites, that is $400,000 from one error pattern.
Pro rata share denominator definition
The pro rata share sets what slice of building costs the tenant owes. The lease sets the top number, which is the tenant's space. It also sets the bottom number, which is the building's leasable space. The bottom number can shift in ways the lease allows. An overcharge happens when the landlord's bottom number breaks the lease.
Empty or large suites may change the space total. Compare that total with the lease. A gap needs review.
ANSI and BOMA International publish building measurement standards, like BOMA 2017 for Office Buildings. They set how to figure rentable area. A gap between that standard and the landlord's bottom number is a second thing to check.
Operating expense exclusion list
Leases set which costs can and cannot go in the CAM pool. Common left-out costs are work on other tenants' space, default or eviction costs, costs paid by insurance, top executive pay above a set level, and capital costs. When a landlord puts a left-out cost in the pool, every dollar is an overcharge.
This list ties back to the management fee cap. If left-out items sit in the fee base, the fee overcharge grows from both the bad base and the fee percent.
Capital expenditure treatment
Check how the lease treats large building projects. A roof or HVAC job may be a capital cost. The lease may keep it out of CAM. It may also spread the cost across many years. The lease controls what the landlord may bill.
Make CAM audit part of the 100-day plan
You can fit CAM audit into your plan after you buy. It takes three steps.
Step 1 checks which sites fit. Find leases that pass CAM to the tenant. Read the audit rights clause for each site. Save the bill date and each lease due date. Put the sites with near due dates first.
Step 2 gets the files. Get the signed lease and all changes. Then get each CAM bill still in scope. The practice team may have them. If not, ask the property manager.
Step 3 is review and recovery. Run the lease and statements through CAMAudit. The tool runs the CAM detection rules. These cover management fee overcharges, pro rata share errors, gross-up violations, CAM cap violations, excluded service charges, and more. It returns a findings report for each site. Each finding names the lease clause, shows the overcharge, and adds a dispute letter draft. The MSO finance team reviews and ranks findings by dollars before the advisor or counsel signs.
A landlord may question a finding. Give it the lease clause and bill math. CAMAudit builds the review file.
Patterns worth tracking across a rollup
An eye-care group may share one landlord across sites. A shared bill method may repeat. Check each file.
Say one site uses the wrong fee base. Check other sites run by the same manager. Do not assume the error repeats. Test each bill against its own lease.
A PE firm may hold 20 to 30 ophthalmology sites. Find one error across 8 sites run by the same manager, and you get an 8x recovery from one finding type. Sort CAMAudit findings by landlord and manager. That is the fastest way to spot the repeats.
A study in the Journal of Property Management looked at these disputes. Tenants win most cases when they bring proof tied to clear lease wording. The block is not the dispute. It is having the time to do the work.
Related resources
- RCM consultant new service line: CAM audit recovery: how firms add rent audits to a current engagement
- Healthcare overhead reduction: occupancy cost is the overlooked lever: the case for auditing rent costs across healthcare portfolios
- Medical group CAM audit white label: branded delivery for firms serving multi-site medical groups
- partner-led CAM review: review the workflow before you commit to a full review
- Pro-rata share error guide: check one site's pro rata share against the lease
Sources
- BOMA International. Experience Exchange Report: Medical Office Buildings (2024). https://www.boma.org/
- MGMA DataDive Cost and Revenue, Practice Overhead Benchmarks (2025). https://www.mgma.com/data/benchmarking-data/datadive-cost-and-revenue
- IREM. Income/Expense Analysis: Office Buildings (2024). https://www.irem.org/
- ASHRAE. Standard 62.1: Ventilation and Indoor Air Quality (2022). https://www.ashrae.org/
- ANSI/BOMA Z65.1-2017: Standard Methods of Measurement for Office Buildings. https://www.boma.org/
- IRS Publication 535. Business Expenses. https://www.irs.gov/publications/p535
- FASB. ASC 842: Leases. https://www.fasb.org/
- Journal of Property Management. Lease Reconciliation Dispute Resolution Outcomes. IREM (2023). https://www.irem.org/
Disclaimer: This article provides general educational information about CAM audit due diligence in the context of ophthalmology practice acquisitions. This is not legal, accounting, tax, investment, or financial advice. Recovery amounts vary based on individual lease terms, reconciliation period, and landlord response. Consult qualified legal counsel before pursuing any commercial lease dispute or CAM audit process.
Frequently Asked Questions
What CAM due diligence should a PE firm perform when acquiring an ophthalmology practice?
PE advisors should collect all NNN and modified gross lease agreements for acquired locations, request 3 years of CAM reconciliation statements from each landlord, and screen each lease for the three highest-risk clauses: the management fee cap formula, the pro-rata share denominator definition, and the operating expense exclusion list. Any location where the reconciliation has not been independently audited during the acquisition target's tenure is a candidate for post-close recovery.
How far back can a PE-backed ophthalmology group recover CAM overcharges after an acquisition?
Most commercial leases include an audit rights clause with a lookback window of 1 to 3 years from the date the reconciliation statement is received. Leases that were never audited by the prior owner may carry unrecovered overcharges dating to the start of the current lease term, subject to the contractual lookback period. PE advisors should confirm the audit rights clause language in each acquired lease before the lookback window closes.
Why check each eye-care site on its own?
Sites may have different leases. High costs do not prove an error. Check each site's lease, bill, and proof.
Which share error can a site check?
Check the space total used for the tenant share. The lease may define which space belongs in that total. A gap can change the bill. Do not apply one site's result to the rest.
How can a CAM check fit a post-deal plan?
A site lead gathers the lease and CAM bill. CAMAudit makes a findings report. The partner checks it and drafts the next step. Counsel should review rights or legal claims. Care staff need not join the file check.
Can a PE-backed ophthalmology group run CAM audits across all locations simultaneously?
Yes. CAMAudit processes multiple locations concurrently. An MSO finance team or operations lead can upload lease documents and reconciliation statements for all acquired locations in a single session. The platform applies the CAM detection rules to each location and returns a findings report per location, ranked by recovery opportunity. Portfolio-level review then prioritizes which dispute letter drafts to send first.
What happens if a landlord disputes the CAM audit findings?
Most commercial leases grant the tenant the right to audit the landlord's books for the reconciliation period. If the landlord disputes findings, the tenant can invoke the formal audit rights clause and request supporting documentation: vendor invoices, management fee calculation worksheets, and building area measurement records. CAMAudit's findings report includes the specific lease clause reference and the calculated variance for each flagged item, providing the evidentiary basis for a formal dispute.