Private equity firms are recalibrating their approach to physician practice acquisitions, seeking new avenues for growth and profitability in a shifting healthcare landscape, according to VMG Health’s 2025 Healthcare M&A Report, released on April 22.
Here are 10 trends affecting PE’s physician acquisition strategy:
1. PE firms and their management services organizations offer capital and operational expertise to scale practices and respond to the rise in value-based care programs.
2. The ability to consolidate acquisitions into large, scalable platforms makes physician groups attractive investments. According to VMG Health, platform practices can negotiate higher deal prices than smaller, bolt-on practices.
3. A perceived arbitrage opportunity exists when a PE firm can acquire a smaller practice at a lower bolt-on multiple and later sell the consolidated entity at a higher platform multiple, often to another PE firm.
4. PE firms often target practices with ancillary revenue streams, such as services historically performed in hospitals or outpatient settings. By consolidating these services, firms boost revenue. Specialties with high ancillary income potential and low capital intensity are particularly attractive.
5. PE firms are increasingly investing in sectors with less reimbursement risk, such as medical spas and dental practices.
6. Many states implemented new regulations in 2023 and 2024 aimed at overseeing healthcare transactions. These rules may limit the ability of PE firms to partner with physician groups through MSOs.
7. PE deal volume in 2024 mirrors trends from 2023, albeit with a slight decline, according to VMG Health. PE remains a major player in the physician medical group subsector. Notably, 2022 marked the highest year on record for PE-driven and overall M&A deals in this space.
8. As of the end of 2024, PE firms have been involved in 280 transactions, accounting for 58.4% of all physician medical group healthcare deals this year.
9. To enhance same-store growth, many traditional med spas, both PE-backed and independent, are broadening their offerings to include wellness services like hormone replacement therapy. These services cater to aging populations seeking improved energy, cognition, and weight management, aligning with the growing trend of personalized wellness.
10. The explosive popularity of GLP-1 medications for weight loss has drawn investor attention. However, concerns about supply chain disruptions and regulatory scrutiny create uncertainty. PE firms remain divided on the long-term viability of GLP-1s and weight loss services as a growth category.
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