Physician deals rebounded in 2024, driven largely by new players — pharmaceutical companies, insurers and pharmaceutical services providers, according to an April 2 blog post from VMG Health.
Here are 10 things to know:
1. Economic conditions in 2023 and 2024 created many challenges to deal-making in the physician practice sector. Inflation and rising interest rates eroded margins and made borrowing significantly more expensive, and there was a 14% decrease in mergers and acquisitions of physician medical groups from 2022 to 2023.
2. Additionally, a heightened regulatory environment created friction. In 2023, the Federal Trade Commission and the Department of Justice introduced changes to the Hart-Scott-Rodino filing process and finalized new merger guidelines in December 2023 that made it more difficult for deals, especially those involving private equity or large platforms, to proceed without scrutiny.
3. Seventeen states, including California, Illinois and New York, adopted or proposed laws that restricted private equity activity in healthcare. These laws imposed stricter transparency requirements, extended transaction review periods and increased reporting obligations for management services organizations.
4. Amid this shift, private practice management aggregators have struggled to achieve projected financial goals and are facing internal operational pressures. Many platforms reported lower-than-expected returns, while workforce shortages and high staffing costs further constrained their ability to grow.
5. On top of existing financial challenges, a major reimbursement cut hit physician practices in 2025. CMS reduced Medicare Physician Fee Schedule payments, resulting in an effective 6.4% drop in reimbursement when adjusted for inflation and cost increases.
6. One of the most pressing concerns for private equity investors in the PPM space is the lack of clear exit opportunities, according to the report. The average hold period for physician practice investments rose to approximately seven years in 2023, a 15-year high, signaling uncertainty around value realization and limiting the appeal.
7. A significant shift toward strategic buyers emerged in 2024, changing the dynamics of the M&A market. These buyers, which include insurers, pharma companies and medical equipment distributors, prioritize long-term synergies and strategic fit over short-term financial returns, making them more resilient in the face of regulatory and economic challenges.
8. Several landmark strategic transactions exemplify this trend. Notable deals included Cencora’s $4.6 billion acquisition of Retina Consultants of America, Cardinal Health’s $2.8 billion majority stake in GI Alliance and McKesson’s $2.49 billion acquisition of Core Ventures, among others.
9 Vertical integration plays a critical role in this strategy, according to the report. By acquiring physician platforms, buyers can control more of the healthcare delivery chain — lowering costs, improving service alignment and enhancing their competitive position in an evolving marketplace.
10. This vertical integration comes as physicians are increasingly wary of selling to large platforms or entering private equity partnerships. Concerns around losing autonomy, navigating post-acquisition compensation changes and adapting to corporate oversight are prompting many physicians to evaluate potential buyers more critically, according to the report.
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