Healthcare private equity has reemerged with renewed momentum – despite lingering uncertainty, cautious sentiment, and shifting deal dynamics. While private equity investment in physician practice management (PPM) began as a niche play in the late 1990s and fell short of early expectations, the 2000s ushered in a more disciplined approach. Successful investors focused on scalable infrastructure and strategic alignment, while others struggled by pursuing misaligned partnerships across fragmented markets. Fast forward to today, and physician practices have become a core area of interest not only for PE firms but also strategic buyers like pharmaceutical distributors, medical technology companies, and family offices. With this expanded pool of investors circling the sector, many physicians are asking: What does this mean for me?
Let’s break it down.
Healthcare Private Equity 1.0 – PPM Roll-Ups Boom and Bust
Private equity (PE) interest in healthcare surged in the ’90s. Soon, attention shifted to physician practice management (PPM) companies, which aimed to consolidate independent physician groups and improve operations at scale.
The strategy grew quickly across specialties. Execution however, lagged behind ambition. Integration was challenging, incentives misaligned, and scale failed to deliver meaningful leverage with payers. Physicians were often disillusioned, and profit margins shrank.
By the early 2000s, the model had largely collapsed, with major players like MedPartners and PhyCor unwinding. The failure left lasting lessons about the complexities of physician alignment, payer relationships, culture, and physician autonomy.
Healthcare Private Equity 2.0 – Rebuilding Through Diversification
Following the PPM fallout, healthcare private equity investors shifted focus to lower-risk healthcare services like behavioral health, home care, and urgent care – sectors with scalable operations, predictable government payers, and growing demand.
Quietly, some firms re-entered physician services – this time targeting specialties like multi-specialty, anesthesia, emergency medicine, and radiology.
These years laid the groundwork for a new, more disciplined PPM model – built on operational rigor and stronger alignment.
Healthcare Private Equity 3.0 – The Platform Model Emerges
The PPM model started its rebirth between 2014 – 2015 as evidenced by the chart below, as healthcare private equity firms built single-specialty platforms around strong anchor practices and expanded through add-ons. Integration became more thoughtful, with physician owners retaining equity to stay invested in the platform’s success and create shared alignment between the investors and providers.
Investors started favoring specialties like dermatology, gastroenterology, ophthalmology, orthopedics, and women’s health – attractive for their recurring revenue and fragmentation.
By 2020, the PPM model was mainstream and healthcare private equity backed platforms spanned most specialties. After a brief lull in healthcare services deal-making in 2020 due to the COVID-19 pandemic, the PPM space saw an explosion of deal activity in 2021 and 2022, driven by near-zero interest rates and pent up appetite, contributing to record breaking M&A activity in 2022.1 The year saw an all time high of 2,395 transactions, with PPM transactions comprising 25%, or 608 deals. The excessive dealmaking in this period accelerated the growth of multiple platforms in the PPM space, setting the stage for platforms becoming extremely attractive to private equity buyers up-market. As a result, this momentum created a number of ‘second bite’ opportunities for founders and owners who partnered with private equity in the past 5+ years.
However, in response to surging inflation, the Fed began a series of aggressive interest rate hikes beginning in early 2023, exceeding five percent in 2024. As a result, the platforms who had spent the previous two years feverishly acquiring assets found themselves suddenly overlevered. Compounding that, a high percentage of platforms had reached exit size all at the same time in the midst of a market with the lowest deal-making appetite in over a decade. These, among other factors, led to a “log-jam” of platforms seeking to exit with very few available buyers, or the same buyers.
Even as platforms faced headwinds, the PPM model continued to evolve. Today’s most successful platforms have continued to refine their strategies and learn from the mistakes of the past. Private equity’s biggest past failures have come from rigid structures of top-down control, where physicians lose control of the clinical and operational governance of the business. Today’s successful platforms instead focus on empowering physicians through shared governance and the preservation of operational and clinical autonomy, leaving the practice of medicine completely in the hands of the physicians.
Back office optimization and standardization of areas including RCM, compliance, HR, and analytics still play an important role in PPM roll-ups, as it enables scale and efficiency, but it is not the sole or dominant strategy. Successful modern, innovative platforms emphasize partnership over ownership, with physicians holding significant equity in their broader platform and participating in leadership roles across the organization. This shift reflects an understanding that physician engagement, culture, and continuity are key to creating long-term value, both for the investors and most importantly, patients.
It is clear that the successful private equity investments are not just about buying practices but rather partnership, alignment and building long-term infrastructure.
Historically, once a physician group partnered with private equity, the most common – and often sole – path to a future exit was through a secondary recapitalization with another private equity firm. These “second bites at the apple” allowed both the PE sponsor and physician partners to realize additional value, but the universe of potential buyers remained relatively narrow, often limited to financial sponsors with overlapping investment theses.
That dynamic began to shift meaningfully in late 2024. With the traditional routes to exit blocked and a fiduciary duty to return capital to their investors, platforms were forced to seek alternative means to achieve liquidity, with new buyers entering the fray, including asset management funds, family offices, large-scale multi-specialty groups purchasing across sectors, payors, and pharmaceutical companies. Perhaps the first platform to make headlines with an alternative exit than traditional PE was Waud Capital’s gastroenterology platform, GI Alliance, setting the stage for other interested strategic players.
In a marked evolution of the market, strategic acquirers – including major healthcare consolidators, distribution, and supply chain companies – have emerged as serious contenders in the acquisition of scaled PPM platforms. These players are seeking more direct alignment with specialty care delivery organizations as a way to control distribution channels, improve vertical integration, and access recurring revenue from clinical services.
Several high-profile transactions signal this new trend:
These transactions demonstrate a maturing of the PPM market – one where scale, infrastructure, and clinical outcomes are not only attractive to private equity but also to global strategic players looking to solidify their role across the continuum of care. For physician owners, this creates newfound optionality. Rather than relying solely on financial sponsors for liquidity events, physician partners may now attract interest from strategic buyers that can offer operational synergies, deeper integration, and access to broader resources.
This influx of strategic buyers is creating new exit opportunities for independent practice owners, while increasing valuation multiples via increased competition.
For many practice owners, today’s environment presents both opportunity and uncertainty.
On one hand, private equity and strategic investor interest in physician practices has never been stronger. Buyers are offering competitive valuations, and deals increasingly emphasize physician alignment, clinical autonomy, and long-term growth. Based on our proprietary dealflow at PGP, we can attest first hand that quality practices (assets) are commanding premium enterprise value (EV) multiples from sophisticated buyers.
On the other hand, the increasing complexity of the physician practice landscape can make a process difficult to navigate, especially as we see a dichotomy of interest or lack thereof from the private equity community. All the more reason it’s more important than ever to have an advisor and advocate like PGP on your side.
Questions we often hear include:
These are important considerations that deserve thoughtful, data-driven answers. The good news: with the right guidance, independent physicians can approach these decisions from a position of strength – understanding their options, evaluating their goals, and positioning themselves for long-term success.
If you’re a physician group leader or healthcare business owner wondering how these trends apply to your organization, we’re here to help.
At Physician Growth Partners, we specialize in advising founder and physician-owned healthcare businesses through every stage of the transaction process – from education and strategic planning to execution and beyond. Whether you’re years away from a potential transaction or actively exploring your options, an exploratory conversation with the leading M&A Advisory firm in healthcare services is a great place to start.
Reach out today to schedule a confidential discussion about your goals and learn how we can help you navigate what’s next.
