Orthopedics Private Equity – Market Update

Private equity investment in orthopedics was initially led by Frazier Healthcare Partners’ HOPCo in 2016 and has seen significant interest over the past several years, with currently over eighteen private equity-backed orthopedic platforms.

While M&A activity across healthcare has slowed in 2023, surgically driven physician specialties continue to remain a point of interest for private equity investors due to an aging population, a resulting demand for procedures, and the ability to continue fighting off market headwinds, driving profitable ancillary service line growth. Most recently, OrthoNebraska received a private equity investment from InTandem Capital in August 2023.

Overall, private equity backed orthopedic groups have shifted focus around building density and acquiring add-on acquisitions in current and adjacent markets, with US Orthopedic Partners and Orthopedic Care Partners being extremely active, as evidenced by the transactions chart below.

While each private equity group has its own strategy, with some more successful than others, a number of these platforms have been able to drive value for their affiliated practices through physician recruitment, ancillary service line growth, payor rate enhancements and geographic expansion, among others. Orthopedic groups gain leverage through a wider network of affiliate practices, helping drive costs down through economies of scale, as well as enhanced purchasing power and negotiating leverage when dealing with payors and hospitals. Several private equity backed orthopedic groups are helping their affiliated practices navigate through the push of value-based care.

When evaluating a potential private equity partner, it is critical to consider cultural fit, as well as value, as strategy differs highly from platform to platform. Key aspects such as clinical autonomy, integration, management fees, and governance must be considered to ensure a strong go-forward partnership.

Recently Formed Private Equity Backed Platforms

Recent Private Equity Transactions in the Orthopedic Space

About Our Firm

Physician Growth Partners (PGP) is a transaction advisory firm working exclusively with independent physician groups in transactions with private equity.

Differentiated Healthcare Transaction Advisors:

• Senior partner involvement at every stage of the process
• Extensive physician practice transaction experience
• Unmatched relationships with all key private equity and strategic buyers interested in orthopedics
• Educational approach focusing on both partnership and cultural fit, while simultaneously achieving a market clearing valuation