Who’s Investing in Healthcare? A Quick Look at Trends in Private Equity and Beyond

Information for Physician Owners of Practices and Surgery Centers

Physician Practice and Surgery Center M&A

Let’s start with the pure economics behind investors’ interest in healthcare.  When we started ASCs Inc. (now Physician Transaction Partners) in 1998, just over $1 trillion was being spent annually on healthcare in the United States, representing 13% of our country’s GDP.  Fast forward to 2025, and those numbers have skyrocketed to a staggering $5.5 trillion annually, now nearly 20% of the US economy.

As you would expect, this has led to significant interest from all corners of the investment community who are trying to figure out how to get a piece of this very large pie. Investors in today’s healthcare landscape include private equity firms, corporate consolidators, hospital systems, large group practices, and even health insurers.

Private Equity Investment in Healthcare

The history:

There have been several phases of investment in outpatient healthcare practices. The first, and an area where long-established firms have forged successful partnerships, is in the surgery center market. Starting more than 35 years ago, companies like USPI (United Surgical Partners), Columbia Healthcare (now HCA), HealthSouth (now Surgical Care Affiliates), and others initially formed to focus on financing, syndicating, developing, and managing ASCs. As these companies grew and the healthcare market matured, the companies began to acquire ASCs and affiliated services.

In the mid-1990’s we saw a second phase of investment into healthcare with entrance of private equity into healthcare with firms like PhyCor and MedPartners investing in and consolidating physician practice management (PPM) groups.  The goal of these firms was to create significant value through scale, cost reductions, improved business practices, and profitability, but they failed to execute on this strategy for a variety of reasons. Challenges in terms of physician alignment, integration and acquisition costs, standardization of processes and systems, and the limited impact they were able to have on both payors and supply costs, eventually led to failure.  MedPartners filed for bankruptcy in 1999, with PhyCor falling shortly after in 2002. The lessons learned from the missteps of an earlier generation of private equity sponsored platforms has served as a cautionary tale for new entrants into outpatient healthcare.

Today:

In recent years, many of the largest companies in the outpatient surgery space have been acquired by large public or private equity-backed companies such as Tenet’s acquisition of USPI, United Healthcare buying Surgical Care Affiliates (SCA), Ascension purchasing Amsurg, and Bain Capital’s PE investment in Surgery Partners. The continued growth in the ASC sector remains a clear sign that the groups that deliver quality outpatient healthcare are desirable to the investment community.

While the second phase of healthcare private equity investment in outpatient practices started slowly in the mid-2000’s, first with groups in Dermatology, Ophthalmology, and Dental, over time we have seen private equity move into virtually every specialty healthcare sector. This trend has continued over the past decade as more services and procedures have shifted into outpatient settings — with the COVID-19 pandemic significantly accelerating this trend. In today’s market, specialties like orthopedics, gastroenterology, urology, pain management, plastic surgery, and more have become desirable targets for PE firms looking to create platforms.

What is Healthcare Private Equity?

Stepping back, private equity refers to ownership or investment in a company that is not publicly traded. While many associate the term with Wall Street, private equity includes private and institutional investors, mutual funds, and pension funds, in which many ordinary Americans hold individual investments or retirement accounts. Many funds are formed with the sole purpose of investing in a particular sector. Some larger private equity firms are themselves publicly traded. A private equity fund (PE fund) typically holds a portfolio company for 3 to 7 years with the goal of exiting the relationship by selling the company through an initial public offering (IPO) or a private sale.  It is important to note that private equity holds an ownership stake in its healthcare platforms but does not directly operate the platform companies. The best platforms are run by experienced leaders who truly understand the healthcare industry and are focused on creating value not only for their PE backers but also for the physician partners, staff, and patients.

Healthcare Private Equity Platforms

The most successful platforms have been built on strong physician anchor groups. These large groups most often act as the catalyst and are joined by “bolt-ons” (newly acquired practices). These newly formed entities typically work with the founding group to implement best practices across their entire continuum of facilities. In doing so they typically put standardized processes in place, which go well beyond operational, clinical, and business systems and include:

• strategic planning and structuring
• physician and staff recruitment
• access to capital
• financial and operational process improvement
• revenue cycle management
• managed care contracting
• material and supply chain
• compliance and risk management
• data and analytics
• facility and real estate management
• the myriad of support services that are of value to every member of the new enterprise

Choosing the Right Partner

For many practice owners, today’s environment presents both opportunity and uncertainty. 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.

Today’s most successful platforms empower their physician partners through shared governance and enabling them to retain their clinical autonomy. While we often focus on the liquidity event, both initial and subsequent, one of the other key elements in new partnership is the ability for doctors to off load much of the burden associated with running a practice.

For independent physicians, choosing the right partnership is essential — not just for financial gain but for long-term success. With a range of options, such as healthcare consolidators, hospital systems, private equity platforms, institutional buyers, or joint ventures, it is crucial to evaluate each thoroughly and understand how the best fit can shape your practice’s future.

When it Comes Time to Sell Your Practice…

When you’re ready to explore selling your medical practice, it is imperative to understand the considerable experience and expertise required to successfully navigate the complex sales process. For most physicians, selling their healthcare practice is once-in-a-lifetime transaction, placing them at a serious negotiating disadvantage when setting the pricing and terms of the transaction with a private equity group or large consolidator who has vast transactional experience. It is simply not reasonable to expect to realize an optimal outcome without the right advisor helping along the way.

How Physician Transaction Advisors Helps Physicians Realize Maximum Value

Physician Transaction Advisors (formerly ASCs Inc.) is not an investment banking or brokerage firm comprised of finance-degreed individuals who have found a profitable niche in healthcare. We don’t do debt financing, raise capital, work in other markets, or represent buyers. We do one thing: we represent the best interests of physicians who want to evaluate and realize the absolute best strategic partnership for their practice and/or surgery center.

We started our firm more than 25 years ago at the request of physicians who asked for our guidance through this time-consuming and complex process. What we have built is an industry leading team comprised of trusted advisors who have spent their entire careers in leadership roles with best-in-class firms that focused exclusively on working with physician owners and executives of practices and surgery centers. We leverage this experience along with the knowledge gained from successfully completing more partnership transactions than any other firm (over 300 to date) to ensure our clients realize outsized financial and non-financial outcomes.