Physician groups are continuing to consolidate, facing increasing pressure to access economies of scale.
Here are five major trends involving physician medical group transactions, according to VMG Health's 2024 Healthcare M&A Report published May 7:
1. The volume of physician services transactions has been historically impacted by large regulatory changes, such as the passage of the Affordable Care Act in 2010 and the passage of Medicare Access and CHIP Reauthorization Act in 2015. As regulatory requirements increase, physicians are opting to align with larger groups to face the burden and expense of these changes. Private equity firms and management service organizations offer capital and business expertise to ease the burden of these pressures.
2. "Independent practices are struggling to keep pace with the capital requirements of the industry’s transition to value-based payments while also facing increasing competition in physician recruiting from health systems, PE firms, and health insurers," the report said.
3. In 2023, internal medicine represented 46 transactions and dental practices represented 180. These trends will continue in 2024, the report said, with orthopedics and cardiology continuing to accelerate.
4. There was a 14% decrease in mergers and acquisitions of physician medical groups in 2023 compared to 2022, likely from high-interest rates, increasing labor costs and a consolidated market.
5. Around 63% of physician transactions in 2023 were attributable to a PE firm or their portfolio companies. PE firms are looking to ancillary revenue streams, which can be consolidated to increase revenue and earnings growth. Specialties with greater allocation to commercial payers are also of interest to private equity.