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Why independent physicians are seeking strategic partners


Independent physicians are looking to maintain their independence and clinical autonomy.

mergers | © NicoElNino -

© NicoElNino -

In recent years, private practice physicians have faced the most difficult challenge – trying to maintain their independence while adapting to previously unforeseen macroeconomic pressures such as rising inflation, payors and retailers becoming competition themselves, and declining reimbursements; all pressures that are contributing to physician groups selling ownership of their practice to private equity and other strategic acquirers in order to better compete. Physicians, however, are made to feel as if they have committed a mortal sin by even considering a sale.

For physician entrepreneurs who have sacrificed 10-15 years becoming educated, and 10, 20 and 30 more years building a practice, my colleague Michael Kroin, CEO & Managing Partner of Physician Growth Partners, asks “Why can’t doctors be rewarded for building such a successful practice to help diversify their portfolio rather than having all their long term financial wealth tied up in their practice?” Kroin added, “In many other industries, entrepreneurial owners who build great businesses are rewarded for their sacrifice, hard work and dedication, eventually choosing to diversify their assets as they grow… why shouldn’t doctors be able to do the same?”

With private equity’s entrance into healthcare - and more specifically, physician practices - still in the early innings, can private equity be positive for doctors and patients? Why are independent physician groups increasingly partnering with private equity?

When making clinical decisions, doctors like to trust their peers when evaluating certain technologies or treatment modalities. Why should evaluating a private equity or strategic partner be any different? We had a chance to speak with several physicians who have sold their practices, and here are some insights on what motivated them to go the PE route, how things are going “after the deal” closed, and how their partnership is helping them maintain their independence while continuing to compete and grow in an increasingly complex healthcare environment.

Maintaining clinical autonomy

One of the key concerns doctors have when considering a collaboration with private equity is the fear of losing clinical autonomy. No doctor wants a non-physician directing patient care with primarily monetary interests in mind. It is important to note that most private equity firms respect the clinical expertise and judgment of physicians and prioritize preserving their autonomy.

Related to how the private equity transactions are structured with practices, Louis Glaser, a partner at Katten Muchin Rosenman LLP, notes, “The typical model employed by private equity based companies is not to employ physicians, but rather to establish management services organizations (MSO) to manage and administer the non-clinical aspects of their practices. In these structures, there is clear delineation between clinical activities/decisions and patient care, which remain within the purview of the physicians, and purely administrative or business decisions that are within the purview of the MSO. In most structures, even those decisions that fall somewhere in the middle are made jointly by the physicians and the MSO. All of this is very different from a hospital/health system or retail clinic employment model.”

In February 2023, UroPartners, one of the largest independent urology practices in the U.S., partnered with Solaris Health, the largest PE-backed urology platform in the country. CEO and urologist Richard Harris, MD, FACS, stated, “It was a long journey. We started years ago thinking private equity was not a good idea, but due to market pressures out of our control, we felt that by being a part of a larger network of private practices would be necessary and valuable to compete. A year into our partnership, and I’m happy to say we are still physician-led and there have been no clinical or scheduling changes.”

Dermatologist Mary Lupo, MD, has been married to PhyNet Dermatology since January 2019 and she said, “Our partners have never interfered with our practice style or clinical decisions in how we treat our patients. Not only that, but I can also take time off when I need to and nothing has changed in that regard. Best of all, my employees are happy, and my patients are unaware I sold since the practice name stayed the same and didn’t rebrand. My experience has been so positive that I’m extending another 3 years since my 5-year contract has ended.”

Amy Taub, MD, FAAD, owner of Advanced Dermatology, had similar things to say. “We sold to Forefront Dermatology in November 2023. We have found few changes in our day-to-day operation after our integration with PE. We have not been told to change how many patients we see, nor how to treat them. Our staff has remained intact.”

Colorado Springs Urological Associates (CSUA) began their partnership with private equity in November 2021, and senior partner Jeffrey Ferguson, MD, has seen a significant impact on many levels. “We have continued to enjoy near complete autonomy as far as scheduling, vacation, and call days. Our local board of managers has first say over all local matters and capital expenditure decisions are made jointly with our national partners,” said Ferguson.

Access to capital and resources for market expansion

In addition to finding the right strategic partner culturally, private equity can help physicians expand their practices to reach new patients by opening new locations or expanding ancillary services. This not only boosts their financial stability but also enhances their independence by allowing them to provide further access to patients.

Beginning in 2021, Orthopaedic Specialists of Austin (OSA), started becoming educated on private equity and what it could possibly mean for the practice, ultimately deciding to partner with Growth Ortho in June 2022. Senior partner Edward Seade, MD, noted, “Since the PE partnership closed, we have added two new MD’s and one PA-C from a provider perspective. We have also started our own physical therapy clinic and expanded our DME within the practice; and PE was also able to help us secure and close a two operating room same day surgery center.”

Ferguson of CSUA noted, “We were lacking the bandwidth and knowledge to take advantage of all the market opportunities that were available to us. Doctors and managers at Solaris were able to help us open a molecular clinical lab and fully acquire our radiation center more quickly and more efficiently than we ever would have been able to do ourselves.”

Centralizing benchmarking data & creating efficiencies

In healthcare, there is no shortage of data being collected, from clinical quality scores to outcome measures, to understanding physician and staff performance. Acting on data however, can oftentimes be a challenge based on disparate sources of information and/or competing interests.

Ferguson of CSUA stated, “Our partners have helped us develop our business intelligence. Prior to our affiliation, it was expensive and time consuming for us to generate meaningful performance reports. Now our data collection is centralized and organized such that any partner can access practice data to improve performance and productivity, and managers can easily generate meaningful reports and benchmark our practice against affiliates across the platform. Business improvement requires data and business intelligence and we lacked this prior to our affiliation.”

Creating long-term economic value

One of the most obvious reason business owners in any industry pursue an “exit” and sell to private equity or any strategic acquirer is the potential economic benefit of taking chips off the table and capitalizing on years’ worth of hard work and sacrifice.

Seade of OSA noted, “I received a large payout on my earnings that I have been able to put to use in different investments. Getting a modest 5% return on this investment makes it so that the portfolio growth is significantly higher than the cash I would have received in my practice without the PE deal. This all while allowing our practice to expand as previously mentioned.”

Economics, however, cannot be the sole reason physician groups transact with private equity. It needs to be the right cultural fit and long-term strategic partner.

For Taub, it’s all about maintaining the culture of the practice she has built and everything else will take care of itself with the help of a strategic partner. “What is expected is that we continue to perform similarly to how we were before, including financially. We also have experienced less expensive health insurance, access to experienced billing, strategic executives, as well as more resources for managers to interact with to foster in our next phase of growth.”

Physician practices aligning with private equity have not come without scrutiny however, and rightfully so, as not all private equity firms are created equal. The basis for many arguments against private equity’s entrance into healthcare stem from claims that, since entering the market, they’ve done nothing but raise costs and decrease quality of care, but is this the full picture? As with any industry, there are good and bad actors and it’s important to partner with private equity firms and strategic partners that will always continue to:

  • Lead with a focus on medicine and quality of care
  • Allow doctors to retain control of their clinical practice
  • Provide resources and capital to empower the practice to continue to grow and benefit from economies of scale

Regarding the THREE key pain points all physician groups are facing regardless of ownership structure, let’s examine them further:

Inflation – Labor and supply costs increasing year-over-year

In a June 2022 survey conducted by MGMA, 90% of medical practices reported that their costs were rising faster than revenues due to inflation, and one respondent noted that “Labor costs are up 30% year-over-year.”

According to Adam Levy, MD, a gastroenterologist in Macon, GA, supply costs are at all-time highs, but Medicare ASC reimbursements do not adjust or offer any flexibility, contributing to a tougher environment for specialists in private practice.

In a recent survey conducted by Morning Consult on behalf of the American Hospital Association (AHA), 94% of physicians think it has become more financially and administratively difficult to operate a practice.

Continued pressure from payors, hospitals, and retailers – Doctors are fatigued

In the same survey conducted by Morning Consult on behalf of AHA, eighty-four percent of employed physicians surveyed reported that the administrative burden from commercial health insurers and government insurance programs had an impact on their employment decision.

According to Medical Economics’ “94th Physician Report” in 2022, 39% of physicians spent 1-9 hours on prior authorizations weekly, and 17% spent more than 20 hours. Similarly, in a Medical Group Management Association (MGMA) November 2023 “Annual Regulatory Burden Report” survey, 97% of patients surveyed said they experienced delays or denials for medically necessary care due to prior authorization red tape.

Meanwhile, payors who enforce prior authorization measures, denials, and set pressure on the independent practice of medicine continue to report extraordinary results on Wall Street. Optum, a subsidiary of UnitedHealth Group, reported $59.5B in revenue for the fourth quarter of 2023, and $226.6B for the full year, a 24% year-over-year increase while its parent United (NYSE: UHG) reported a record-breaking profit (more than $20 billion in 2023) and is now the largest employer of physicians in the country (90,000 and counting).

While compounding profits on the backs of providers and patients, commercial insurers are also leveraging their excess capital and scooping up physician groups as well. Optum, a subsidiary of United Health, has been actively acquiring physician practices and surgical centers over recent years including Surgical Care Affiliates, Physicians Endoscopy, and more.

Major retailers, pharmacies, and convenience stores have also entered healthcare over the last several years. For instance, CVS Health acquired Oak Street Health and Signify Health, while Walgreens acquired VillageMD.

It is hard to point the finger at private equity when commercial insurance companies, hospitals, and large retailers continue to not only post record revenues and profits but have started to become the acquirer themselves. Much of the data utilized to illustrate private equity’s negative impact on healthcare has coincided with a rapid expansion and strengthening of payors’, hospitals, and retailers’ position in the market, opening the door to questions on who/what is really to blame.

Physician reimbursement is NOT keeping up with inflation

According to the American Medical Association (AMA), Medicare physician payment has effectively been cut 26%, adjusted for inflation, from 2001–2023, during a time when the “cost of doing business”, aka running a practice has skyrocketed. Over that same time period, the cost of running a medical practice increased 39 percent, including increases in physician office rent, employee wages, and professional liability insurance premiums, measured by the Medicare Economic Index or MEI.

In one example of lobbying to help independent physicians, orthopedic surgeons banded together recently in response to the episode-based payment model (CMS-5540-NC) proposed by the Centers for Medicare and Medicaid Services (CMS). A letter dated August 17, 2023, was sent to CMS by American Academy of Orthopedic Surgeons (AAOS) President Kevin Bozic, MD, in response to support the overall move to value-based care; and trying to align incentives with the quality of care, in addition to the long-established fee-for-service payment model.

When it comes to alignment of incentives and creating a strong clinical and business partnership, Anthony Romeo, MD, a world renowned orthopedic surgeon and EVP of the Musculoskeletal Institute for Downers Grove, IL-based Duly Health and Care, suggests new partnership models could be a sustainable model of the future in specialties like orthopedics. “So far value-based care has been mostly a buzzword, and in reality, costs have been going up for many physician groups and their patients,” stated Romeo. “Newer MSO partnership models that prioritize patient care first and allow the finance folks to do what they do best and physicians to do what they do best will be successful.” Romeo added, “The key with any of these partnerships is strong physician leadership, ensuring no decision that significantly impacts the care delivery model and resources necessary for high quality care is made without the approval of physician leadership. We’ve all heard the horror stories of private equity and practice partnerships in years past. New partnerships moving forward need to be formed with sustainability at their core, instead of management and operations by excel spreadsheets. I do think private equity can help groups compete but is has to be at a level of investment that won’t suffocate the group.”


Private equity or a strategic partnership doesn’t make sense for every group but it is important to rationally consider the objective and potential benefits of partnering with private equity, in the face of numerous headwinds physician groups continue to face.

Maintaining clinical autonomy, gaining access to capital and operational resources, centralizing benchmarking data and creating efficiencies, and creating short- and long-term economic value are all compelling reasons for physicians to explore these partnerships. It is however, essential to approach such collaborations with caution, due diligence, and the help of the right advisor.

Thomas Cunningham is Director of Business Development at Physician Growth Partners, a healthcare investment banking and advisory firm focused on representing independent physician groups in transactions with private equity and strategic buyers. He can be reached at

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