The Physician Practice M&A Market in 2023 & 2024
Following several years of sluggish activity, mired by both financial and operational challenges, the healthcare industry began to see more positive news emerge in 2024 and continue into the current year. A key influence in this rebound has been the entrance of a new pool of buyers within the physician practice management (PPM) space—pharmaceutical companies, pharmaceutical services providers, and insurers. These new entrants into the physician practice M&A space, which have their own unique financial and strategic motivations for pursuing such acquisitions, have fueled a much more optimistic view of large-scale PPMs that had previously fallen out of favor due to concerns over exit opportunities.
Headwinds of the Physician Practice M&A Market
First and foremost, it is important to note the specific headwinds that negatively impacted mergers and acquisitions throughout 2024.
Macroeconomic Headwinds
The combination of rising interest rates and ongoing inflationary pressures created a challenging economic backdrop throughout 2024, causing many potential transactions to be postponed, scaled back, or canceled altogether. Persistent inflation has eroded purchasing power and increased costs for healthcare provider businesses, leading to tighter margins and a cautious approach toward expansion. Higher borrowing costs have made it more expensive for investors to finance deals and operators to fund expansion activities. Because of the pressures created by these two dynamics, deal volumes across various industries have decreased compared to previous years, with companies opting to wait for more favorable market conditions before pursuing major investments or acquisitions.
Regulatory Headwinds
Another significant headwind, which is not unique to any one subsector of the healthcare industry, is an increase in the regulatory pressure surrounding M&A deals involving healthcare companies. In June 2023, the Federal Trade Commission (FTC) and the Department of Justice (DOJ) proposed critical changes to the Hart-Scott-Rodino (HSR) Act notification form and filing process to improve oversight of healthcare mergers and identify potential anti-competitive practices. 
Seventeen states, including Illinois, California, and New York, have implemented measures to restrict private equity (PE) activity within the industry, primarily through imposing more onerous reporting requirements and enacting or proposing transparency laws for management services organizations (MSOs). The transparency laws would require earlier transaction notifications and an elongated review period.
In December 2023, the FTC and the Antitrust Division of the DOJ finalized stricter guidelines for M&A, proposed by federal antitrust agencies, to make it more difficult for healthcare deals to close, potentially affecting health sub-sectors such as hospital systems, pharmaceutical companies, or healthcare tech firms. The new U.S. merger guidelines give regulators (DOJ and FTC) more power when reviewing proposed deals and going after vertical and cross-market deals that would have been hard to challenge otherwise. Per the guidelines, mergers are not allowed to create anti-competitive market structures, and regulators can now examine deals that would create a firm with a 30% market share post-merger and lessen market concentration.
Additionally, according to antitrust experts, the new merger guidelines provide a hook for regulators to challenge roll-ups that may be anti-competitive by analyzing prior transactions and the possibility of future transactions, not just every transaction in isolation. The new merger guidelines do not offer detailed specifics on what thresholds or behaviors might trigger antitrust action. This ambiguity may cause healthcare companies to proceed only with deals that have less regulatory risk to avoid regulatory challenges.
Operational Headwinds
PPM aggregators are struggling to achieve expected synergies and are experiencing lower-than-anticipated financial performance. Additionally, workforce shortages driven by a limited candidate pool and challenges in recruiting physicians under less attractive, post-sale compensation models are increasing staffing expenses. These challenges limit PE groups’ ability to scale these physician groups and platforms.
On January 1, 2025, the Centers for Medicare & Medicaid Services (CMS) implemented reimbursement changes to significantly decrease the Medicare Physician Fee Schedule (MPFS) payments to physician practices, reducing their reimbursement rates. CMS estimates that practice-cost expenses will rise by 3.6% in 2025, which means physicians will effectively see a 6.4% cut in Medicare payments.
Bad Publicity & Negative Perceptions
With a sharper focus on the healthcare sector by governmental agencies and the public, buyers must be more mindful of the implications of acquiring a particular target. Certain deals can generate bad publicity, with concerns over elevated patient costs, limited competition, and the disruption of quality care under scrutiny. There are also increasingly negative perceptions of consolidation in the healthcare industry and criticism of corporate control over medical practices. On occasion, there is physician resistance to PE partnerships or merging with larger healthcare platforms.
Uncertainty Around Exit Opportunities
A key concern for PE buyers revolves around exit opportunities. If a firm successfully acquires a facility, they must then face the daunting task of finding a potential new buyer. Due to challenges in realizing synergies and achieving anticipated exit points, the hold period for PPM investments has risen to a 15-year high in 2023 of approximately seven years.
Silver Lining: Strategic Buyers Emerge in 2024
A Shift Toward Strategic Buyers
Strategic buyers are buyers who look at the value of businesses beyond focusing purely on the financial return generated by the specific target. Those targets may be outside of a strategic buyer’s core business to expand their reach through avenues like new service offerings or vertical integration. In the context of physician practices and PPMs, strategic buyers include insurance companies, pharmaceutical companies, and medical equipment distributors.
Notable Strategic Buyer Transactions
Retina Consultants of America: On January 2, 2025, Cencora, Inc. completed its acquisition of Retina Consultants of America (RCA) from Webster Equity Partners for $4.6 billion. RCA is a management services organization (MSO) of retina specialists. According to Cencora’s President and CEO Bob Mauch, the acquisition will allow Cencora to broaden its relationships with community providers in a high-growth segment and build on its leadership in the retina specialty. With a robust clinical research network and nearly 300 retina specialists across 23 states, RCA is the leading MSO in the retina space. Cencora intends to use its leading operational infrastructure and resources to enhance RCA’s provider experience, drive innovative research efforts, improve patient outcomes, and continue growing RCA’s physician network.
GI Alliance: In November 2024, Cardinal Health acquired a majority stake in GI Alliance (GIA) for $2.8 billion from physician owners and funds managed by Apollo Global Management affiliates. With over 900 physicians across 345 practice locations in 20 states, GIA is the country’s leading gastroenterology MSO and partners with independent gastroenterology practices. This acquisition will create a physician-led, national, multi-specialty managed services healthcare platform to help Cardinal Health expand its specialty offerings, including gastroenterology, oncology, and rheumatology.
McKesson Acquires Community Oncology Revitalization Enterprise Ventures, LLC (Core Ventures): In August 2024, McKesson Corporation announced that they signed a definitive agreement to acquire a controlling interest in Community Oncology Revitalization Enterprise Ventures, LLC (Core Ventures) for $2.49 billion from Florida Cancer Specialties & Research Institutes (FCS), a leading physician-owned community oncology practice. It provides non-clinical administrative support and operational services to FCS clinics across Florida. FCS will continue to operate as a physician-owned practice and physicians will retain a minority interest in Core Ventures. Core Ventures will become part of McKesson’s oncology platform and, following the close, FCS will remain independently owned. McKesson intends to use this platform growth to bring advanced treatments to patients and improve patient experiences while reducing the overall cost of care.
AmerisourceBergen/TPG Acquires OneOncology: In June 2023, TPG (a private asset management firm) and AmerisourceBergen (now Cencora) acquired OneOncology, a network of independent oncology practices, from General Atlantic, a leading global growth equity firm for $2.1 billion. TPG will hold a majority stake, while AmerisourceBergen will take a minority position. OneOncology’s affiliated practices, physicians, and management team will also retain a minority interest in the company. The deal strengthens TPG’s healthcare investments and allows AmerisourceBergen to enhance its relationships with community oncologists. OneOncology, known for its technology and clinical expertise, will benefit from both firms’ resources, advancing their shared goal of improving cancer care by providing lower-cost, higher-quality solutions.
SCA Health Acquires OrthoAlliance (Optum/United Healthcare): SCA Health, a subsidiary of UnitedHealth Group, and The Ambulatory Surgery Center (ASC) Division of Optum, acquired OrthoAlliance, an orthopedic MSO, on November 1, 2024 for around $1.4 billion. This acquisition is an example of a large practice platform bought by an insurance company subsidiary. The acquisition expands SCA Health’s network in orthopedic and sports medicine services. OrthoAlliance was founded in 2019 and has a network across Ohio, Indiana, and Kentucky.
McKesson Acquires Controlling Interest in PRISM Vision Holdings, LLC: McKesson Corporation announced on February 4, 2025 that it signed a definitive agreement to acquire an 80% controlling interest in PRISM Vision Holdings, LLC, a premier provider of general ophthalmology and retina management services, from Quad-C for $850 million. The acquisition of PRISM Vision “will allow McKesson to build on our leadership in community practice and specialty solutions while building a platform to serve the high-growth area of retina and ophthalmology,” said Brian Tyler, CEO of McKesson.
Why Are Strategic Buyers Interested?
Based on the transactions noted above, recent acquirers of physician practices and PPMs include insurance companies, pharmaceutical companies, and medical equipment distributors. Acquisitions of PPMs can enhance the strategic buyers’ core businesses in unique ways.
Diversification
PPM acquisitions allow buyers to strategically diversify their business by adding physician specialists across the United States to their portfolio. This helps to balance financial risk and expand their revenue streams. Diversification through large platforms also benefits physicians, as providers are actively seeking partners to help them run their practice more efficiently, so they are more readily available to prioritize their patients’ needs.
Vertical Integration
Strategic buyers are also interested in these transactions because they allow for vertical integration within their company. The ability to access distribution channels is a notable advantage of managing a physician practice group. Additionally, this can provide opportunities to expand service offerings.
Control Care Delivery
For insurance companies, acquiring a PPM allows them to exert greater control over care delivery and reduce costs, increasing efficiency. Pharmaceutical companies could enhance their medication sales by acquiring a PPM that would allow them to integrate care delivery and patient management into their business models. With patent protection ending, there is an opportunity to push generic medications. For example, Bayer’s patent for Xarelto, a medication that helps prevent and treat blood clots, is set to expire in August of 2025. Novo Nordisk’s patent protection for Ozempic expires in March 2026, which could largely increase competition in the semaglutide market. For medical equipment distributors, there are opportunities to bolster their medical device sales by providing their equipment directly to practices.
Navigating Future Consolidation Trends
More strategic buyers with available capital and a vested interest in diversification are likely to drive acquisition activity in the future. If these buyers are successful, consolidation will continue in the healthcare sector. However, no one is immune to regulatory challenges and other headwinds. The future of PPMs and physician practice deals will likely be shaped by a combination of regulatory shifts, market pressures, and the ongoing pursuit of operational efficiencies and strategic growth.
