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Why are private equity firms purchasing physician groups?

The purchase of physician groups by private equity firms has soared in recent years. According to a recent publication in the Journal of the American Medical Association (JAMA), private equity firms acquired 1,426 sites and almost 6,000 physicians from 2013 through 2016. Multispecialty and anesthesiology practices make up the largest portion, at 19% each, followed by emergency medicine at 12%, family practice at 11% and dermatology at 10%. Recently, increases are also noted in the fields of radiology, obstetrics/gynecology, ophthalmology and cardiology.  

What do private equity firms get out of these deals? 

Physicians groups may be skeptical to enter a deal with a private equity firm. Afterall, these investors must be in it for something, right? What do these private equity firms get out of the deal? Although the exact goal of the firm will vary with each transaction, the end game is often to increase the value of the physician group for future financial gain.

The way the private equity firm increases the physician group’s value could include growing the group by acquiring more physicians or smaller practices in the area.

Is this deal right for your private practice?

Physician groups who are considering a deal with a private equity firm are wise to complete due diligence before moving forward with the transaction. If structured wisely, the deal can help to provide some physicians with increased efficiency when it comes to billing and administrative practices as well as potential growth and financial stability. However, the deal can also come with pressure to increase revenue. As a result, it is important to review the proposed deal and negotiate terms that meet your needs before completing the transaction.