Blog Post

How physician practices are thinking about acquisition in today’s financial landscape

Covid-19 is threatening the margins needed to keep many independent physician practices financially viable. Groups of all types are grappling with serious concerns for their workforce’s health and safety as clinicians suffer from stress, burnout, trauma, and safety fears amid the epidemic.

These challenges have made groups look at their strategic options differently—from operational cost reductions to new partnership strategies. Likewise, private equity firms, physician aggregators, health plans, and health systems are reevaluating their opportunities for partnership with these practices.

On June 24, we hosted a facilitated discussion with our experts to better understand how these decisions are unfolding for different types of physician groups, including how physician groups are evaluating potential partners, and what that might mean for the ecosystem of provider networks. Check out our key takeaways below:

Takeaway #1: Most physician practices were able to sustain the financial loss from the initial Covid-19 shutdown, and many are on their way to recovery.

In response to plummeting volumes, many physician practices furloughed staff or reduced salary and benefits. As patients return, practices are seeing roughly 70% of their pre-Covid volumes. While this restored volume isn’t enough to sustain all independent physician practices, many were able to mitigate the financial losses, and are now focused on cutting costs to make up for reduced revenue and to prepare for a second shutdown.

Small and rural practices face additional headwinds. These groups have less capital in reserve and fewer diversified revenue streams, unlike larger practices with fifty or more physicians. As a result, they’re more likely to sell or close their practice entirely.

Takeaway #2: It’s unlikely that Covid-19 will drive an entirely new wave of physician practice consolidation.

Even before the pandemic began, few remaining large independent physician practices were open to the idea of acquisition by a hospital or health system. Larger practices that chose to remain independent generally developed a robust infrastructure, cost-cutting levers, and business capabilities to successfully adopt value-based payment models. As a result, many of these larger independent practices were better positioned to weather Covid-19 financially: a higher percentage of capitated contracts and infrastructure for telemedicine made it easier to pivot this spring.

Small, independent practices that are struggling to recover from Covid-19 are more likely to explore options for full acquisition or equity sale. However, these practices are likely to prioritize on non-hospital acquisition or equity partnerships, as they view these alternatives as a way to maintain some autonomy in exchange for support. Independent practices generally view joining an existing large independent practice as a more appealing option than an outright acquisition by the local hospital, and this trend isn’t expected to change as a result of the pandemic.

Takeaway #3: Practices that are considering equity sale or partnership are taking a closer look at the capabilities, support, and strategic alignment that potential partners offer.

Before Covid-19, independent groups looking for partners focused on finding creative ways to gain access to capital, scale up their existing infrastructure, and expanding their influence—without selling to a hospital or health system. As a result, private equity firms, physician aggregators, and “platform practices” (e.g. Privia Medical Group, ChenMed) were promising capital partners for independent groups. They could help independent practices achieve their larger, strategic goals—such as investing in population health or building out a robust IT infrastructure—while allowing groups to retain some control over their practice. They also allowed independent groups to maintain their existing culture, preserve their day-to-day workflow, and keep their ownership and equity stakes.

These prioritization criteria have not drastically changed as a result of Covid-19. However, independent groups looking for capital partners are now focusing on finding additional support to address the uncertainty caused by the pandemic. For example, independent groups might place greater weight on partners that can provide telehealth infrastructure or access to PPE. They also may prioritize access to immediate cash to offset the many loan-based options they have, or to implement sustainable changes to improve operations during the pandemic. They are interested in partners that can help efforts to remodel clinics to allow for social distancing requirements and make remote work more feasible in the long term.

Physician aggregators and other equity partners will continue to seek out practices similar business models and goals—whether it’s delivering high-touch care to a chronic elderly population, scaling primary care, or delivering high-quality specialty care. Now, to convince practices to join or sell equity, these partners must also demonstrate their ability to support practices through the financial and operational uncertainty of Covid-19.

What physicians prioritize when assessing a potential partner


Potential partner

Attractive factors

Deterring factors

Common target specialties

Other physician practices


Like-minded, similar to status quo

Likely only large groups with enough capital to acquire

Single and multispecialty groups

Enablement partner


Remain independent, long term sustainability, burnout mitigation

Partial business model change, limited short term cash support

Small independent primary care practices

Health plan


Long term sustainability, burnout mitigation

Lose independence, partial business model change

Independent primary care practices

Private equity investor


Rapid cash infusion, remain independent

Aggressive growth targets, limited control over future owners, range of business model change

Orthopedics, gastroenterology, women’s health, urology

Health system


Stability with employment, existing delivery infrastructure

Lose independence, uncertain revenue stability due to Covid-19

Primary care practices, new physician graduates



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