Physician groups play a pivotal role in the healthcare system, operating at the front line of clinical care and service delivery. Amid continued fragmentation in many specialties, physician groups still attract private capital, particularly in the US and among middle-market investors.

That said, physician groups have declined as a share of all global provider transactions, from 28% in 2021 to 23% in 2025, driven largely by trends in the North American market, which accounts for more than 60% of global provider deal value (see Figure 1). This drop reflects post-pandemic challenges in the US, including labor shortages and reimbursement pressure from both public and private payers. In Europe, investment in scale physician groups is far less common given the fragmented national markets and regulatory landscapes. Similarly, physician groups are an uncommon investment theme in Asia-Pacific, where provider deals largely focus on health system–centric models.

Figure 1

Despite the decline in deal volumes from their peak, physician groups remain a major part of many private equity (PE) portfolios, making both value creation and exit strategies highly relevant to current and prospective investors. 

Positioning investments for a successful exit

Private equity investments in US physician groups continue to evolve as the market matures. Historically, these investments prioritized mergers and acquisitions (M&A) to build scale. Today, the paths to success require more sophisticated management practices that deliver greater value to patients, clinicians, payers, and ultimately investors. Demonstrating a track record of organic growth, executing on repeatable ancillary and M&A playbooks, and positioning the physician group as an employer of choice have become the leading priorities.

The universe of potential acquirers has also broadened to include distributors, alongside diversified providers, payers, and other PE investors. For instance, pharmaceutical distributor Cardinal Health’s GI Alliance acquired Solaris Health, a urology healthcare platform, from Lee Equity Partners, underscoring the widening corporate interest in the space. This follows several notable physician group acquisitions by distributors over the past 18 months, including Cardinal Health’s original acquisition of GI Alliance from a group of physician owners and Apollo Global Management, Cencora’s acquisition of Retina Consultants of America from Webster Equity Partners, and McKesson’s acquisition of ophthalmology and retina services provider Prism Vision Group from Quad-C Management. While payer acquisition activity has been muted in recent years, the potential for renewed interest in strategic provider purchases may offer another avenue for exit for investors.

Scaled, integrated platforms define the next phase of investment

For success in the next phase of physician group investment, firms will need to build scaled, integrated platforms. To respond to the turbulence caused by staffing shortages and reimbursement challenges, physician groups must evolve from loose confederations into coordinated platforms that provide clinicians with the tools and support to deliver high-quality care. The most successful of these will have a clearly defined role of the center, shared infrastructure, and a compelling value proposition for clinicians.

In addition, physician groups have the opportunity to unlock value by expanding the boundaries of the business via an optimized ancillary suite, exploring vertical or horizontal integration, or investing in the technology infrastructure to reduce administrative burdens on clinicians—though the applicability of each approach depends on the specialty served. Successful investors are using these five value-creation strategies:

• Improve the clinician experience by focusing on the clinician value proposition and clearly defining the role of the center.
• Enhance core business operations to better engage patients and referrers, while leveraging technology to drive productivity gains.
• Grow into new care delivery models, such as participating in alternative payment models and entering ancillary and adjacent services.
• Expand operations by selecting key markets and areas for growth, developing a playbook for future growth, and planning for integration.
• Reinforce the value of the center and practice economics by deploying AI-enabled technologies to enhance operational performance, optimize front- and back-office operations, improve revenue cycle management, and unlock new levers for value creation.

Pockets of opportunity in a selective deal-making environment

While the past several years have seen headwinds due to labor constraints, payer relationship hurdles, and a shifting regulatory environment, mid-market investors continue to find opportunities and build conviction around themes aligned to long-term trends in healthcare:

• Specialty pharmaceuticals. The high and rising cost and complexity of specialty therapeutics in some specialties, evident in oncology for many years, has placed a premium on properly managing the utilization (and economics) of drugs to deliver efficient and effective care. In drug-intensive specialties, such as neurology and urology, scale platforms can support drug-cost management.
• Value-based care. Provider groups in high-cost-of-care specialties appear primed to advance adoption of value-based care models, with orthopedics and cardiology at the forefront through ongoing experiments in bundled payments and outcomes-based models. However, given the gradual pace of value-based care model adoption, success will hinge on investing in key enablers—such as leveraging data, integrating care models, and embracing site-of-care shifts—to develop the muscles to practice in value-based care while continuing to drive strong performance in fee-for-service models.
• Ancillary expansion. As diagnostics and ancillaries play a greater role in achieving optimal care outcomes, selectively owning or partnering with these services enables providers to better coordinate care and strengthen practice economics. Specialties such as dermatology and gastroenterology have benefited from this strategy.
• High-growth end markets. In high-growth end markets, scalable platforms with differentiated patient engagement models are emerging as attractive targets for both PE and strategic acquirers. Specialties that are drawing interest include nephrology, plastic surgery, and behavioral health.
• Early-innings roll-ups. Some specialties remain fragmented, presenting a runway for future consolidation. Neurology, nephrology, and plastic surgery are areas where greater scale and geographic density can unlock efficiencies.

Collectively, these themes point to a physician group investment landscape that offers rewards for operational sophistication and clinical excellence as much as for financial discipline and scale. Investors that blend sector expertise with a disciplined value-creation approach will continue to find attractive opportunities.