For the better part of two decades, physician practice management was the easiest trade in healthcare private equity. Buy an independent practice at a high-single-digit EBITDA multiple. Move the back office into a "management services organization." Add leverage, bolt on smaller practices at mid-single-digit prices, then sell the platform to the next sponsor at a double-digit multiple. The model produced real returns. It began in the 2000s with hospital-based specialties like neonatology, emergency medicine and radiology. In the 2010s, sponsors carried the same playbook into office-based specialties like gastroenterology, dermatology and ophthalmology. By the end of the decade, nearly every major specialty had drawn institutional capital, with a few exceptions like neurology, and not for lack of trying.
Private equity engineered respectable returns in what had been a sleepy corner of healthcare. It rarely produced better practices. And in 2026 the model is coming apart on three fronts at once: the economics, the physicians and the law.
The friendly-PC structure was invented by creative attorneys because most states bar corporations (including investors) from owning an entity tjat practices medicine. A physician-owned professional corporation holds the licenses and the patient relationships. A sponsor-owned MSO provides “administrative services” and, through management fees and control agreements, captures the practice economics.
On paper, the MSO brought scale: shared billing, purchasing, payer contracting and technology. In practice, most of the return came from the gap between the price paid for small practices and the price a buyer would pay for a large one. That is multiple arbitrage. It depends on three conditions that no longer hold: cheap debt, rising exit multiples and physicians who keep producing after they get paid.
Cheap debt disappeared first. Platforms financed with floating-rate loans in 2020 and 2021 now carry interest costs and refinancing walls their original models never assumed. Holding periods have stretched well past plan, and the exits meant to repay everyone keep slipping.
Reimbursement never cooperated either. Medicare physician payment has trailed the cost of running a practice for two decades, and the proposed 2027 fee schedule cuts the conversion factor again, by 1.68% for physicians outside advanced payment models, as a temporary 2.5% increase expires. Commercial rate gains are harder to win, and the No Surprises Act dispute process adds cost and delay even when providers prevail.
The failures are now a list, not an anecdote. Envision Healthcare and American Physician Partners collapsed in 2023. Cano Health and CareMax, two of the most aggressive value-based primary care roll-ups, went bankrupt in 2024. TA Associates exited InHealth MD Alliance for pennies on the debt dollar. Each had its own story, but each assumed scale would keep improving economics that were already stretched to the limit. When a key assumption broke, so did the platform. In value-based primary care, that assumption was risk adjustment: CMS's V28 model, phased in from 2024 through 2026, sharply cut the revenue providers could capture through aggressive HCC coding.
The least discussed flaw in the model is the simplest. When physicians sell a practice, they sell a share of their future income for cash today (and a far better tax rate). The incentive to keep producing at the same level weakens the day the wire hits.
Platforms answered with rollover equity and earn-outs, but equity in an over-levered holding company is a weak motivator when exits stall. Younger physicians, who never shared in the first payout, see little reason to stay. In a tight labor market, losing one high-producing specialist can erase a practice’s margin. The asset the model depended on most was the one it controlled least.
Oregon has now written the model’s obituary into statute. Senate Bill 951, signed in June 2025 and described by one leading law firm as the nation’s toughest limit on private equity in physician practices, bars an MSO from owning or controlling a majority of the practices it serves. It prohibits MSOs from holding proxies over practice shares or exercising de facto control over clinical, administrative or business decisions, including staffing, compensation and payer contracting.
New arrangements had to comply by January 1, 2026; existing ones have until January 1, 2029. A companion law, HB 3410, makes most physician non-competes void. The framework is already being tested: in April 2026, an emergency physician group sued over a health system’s new staffing arrangement, the first major challenge under the law.
Oregon is not alone. California’s SB 351, effective January 2026, bars private equity investors from interfering in clinical decisions, and the state’s attorney general settled with a digital health company over its friendly-PC arrangement in June 2026. More than a dozen states now review or restrict private equity healthcare transactions, and six states enacted nine new oversight laws in 2026 alone, from Vermont’s MSO disclosure rules to Maine’s power to block large deals.
In September 2026, a group of senators introduced the Stop Corporate Takeovers of Physicians Act, a federal bill modeled on Oregon’s. It is unlikely to pass soon. Its direction is unmistakable.
Capital is already leaving. Private equity closed 851 physician practice deals in 2021. In the first half of 2026 it closed 105, and PitchBook data put the year on pace for roughly half of 2025’s total. Physician groups’ share of provider deals fell from 28% in 2021 to 23% in 2025, according to Bain & Company.
The sponsors still active have changed their pitch. Bain describes a shift from “loose confederations” of acquired practices to integrated platforms that invest in clinician experience, operations, technology and value-based care. That is a better model. It is also slower, harder and more expensive, and it no longer looks like the old trade.
None of this means physicians are uninvestable, or that the sector has run out of room for private capital. It means value has to come from operations, not structure.
The strongest physician opportunities today share three traits: demand that outruns supply, a payer mix that is not hostage to a single government rate-setter, and a structure regulators are not trying to dismantle.
A roll-up of plastic surgery practices is a good example. It runs largely on cash-pay aesthetic procedures, where patients pay directly and prices reflect demand rather than a fee schedule. Other specialties with meaningful self-pay or ancillary revenue, or fragmented fields that consolidators have barely touched, can work the same way. What they need is a structure built with physicians rather than around them: real physician ownership and governance, compensation tied to the platform's growth, and an MSO that supports the practice without controlling it. Those are the partnerships that survive the new rules, and the ones physicians will still want to join.
The PPM model did not fail because private equity is bad for medicine, or because physicians cannot run businesses. It failed because it was built to capture value rather than create it, and every one of its supports—cheap money, rising multiples, compliant physicians and permissive law—has been knocked out at once.
The next generation of physician investments will look more like partnerships and less like acquisitions. Sponsors who understand that will still find good businesses to back. Those waiting for the old trade to return will be waiting a long time.
250 Fillmore Street
Denver, CO 80206
50 Milk Street
Boston, MA 02109
970-450-7400
connect@4-cc.com
