Strategic Options For Physicians Facing Challenges In Private Practice

Private medical practices across the country are grappling with lower reimbursements, rising expenses, and intensifying competition from hospital systems and investor-backed platforms. According to a recent article by Gary Herschman, Dana Jacoby, and Nivedita Patel published in Medical Economics, these pressures are forcing many physicians to evaluate strategic alternatives to remaining independent.

The authors—experts in healthcare transactions and strategic consulting—outline ten pathways physicians can consider when facing financial and operational challenges. Their analysis reflects the changing landscape of healthcare delivery, where larger organizations often hold competitive advantages in managed care contracting, capital investment, and technology infrastructure.

The Core Challenge

Independent physician practices are competing against well-funded health systems, private equity-backed platforms, and national companies that have access to seasoned healthcare executives, advanced electronic health records, data analytics, and cybersecurity infrastructure. These larger competitors also benefit from economies of scale in billing, human resources, and managed care contracting.

For many practices, the result is lower physician take-home compensation despite stable or increasing patient volumes. Workforce shortages in many regions compound the problem, making recruitment and retention even more difficult.

Ten Strategic Options

The authors present the following alternatives for physician practices evaluating their options:

1. Partner With A Private Equity-Backed Platform

Private equity platforms exist in nearly every specialty, including primary care. According to the article, approximately 80 to 90 percent of PE-physician partnerships are successful, though outcomes depend heavily on thorough due diligence. The authors recommend evaluating cultural fit, confirming the platform’s track record of “income repair,” and speaking confidentially with other physicians who have joined the platform.

2. Partner With A Family Office-Backed Platform

Family offices typically have longer investment horizons—often ten years or more—and are generally perceived as more physician-friendly. These arrangements may offer more stability and less pressure for short-term exits.

3. Sell To A Local Hospital Or Health System

Some physicians trust their local hospitals and prefer employment arrangements with familiar organizations. However, the success of this option depends heavily on the hospital’s reputation and relationship with physicians in the community.

4. Join A Three-Way Partnership

A growing trend involves partnerships among academic health systems, management platforms, and private equity investors. Recent examples include collaborations between Hospital for Special Surgery and General Atlantic, and Mount Sinai partnering with US Anesthesia Partners.

5. Merge Into A Physician-Owned Specialty Or Multi-Specialty Group

Larger physician-owned groups can provide economies of scale and shared administrative infrastructure. However, growth still requires capital, which must come from the physician owners directly or through debt.

6. Sell To A Payor-Owned Medical Group

National companies like Optum—rumored to employ nearly 100,000 physicians nationwide—offer scale and resources. However, many physicians are averse to payor ownership due to concerns about conflicts of interest.

7. Partner With A Health Care Distributor-Backed Platform

Companies like Cardinal Health, Cencora, and McKesson have entered the physician practice market. These public companies have long-term investment horizons and significant capital for expansion.

8. Contract With A Management Services Organization (MSO)

MSOs provide administrative services and strategic advice for a fee without purchasing the practice. This option allows physicians to retain ownership while accessing experienced leadership.

9. Join An Independent Practice Association (IPA) Or Clinically Integrated Network (CIN)

IPAs and CINs can provide access to enhanced payor rates and value-based care arrangements without requiring the sale of practice assets. However, this option does not address challenges like capital access or sophisticated management.

10. Enter Into A Professional Services Agreement (PSA) With A Hospital

In this arrangement, physicians and clinicians provide services exclusively to a hospital or its affiliate, which bills for professional services. PSAs offer higher compensation potential through wRVU-based models and are “easy-in, easy-out” if physicians later decide to pursue other options.

Remaining Independent

For practices that choose to remain independent, the authors stress the need for seasoned management teams and access to capital. Independent practices must invest in ancillary services, advanced EHR systems, cybersecurity, and data analytics to compete effectively. However, the article notes that remaining independent is becoming increasingly difficult for small-to-medium sized practices.

Why This Matters For Healthcare Leaders

The options outlined in this article reflect the financial and operational pressures reshaping healthcare delivery. Physicians who once thrived in independent practice are now evaluating partnerships, employment, and platform models they might have rejected years ago.

For healthcare administrators and CFOs, understanding these dynamics is critical. Whether advising physician groups, evaluating potential acquisitions, or planning long-term strategy, leaders must recognize that physician autonomy and financial sustainability are increasingly in tension.

Practices considering a strategic transaction should conduct thorough due diligence, evaluate cultural fit, and confirm that potential partners have a proven track record of supporting physician success. As the authors emphasize, culture and trust matter as much as financial terms.

Evaluating a strategic transaction or partnership?
The James Moore healthcare team can help you assess financial feasibility, conduct due diligence, and prepare for what’s next. Connect with our healthcare advisors today.

All content provided in this article is for informational purposes only. Matters discussed in this article are subject to change. For up-to-date information on this subject please contact a James Moore professional.