How do private equity firms affect the future landscape of orthopaedic surgery?
The increasing presence of private equity in medical practices has brought a high level of scrutiny to the changing landscape for physicians. There have been joint inquiries launched by the Federal Trade Commission, Department of Justice, and Department of Health and Human Services along with updated merger and acquisition guidelines from the Department of Justice. Most recently, in mid-September of 2026, several senators and representatives introduced a new bill attempting to address the rapidly changing landscape of medicine.
Why Are Orthopaedics and Healthcare Such Attractive Investments?
Private equity (PE) firms function as investment firms that purchase private companies with hopes of creating attractive returns for investors. Between 2010 and 2020, private equity firm investment in healthcare has increased more than 250% with 2025 showing a total deal value of approximately 191 billion USD. The attractiveness of orthopaedic practices as a strategic acquisition for a private equity firm can be traced to a few major aspects of healthcare and reimbursement. One major contributor to this is the ability to capture facility and ancillary fees, which make independent practices highly valuable. Private equity firms generate massive returns by acquiring the practice alongside ambulatory surgery centers and ancillary services like physical therapy and MRI machines, which prevents leakage of revenue to outside institutions. This model creates a synergy through several operational advantages that make the practice far more profitable to large institutions than to independent surgeons. The private equity firm can provide upfront capital to expand the practice, upgrade equipment, and build new ambulatory surgery centers without surgeons taking on personal financial risk. Furthermore, private equity funds can participate in “roll-up” strategies by systematically acquiring small local practices to achieve a large regional market share. In addition to this, overhead costs are decreased through economies of scale as private equity firms can centralize administrative operations into a single management services organization. These synergies and advantages of private equity ownership allow the private equity fund to turn the company around and sell it for a profit in 3-7 years.
Why Might a Surgeon Sell to Private Equity?
Historically, if a senior surgeon wanted to retire, they would often sell their share of the practice to a younger surgeon. However, selling to a private equity firm is often more lucrative as the funds can offer more generous payouts. Along with higher payouts, surgeons often retain a minority stake, also known as rollover equity, in the new private-equity backed company. As the private equity firm grows the practice and revenues with the intent to sell the company to a larger buyer in several years, the surgeon’s rollover equity can multiply in value and generate a second massive payout. There are several other benefits that come from selling to a private equity firm. The administrative and regulatory burdens of the practice are typically offloaded to a management services organization after private equity backing, which may dramatically decrease surgeon workloads. Private equity companies have much more leverage when negotiating with insurance companies as well. This increased leverage stems from an increased market share and number of surgeons working for the practices as insurance companies are required to maintain a certain number of physicians as in-network. Lastly, younger surgeons often face higher living costs, increased medical school debt, and value the work-life balance of employment over owning their own practice.
What Happens After Selling to Private Equity?
The fate of the surgical practice often changes after private equity acquisition or backing. The primary goal for the new practice is to increase earnings in order for the private equity fund to sell the company for an adequate profit in several years. For the physicians who stay, this often translates to a shift in clinical workflows. PE-backed management services organizations frequently implement optimization strategies. This can include increasing patient volume targets, reducing allotted time for routine appointments, and integrating advanced practice providers, such as physician assistants and nurse practitioners, to handle lower-acuity cases while the surgeons may focus on high-revenue procedures. While this improves the bottom line, physicians may report a loss of clinical autonomy and increased pressure to prioritize volume over individualized patient care. This has led to a disruption in workforce stability. A study recently published in Health Affairs provided an insightful metric: physician turnover skyrockets by 265% following a private equity acquisition compared to independent practices. Furthermore, when the practice is eventually sold by the private equity firm, another wave of instability occurs. According to a recent study published in JAMA, when a PE firm exits and resells the practice, physicians are 16.5 percentage points more likely to leave within two years compared to peers in non-PE practices.
The Effect of Career Stage
When examining private equity acquisitions, it is crucial to recognize that the physicians involved are not all equally affected. The financial mechanics of a buyout create different outcomes depending on a surgeon’s career stage and ownership stake. For founding partners and senior surgeons with ownership stake in the practice, a private equity buyout is an attractive financial option. A massive cash payment and rollover equity offer financial security in exchange for a lower guaranteed salary during the surgeon’s post-sale contract. The lower salary is often inconsequential after a surgeon receives the large payout and is nearing the end of his or her career. For younger surgeons who may not retain an ownership stake in the practice, the outcomes are different. Historically, a younger surgeon would accept lower pay early in their career in exchange for the opportunity to gradually buy into the practice and share in its long-term profits. However, young surgeons may lack the capital to buy in early on in their careers and it typically takes several years to achieve an ownership stake. A sale to a private equity firm prior to having an ownership stake may eliminate this traditional pathway and transition younger surgeons from a partnership track to a standard employment model if they are not offered equity.
Clinical Pearl:
The fundamental shift in private equity-owned medicine is the transition from a long-term partnership model to a three-to-seven-year optimization and resale cycle. Therefore, the best advice to orthopaedic surgeons is to align your contract with your specific career stage and goals. Senior surgeons must ensure the upfront payout and rollover equity adequately compensate for the loss of clinical autonomy in their final years. Younger surgeons must recognize that the traditional pathway to partnership in the practice may be different, making it essential to negotiate upfront protections regarding workload, base salary, and patient volume expectations in a corporate environment.
Why it Matters:
The rapid influx of private equity into orthopaedics is not just an administrative shift; it alters the broader healthcare ecosystem. On one hand, PE investment provides the necessary capital to modernize facilities and shift procedures to highly efficient ambulatory surgery centers, which can streamline care delivery. On the other hand, the financial imperatives of a short-term investment model have broad implications for the healthcare system and surgeons within it.
References:
- Singh Y, Song Z, Polsky D, Bruch JD, Zhu JM. Association of Private Equity Acquisition of Physician Practices With Changes in Health Care Spending and Utilization. JAMA Health Forum. 2022;3(9):e222886. doi:10.1001/jamahealthforum.2022.2886
- Federal bill proposes banning the corporate practice of medicine nationwide. Nixon Peabody LLP. Accessed September 26, 2026.
- Berquist V, Klarnet L, Dafny L. Sale of Private Equity–Owned Physician Practices and Physician Turnover. JAMA Health Forum. 2025;6(2):e245376. doi:10.1001/jamahealthforum.2024.5376
- Singh Y, Bejarano G, Torabzadeh H, Borkar D, Whaley CM. Physician Turnover Increased In Private Equity–Acquired Physician Practices. Health Affairs. 2025;44(3):280-287. doi:10.1377/hlthaff.2024.00974
- Boddapati V, Danford NC, Lopez CD, Levine WN, Lehman RA, Lenke LG. Recent Trends in Private Equity Acquisition of Orthopaedic Practices in the United States. J Am Acad Orthop Surg. 2022;30(8):e664-e672. doi:10.5435/JAAOS-D-21-00783
- Mikhail C, Shankar D, Taree A, et al. Trends in Private Equity Acquisition of Orthopaedic Surgery Practices in the United States. J Am Acad Orthop Surg Glob Res Rev. 2021;5(12):e21.00162. doi:10.5435/JAAOSGlobal-D-21-00162
About the Author:
Steven Racki is a 3rd year medical student at Rutgers Robert Wood Johnson Medical School with industry experience in investment banking and private equity.
