Private equity (PE) investment in healthcare has surged in recent years, reshaping how medical practices operate, grow, and deliver care.
For physicians and practice owners, the decision to sell to a PE firm is complex—offering both strategic advantages and potential pitfalls. Private equity ownership presents a mix of opportunities and challenges for medical practices, especially when considering management services organizations (MSOs), cost-cutting strategies, and the regulatory complexities unique to New York State.
The Three to Five Year Plan: A Common PE Strategy
Private equity firms typically operate on a three to five year investment horizon. During this period, they aim to increase the value of the acquired practice through operational efficiencies, revenue growth, and strategic expansion. This often includes:
- Consolidating smaller practices into larger networks
- Streamlining administrative functions via MSOs
- Enhancing billing and coding practices
- Introducing performance metrics and financial targets
While this model can lead to short-term profitability, critics argue it may prioritize financial returns over long-term patient care and physician autonomy (Commonwealth Fund, 2023a).
Advantages of PE Ownership
- Capital Infusion: PE firms provide immediate financial resources, allowing practices to invest in technology, expand services, or pay down debt.
- Operational Support: Through MSOs, PE-backed practices gain access to centralized services such as HR, IT, and compliance, reducing administrative burdens.
- Negotiating Power: Larger PE-backed networks may have stronger leverage with insurers and suppliers. (results in NYS can vary due to the limited number of insurance payors)
- Exit Strategy: For aging physicians or those seeking a transition, PE offers a structured exit with financial upside.
Disadvantages and Risks
- Loss of Autonomy: Physicians may lose control over clinical decisions, staffing, and scheduling.
- Pressure to Perform: PE firms often impose aggressive financial targets, which can lead to increased patient volume and reduced visit times.
- Staffing Cuts: Cost-cutting measures may include layoffs or reduced benefits, impacting morale and care quality.
- Regulatory Challenges: In states like New York, corporate ownership of medical practices is restricted, requiring creative structuring through MSOs or other legal entities (Medical Economics, 2023).
MSOs: The Backbone of PE Integration
Management Services Organizations (MSOs) are commonly used to navigate regulatory barriers. MSOs handle non-clinical operations while physicians retain ownership over medical decisions. This structure allows PE firms to influence practice management without violating laws that prohibit non-physician ownership of medical entities (American Journal of Medicine, 2023).
Navigating the Landscape in New York State
New York’s corporate practice of medicine doctrine limits direct ownership of medical practices by non-physicians. As a result, PE firms must use MSOs or joint ventures to operate within the law. Despite these constraints, several PE-backed practices have found success in New York by focusing on specialty care, such as dermatology and ophthalmology, where economies of scale and centralized services offer clear advantages (Commonwealth Fund, 2025).
Final Thoughts & Next Steps
Private equity can offer medical practices a pathway to growth, efficiency, and financial stability—but not without trade-offs. Physicians must weigh the benefits of capital and support against the potential erosion of autonomy and clinical priorities. In regulated environments like New York, success hinges on thoughtful structuring and a commitment to preserving the integrity of patient care.
Thinking about how private equity could impact your risk exposure or insurance needs?
Reach out to Contact OneGroup’s Healthcare team to ensure your practice is protected, compliant, and prepared for the future—no matter who owns it.
References
Commonwealth Fund. (2023a, November). Private equity’s role in health care. https://www.commonwealthfund.org/publications/explainer/2023/nov/private-equity-role-health-care
Medical Economics. (2023). Navigating the pros and cons of selling your medical practice to private equity. https://www.medicaleconomics.com/view/navigating-the-pros-and-cons-of-selling-your-medical-practice-to-private-equity
American Journal of Medicine. (2023). What happens when private equity firms sell medical practices. https://www.amjmed.com/article/S0002-9343(23)00589-2/fulltext
Commonwealth Fund. (2025, May). How private equity deals are reshaping your health care [Podcast]. https://www.commonwealthfund.org/publications/podcast/2025/may/how-private-equity-deals-are-reshaping-your-health-care
Harvard Business School Library. (n.d.). What happens when private equity firms sell medical practices. https://www.library.hbs.edu/working-knowledge/what-happens-when-private-equity-firms-sell-medical-practices
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