A Primer on Hospital and Private Equity Consolidation
(By David Lopez)
For the better part of the last decade, physician practices have seen a wave of consolidation by hospitals and private equity with 2018 being no exception . M&A activity in physician practices continues to grow and outpace other sectors as deals in the healthcare industry are coveted by investors for their strong growth, recession resistance, and superior historical returns. In fact, acquisitions by hospitals and private equity in provider services broke records last year according to Bain & Co’s 2019 global healthcare report.
This is not a new phenomenon as during the 1990s competition to consolidate physician practices reached a feverish pitch with the emergence of Health Maintenance Organizations (HMOs), and the resulting joint ventures formed to integrate and operate acquisitions while adhering to federal and state regulations . It is widely regarded that these earlier attempts at consolidation ultimately failed; however, important lessons were learned by hospitals and private equity evident in how present-day physician practice transactions are structured  .
The healthcare industry has changed since the 90s as new regulatory frameworks and financial incentives now drive the consolidation we see from hospitals and private equity, which continue to pursue physician practice acquisitions, albeit taking distinctly different approaches and for uniquely specific objectives which this article will attempt to shed some light on in a three part series .