Fewer physicians want to own practices, reshaping value of small medical groups

For most of my memory, private practice ownership was seen as the standard model for physicians. After years of training, many doctors joined small groups, bought into the practice and eventually transitioned to leadership roles. I have firsthand witnessed that model steadily eroding as younger physicians and new graduates show declining interest in practice ownership, a shift that is and will continue to change how small medical practices are valued and sold.

Newly trained physicians increasingly favor employment that offers predictable income, defined schedules and limited administrative responsibility. Heavy student loan debt remains a central factor. Graduates often enter the workforce owing hundreds of thousands of dollars, making the financial risk of ownership less appealing early in their careers. Employment models, specifically those offered by hospitals and private equity-backed platforms, provide immediate compensation without the capital investment ownership requires.

Lifestyle considerations also play a growing role. Burnout rates among physicians remain high, and many younger doctors prioritize work-life balance, flexibility and time off. Ownership, by contrast, is often viewed as requiring long hours and increased headaches spent managing staffing, operations, billing and “most forgotten” payer relationships in addition to providing clinical care. For physicians trained in medicine rather than business, the operational burden of running a practice can feel overwhelming.

Reimbursement, uncertainty and lack of clarity further dampen interest. Smaller practices often lack negotiating leverage with payers and face ongoing pressure from stagnant reimbursement rates. Many physicians perceive employment as a solution to these problems, even if it comes at the cost of autonomy.

This trend disproportionately affects small practices with one to three physicians. Historically, such groups relied on internal succession, with associates eventually buying in and replacing retiring partners. As fewer associate physicians seek ownership, these practices lose their most natural exit strategy. Without a clear succession plan, the long-term continuity of the practice becomes uncertain, increasing perceived risk for external buyers and lowering possible valuations.

Practice value is typically based on sustainable earnings with an adjustment for risk. Without a clear succession plan, buyers gain negotiating leverage. Small practices without a clear succession plan may attract lower offers, even if current cash flow is strong.

Buyers are also placing greater emphasis on transferability. Practices heavily dependent on a founding physician’s personal reputation, referral relationships or informal processes are often discounted. In contrast, buyers favor practices with standardized operational procedures, reliable revenue cycles and systems that can function independently of any one physician. As a result, in my experience, small practices are increasingly viewed as income-generating businesses rather than scalable growth assets.

This shift has led to a change in valuation multiples for small groups. While well-run practices still command strong interest, buyers often price in the cost of future investments such as physician recruitment, technology upgrades and operational restructuring, adding to perceived risk.

Despite these challenges, small practices are not losing value across the board. Groups that invest in infrastructure, documentation and clear operational processes tend to perform better in the marketplace. Clean financial records and bookkeeping, lack of commingling personal expenses, consistent billing and accounts receivable, and clear written processes and structures signal stability to potential buyers. Practices that reduce or eliminate reliance on a single physician and demonstrate durable patient relationships are viewed more favorably.

The decline in ownership interest among younger physicians does not signal the end of private practice, but it does mark a transition. Valuations are increasingly shaped by how easily a practice can be transferred, transformed, integrated or scaled rather than by tradition or legacy. For small medical groups, adapting to this new reality may determine whether they remain viable assets in a consolidating health care market.

Peter Kemp, M.H.A., is the founder of Practice Management Consultants.