Practice roll-ups aren't dead, but the underwriting that built them is

Is the physician practice roll-up industry dead or humming along? The answer depends on the sector, specialty and platform. Some physician practice management roll-ups in various sectors have cooled radically from the investment spree of the last decade, while other specialties, particularly oncology, continue to attract interest. The model is familiar: acquire fragmented local practices, work to centralize billing and back-office functions across all acquired practices, add compliant ancillary services, improve payor contracting and seek an exit at a higher valuation. That model is not dead. High-quality specialty groups with durable physician alignment, strong compliance infrastructure and defensible local market positions still attract capital. But the distressed side is real. Exits are slower, financing is more expensive, physician reimbursement is stagnant and platforms built on optimistic assumptions are facing harder tests operationally, both impacting day-to-day operations and future exits or acquisitions.

What broke? Not the concept, but the underwriting or the acquisition of certain practices perceived to be platform acquisitions to accommodate strategic "bolt-on" deals. Physician practice acquisitions have existed for decades, first through hospitals and health systems expanding their footprint, many qualifying for hospital-based reimbursement and later through private equity-backed management service organizations. What has proven fragile is the belief that smaller or mid-size practices can always be aggregated for integrated care or more margin.

Challenges with the operations of physician roll-up structures are multi-factored. Physicians pack up their bags and leave practices (either by relocating, retiring or directly competing, notwithstanding restrictive covenants), even after profiting from the original transaction and the steak dinner came to a close. Losing a single specialist in a tight labor market can materially impair earnings; losing a senior physician leader in the organization can start a broader exodus. Engagement fades when physician rollover equity produces no distributions, distributions fall short of the pre-closing model or younger physicians have no path to ownership.

Several external pressures have also converged. Many roll-up platforms were launched when debt was cheap and higher interest rates have turned refinancing and delayed exits into maturity-wall problems. Physician reimbursement is stagnant in many areas and rate increases not keeping up with the costs of medical inflation in the United States. Inflation has not been kind. According to the KFF Analysis of Bureau of Labor Statistics Consumer Price Index, “since 2000, the price of medical care, including services provided as well as insurance, drugs, and medical equipment, has increased by 121.3%. In contrast, prices for all consumer goods and services rose by 86.1% in the same period.” The No Surprises Act shifted many out-of-network disputes into Independent Dispute Resolution system with the pursuit of higher reimbursement amounts through the process.

While providers, facilities and air ambulance providers have been winning a vast majority of disputes before certified IDR entities, with CMS reporting approximately 85% in the last six months of 2024 and approximately 88% in the first six months of 2025, many payors resist making payment on IDR awards, and the costs and administrative hassle of pursuing the IDR process cannot be overestimated. State transaction-notice laws, corporate-practice-of-medicine nuances and enforcement trends, including the most recent settlement in California with Carbon Health announced on June 27, 2025, and antitrust scrutiny may add additional friction.

The future of physician roll-ups

The future of physician roll-ups is not a referendum on private equity nor physician integration structures more broadly. Stronger platforms will be those that distinguish themselves through physician alignment and engagement strategies and a realistic view of what scale really means for success, integration and profitability. It is clear that successful physician roll-up structures share several traits: founder-physician involvement in management post-closing, a home for the “emerging” future physician leaders, diversified payor relationships with careful consideration of the impact of an out-of-network presence (notwithstanding the NSA), strong revenue cycle management (RCM) systems deployed across all practices within the tent, compliance programs in a wide range of areas including medical coding and compliance with federal and state privacy and security laws relating to health information, a real understanding of where scale reduces cost, and physician recruitment, retention and retirement strategies.

Platforms on shakier grounds share many of the same red flags that have existed since the first roll-up was just a glimmer in the eye of creativity: aggressive debt-funded acquisitions, efforts to deploy out-of-network strategies in reliance on the NSA dispute resolution process, concentrated payor relationships and outdated payor contracts, weak compliance infrastructures and a lack of integrated electronic health record and RCM reporting systems. Rapid growth acquisition may have hidden those flaws for a short period of time, but fissures eventually show up as cash burn, physician departures, missed or widely divergent distributions from “promises” in the deal, and a loss of confidence in any future exit path.

So, where do we go from here?

First, efforts must be made to change the “wiring” of physician thinking and physician engagement. In the traditional roll-up structure, the management fee shifts part of their compensation into future equity distributions. If physicians do not understand this economic shift, the “MSO scrape” quickly starts to feel like a pay cut and physicians do not understand why. Evaluate how to reset profit expectations. Margins do not improve simply because a platform becomes larger. New EHR systems, privacy and cybersecurity upgrades, HIPAA security remediation requirements, billing integration, managed-care contracting and new EHR and RCM systems or upgrades often require capital investment before they produce any operational savings and favorable distributions. Transactional diligence should estimate investment costs into the practice or platform and how the costs affect physician compensation and their distributions, or lack thereof.

Second, evaluate changes, even fundamental ones, to the platform itself, irrespective of the months of ‘well negotiated’ transaction agreements. Ask whether the management agreement, compensation model, governance and committee structure and equity plan still work two or three years after the champagne glasses are clanged at closing and the steak dinner has concluded. Evaluate adjustments to the MSO fee to create better alignment and productivity incentives, re-consider compliant compensation plan structure and incentive-based structures, add or change physician leadership, create new equity classes (particularly for the next generation of physician leaders), or change governance if the current structure is impairing recruitment, physician engagement, retention or leading to a feeling of lack of a voice by younger physicians.

Third, accept that not every market works. A market that cannot recruit, has poor payor contracts, outdated systems or physicians waiting for restrictive covenants to burn off may drag down the entire organization. Spinning practices back out to the physicians that sold the business may be painful, but necessary. Failure in one market does not mean the model failed everywhere. Market dynamics, payor dynamics in that market, increasing hospital and healthcare system physician practice acquisitions or simply a new market entrance may combine to negatively impact operations in that market, but not others. Sometimes the best decision is knowing when to let go.

Lastly, redesign before decline becomes irreversible. A platform that looked attractive in diligence may later reveal weak RCM reporting, disconnected EHR and billing systems, poor scheduling workflows, outdated payor contracts, inadequate privacy and security systems or limited physician governance. Take a solid-time out and open up the door to physician input—you may be very surprised to learn that even your physician partners have productive solutions for change. Identify what is driving cash burn, physician disengagement, poor collections, or stalled growth. The solution may be a new platform acquisition, a refreshed payor strategy or new equity structures for younger physicians and retiring physicians.

The future in the physician roll-up industry is strained, but not static. There is no single cause of stress and no single “one-size fits all” solution. Specialty, geography, payor mix, legal structure, debt, physician engagement and technology all matter and constantly change in the health care industry. Change does not mean the original roll-up strategy failed. What it does mean for many platforms is that change is here. The only question is whether the organization’s leadership is strong enough to get on that bandwagon or whether leadership chooses to bury its head in the sand, merely hoping for a better day.

Barry Alexander is a shareholder at Polsinelli PC in Raleigh, North Carolina, where he advises health care providers, specialty pharmaceutical and medical device companies, and private equity investors on health care transactions and regulatory matters.