Another wave of mergers and acquisitions? Orthopedic practices attract private equity interest
Orthopedic practices are expected to be part of a second wave of physician practice consolidation. (iStockPhoto)

Orthopedic practices are one of the few physician specialties to remain relatively untouched by outside investment, but that’s about to change, according to a new report.

The next five years will see a flurry of investment from private equity into orthopedic practices, predicts healthcare investment bank Edgemont Capital.

In an interview with FierceHealthcare, Jeff B. Swearingen, Edgemont's co-founder and managing director, called it the second wave of physician consolidation—this time focusing on orthopedic practices. He anticipates investment deals that will result in further acquisitions with other practices that will consolidate local and regional markets.


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The industry saw its first majority recapitalization by a private equity group in April 2017 when Candescent Partners invested in Southeastern Spine Institute, according to the Edgemont report. One of the latest took place this month with Atlantic Street Capital’s acquisition of orthopedic services provider OrthoBethesda, a provider of orthopedic services in the greater Washington, D.C., area.

Merger and acquisition activity puts the sector on course to be one of the fastest growing areas of healthcare consolidation, according to Swearingen. 

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While private equity has become commonplace among many other specialties, including dermatology and ophthalmology, a number of factors make the orthopedics industry well positioned for investment and consolidation. They include:

  • Rapid growth in expenditures related to orthopedic care in support of an aging population
  • The shift of orthopedic procedures to lower-acuity outpatient settings, creating opportunities for consolidating multiple facilities on a regional or national level
  • Reimbursement changes and cost pressures driving a search for scale across healthcare systems
  • The need to invest in technology to track patient outcomes and optimize payments
  • Increased interest on the part of private equity investors in the specialty 

“Physicians are more aware that healthcare is fundamentally changing,” says Swearingen. “Size and scale matters.”

Physicians have watched, for instance, as large insurers have consolidated and as payment models have shifted to value-based care. He predicts that more orthopedic practices will take on private equity capital, which now has a lot of interest in that space.

Practices will buy other practices or partner with other orthopedic groups, he predicts. More deals are expected in the next few years. “There is a lot of private equity groups reaching out to orthopedic practices,” he says.

Last year was already an active one for physician practice mergers and acquisitions—a trend that Swearingen said would continue this year. Among the drivers: constant regulatory changes and pressure to invest in healthcare technology.