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Can Private Equity Firms Help Independent Physician Practices Keep Their Independence?

Analysis  |  By Christopher Cheney  
   January 26, 2024

Private equity-backed management services organizations provide independent physician practices with business-savvy talent and access to capital, according to one practice leader who has taken that route.

Private equity-backed management services organizations (MSOs) are helping independent physician practices to remain independent.

Independent physician practices are declining, according to the American Medical Association (AMA). From 2012 to 2022, the proportion of physicians working in private practices fell from 60.1% to 46.7%, the AMA says. Over the same period, the proportion of physicians working in hospitals as employees or contractors rose from 5.6% to 9.6%.

Paul Berggreen, MD, founder and president of Arizona Digestive Health and president of the American Independent Medical Practice Association (AIMPA), says joining a private equity-backed MSO, the GI Alliance, enabled Arizona Digestive Health to remain an independent physician practice.

"In 2017, we saw that there were other independent physician practices across the country that were joining these MSOs and we wondered whether we should, too," he says. "As we got further into the weeds, what became apparent to us as a physician-led organization is that joining an MSO would provide us with several abilities."

"We were thinking: How do we stay independent?” he adds. "How do we deliver quality care? How do we keep costs to the system low? And how do we make sure access to our services is expanding? That is what led us to join the GI Alliance."

An MSO serves as the business office of a medical practice, providing such business functions as billing, compliance, information technology, and accounting.

Private equity-backed MSOs provide two primary advantages for independent physician practices, Berggreen says.

  • Access to higher levels of business talent. "Back in the day, we all had office managers, and they were good at managing an office of five to 10 doctors," he says. "But to run the business functions of an MSO, you need to have people who have a lot of business skills. Even at Arizona Digestive Health, which has 50 doctors, we could not afford that type of talent. Joining the MSO gave us access to that type of talent."
  • Access to capital. For example, Berggreen says, a large oncology practice in Tennessee recognizes that many patients in rural counties have significant access issues getting to appointments. The oncologists joined an MSO with a private equity backer and used their new access to capital to open clinics in rural areas so their patients can access oncologists without having to make a one- or two-hour drive. The oncologists were able to identify where their rural patients are located, where it makes most sense to put a rural clinic, and how they’re going to staff the clinics with help from the MSO.

Helping independent physician practices stay independent

With access to business talent and capital that private equity-backed MSOs provide, independent practices can remain independent with few strings attached, Berggreen says.

"At AIMPA, we look at private equity-backed MSOs as part of independent physician practices remaining independent," he says. "But we look at that as a neutral financing mechanism. In this case, private equity firms do not own medical practices. So the clinical decision-making stays separate from the business functions of a practice. The whole concept of these kinds of MSOs is that the business functions remain separate from the clinical operations, and any clinical decision-making remains with the physicians."

Arizona Digestive Health is physician-owned and -led. The CEO, chief medical officer, and chief development officer are all gastroenterologists. The practice's physicians have oversight and direction on every decision that is made without interference from the MSO, Berggreen says.

"With these private equity-backed MSOs, there is no ability for a private equity firm to make decisions or force physicians to do anything from a clinical standpoint," he says.

Prospects for private equity-backed MSOs

Berggreen says the private equity-backed MSO model for independent physician practices is a national trend.

"In 2010, you saw very few of these arrangements," he says. "In recent years, you have been seeing more and more of these arrangements because independent practices love autonomy."

"If there are concerns about getting involved with a private equity firm, the solution is for physicians to stay involved," he adds. "You need to make sure that physicians have an active role in the everyday management of the practice. You need to make sure that physicians are insisting that quality, cost, and access remain the three most important things that inform your business decisions."

Several studies have recently reported that private equity has a negative impact in the healthcare sector. For example, a December 2023 article published by JAMA found that private equity acquisition of hospitals was associated with a 25.4% increase in hospital-acquired conditions, such as falls and central line–associated bloodstream infections.

Private equity-backed MSOs that work with independent practices are an example of how private equity can have a positive impact on healthcare, Berggreen counters.

"There are many examples, such as the Tennessee oncologists, that show private equity-backed MSOs can have a positive impact when physician practices remain independent but have the operational and financial firepower of a well-tuned MSO," he says. "You are going to see more stories and research that show what private equity-backed MSOs can accomplish."

"This model is not that old," he adds. "Most independent practices have joined these MSOs in the past five years. I expect that we are going to see positive data on what we can accomplish with these MSOs."

Christopher Cheney is the CMO editor at HealthLeaders.


A management services organization can provide physician practices with business functions that include billing, compliance, information technology, and accounting.

When an independent physician practice joins a private equity-backed management services organization, any clinical decision-making remains with the physicians.

This model is becoming a national trend, with adoption accelerating over the past five years.

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