Things are tough for physician medical groups, there’s no doubt about that. Since March 18, 2020, when the Centers for Medicare & Medicaid Services recommended that all elective, nonessential medical, surgical and dental procedures be delayed for the duration of the pandemic, a major source of revenue for many practices, the M&A market has dwindled. May 2020 only had four transactions announced, one fifth of May 2019’s amount, according to our Deal Search Online database.

A survey by The Medical Group Management Association revealed that physician groups reported a 55% decrease in revenue and 60% decrease in patient volume since the beginning of the crisis. Approximately 75% of respondents in that survey are part of independent medical practices and employ fewer than 50 full-time-equivalent physicians. Also, expenses are on the rise, as practice groups need to make sure they’re equipped for telehealth visits and to provide adequate personal protective equipment (PPE), while some reports find that PPE costs have skyrocketed by 1,000%. Coupled with dropping revenue, PMGs have had no choice but to furlough employees and announce layoffs.

So, what does the market look like now? Deal count is down, but M&A activity isn’t dead. Private equity firms are still hunting for ophthalmology practices, accounting for roughly one-fifth of all targets in 2020 through May 31, according to our Deal Search Online database.

In the largest deal of the year so far by announced price, Webster Equity Partners formed Retina Consultants of America in March by merging Retina Consultants of Houston, Retina Group of Florida, Long Island Vitreoretinal Consultants and Retinal Consultants serving Northern California. Webster invested $350 million to build the new platform. A fifth group, California Retina Consultants, was added in mid-March. Webster Equity Partners also spent a reported $80 million on Gastro One in April, the largest GI practice in Tennessee, with 30 physicians and six advanced practice providers. This acquisition establishes a new gastroenterology platform for Webster, which will be called One GI.

In a more recent transaction, North American Partners in Anesthesia, a portfolio company of American Securities, acquired American Anesthesiology, Inc. from Mednax, Inc. (NYSE: MD) for $50 million. American Anesthesiology reported revenue of $1.2 billion in 2019. Mednax launched the group in 2007, but the practice has experienced multiple business challenges since 2017, including labor costs, changes in payor mix, and revenues not meeting expenses.

Hospitals and health systems have remained active buyers in this market as well, which could foreshadow more consolidation once the pandemic passes, as financially distressed physician groups look to join larger systems. St. Mary’s Medical Center, the largest medical facility in Huntington, West Virginia, announced on May 22 it was acquiring the Huntington Internal Medicine Group for an undisclosed price. The group is a multispecialty practice with more than 60 physicians, physician assistants, and nurse practitioners. HIMG houses its own diagnostic laboratory, imaging center, endoscopy surgery center, chemotherapy center, heart & vascular center, and hearing center in a 150,000 square foot medical facility. The Board of Directors for St. Mary’s Medical Center and Huntington Internal Medicine Group has approved the transaction.

Orlin & Cohen Orthopedic Group, an affiliate of the Northwell Health System on Long Island, made moves to acquire New York City-based Healthcare Associates in Medicine, which has six clinic offices and 18 doctors in Staten Island and Brooklyn.

However, if the pandemic continues past the summer, we might see hospitals switch gears and aim for targets such as ambulatory surgery centers, which could help handle surgical overflow from facilities at capacity or manage more immediate elective surgery to keep the revenue flowing. It all depends on how CMS decides reimbursement rules. And it also depends on Congress, which isn’t something we usually like to bet on. Here’s to a better summer. Hopefully.