The internal medicine specialty, within the Physician Medical Group (PMG) sector, isn’t particularly known for its M&A activity. In fact, it’s considered one of the less active subsectors, averaging approximately 8% of the PMG totals. Yet, internal medicine’s M&A volume has increased substantially between 2018 and 2023, making it an interesting specialty to look into.
According to data captured in the LevinPro HC database, in 2018, eight eight internal medicine transactions were reported, which more than doubled in 2019 and 2020 when 19 and 25 deals were reported, respectively. There was another surge of deal activity in 2021 with 40 transactions and a slight increase to 41 in 2022 and 46 in 2023. Through the first four months of 2024, there have been 13 internal medicine acquisitions announced. Annualized, this is actually a decline in M&A activity, which could be attributed to a tough market and hesitancy from investors.
The most active buyer in the internal medicine space is VillageMD, which is owned by Walgreens. Since the start of 2016, VillageMD has completed 16 internal medicine transactions, expanding its portfolio by more than 180 physicians. In addition to its internal medicine activity, VillageMD purchased Summit Health, a primary and value-based care organization in late 2022 for $8.9 billion, further expanding its ability to provide care.
Another active buyer is Complete Health, a portfolio company of private equity (PE) group Pharos Capital Group, which has completed seven acquisitions since 2018. These transactions have expanded Complete Health’s network by eight practices and more than 52 providers in Alabama and Florida.
One of the more active buyers that are not backed or affiliated with a PE group is Forum Health LLC, which has acquired six internal medicine practices since its launch in 2019. According to a 2022 article published by Imperium Group, the company has shown more than 300% in revenue growth, with more than $40 million projected revenue by the end of 2022. Although we are not able to confirm if Forum Health reached its projected revenue, the company’s activity still indicates strong growth.
As with many other PMG specialties, PE is drawn to internal medicine, because the industry is fragmented allowing companies to carve out a space for themselves and dominate the market. Although, PE’s interest has waned over the past few years. In 2018, six out of the eight internal medicine transactions were completed by a private equity or private equity-backed company. In 2023, 14 out of 46 were PE-backed and in 2024, so far, half of the transactions are. The decline in PE interest can be attributed to the fact that interest rates are high and tuck-in acquisitions are usually financed by debt. So, with higher interest rates, many investors are finding it harder to justify expanding their practice without knowing if the add-ons will be profitable.
In addition to private equity being an active internal medicine buyer, other PMG practices have a large hold in the space. Overall, PMGs have completed 55 transactions in the internal medicine field. In 2018, PMG groups completed four internal medicine acquisitions; in 2019, there were six independent PMG internal medicine deals and in 2020 there were three; in 2021, there was a big jump to 14 acquisitions, which was followed by 12 in 2022; and in 2023, there were 16 transactions.
Active PMG buyers not affiliated with a PE group include AllerVie Health (one transaction in 2023 and one in 2024); Alo Solutions LLC (two in 2023); MyCare Medical Group (two in 2021 and one in 2022); and Consensus Health (two in 2023).
While not as active as PE or PMG practices, hospitals and health systems have still made some notable transactions in the internal medicine field. Since 2018, hospitals and health systems have completed 33 internal medicine transactions. While many of these acquisitions are of small, independent internal medicine practices, there are several transactions with more than 300 providers on staff, demonstrating a hospital’s appeal for physicians.
Hospital acquisitions with the largest providers on staff have included SSM Health’s purchase of SLUCare Physician Group (648 physicians); Orlando Health’s acquisition of Florida Medical Clinic (350 physicians); and Intermountain Healthcare’s purchase of HealthCare Partners Nevada (340 physicians), which was bought from DaVita Medical Group.
Additionally, in 2020, Intermountain Healthcare also purchased Saltzer Health, a 39-provider practice in Nampa, Idaho. The seller was Ball Ventures Ahlquist. No other buyer made more than one acquisition since 2018.
But why has internal medicine’s M&A activity steadily increased? While there are many reasons, two stick out; increase in demand and the desire to consolidate a fragmented market.
This is something that we touch upon frequently, but its importance cannot be understated: the American population is increasing, especially the older demographics, which calls for more medical care. WIth this, there is simply more need for internal medicine practices. Several industry experts that we’ve spoken to have addressed the fact that with a higher demand for care, investors are more likely to acquire practices in areas where an older population tends to reside. This is why there have been a large number of transactions in Florida, Texas and Alabama.
Additionally, going hand in hand with the increase in demand, is the fact that the internal medicine market is so fragmented, which allows for investors to have more acquisition opportunities. So, although 2024 has been off to a slower start for internal medicine, we anticipate that activity will pick up in the second half of the year and continue to see M&A growth in the specialty.
