The orthopaedic sector experienced a decrease in M&A deal volume in 2024, according to data captured in the LevinPro HC database. Since January 1, 2024, investors and dealmakers have announced 18 transactions for orthopaedic practices and physician groups. This is a notable decrease from the full-year results in 2023 and 2022, when 37 and 38 orthopaedic deals were announced, respectively. It also decreased from 2021, when 31 acquisitions were reported. However, the deal volume of 2024 is greater than that of 2020 (12 deals) and 2019 (nine deals) so, the space, while experiencing a decrease, is still more active than it was several years ago.
The 18 orthopaedic acquisitions represent approximately 4% of the total Physician Medical Group (PMG) transactions announced throughout the year. This is less than other sectors that have historically reported a similar number of transactions, including internal medicine (7%), eye care (6%) and oncology (5%).
But after all this talk of declining orthopaedic activity, why? According to a 2023 article by Orthoworld, there was a slew of funding brought into the orthopedic space following the COVID-19 pandemic that allowed a surge of activity. However, activity has declined since then, which matches our data. According to the article, the reasons for a decrease in activity include buyers prioritizing targets with a strong presence, over small and frequent add-on acquisitions. This is done to create strategic partnerships to mitigate risk.
An example of this is Louisiana Orthopaedic Specialists, LLC’s acquisition of Baton Rouge Orthopaedic Clinic, which has 38 physicians on staff. The high number of employed physicians is out of the normal for orthopedic practices, which typically average six physicians on staff.
When it comes to active buyers, the orthopaedic specialty differs from other PMG fields as there is not an abundance of buyers that complete multiple transactions. In comparison, MB2 Dental, the most active dental acquirer, averages 50 transactions a year. There were three acquirers that announced the acquisition of more than one practice in 2024: Surgery Partners, Inc., Cedars-Sinai Health and Orthopedic Care Partners (OCP).
Surgery Partners, Inc. announced in October the acquisition of nine practices to form Midwest Orthopedic and Musculoskeletal Alliance. This transaction adds more than 40 physicians to its network across Wisconsin and South Carolina.
Founded in 2004, Surgery Partners is a leading operator of surgical facilities and ancillary services. It is backed by private equity firm Bain Capital and has more than 180 locations in 32 states, including ambulatory surgery centers, surgical hospitals, multi-specialty physician practices and urgent care facilities.
While this transaction is the only orthopaedic acquisition Surgery Partners announced in 2024, it did acquire one gastroenterology practice, one eye care practice and two ambulatory surgery centers.
In March, Cedars-Sinai Health purchased Risser Orthopaedic Group, which has nine physicians on staff, and Orthopaedic Associates Inc., a 19-physician practice. Both practices operate out of two locations in Southern California. The acquisitions were reported at the same time. The two practices will strengthen Huntington Health, an affiliate of Cedars-Sinai. The financial terms were not disclosed.
Established in 2017, Cedars-Sinai Health comprises Cedars-Sinai (Cedars-Sinai Medical Center and Cedars-Sinai Marina del Rey Hospital), Torrance Memorial Medical Center and their respective physician networks. Founded in 1902, Cedars-Sinai serves more than one million people across 40 locations with more than 4,500 physicians/nurses.
Finally, in January, OCP purchased Palm Beach Hand to Shoulder, which is based in Jupiter, Florida and run by one physician. In February, the company acquired The Orthopedic Partners, a 12-physician practice based in Park City, Utah. The acquisition of The Orthopedic Partners represents the only target in the LevinPro HC database that was acquired by OCP outside of Florida, indicating that the company is branching out of its typical reach to attract more patients.
OCP is a portfolio company of Varsity Healthcare Partners. Based in Gainesville, Florida OCP is a leading orthopaedic provider that has partnered with leading clinics across the United States such as The Steadman Clinic, The Orthopaedic Institute and OrthoAspen.
Additionally, in 2023, OCP added three orthopaedic and one pain management practices to its portfolio, expanding its network deeper into Florida. OCP’s decreasing deal announcements highlights how the orthopaedic field has seen a drop in overall activity.
There are several other companies that highlight this trend. In 2024, OrthoAlliance reported no transactions, but in 2023 the company reported two deals and in 2022, six acquisitions.
Healthcare Outcomes Performance Company is also showing a decrease in activity. Since the start of 2024, the company has only announced one transaction, but in both 2023 and 2023 it completed three deals.
Other companies that completed a transaction in 2024 include Louisiana Orthopaedic Specialists, LLC, Mercy Health and Tufts Medicine. According to the LevinPro HC database, the singular orthopaedic transaction announced in 2024 is the first transaction for both Tufts Medicine and Louisiana Orthopaedic Specialists.
Mercy Health, based in Ohio and part of Bon Secours Mercy Health, announced in January 2024 that it acquired Orthopedic Institute of Western Kentucky. The practice is based in Paducah, Kentucky and, per its website, is run by a team of physicians.
The scarcity of deal announcements is not abnormal for Mercy Health, as the company typically announces one or two transactions per year. In 2023, the company purchased three urgent care centers and in 2021, they acquired one oncology practice. However, it is abnormal for Mercy Health to have ventured into the orthopaedic space, possibly indicating the health system’s desire to strengthen its offered specialties into new territory.
Unlike in other PMG spaces, private equity (four deals) was not the most active buyer type in the orthopaedic field for 2024; independently owned PMG buyers were the most active with eight transactions. Acquirers in that space include South Florida Orthopaedics & Sports Medicine and Urgently Ortho.
Health systems were the second most active buyers with five deals. Some of the health systems that completed an acquisition are Cape Fear Valley Health System and Cedars-Sinai Health System. This level of recorded activity is not out of the normal for health systems in the orthopaedic field, although it is slightly on the higher side. In both 2023 and 2022, they were responsible for three acquisitions each year. The pattern of low activity was carried on from 2021 with two deals, and even 2020 and 2019 when there were no orthopaedic targets acquired by a health system.
However, it is unusual for private equity to not have had a larger presence in the field. In 2023, private equity buyers accounted for 35% of the orthopaedic transactions; in 2022, they represented more than 68% of orthopaedic buyers and in 2021, they accounted for more than 54% of orthopaedic acquirers.
According to a 2022 article by Physician Growth Partners, private equity interest in the orthopaedic field was rising partly because of the increasing demand driven by an aging population. This is also why so many of the orthopaedic targets are based in states like Florida. So, with less private equity investments into the space, overall M&A volume drops, demonstrating private equity’s influence in the orthopaedic field.
Private equity groups that did complete acquisitions in 2024 include Spire Orthopedic Partners, which is backed by Kohlberg & Company LLC and Surgery Partners, Inc., which is part of Bain Capital.
So, while there was an increase in the years immediately following the pandemic, the decrease in orthopaedic activity throughout 2024 is not cause for alarm. As one of the most fragmented PMG markets, there is no shortage of acquisition opportunities for orthopaedic investors, who will continue to be pickier with their investments.
