Earlier in March, Ben Swett, Managing Editor of The SeniorCare Investor, was joined by John Tiedmann, Managing Director at Physician Growth Partners, Bill Hoffman, Shareholder at Polsinelli and Matt Bogle, Managing Director at Intrinsic, to examine key factors fueling and impeding healthcare services M&A deal volume.
In a follow-up to our previously posted webinar wrap-up, we’re discussing the panelists’ perspectives on the different healthcare verticals, their headwinds/tailwinds and impact on the market.
BEHAVIORAL HEALTH
Although the Behavioral Healthcare (BHC) market saw a leading 44% surge in activity from 2024 to 2025, deal volume still trailed expectations given the immense demand for services. Nevertheless, the panelists remained focused on this growth, acknowledging the sector’s significant and rising momentum.
“We’re seeing a second wave of behavioral health M&A,” said Hoffman. “It’s not as robust as it was in 2021 and 2022, but we’re still seeing it as a key strategy for many of our PE fund clients.”
But he did point out notable differences between the current market conditions driving BHC deal volume and those of several years ago.
“I think that the strategy has shifted a little bit,” Hoffman noted. “In the past, we saw investors buy facilities. Now we’re seeing investors buy access to labor.”
Due to the difficulty in finding and retaining qualified workers, Hoffman views the shift as less focused on any specific geography and more on finding targets that already have qualified workers. That’s what’s attracting investors and fueling deal volume.
However, Hoffman did have a brief comment on geography, noting that it occasionally plays a small role. The Trump Administration said that it would not enforce the Mental Health Parity and Addiction Equality Act, which has increased audits of insurance companies that deny claims. In response to the administration’s statement, several states would enforce this act, whether by their own laws or by choice. Hoffman believes that in the states that choose to stick to this act, activity will be robust.
When speaking about which types of BHC services are drawing the most attention, Bogle noted that the wide variety of services BHC offers adds to its attractiveness. He specifically pointed to the hearty activity across applied behavior analysis, substance use disorder treatments (both inpatient and outpatient care) and general mental health counseling.
To Bogle, it doesn’t seem that any specialty is more active than another because it offers a specific service, as all services are desperately needed, but rather that investors are looking at payor mix and reimbursement rates to determine investment strategies.
“But what we’re seeing command the higher multiples is going to be companies that have a commercial payor mix versus the governmental payor mix,” commented Bogle.
He did note that transcranial magnetic stimulation is seeing a lot of activity because profile margins are better, and when a clinic offers the service, its reimbursement rate is generally higher than that of those who don’t offer it. Hoffman also added that Spravato and ketamine clinics are also receiving a great deal of attention because their Medicare reimbursement is substantial.
HOME HEALTH
Home Health & Hospice deal volume increased 13% from 2024 to 2025, rising from 97 deals to 110. To Bogle, the driving factors behind the increase in deal-volume fragmentation that creates deal opportunities are an aging population shifting towards home care needs and a cash-pay environment.
“I would expect this trend to continue, maybe modest upticks year over year and maybe some larger players getting involved,” commented Bogle.
Hoffman agreed, but added that in 2021 and 2021 most of the deals were focused on smaller practices. The sellers were “unsophisticated and had no management workforce,” which caused the deals to fail during the integration process. As a result, in 2026, there’s been greater emphasis on larger, more professional assets that already have sophisticated workforces in place.
“We’re actually seeing multiples be pushed up. We’re seeing some really competitive bidding processes, but fewer large assets obviously means that it’s a softer market; it gets particularly soft when you go down to like 1 to $3 billion in EBITDA,” he also said.
Even if deal volume doesn’t increase like predicted, all the factors driving deal volume indicate, at the very least, a stable market.
HOSPITALS
Deal volume in the Hospital sector decreased from 71 in 2024 to 64 in 2025 (a 10% decrease). Additionally, the number of hospitals involved in the transactions also decreased, going from 193 in 2024 to 143 in 2025.
The drop in deal volume is due, according to Hoffman, to fewer health systems buying other health systems. Instead, more recent deals involve smaller acquisitions of hospitals that are finally distressed and, if not acquired, would close.
“We’ve seen quite a bit of rural and critical access hospitals struggle and be completely destroyed by Trump’s legislation because of cuts to Medicaid and percentage use,” said Hoffman. In this, larger health systems aren’t injecting capital into smaller hospitals as they did several years ago, which limits the number of hospitals worth buying.
Tiedmann added another reason for the decline in deal volume: health systems are focusing their attention on acquiring outpatient care services, including surgery centers, general healthcare facilities, and physician groups. But they’re also closing excess facilities where demand is not supported.
“There’s always going to be a need for hospital inpatient care,” added Tiedmann. “But as more procedures shift to the outpatient setting, the strategy is changing. And what a health system would want to buy is no different than what a private equity firm would want to buy.”
“Hospitals are strengthening their margins by outsourcing services like radiology or care coordination to specialized companies, rather than trying to keep everything in-house,” added Bogle, to emphasize the importance of outpatient care to a health system. Outsourcing allows hospitals to reduce operational complexity and losses from running these services internally, while outside providers operate them more efficiently.
Hoffman agreed and added on to Bogle’s sentiment. “Hospitals realize that they do certain things very well and other things not well, particularly therapy like occupational, physical and speech,” said Hoffman. “I’ve seen a lot of joint ventures where the therapy operation is able to use hospitals’ third-party payor rates and hospitals are able to leverage the therapy’s operational excellence.”
While there has certainly been a decrease in Hospital deal volume, the sector is recalibrating its priorities, and that is reflected in the deal volume.
PHYSICIAN MEDICAL GROUP
The Physician Medical Group (PMG), often referred to as the physician practice management (PPM) sector, is one of the most active sectors in the healthcare industry. And that is reflected in its increased year-over-year deal volume. In 2024, there were 504 PMG deals and in 2025, there were 519, a 3% increase.
“We’re seeing a lot of practices that tried to hold out on selling, look at the market and think this is a good time to sell. This will be an up year from a PPM standpoint,” noted Tiedmann, highlighting one of the reasons for such high deal volume.
“We’re working on more PPM deals right now than we have in the last three years combined,” added Bogle.
In addition to the notable deal volume, the panelists also addressed some shifts in investors’ interest in the PMG space.
“There’s probably not as many new entrances into the PPM world, but there certainly are good success stories,” said Bogle, pointing to the idea that there has been a decline of new investors in the space over the last few years.
“The fundamental investment thesis behind physician practice management hasn’t changed,” said Tiedmann. “It’s getting incredibly hard for these doctors to run these businesses. Reimbursements are getting cut, expenses are going up.”
In this, Tiedmann suggested that AI could streamline practice operations, although he doesn’t know specifically what AI’s impact on healthcare will be. Hoffman offered a contrasting view, contending that the current surge in revenue cycle management transactions will soon subside and that AI is unlikely to significantly disrupt the PMG sector.
Yet, because of the difficulties physicians face in running their practices, the PMG space will always be an active sector, whether or not AI is used. There’s an aging population that requires care, thousands of physicians looking to retire, consistent revenue streams and organic growth opportunities.
However, specifically, investors are drawn to ebbs and flows. Tiedmann noted that orthopedics, while previously experiencing a dip in deal volume, was attracting investor interest because, when paired with pain management, it offers a broad client base. He also said that eye care and dermatology were active because of fragmentation. Bogle agreed that dermatology was rather busy and added that neurology has seen strong interest due to its recurring revenue stream.
“While there are certainly question marks in certain pockets of the economy, we’re seeing a trend where those invested in aesthetic medicine continue to allocate capital from their personal pocketbooks, regardless of the broader financial climate,” said Tiedmann. “For a long time, there was uncertainty about how plastic surgery would fare during a recession, but patient demand has remained remarkably resilient.”
Although Hoffman agreed that plastic surgery and other aesthetic spaces are drawing notable investor interest, he was less optimistic about the space’s longevity, even predicting it will implode in a few years.
“We see so much geographic concentration of med spas that I don’t know how long that space is gonna be sustainable, particularly because when you can have aestheticians and RNs do so much of the work,” said Hoffman. “You also don’t have constraints like you do in the ophthalmology space.”
PRIVATE EQUITY
While private equity (PE) permeated throughout the entire discussion, there were several notable things to highlight.
Overall, the panelists agreed that the “feeding frenzy” of 2021 and 2022 has come and gone. What’s left is highly selective PE firms contributing to the deal volume. Buyers have become much more disciplined and selective when investing their assets.
“There may be [roughly] 1,000 private equity firms that are seriously looking into healthcare service deals, in particular provider deals with reimbursement risk,” said Tiedmann. “But there are only 100-250 firms that truly understand the space and will continue to be active.”
Tiedmann also noted that several PE firms are currently sidelined, awaiting the final closing of their funds before re-entering the market. When the funds do close, he anticipates a significant increase in PE deal volume across the sectors.
Finally, while private equity interest in healthcare services remains steady, the panelists highlighted a growing shift toward technology-driven fields, attracted by high reimbursement rates and lower operational costs. Hoffman, however, remains skeptical of this trend’s longevity. Based on historical precedent, he anticipates that as these markets become oversaturated with new entrants, CMS will lower reimbursement rates. So he urged caution when entering sectors such as remote patient monitoring or revenue cycle management.
