Orthopedic Practice Sale Calculator

A PE firm's letter of intent will show a headline enterprise value. Your financial reality is what's left after the EBITDA normalization math, your ownership percentage, deal structure, and the tax hit. This calculator normalizes your EBITDA from actual practice financials, applies a configurable multiple, and shows net cash at close — plus rollover equity scenarios if you're evaluating a PE deal versus a physician-to-physician sale.

Practice financials

Annual gross collections — total practice ($) Use total collections for all physicians in the practice, not just your personal production.

Non-physician overhead rate (%) All operating expenses except physician comp, as % of collections. MGMA ortho benchmark: 38–45%. Includes staff, rent, malpractice, supplies, billing.

Total market-rate physician compensation ($) For a solo practice, this is your market-rate salary — what a group would pay a hired surgeon to do your job. For group practices, sum all physicians. MGMA 2025 medians: spine $875K, joint replacement $870K, sports medicine $560K, general ortho $610K.

One-time add-backs ($) Non-recurring expenses the buyer will add back: startup costs, unusual litigation defense, one-time equipment replacement, owner personal expenses run through the practice.

Deal terms

EBITDA multiple Current ortho market: physician buyers 3–5×, PE add-ons 6–8×, platform-scale groups 9–12×. ASC ownership adds 1–3 turns vs. comparable practice without ASC.¹

Your ownership percentage (%) Solo practice = 100%. For a 5-surgeon equal partnership = 20%. The calculator applies this to enterprise value to get your gross proceeds.

Cash at close (%) Physician-to-physician sale: typically 100% cash. PE acquisition: typically 65–75% cash, remainder as rollover equity. Set to 100% to model an all-cash deal.

Tax settings

Sale structure Stock sale (all LTCG) Asset sale (mixed: ~60% LTCG, ~40% ordinary)

Filing status Married filing jointly Single

State capital gains / income tax rate (%) Top marginal rate in your state. Notable rates: CA 13.3% · NY 10.9% · NJ 10.75% · MA 9% · OR 9.9% · MD 5.75% · TX/FL/WA/NV/TN 0% (no income tax).

Include NIIT (3.8% Net Investment Income Tax) — applies when MAGI exceeds $250K MFJ / $200K single²

How EBITDA normalization works

Private equity buyers value orthopedic practices on normalized EBITDA — earnings before interest, taxes, depreciation, and amortization — adjusted to reflect a sustainably profitable operation under professional management. The normalization step is where the most important math happens, and it's where surgeons often get surprised.

The key adjustment: your actual compensation as owner is replaced by market-rate compensation — what a group would pay a hired surgeon to perform the same work. If you're a spine surgeon netting $1.5M from a practice with $3M in collections and $1.2M in overhead, the normalized EBITDA isn't $300K — it's $3M minus $1.2M overhead minus $875K market comp = $925K. That's the number a PE firm applies the multiple to.

The normalization checklist buyers use:

Excess physician compensation. Total actual comp minus market-rate MGMA comp. A surgeon earning $400K above market has $400K added back to EBITDA.
One-time expenses. Legal settlements, startup costs, non-recurring equipment, unusual repair bills — added back to normalize earnings.
Personal expenses through the practice. Any owner personal expenses run as business expenses — auto, travel, club memberships — are added back.
Depreciation and amortization. Non-cash charges added back by definition in EBITDA.
Owner perks and benefits. Health insurance, life insurance premiums, disability — may be added back as excess comp.

The buyer will do this normalization. You should do it first so you understand where the multiple is being applied — and so you can push back if their normalization understates your EBITDA.

Note that the calculator uses a simplified model: non-physician overhead rate × collections gives total operating expenses, and the remainder minus market comp is EBITDA. A real diligence process will build up from actual financials, but this approximation is accurate enough for planning purposes.

What drives your multiple

Orthopedic practices currently transact in a wide range depending on who is buying and the practice's profile. After the 2021–2022 peak (healthcare services often cleared 14× EBITDA), multiples have moderated to roughly 7–10× for ortho-specific PE deals as of 2025–2026.¹

Buyer type	Typical multiple	What they want
Physician buyer (colleague or new associate)	3–5×	Working practice, transition, existing referral base
PE add-on acquisition	6–8×	Your EBITDA bolted onto existing platform; immediate accretive growth
PE platform acquisition	8–10×	Your group as the nucleus of a new platform; pays up for scale potential
Platform-scale group (20+ surgeons, ASC)	10–12×+	Largest groups with embedded ASC, diversified subspecialties, regional dominance

Factors that push your multiple up: ASC ownership (adds 1–3 turns), subspecialty diversification, employed non-surgical staff generating ancillary revenue, payer mix with significant commercial, geographic market dominance, existing management infrastructure, favorable leases.

Factors that push your multiple down: Highly referral-dependent single-surgeon practice, single-payer-heavy (Medicare/Medicaid), physician-age concentration near retirement, high litigation history, restrictive facility agreement, no ASC equity, rural catchment with limited growth.

For the full breakdown of active PE buyers in orthopedics (SCA Health, USPI, Spire Orthopedic Partners, HOPCo, Growth Ortho, United Musculoskeletal Partners), see our orthopedic PE acquisition guide.

Asset sale vs stock sale: the tax difference

The transaction structure — whether you sell the assets of the practice or the equity shares of your PC — has a large impact on your after-tax proceeds. Buyers typically prefer asset sales because they get a stepped-up basis in the assets for depreciation and amortization purposes. Sellers typically prefer stock sales because more of the gain qualifies for long-term capital gains treatment.

Component	Asset sale treatment	Stock sale treatment
Practice goodwill	LTCG (20% + 3.8% NIIT)	LTCG on all shares
Personal goodwill	LTCG — paid directly to surgeon³	Embedded in share price (LTCG)
Accounts receivable	Ordinary income (37%)	LTCG on shares
Equipment (§ 1245 recapture)	Ordinary income on prior depreciation	LTCG on shares
Covenant not to compete	Ordinary income (37%)	LTCG on shares

2026 federal LTCG rates (IRS Rev. Proc. 2025-32⁴):

MFJ: 0% up to $98,900 · 15% up to $613,700 · 20% above $613,700
Single: 0% up to $49,450 · 15% up to $545,500 · 20% above $545,500
NIIT adds 3.8% when MAGI exceeds $250K (MFJ) / $200K (single) — not inflation-adjusted since 2013

For most orthopedic surgeons selling a practice in the $3M–$15M+ range, the combined federal LTCG + NIIT rate is 23.8%. Add your state rate — 0% in Texas and Florida, 13.3% in California — and the total federal + state effective rate ranges from 23.8% to 37.1% on the capital gains portion.

Personal goodwill is the most important tax planning lever. In 30+ states, a surgeon's personal relationships with referring physicians and patients are considered personal goodwill belonging to the surgeon individually, not to the practice entity. Properly documenting and allocating personal goodwill in an asset sale converts that portion from entity income (potentially double-taxed in a C-corp, or subject to entity-level ordinary income treatment) to direct LTCG income for the physician. For an orthopedic surgeon with strong referral relationships, personal goodwill allocation can represent $500K–$2M+ of savings in an asset deal. Your M&A attorney and CPA should model this before accepting any purchase price allocation.

The calculator above uses a simplified split for asset sales (60% LTCG / 40% ordinary). Your actual tax depends on the agreed purchase price allocation across asset classes — make sure you negotiate this before signing, not after.

The rollover equity bet

In a typical PE acquisition, you receive 65–75% of your proceeds as cash at close and roll the remaining 25–35% into equity in the combined PE-backed platform. This rollover is generally not a taxable event — you exchange your practice shares for platform shares in a structure designed to defer taxes under IRC § 351 (asset reorganization) or similar exchange mechanics.

The rollover equity is often framed as the "second bite of the apple." The thesis: the PE firm grows the platform over 3–5 years (adding more surgeon groups, building the ASC network, expanding ancillaries), then sells the platform to a larger PE fund or strategic buyer at a higher multiple. Your rollover equity participates in that upside.

What realistically happens to rollover equity:

1.5× return: Modest platform growth or secondary buy at similar multiple. Your $1M rollover becomes $1.5M gross, about $1.1M after LTCG+NIIT+state tax on the $500K gain.
2× return: Reasonable outcome if the platform executes on its growth thesis. Common in surgical PE given orthopedics' favorable fundamentals and volume growth.
3× return: Strong outcome, usually requires the platform to grow significantly and exit at an expanded multiple. Possible but not guaranteed.
0–0.5× return: Platform fails to scale, files for bankruptcy, or exits at a depressed multiple. Your rollover is worth little or nothing. This happens — especially with early-stage platforms or in challenging rate environments.

The rollover equity is illiquid until exit. There's no public market and no guaranteed timeline. Minority shareholders have limited control and limited information rights. Model the 2× scenario as your base case and the 1× scenario as your downside.

Unlike physician-to-physician sales, which typically close at 100% cash and are often financed by the buyer via SBA loans, PE deals are explicitly structured so you have ongoing skin in the game — which also means ongoing risk. The ASC investment calculator can model ongoing cash flows from ASC equity you may retain separately; estate planning considerations for large liquidity events are worth reviewing before you close.

Selling Your Orthopedic Practice to Private Equity — full guide covering PE buyers, MSO deal structures, earnouts, and what to ask before signing an LOI
ASC Investment ROI Calculator — if your ASC equity is a separate line item in the deal (or being retained), model the ongoing distributions and exit value
Orthopedic Group Partnership Agreement Guide — understand your buy-sell provisions, drag-along/ROFR rights, and distribution waterfall before a PE deal triggers them
Roth Conversion Strategy — practice sale year is often the last high-income year before a golden conversion window opens; plan this before close, not after
Estate Planning for Orthopedic Surgeons — $5M–$15M+ liquidity events interact directly with the $15M OBBBA exemption, ILIT planning, and gifting strategies
Deploying Net Proceeds — account hierarchy, ASC equity as the anchor alternative position, and managing the 23.8% capital gains rate on future growth
Practice Entity Structure Before the Sale — S-Corp election, FICA savings, and ensuring you're not leaving money on the table in the final years before a transaction

Talk to an advisor before you sign anything

Practice sale transactions are complex, high-stakes, and largely irreversible. An orthopedic-specialist advisor can model the EBITDA normalization before your first LOI conversation, structure personal goodwill documentation with your CPA, run the Roth conversion and estate planning interaction, and make sure your rollover equity terms don't include hidden traps (management fee structures, ratchet provisions, pari-passu vs. participating preferred returns).

OrthoAdvisorMatch is a referral service, not a licensed advisory firm. We may receive compensation from professionals in our network. Content is for informational purposes only and does not constitute financial, tax, or investment advice.

Sources

FOCUS Investment Banking, Physician Practice M&A Multiples: 2026 Data and Soferad Advisors, Medical Practice Valuation Multiples Guide 2025–2026. Ortho-specific PE multiples 7–10× normalized EBITDA; platform-scale groups 10–12×+.
IRC § 1411 (Affordable Care Act, 2010). Net Investment Income Tax of 3.8% on net investment income for taxpayers with MAGI exceeding $250,000 (MFJ) / $200,000 (single). Thresholds are not inflation-adjusted. Verified as active for 2026.
Personal goodwill doctrine derived from Martin Ice Cream Co. v. Commissioner, 110 T.C. 189 (1998), and subsequent case law in 30+ states. Consult M&A attorney and CPA for proper documentation and allocation in your jurisdiction.
IRS Revenue Procedure 2025-32 (annual inflation adjustments for 2026). 2026 long-term capital gains brackets: MFJ 0% ≤ $98,900; 15% $98,901–$613,700; 20% > $613,700. Single 0% ≤ $49,450; 15% $49,451–$545,500; 20% > $545,500.
MGMA 2025 Physician Compensation and Production Report (2024 actuals). Orthopedic surgery median compensation used for market-rate normalization: spine $875K, joint replacement $870K, sports medicine $560K, general ortho $610K.

Tax values verified against IRS Rev. Proc. 2025-32 and IRC § 1411. Ortho EBITDA multiples cross-checked against FOCUS Investment Banking and Soferad Advisors 2026 data. Values current as of June 2026.