Selling Your Orthopedic Practice to Private Equity: A Surgeon's Guide

Private equity has moved aggressively into orthopedic surgery. SCA Health (an Optum subsidiary) acquired OrthoAlliance for $1.4 billion in December 2024. Dozens of smaller transactions close each year across PE-backed platforms — Spire Orthopedic Partners, HOPCo, Growth Ortho, United Musculoskeletal Partners, and others. If your group hasn't received an inbound inquiry, it likely will.

A buyout offer is one of the most financially complex decisions of your career. The headline number is almost never the real number. Understanding multiples, deal structure, tax treatment, and rollover equity mechanics separates surgeons who negotiate well from those who don't.

What is your practice worth?

Orthopedic practices are valued on EBITDA — earnings before interest, taxes, depreciation, and amortization — applied to your normalized owner physician compensation and practice EBITDA.

• Typical range: 6x–12x EBITDA depending on group size, ancillary services, geographic concentration, and payer mix.
• Add-on acquisitions (smaller practices joining an existing platform): 6–8x EBITDA.
• Platform-scale groups (20+ surgeons, embedded ASC, diversified subspecialties): 10–12x EBITDA or higher.
• ASC ownership adds 1–3 turns of multiple. A practice netting $3M EBITDA that also owns a share of a high-margin ASC will clear significantly more than the same EBITDA without ASC.

EBITDA multiples in healthcare services have moderated since 2023. The median healthcare services transaction was around 11.5x in 2025, down from 14.5x at the 2021–2022 peak. Ortho-specific multiples track slightly below that median for smaller groups, slightly above for platform-scale practices with ASC equity.

How deals are structured

Almost all PE acquisitions of physician practices use a Management Services Organization (MSO) structure. The clinical practice (physician-owned, required by state corporate practice of medicine doctrine) is legally separate from the management company (PE-owned). The PE firm buys the management company, and the practice signs a long-term management services agreement with it.

Typical transaction anatomy:

• Cash at close: 65–75% of purchase consideration. This is the immediate taxable event.
• Rollover equity: 20–35% of consideration reinvested into the combined platform. You're now a minority shareholder in the PE-backed entity.
• Earnout: 0–15% of consideration tied to performance metrics (revenue, EBITDA, case volume) over 1–3 years.
• Work-back period: 2–4 years is standard. You agree to continue practicing at the group and maintaining case volume. Early departure typically triggers purchase price adjustments or clawbacks.

The 60–80% stake acquisition means the PE firm controls the entity. You retain 20–40% as rollover equity. This is often framed as the "second bite of the apple" — the expectation that the platform grows and sells again at a higher multiple in 3–5 years, when you cash out your rollover equity.

Who's buying orthopedic practices?

The acquirer matters. The multiple, culture fit, and rollover equity upside depend heavily on which platform is buying and at what stage of its growth cycle.

• SCA Health / Optum (UnitedHealth Group) — Largest ASC operator in the U.S.; acquired OrthoAlliance for $1.4B (2024). More corporate structure, hospital-adjacent culture.
• USPI (United Surgical Partners International) — Tenet subsidiary; active in ASC-centric acquisitions. Major buyer of ortho groups with surgery center infrastructure.
• Spire Orthopedic Partners — Pure-play ortho PE platform; targets established groups and offers partnership-model incentives for surgeons.
• HOPCo (Hospital Outpatient Partners) — Focuses on ASC joint ventures and integrated ortho groups.
• Growth Ortho, United Musculoskeletal Partners, Aligned Orthopedic Partners — Newer PE-backed platforms earlier in their growth cycle; potentially higher rollover upside if they execute, higher risk.
• Regional hospital systems — Non-PE acquirers; typically pay lower multiples but offer employment stability and tail coverage.

Tax implications

The gap between gross proceeds and after-tax proceeds can easily exceed $1M depending on deal structure. This is where most surgeons are under-prepared.

Asset sale vs. stock sale

Buyers prefer asset sales — they get a stepped-up basis in acquired assets, which reduces their future taxes. Sellers typically prefer stock sales — the entire gain is treated as long-term capital gain at 15–20% federal rates (plus 3.8% NIIT for surgeons at this income level).

In an asset sale, proceeds are allocated across different asset classes with different tax treatment:

• Goodwill: Long-term capital gains — 15–20% + 3.8% NIIT for most surgeons. This is the favorable bucket.
• Equipment and furniture: Depreciation recapture at ordinary income rates — potentially 37% federal + state.
• Non-compete agreement: Ordinary income rates. Buyers push to allocate more here; sellers should push back.
• Patient records / charts: Usually allocated here as intangibles — ordinary income treatment.

For a practice selling at $5M in an asset deal with $3.5M allocated to goodwill, $1M to non-compete, and $500K to equipment recapture: the ordinary-income portion ($1.5M at 37% = $555K federal tax) vs. goodwill portion ($3.5M at 23.8% = $833K) — total $1.39M federal tax. A comparable stock sale at 23.8% on $5M = $1.19M. The structure difference is $200K+ in this example.

Capital gains rates in 2026

For surgeons with taxable income above $583,750 (MFJ), the federal long-term capital gains rate is 20%.¹ The Net Investment Income Tax (3.8%) applies to investment income — which includes gains from the sale of a business interest — for earners above $250,000 MAGI (MFJ).² Combined rate on goodwill and long-term capital gains: 23.8% federal + state.

Understanding rollover equity

Rollover equity is a real asset — not Monopoly money — but it comes with material risks:

• Illiquidity: You cannot sell your rollover equity until the PE firm exits (a subsequent sale of the platform). That's typically 3–6 years away.
• Valuation is uncertain: You receive units/shares at today's platform valuation. If the platform grows and exits at a higher multiple, you profit proportionally. If growth disappoints, your rollover equity may be worth less.
• Dilution risk: New investors or additional equity grants can dilute your position. Review the capitalization table and anti-dilution provisions.
• Preference stacks: PE investors typically hold "preferred" equity that gets paid before your common/rollover equity on exit. Understand the waterfall.

The typical PE thesis for ortho: acquire 15–25 groups, reach $80–100M combined EBITDA, and sell the platform to a larger PE firm or strategic (hospital system, insurer) at 12–15x EBITDA. If the entry multiple was 8x and the exit is 13x, the platform value roughly doubles — and so does your rollover equity.

The question is: do you believe in this platform's management team and growth plan enough to leave 25–35% of your proceeds at risk? That's a real investment decision, not a formality.

Questions to ask before signing

• What is the current platform EBITDA and the entry multiple for my group?
• How many add-on acquisitions have closed, and what's the pipeline?
• Who are the PE firm's limited partners, and what is the fund's vintage year and expected hold period?
• What does the capitalization table look like — full diluted shares outstanding, preference stack, liquidation waterfall?
• What happens to my rollover equity if I leave before the work-back period ends?
• Who covers malpractice tail — does the acquisition agreement address tail coverage explicitly?
• What governance rights do rollover equity holders have?
• Can I see audited financials for the management company post-close?

When to bring in a financial advisor

Most surgeons engage an M&A attorney for the transaction itself (correctly). Fewer engage a financial advisor — which is a mistake, because the financial modeling and tax structuring decisions are distinct from the legal terms.

A financial advisor who works with physician sellers can:

• Build an independent EBITDA normalization to reality-check the buyer's number
• Model after-tax proceeds under asset-sale vs. stock-sale scenarios
• Value the rollover equity on a risk-adjusted basis so you're comparing apples to apples
• Advise on timing — closing in December vs. January can mean $100K+ in tax timing differences
• Model what to do with liquidity proceeds — trust structure, real estate, retirement vehicle top-up

The right time to engage is before you receive a term sheet, not after. Deal terms are far more negotiable before exclusivity is signed. Many surgeons discover post-signing that asset-sale treatment was never challenged and the non-compete allocation was above market.