Medical Practices: Is Bigger Better?

Apparently so.  Dollar for dollar, investors pay more for larger practices than they do for smaller ones. The US has 133,778 medical practices (i.e., defined as North American Industry Classification System code 621111). In 2024, they generated $336.1 billion in gross billing.  They paid $134.4 billion in wages and reported a profit of $38 billion.  Using September 2025, data from DealStats private transactions, for practices with gross billings under $1 million (Low-Tier), for every $100 in gross billings, investors paid $42 to buy the practice.  For practices with gross billings between $1 million and $5 million (Mid-Tier), for every $100 in gross billings, investors paid $64 to buy the practice.  Finally, for practices with gross billings in excess of $5 million (Upper-Tier), for every $100 in gross billings, investors paid $147 to buy the practice.

   The data above shows that investors were willing to pay 52% more for a Mid-Tier practice compared to a Low-Tier practice. Similarly, investors were willing to pay 130% more for an Upper-

Tier practice than a Mid-Tier practices.  Some reasons for these preferences may be:

• Upper-Tier practices have more consumer brand awareness in their local market than Mid-Tier and Low-Tier practices.

• Upper-Tier practices are better capable at mitigating change-of-ownership risks.

• Upper-Tier practices may have better future negotiation leverage with private payors.

• Low-Tier and Mid-Tier practices have more client concentration risk than Upper-Tier practices have.

• There are fewer Upper-Tier practices so investors bid-up the valuations.