For physician practices, uncertainty is not new. What has changed is the scale and speed of the forces reshaping healthcare, and how many of those forces are political rather than economic or clinical. There was a time when strong operations, solid financials, and a good local reputation could largely insulate a group from external shocks. Today, even well-managed large practices contend with policy decisions, regulatory actions, and payer shifts that originate far from the communities they serve.
The physician leaders I've been speaking with describe this moment as one defined less by market cycles and more by policy cycles. These groups are not scrambling or failing; they are stable, often growing, and led by smart, engaged clinicians. Still, they face questions without straightforward answers: What will Medicare reimbursement look like after the cuts proposed for 2027? Will federal and state scrutiny make partnerships harder to complete? Will telehealth remain reimbursable once the current extension expires at the end of 2027? What happens if Medicare Advantage rules keep changing year after year? And how do you plan for any of this when the political climate seems to rewrite the script every few months?
These concerns influence valuations, deal structures, staffing, technology investments, and a medical practice's ability to remain independent. That's why the most critical strategic decision right now is how early to prepare. Practices that start early can evaluate selling, partnering, or staying the course from a position of strength.
8 Ways Policy and Politics Are Reshaping Physician Practices
Political debates and regulatory decisions now intersect with the core economics of physician practices. Reimbursement, staffing, compliance, contracting, and operational structure are all shaped — sometimes subtly and sometimes dramatically — by decisions made at the federal and state levels.
1. Medicare reimbursement cuts
Medicare cuts are no longer occasional policy adjustments; they have become a recurring pressure point that erodes margins and constrains investment. Congress gave physicians a one-year 2.5% payment increase for 2026, but it expires at year-end, and CMS's proposed 2027 physician fee schedule would lower the conversion factor by about 1.7% for most clinicians. The same proposal would reduce payment when a practice bills an office visit on the same day as a procedure with a global surgical period, paying the lower-cost service at 50%. CMS typically finalizes the rule in November. Practices with thin or uneven payer mixes feel these cuts most acutely, but large, multi-site groups absorb the cumulative effect too. Uncertainty around value-based care compounds the problem. Different payers are taking different approaches, and the administrative lift varies widely. Practices are being asked to build infrastructure for models whose long-term reimbursement remains unclear.
2. Prior authorization and Medicare Advantage oversight
Every year, prior authorization is cited as a top frustration for physicians. Both major political parties say the system needs reform, yet progress has been slow, and in some areas the requirements are expanding. CMS announced the WISeR model in June 2025, and since January 2026 it has applied prior authorization in traditional Medicare for selected services, including steroid injections for pain, nerve stimulation, and knee arthroscopy, in Arizona, New Jersey, Ohio, Oklahoma, Texas, and Washington through 2031. Meanwhile, CMS's 2025 plan to audit every eligible Medicare Advantage contract puts insurers' diagnosis coding under closer review, which raises documentation demands on the practices that treat their members. Practices now face administrative volatility driven by policy pressure on insurers as well as by insurers' own utilization management decisions.
3. Regulatory scrutiny of consolidation
Federal and state regulators have made it clear that they intend to examine healthcare mergers and acquisitions (M&A) more closely, including deals involving private equity and physician roll-ups. In March 2026, FTC Chairman Andrew Ferguson launched a Healthcare Task Force to coordinate the agency's competition and consumer protection work in the sector. The FTC's case against U.S. Anesthesia Partners, a private equity-backed anesthesiology roll-up, reached an agreement in principle to settle in April 2026, and recent FTC consent orders in healthcare deals, including Ascension's acquisition of AmSurg, require the buyer to give advance notice of future acquisitions in affected markets for 10 years.
State activity has been even more pronounced. Oregon, California, Rhode Island, Washington, and Indiana have enacted laws that restrict management services organization (MSO) control of medical practices, require advance notice of healthcare transactions, or expand ownership reporting, and similar bills are pending in several other states. These rules affect how buyers structure deals, how they evaluate potential partners, and how quickly they can close. They also affect sellers, who now need to demonstrate operational integrity, compliance readiness, and strategic fit in far more detail than in previous years.
4. Payer contracting
Insurers are adapting to political decisions on Medicare Advantage audits, Medicaid funding, and Affordable Care Act (ACA) subsidies. The enhanced ACA premium tax credits expired at the end of 2025, and marketplace enrollment fell from 21.8 million in 2025 to 19.2 million in 2026. The One Big Beautiful Bill Act, signed in July 2025, requires states to implement Medicaid work requirements for many adult enrollees by the end of 2026 and limits the provider taxes states use to fund their programs. Each of these changes shifts payer mix and insurer behavior, often in ways that create new constraints for practices. Contract terms may change as insurers manage their own exposure, leaving practices with less leverage and more uncertainty.
5. Workforce shortages
Visa policy is adding pressure to physician shortages. International medical graduates make up about 23% of licensed U.S. physicians, and a $100,000 fee on certain new H-1B petitions, imposed in September 2025, has added cost and uncertainty to recruiting them. States are expanding scope-of-practice authority for nonphysician providers at different rates depending on the political climate. Rising labor costs and staffing turnover continue to squeeze practice margins. Practices have to plan for how to attract and retain talent and for how to keep operating when that talent isn't available.
6. Price transparency and reporting rules
Federal mandates require hospitals and insurers to publish detailed pricing information, and a February 2025 executive order directed agencies to strengthen enforcement. Even when such rules are not aimed directly at physician groups, the ripple effects reach them. Technology upgrades become necessary, and contract negotiations take on new dimensions. Multi-site groups operating across state lines face inconsistent enforcement, which complicates compliance planning.
7. Telehealth
The pandemic expanded virtual care rapidly, but most of the Medicare waivers that supported that growth have never been made permanent. They lapsed during the fall 2025 government shutdown until Congress restored them, and a February 2026 spending package extended them through Dec. 31, 2027. States and federal agencies are still debating long-term licensing rules, privacy and security standards, and reimbursement parity. Practices that built integrated hybrid models remain unsure whether those investments will continue to pay off. If telehealth reimbursement tightens, more care could shift back into the exam room, and many practices may not have the staff to absorb that volume.
8. The future of American healthcare
Proposals for Medicare for All on one side and for a stronger private market on the other may sound like opposite visions, but both point toward the same pressure point: lower reimbursement for providers. Public-option models, cost-control strategies, and scrutiny of private capital shape market expectations long before any bill becomes law. Even when reforms stall, political signaling — including the debate surrounding the 2026 midterm elections — influences how insurers, investors, regulators, and large health systems behave, often in ways that tighten margins and shift risk downstream to physician practices.
Policy forces have become a primary driver of practice stability, and strategic decisions made without expert guidance carry more risk than ever.
4 Missteps That Cost Physician Practices Leverage
I've seen practices that weigh their options without experienced M&A advisory support underestimate how political shifts influence buyer behavior. Four missteps come up again and again.
- Overlooking how state and payer trends affect valuation. Buyers model reimbursement risk by state and by payer. A practice weighted toward Medicare Advantage or Medicaid in a state where those programs are tightening will see that exposure reflected in the offer, often before the owners have accounted for it themselves.
- Missing red flags in a letter of intent or governance structure. The letter of intent sets the terms for everything that follows, including how much of the price is paid at closing, earnouts, rollover equity, post-closing physician compensation, and who controls clinical and operational decisions. Terms that look standard can shift value and control away from physicians after closing.
- Leaving financial reporting and compliance issues unresolved. A buyer's diligence team will look for coding inconsistencies, incomplete documentation, and unsupported add-backs, and any issues they find become price reductions, escrows, or indemnification demands. A compliance assessment before going to market lets a practice address them on its own timeline.
- Relying on outdated benchmarks. What a colleague's practice sold for three years ago says little about what a buyer will pay today. Buyers price specialty, payer mix, growth, and regulatory exposure based on current conditions, and a credible valuation has to reflect them.
Not too long ago, a well-run practice could weigh its strategic options with a fairly simple framework. Today, the variables involved in selling, partnering, or expanding have multiplied, and timing, preparation, and the ability to interpret regulatory signals all matter more. Even small miscalculations can cost a practice leverage that is difficult, if not impossible, to regain, and late or incomplete preparation can take the best options off the table entirely. It's an outcome I hate to see, especially when it could have been prevented.
Strategic Paths for Physician Practices in a Shifting Policy Climate
Despite the volatility, physician groups still have meaningful strategic options, and buyer demand remains strong. Physician medical groups accounted for a record 46% of health services deal volume in the first quarter of 2026, according to PwC. But buyers have become more selective. They are examining payer mix, staffing models, compliance exposure, and integration feasibility earlier in the process, and for groups heavily exposed to Medicare Advantage or Medicaid, they are assessing downside risk before growth potential. The key is evaluating each path with full awareness of that landscape.
Consolidating or joining an MSO
For many practices, scale offers protection. Joining a larger group or affiliating with an MSO can provide stability through shared infrastructure, greater negotiating power with payers, better technology, and operational support. In a typical MSO arrangement, the MSO handles nonclinical functions such as billing, revenue cycle management, human resources, IT, and payer contracting, while physicians retain ownership and control of clinical care. With compliance expectations rising and payer dynamics shifting, those shared resources can make a significant difference.
But consolidation works only when there is genuine alignment. Governance structures, compensation models, expectations around autonomy, and cultural fit all matter. A practice that consolidates without fully understanding these dynamics may find that it traded one form of uncertainty for another. This is where advisory guidance becomes essential, not only to assess the opportunity, but to negotiate terms that protect the practice's long-term mission and viability.
Recapitalizing or bringing in a strategic partner
For growth-minded physician groups, capital can open doors to expansion, modernization, and diversification. Partners can help a practice invest in ancillary services, technology, and physical infrastructure that might otherwise be out of reach. Those partners include private equity firms, health systems, and other strategic buyers, and each type of buyer brings different expectations around hold periods, leadership, and control. In a private equity recapitalization, physicians often sell a majority stake and roll a portion of their equity into the new entity, which gives them a second opportunity to realize value if the platform is sold later.
However, the structure of these deals requires careful scrutiny. Federal and state attention on private equity means buyers are more cautious, diligence is more rigorous, and the terms of control and governance vary widely. State notice requirements can also extend the timeline; Rhode Island, for example, now requires 60 days' notice before closing a transaction that changes control of a medical practice group. Practices need a clear understanding of what they are giving up, what they are gaining, and how the deal positions them for future regulatory shifts. Experienced M&A advisory support helps ensure that the partnership strengthens the practice rather than constraining it.
How state laws are reshaping deal structure
Regulatory complexity at the state level is increasingly affecting transaction timing, deal structure, and buyer eligibility. California's AB 1415, Washington's expanded transaction notice law, Rhode Island's pre-merger notification rule for medical practice groups, and Massachusetts' expanded Health Policy Commission reporting requirements have all added steps for private equity investors. States take different approaches to the corporate practice of medicine, management services arrangements, ownership disclosure, and transaction oversight. In a physician practice deal, the buyer may need to set up the acquisition so that clinical decision-making stays with appropriately licensed professionals while the MSO provides only permitted administrative services.
Oregon is the clearest example, and I'm seeing it firsthand with one of our current listings. SB 951 may prevent a private equity buyer from simply becoming the 100% owner of the clinical practice entity. It does not necessarily prevent a seller from selling 100% of the economic value of the business and exiting completely, provided the clinical entity and its ownership are reorganized in a manner Oregon law permits. The law applies to new MSO arrangements now and to existing ones starting in 2029.
That's why bringing healthcare regulatory counsel into the process early is essential. Issues that surface late in diligence can delay a closing or change the terms of the deal.
Staying independent, intentionally (at least for now)
For groups with healthy balance sheets and strong operations, staying independent remains a valid and sometimes optimal path. Independence offers agility and the ability to make fast, local decisions. But it shouldn't mean inaction. This is the time to streamline processes, strengthen leadership depth, invest in technology, and monitor market trends closely. Buyers increasingly treat investments in revenue cycle automation, ambient documentation, and scheduling tools as valuation inputs, so operational improvements made now pay off in any future transaction.
A well-prepared independent practice can move quickly and, more importantly, intelligently when the right opportunity arises, whether that means joining a platform, bringing in a partner, or expanding on its own terms. Independence works best as a deliberate choice rather than a default.
Should Your Practice Consolidate, Partner, or Stay Independent?
Strategic Path | Primary Objective | Key Benefit | Major Risk | Best Fit For |
Consolidate (Join a Group or MSO) | Scale and stability | Shared infrastructure spreads compliance, technology, and administration costs as Medicare rates tighten | Cultural misalignment, loss of autonomy, and state limits on MSO control | Practices facing rising administrative overhead |
Partner (Recapitalization) | Growth and modernization | Capital for technology, AI, and ancillary expansion, often with rollover equity | Federal antitrust scrutiny of roll-ups and state transaction notice requirements | Growth-minded groups looking to scale or modernize quickly |
Stay Independent | Autonomy and agility | Physician control over governance, clinical decisions, and timing | Margin pressure from limited payer leverage and less cushion against reimbursement cuts | High-performing groups with strong cash flow and low debt |
How to Prepare Your Practice for Policy Shifts
Across all these paths, one theme is consistent: knowledge and preparation translate to leverage. The practices that begin evaluating their options early, long before pressure forces a decision, are the ones best positioned to capitalize on opportunities and avoid missteps.
Preparation means:
- Learning your value. A current valuation based on today's market gives you a baseline for every decision that follows, including the decision to stay independent.
- Knowing your numbers. Clean, accrual-based financials, normalized EBITDA, and revenue broken out by payer let you test how a reimbursement change would affect margins. They are also the first things a buyer will scrutinize, along with how you recognize revenue.
- Documenting your strengths clearly. Provider productivity, referral relationships, payer contracts, ancillary revenue, and leadership depth all support value, but only when you can show them in data a buyer can verify.
- Identifying risks before a buyer does. Review coding, billing, licensure, contracts, and ownership structures for compliance issues, and fix what you find on your own timeline.
- Aligning leadership around the long-term vision. Partners who disagree on timing, autonomy, or retirement plans weaken the group's position in any negotiation. Settle those questions internally first.
- Mapping your political and regulatory exposure. Model how the 2027 Medicare fee schedule, state transaction laws, telehealth rules, and Medicaid changes in your state affect your specialty and payer mix.
- Working with advisors who know healthcare transactions. Professionals who understand the market, the policy climate, and the details of healthcare deals can spot risks and opportunities that owners focused on running a practice often miss.
Waiting for clarity is no longer a viable strategy. The environment is too volatile, and the consequences of late preparation are too significant. Unpreparedness is a choice, and one practices can avoid.
At VERTESS, we emphasize education and readiness. When a practice has a firm grasp of its growth story and the details of deal structure, it gains better control over its future. Even if the decision is to stay independent, preparing for a transaction builds internal discipline and strategic clarity that benefit the organization immediately.
Today's Actions Define Your Business Options for Tomorrow
The forces shaping healthcare, including policy, payment, technology, and the workforce, will continue to evolve faster than most can predict. The medical practices we have seen succeed through periods of change are the ones that evaluate their options early. They have a clear view of their value, define their priorities, and surround themselves with experts, including a healthcare M&A advisor, who have guided similar organizations through the same crossroads.
The steps you take now will determine which opportunities remain available down the road. Whether you ultimately decide to consolidate, partner, or remain independent, make that decision from a place of information, confidence, and readiness.
If your practice is beginning to explore its options, an experienced advisor can make all the difference. VERTESS works exclusively with healthcare organizations, helping physician leaders understand their value, strengthen their position, and connect with the right strategic or financial partners. Whether your goal is to sell, bring in capital, or prepare for the future, we're ready to help you through the process.
About the Author
Blake Peart, RRT, CM&AA, has more than 20 years' experience in healthcare, having worked as both a clinician and a CEO, including for multiple hospitals of Fortune 500 companies and several large ambulatory surgery centers. He has himself experienced the mergers and acquisitions process from beginning to end multiple times and now shares his deep knowledge with other business owners.
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