Selling an orthopedic practice to private equity

Where private equity stands in orthopedics in 2026

Orthopedics is one of the few specialties where private equity is still buying in 2026. Physician practice deal counts fell 18 percent in 2025 according to PitchBook, and STAT reported in August 2026 that the first half of this year was down roughly half again. Inside that shrinking market, orthopedic groups that own surgery centers remain on the short list of what buyers still want.

How much of orthopedics is already owned by private equity is a question nobody can answer well. We looked for a reliable penetration percentage and did not find one, so we will not quote one. The AMA's 2024 Benchmark Survey does show that 54 percent of orthopedic surgeons still work in private practice, a higher share than most specialties, which is why platforms see room to grow.

The platform list is short compared with dermatology's 35 or more. The names that come up most are OrthoAlliance, Orthopedic Care Partners, and Growth Orthopedics. OrthoAlliance's sponsor, Revelstoke, sold it to SCA Health for roughly $1.4 billion, the only true orthopedic second-bite exit to date. Orthopedic Care Partners completed a $543 million recapitalization in late 2024. If you take rollover equity, you are betting on a cycle that has completed exactly once in this specialty.

What an orthopedic practice is worth to a platform

A buyer prices your group as a multiple of EBITDA, which is your yearly profit before interest, taxes, depreciation, and amortization, after your compensation has been restated to a market salary. Stout's January 2026 review reported the ranges below. Treat them as indicative ranges reported by a valuation firm, not as a quote for your group.

Across healthcare, platforms clear roughly 3 to 5 turns above add-ons, and the public healthcare-services median fell from 14.5 times EBITDA in 2024 to roughly 11.5 times in 2025. That drop caps what a sponsor can pay you and still make its own math work. Within the range, a surgery center you own, a bench of surgeons more than ten years from retirement, in-house MRI and physical therapy that will transfer, and a payer mix that does not depend on one hospital all raise the multiple. Senior partners who plan to retire inside the employment term, profit that depends on hospital call pay a hospital can cancel, and add-backs that a quality of earnings review rejects all lower it.

The deal terms orthopedic surgeons typically see

Orthopedic deals run a little heavier on cash than the textbook 70/30 split. A typical structure pays 60 to 70 percent of your price in cash at closing and asks you to roll 30 to 40 percent into equity in the management company. That rollover is usually deferred for tax purposes, which the tax page explains. The rollover equity page covers what those units are and where you sit in the waterfall.

The waterfall deserves a specific warning in orthopedics because these deals carry more debt than most. When the platform is sold, lenders are paid first, then the private equity fund's preferred return, and then the common equity that physicians hold. An analysis written by an orthopedic surgeon modeled a moderate downside and found that the physician common equity received nothing once debt and preferred were paid. The pitch deck will show you the base case. Ask to see this one modeled as well before you sign, and read is the second bite real for how often the upside case has arrived.

Your pay changes at closing. Buyers take 20 to 30 percent of practice profit as the scrape, according to the Commonwealth Fund's April 2026 report, and your base salary typically falls to 40 to 50 percent of your total compensation from 60 to 80 percent before the deal. Productivity pay of roughly $40 to $70 per work RVU makes up the rest. The scrape and income repair page works through the cash flow.

The piece that is specific to orthopedics is ancillary income. Surgery center distributions, MRI, physical therapy, and durable medical equipment often make up a large share of a surgeon's take-home pay, and the buyer wants all of it inside the deal because it is the profit being purchased. Commonwealth Fund interviews put the lost ancillary income at roughly $100,000 per year per orthopedic surgeon. Your purchase price is meant to pay you for that stream in advance, and whether it does depends on how many years you would have kept earning it.

Employment terms are standard across specialties: a three-year minimum with a clawback of part of your cash if you leave early, and a non-compete that survives even in states that limit employment non-competes, because the covenant is tied to the sale of a business. If your group holds a co-management agreement, an exclusive trauma call contract, or a hospital-paid call stipend, ask who controls that relationship after closing and what the price assumes about its renewal.

Tax issues specific to orthopedics

Orthopedics has more taxable moving parts than most specialties because you own more things.

Imaging, C-arms, and physical therapy equipment

If you wrote off an MRI, a C-arm, or PT equipment with bonus depreciation or Section 179 (bonus depreciation is 100 percent for property acquired after January 19, 2025, and the Section 179 limit is $2.5 million), the gain on that equipment up to the amount you deducted is ordinary income under Section 1245, taxed at up to 37 percent federal. Under Section 453(i), that recapture is recognized in the year of sale even if part of your price arrives later as an earnout or seller note. This can be the largest ordinary-income item in the deal.

Implants and supplies

Implant inventory is Class IV on Form 8594 and produces ordinary income when sold. It is usually a small number, but it is not capital gain.

Surgery center interests

Most ASC interests are partnership or LLC units. Selling them is capital gain except for your share of the center's hot assets under Section 751: cash-basis receivables and depreciation recapture on the center's own equipment. Those pieces are ordinary income regardless of how the purchase agreement describes the sale. Ask for a Section 751 estimate before you agree to a value for the ASC piece. If your group owns the building under the center, the usual advice is to keep it out of the deal and lease it to the buyer.

Personal goodwill and the non-compete

A surgeon with a referral base built on his or her own name may be able to sell personal goodwill directly, which is capital gain and, for a C corporation, avoids a second layer of tax. It only works if you are not already bound by an employment agreement and non-compete with your own practice. Watch the allocation to the covenant not to compete, which is ordinary income to you at up to 37 percent. Moving $2 million from goodwill to the covenant costs roughly $300,000 or more in additional federal tax for the same headline price. The calculator lets you test the allocation before your lawyer does.

Reimbursement and regulatory headwinds to price in

Medicare has been moving value from the surgeon's fee toward the facility fee, and a buyer prices your group on that trend. The clearest recent example is in a neighboring specialty: the 2026 Medicare fee schedule cut cataract surgeon fees 11 percent while raising ASC facility payments 3.4 percent. The same pressure applies to joint replacement and spine as cases shift to surgery centers, and it is one reason ASC ownership adds turns to your multiple. In-office ancillaries also live under the federal self-referral rules, and a change in ownership can change whether your MRI and PT arrangements still fit the exception you rely on. Have health care counsel confirm this before closing.

On the regulatory side, the FTC created a Healthcare Task Force in March 2026 and now reviews non-competes case by case after dropping its rule in September 2025. Fourteen states require advance notice of practice transactions. In California, groups of 25 or more physicians file with OHCA at least 90 days before closing, and the California page covers that process and the 13.3 percent state tax on the gain. Texas has no income tax and no transaction notice law, but its SB 1318 now caps physician employment non-competes at one year and five miles. The Texas page has the details.

Who should not sell right now

• If you are under 45 and your ancillary income is a large share of your pay, the math often runs against you. You would give up roughly $100,000 a year for a long career in exchange for a multiple on a scraped profit number. Run the numbers over 20 years, not five.
• If your group does not own a surgery center and your profit is mostly surgeon labor, you will be priced as a tuck-in. A mid-single digit multiple on scraped EBITDA may be worth less than staying independent and building the ASC first.
• If you need the rollover to be cash within five years, the timing works against you. Recaps fell from roughly 100 a year in 2021 and 2022 to 13 in 2024, and hold periods have stretched to 8 to 10 years. Orthopedics has one completed exit to show.
• If your profit depends on a hospital contract that expires inside the employment term, fix that first or expect the buyer to discount it.

What to do next

1. Separate your income into the pieces a buyer will price

   Professional fees, ASC distributions, imaging, therapy, and hospital stipends each need their own line, because a buyer will restate all of them.

2. Get a depreciation schedule and a Section 751 estimate before the letter of intent

   Your CPA can tell you in an afternoon how much ordinary income is sitting in your equipment and your ASC units. That number belongs in your negotiation, not in your April surprise.

3. Ask for the waterfall at a lower exit multiple

   Have the buyer model the second bite at two or three turns below the case in the deck. If your common equity goes to zero in that scenario, you know what the rollover is really worth.

4. Compare against the other specialties

   The specialties hub shows how orthopedic terms compare with the other specialties, which helps you judge whether an offer is strong for the market or only for your group.