Valuing Primary Care Practices in 2025: A Comprehensive Guide for Physicians, Investors, and M&A Professionals

Will Hamilton
May 13
9 min read

Primary care serves as the cornerstone of the healthcare system, providing essential, first-contact medical services to individuals and families across a wide range of demographics. The industry is undergoing rapid transformation, with strong M&A activity fueled by shifting payment models, value-based care initiatives, and the strategic importance of primary care in population health management. Private equity, health systems, and payers are actively acquiring or partnering with primary care groups to manage referral pathways with a goal of reducing total cost of care. Scaled physician groups with robust care coordination, quality performance, and risk-based contracting capabilities are attracting the highest valuations in today’s evolving market.

Whether you're preparing to sell a primary care practice, evaluating a partnership opportunity, or seeking to benchmark financial performance, this article explores the key valuation methodologies, drivers, and risk factors that determine the value of a primary care practice.

I. Industry Context: Why Primary Care is in Demand

Primary care physicians (PCPs), including family practitioners, internists, pediatricians, and geriatricians, focus on preventive care, chronic disease management, and acute illness treatment. The industry is increasingly shifting toward value-based care models, driven by healthcare reform initiatives and payer pressures, which emphasize improved patient outcomes and cost efficiency. This has led to the growth of accountable care organizations (ACOs), patient-centered medical homes (PCMHs), and the integration of technologies like telehealth and electronic health records (EHRs). Despite these advancements, the industry faces challenges such as physician shortages, rising operational costs, and reimbursement pressures, particularly in rural and underserved areas. However, the demand for primary care services continues to grow, fueled by an aging population, the prevalence of chronic conditions, and expanded insurance coverage under the Affordable Care Act (ACA).

Key Growth Drivers

Key growth drivers for the industry include the following:

Aging Population and Chronic Disease Prevalence: The increasing aging population and the rising prevalence of chronic diseases (e.g., diabetes, hypertension, and cardiovascular conditions) are driving demand for primary care services. Older adults require more frequent and comprehensive care, boosting the market.
Shift Toward Value-Based Care: The transition from fee-for-service to value-based care models emphasizes preventive care, patient outcomes, and cost efficiency. This shift incentivizes primary care providers to focus on holistic, long-term patient management, which can result in additional income opportunities in the form of shared savings and other incentives.
Technological Advancements: The adoption of digital health technologies, such as telemedicine, electronic health records (EHRs), and wearable devices, is intended to enhance the efficiency and accessibility of primary care. These tools enable remote monitoring, early diagnosis, and personalized care.
Increased Focus on Preventive Care: Growing awareness of the importance of preventive care to reduce healthcare costs and improve population health is driving demand for primary care services. Preventive measures include routine check-ups, vaccinations, and lifestyle counseling.
Expansion of Healthcare Access: Government initiatives, such as the Affordable Care Act (ACA) in the U.S., and global efforts to improve healthcare access are increasing the number of insured individuals, thereby expanding the patient base for primary care providers.
Workforce Development and Team-Based Care Models: The integration of nurse practitioners, physician assistants, and other healthcare professionals into team-based care models is addressing primary care provider shortages and improving service delivery. This collaborative approach enhances patient access and care quality.

Reimbursement Outlook

Medicare physician reimbursement rates for primary care services will be impacted by several factors in 2025, including a decrease in the conversion factor, updates to care coordination billing, and the introduction of new payment models. The Centers for Medicare & Medicaid Services (CMS) finalized a 2.83% decrease to the PFS conversion factor, according to KFF, which will affect overall payment rates. Additionally, CMS is implementing changes to how care coordination services are billed and paid for in rural health clinics (RHCs) and federally qualified health centers (FQHCs), shifting towards more specific code reporting. CMS is also introducing new models like the ACO Primary Care Flex Model, which aims to improve primary care within accountable care organizations.

II. Top Reasons to Get a Valuation of Your Primary Care Practice

The following is a list of common reasons for commissioning a valuation analysis or appraisal of a primary care physician practice:

1. Preparing for a Sale or Strategic Partnership

To establish a defensible asking price when marketing the business
To evaluate offers from private equity, strategic buyers, or joint venture partners
To understand how your practice compares to market benchmarks

2. Internal Ownership Transition

For buy-in or buy-out of partners or associates
To support fair and compliant equity allocation among clinicians
To plan for generational succession or family transfers

3. Compliance with Healthcare Regulations

To support Fair Market Value (FMV) and Commercial Reasonableness (CR) assessments required by Stark Law and Anti-Kickback Statute in deals involving ownership by other healthcare providers
To document compliance in joint ventures, especially when there is a referral relationships (hospitals, ancillary service providers, or other physicians)

4. Estate & Tax Planning

For gift or estate tax reporting to the IRS (especially for closely held businesses)
To support asset protection strategies
To plan for long-term wealth transfer or charitable contributions

5. Litigation or Dispute Resolution

For divorce proceedings involving business asset division
In shareholder or partnership disputes
For economic damages assessments in legal proceedings

6. Business Planning & Strategic Growth

To establish a valuation baseline for performance benchmarking
To support capital raise, refinancing, or line-of-credit applications
To identify value drivers and areas for operational improvement

III. Valuation Approaches for Primary Care Practices

Valuation professionals typically apply three core methodologies to estimate the value of a primary care group:

Income Approach (Discounted Cash Flow or Capitalization of Earnings)

This approach values a business based on the present value of its expected future earnings or cash flows. It’s most appropriate when a practice has a stable operating history and predictable future performance.

Key assumptions include:

Normalized EBITDA or owner’s discretionary earnings
Growth rate assumptions (organic and acquisitive)
Risk-adjusted discount rate (typically 10–25% for primary care)
Capital expenditure needs

Pros: Based on the business’ future earning power

Cons: Sensitive to forecasting errors and discount rate subjectivity

Market Approach (Comparable Transaction Method, e.g. Market Multiples)

This method uses observed EBITDA multiples or revenue multiples from recent M&A transactions in the primary care space. Typical multiples for small to medium -sized primary care physician practice are within the range of 3x to 8x EBITDA, depending on a wide variety of factors.

This article includes more details and information about primary care valuation multiples.

Pros: Easy to benchmark; useful in active M&A environments

Cons: Requires access to quality private market data and careful adjustment for practice size, margin, geography, and a variety of other factors

Asset-Based Approach

Used only when the business is underperforming or being liquidated. The value is derived from the net assets (e.g., equipment, leasehold improvements) minus liabilities.

Pros: Useful in distressed scenarios

Cons: Intangible value of the practice can be difficult to quantify under this method

IV. Key Value Drivers in Primary Care Practice Valuation

Several specific factors can materially influence a primary care practice's valuation multiple:

Earnings Quality

Buyers and valuation professionals place significant emphasis on normalized EBITDA and / or cash flow. Adjustments often include:

Owner compensation (if above/below market)
Non-recurring revenue or expenses
Related-party lease arrangements
Post-transaction adjustments
Out-of-period adjustments

Growth Potential

Discount rates and valuation multiples are a function of perceived risk and growth. Key considerations within the industry related to growth include the following:

Large and Growing Patient Panel: A robust, actively managed patient base (especially in a growing geographic market) signals opportunities for increased visit volume and service expansion.
Value-Based Care Capabilities: Participation in risk-sharing arrangements (e.g., ACOs, capitation, Medicare Advantage) with demonstrated success in quality and cost metrics indicates scalable, future-ready revenue streams.
Ancillary and Integrated Service Lines: Offering services like behavioral health, chronic care management, diagnostics, or in-house labs and imaging increases revenue per patient and deepens care continuity.
Modern Technology Infrastructure: Use of advanced EMR systems, telehealth capabilities, and patient engagement tools supports operational efficiency and potential for multi-site growth.

Risk Factors

Key considerations within the industry related to risk include the following:

Stable and Diversified Payer Mix: A balanced mix of commercial, Medicare, and value-based contracts reduces reliance on any single payer type and cushions against reimbursement changes.
Recurring Patient Engagement and High Visit Rates: A loyal patient base with consistent annual visit patterns indicates predictable revenue and strong patient-provider relationships.
Strong Provider Team with Mid-Level Support: A scalable clinical model with nurse practitioners and physician assistants enables higher patient throughput and reduces dependence on physician labor.
Limited Owner/Key Provider Dependence: Having multiple providers and clinical staff—not overly reliant on a single physician—reduces succession risk and ensures continuity post-acquisition.
Strong Compliance and Documentation Practices: Up-to-date EMR use, accurate coding, and established regulatory procedures (e.g., HIPAA, CMS guidelines) minimize the risk of audits and legal exposure.
Proven Financial and Operational Stability: Demonstrated profitability, clean financials, and efficient revenue cycle management reassure investors of operational reliability and ease of integration.

V. Current Market Trends in Primary Care M&A

From a mergers and acquisitions (M&A) perspective, the primary care sector is highly attractive due to its critical role in the healthcare ecosystem and its potential for consolidation. Private equity firms, health systems, and payer-owned entities are actively acquiring independent practices and primary care networks to achieve scale, enhance care coordination, and capture a larger share of value-based contracts. Vertical integration strategies are also prominent, with payers and health systems acquiring primary care practices to control costs, coordinate care, improve patient outcomes, and streamline care delivery. Additionally, the rise of retail health clinics and technology-driven primary care models has introduced new players into the market, further driving competition and innovation. As the industry evolves, M&A activity is expected to remain robust, with a focus on strategic partnerships that align with the shift toward population health management and value-based reimbursement models.

The number of announced primary care M&A deals has increased steadily since the 2021 / 2022 boom / bust cycle. However, only a small percentage of primary care deals are announced publicly as hospital and health system purchases, payer-owned entity acquisitions, and physician-to-physician deals, which represent the majority of the market, tend not to be announced publicly.

Unlike total M&A volume, new private equity -owned platform creation has actually declined over the past three years, from 12 new platform deals in 2022 to six in 2024.

Impact of Size on Primary Care EBITDA Multiples

To better illustrate the impact of size on primary care valuations, we reviewed data from the Scope Research Healthcare M&A Valuation Database and compared the size of the acquired practice in terms of EBITDA to the implied multiple from the transaction. On the low end, multiples range from 3x to 6x EBITDA, while multiples for larger, fast-growing platforms can get up into the 10x to 20x EBITDA range (depending on many different factors).

Cash Flow Multiples for Small Primary Care Practices

There are a large number of one-to-four provider primary care clinics listed for sale currently, most of which are seeking a physician-to-physician type of deal. According to our research, small 1-4 provider practices are listed for sale for between 0.7x and 1.2x revenue at the 25th and 75th percentiles, respectively, and between 1.5x and 3.1x owner cash flow. However, it's difficult to glean much useful information from clinics so small where the level of owner involvement is unclear. A clinic making $400k per year in cash flow for an absentee owner is much different from a clinic making $400k per year in take-home for a full-time physician-owner.

VI. Final Thoughts: Keys to Maximizing Value

If you're a primary care physician practice owner or practice executive planning to explore a sale or equity partnership, consider the following strategies to enhance your valuation:
- Enhance Revenue Through Value-Based Care and Ancillary Services: Incorporate risk-based contracts, chronic care management, remote patient monitoring, and in-office services like labs or behavioral health to diversify revenue and improve margins.
- Build a Scalable Provider and Operational Model: Recruit nurse practitioners and physician assistants to expand capacity, and implement efficient EMRs, centralized billing, and care coordination to streamline operations and support future growth.
- Strengthen Patient Panel and Engagement: Maintain a large, loyal, and actively managed patient panel with low churn, high annual visit rates, and strong patient satisfaction, which are key indicators of stable, recurring revenue.
- Minimize Owner Dependence and Key-Person Risk: Ensure the practice can operate independently of the founding physician by delegating clinical and administrative responsibilities and building a leadership pipeline.
- Professionalize Financials: Buyers prefer accrual-based, GAAP-compliant statements.
About HealthFMV
HealthFMV specializes in appraising healthcare businesses and services arrangements, including primary care practices.
- Business Valuation: We perform independent, third-party valuations of healthcare businesses to document regulatory, tax, and financial reporting compliance, resolve ownership disputes, and help ensure both parties to the transaction are comfortable with the financial terms.
- Transaction Advisory: We work with healthcare business owners, organization executives, providers, and their health lawyers to develop transaction structures and deal terms that further their business objectives while maintaining compliance with the complex healthcare regulatory environment.
- Services Arrangements: We prepare fair market value and commercial reasonableness opinions for a variety of healthcare services arrangements including management services, hospital-based specialty stipends, case rates and PC/TC splits, block leasing, and shared savings distributions, among others.
Contact Will Hamilton at whamilton@healthfmv.com with questions about our healthcare valuation services or to discuss your specific situation. Visit scoperesearch.co for more information about our healthcare M&A research services.