Published July 2018
Despite an increase in consolidation over the last decade, the outpatient physical therapy industry remains highly fragmented and vast compared to other healthcare services sectors experiencing investment and consolidation activity led by private equity investors. There are over 200,000 licensed physical therapists in the U.S. spread across more than 16,000 outpatient clinics, with no single provider owning more than 10% market share in the outpatient industry, according to U.S. Physical Therapy’s May 2018 Investor Presentation. Comparatively, other healthcare verticals in the midst of significant consolidation, such as dental practice management and behavioral health, employ approximately 190,000 and 140,000 providers, respectively*, and highly sought-after areas for investment in the physician services industry, such as dermatology and ophthalmology, contain less than 30,000 doctors per subspecialty nationally. Though the aforementioned investment areas differ from physical therapy, the investment theses from private equity investors have comparable components across each of these outpatient healthcare services areas.
The size of the physical therapy industry, favorable macroeconomic tailwinds, and a practice environment ripe for consolidation have led to a steady trend of merger and acquisition activity across the United States. Between 2012 and 2016, 12 private equity groups made initial platform investments in outpatient physical therapy practices. The entrance of new private equity groups, however, slowed in 2017 as industry transaction activity shifted more heavily towards add-on transactions as private equity-backed groups actively acquired independent or private equity-owned competitors, a trend that is expected to continue moving forward.
• Physical Therapy Industry Tailwinds Continue to Attract Healthcare Investors
• Analyzing The PT Industry Private Equity Activity
• Concluding Thoughts
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