Physician medical groups captured a record 46% share of first-quarter 2026 healthcare deal volume, up from 37% in the first quarter of 2025, according to PwC’s Health Services US Deals 2026 Midyear Outlook published June 17.
Physician practice’s year-over-year deal count growing 18%, making it the most active subsector in health services M&A by a wide margin.
The physician group subsector generated 2.9 times more transactions than the next largest subsector in the first quarter of 2026, according to the report. Private equity continued to drive most deal flow, particularly through platform add-ons, which are smaller acquisitions that bolt onto existing PE-backed physician platforms rather than new platform entries.
The concentration of activity in physician groups reflects a dynamic that has been building for several years. Consolidation is still early in many specialties, reimbursement is more visible in physician services than in hospital-based care and the labor model in physician practices is more flexible than in inpatient settings.
The PwC report said that the record volume is not translating into easy deal terms. Underwriting standards have tightened materially. Buyers are scrutinizing payer mix, labor model resilience, compliance exposure and integration feasibility earlier in the process than they were a year ago.
PwC also noted that AI shifted from experimentation to diligence requirements in the first half of 2026. Valuation support for technology-enabled physician platforms now depends on demonstrated operating impact, not pilot-stage promise. For physician practices that have invested in AI-enabled revenue cycle management, ambient documentation or scheduling optimization, that investment is now a tangible valuation input. For those that have not, it is increasingly a gap buyers will price in.
The report projects a 9% increase in medical cost trend from 2026 to 2027, the highest in recent memory, while simultaneously noting persistent Medicare Advantage margin compression and government-program volatility. For physician groups heavily exposed to MA or Medicaid, PwC notes that buyers are underwriting downside first, then growth.
According to PwC, first movers with reimbursement visibility and operational discipline are best positioned to capture premium outcomes in the second half of 2026. Practices that are operationally ready, with clean compliance records and demonstrable productivity, are entering the strongest physician M&A market on record. Practices that need time to resolve billing issues, compliance gaps, or payer mix problems are entering a market where buyers have more leverage than they did a year ago.
“We expect payer and provider M&A activity to increase selectively, driven less by scale and more by the need for operational resilience, AI-enabled efficiency, and value-based care capabilities,” Daniel Farrell, PwC’s health services deals leader, said in the report. “Investors are prioritizing assets with strong margin profiles, scalable operations, and measurable performance improvement potential.”
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