The Reimbursement Reality: Physician reimbursement has been under persistent structural pressure for decades. Medicare physician payment rates have effectively declined by approximately 26% since 2001, when adjusted for inflation, according to the Medical Group Management Association. For OB/GYN practices, which rely heavily on global obstetric billing codes and face ongoing scrutiny of evaluation and management (E&M) services, these reimbursement dynamics are not abstract policy issues; they directly affect EBITDA, which determines practice value. A buyer underwriting an OB/GYN acquisition today must carefully evaluate the sustainability of current revenue levels, considering potential future rate adjustments.
Payer Mix and Valuation Discounts
In physician practice M&A, payer mix is widely considered one of the most consequential Quality-of-Earnings (Q of E) factors. Practices with predominantly commercial insurance revenue command a significant premium, often 40% to 60% higher multiples than practices with heavy Medicaid or government payer exposure. For OB/GYN practices, this is a particularly salient issue: maternity care has disproportionately high Medicaid participation rates, and Medicaid reimbursement rates for obstetric services vary substantially by state. In states with low Medicaid rates and high Medicaid patient volumes, buyers will apply meaningful discounts to reflect the earnings risk. Understanding your payer mix composition and its trajectory is a prerequisite to accurate practice valuation.
Regulatory Pressures Specific to Women’s Health
The post-Dobbs regulatory environment has introduced new dimensions of uncertainty into the OB/GYN practice landscape. State-level abortion restrictions have had measurable effects on physician recruitment, with the average number of applications per OB/GYN residency program declining from 661 in 2022 to 585 in 2024, with particularly sharp decreases in states that adopted complete abortion bans, according to AMB Wealth’s OB-GYN Industry Primer. These workforce dynamics have downstream valuation implications: practices in restrictive-legislation states may face greater physician recruitment challenges and potential volume uncertainty, both of which buyers will factor into their underwriting assumptions.
State-Level PE Oversight Legislation
An emerging regulatory risk for physician practice transactions is the wave of state legislation targeting private equity’s role in healthcare. Massachusetts enacted comprehensive healthcare transaction review legislation in late 2024, requiring detailed reporting and extending review timelines up to 215 days for certain PE-healthcare transactions. Connecticut, Maine, and New York have proposed similar legislation that would impose new notice requirements and operational restrictions. While these regulations have not halted deal activity, they have increased transaction complexity, extended timelines, and elevated compliance costs for buyers—factors that can influence deal structure, terms, and ultimately price.
Preparing Your Practice for Reimbursement Scrutiny
Buyers conducting quality-of-earnings due diligence will examine reimbursement sustainability as a central pillar of their analysis. Practice owners who want to maximize valuation should proactively document their revenue cycle management processes, demonstrate rigor in payer contract management, and be prepared to articulate their exposure to, and mitigation strategies for, reimbursement risk. Practices that can demonstrate a commercially weighted, diversified payer mix, ideally with a growing proportion of fee-for-service commercial business, will consistently achieve superior transaction outcomes.