M&A activity snapshot
Outpatient physical therapy is still fragmented after three decades of roll-ups. The largest public operator says the business is highly fragmented with no company having a significant market share nationally. That operator, U.S. Physical Therapy (USPH), ended 2025 with 780 clinics, up from 761 a year earlier.
Deal volume has not returned to its peak. HealthFMV notes that announced PT M&A transactions fell off a cliff following the late 2021 peak. Activity since then has centered on add-ons into existing platforms. USPH alone included 47 owned clinics added during 2025, and separately tucked fourteen purchased clinics into larger partnerships.
The most visible change of control was a take-private by existing investors. ATI Physical Therapy went private in August 2025, in a merger led by Knighthead Capital Management and Marathon Asset Management. Remaining shareholders received $2.85 per share in cash.
Who is buying
Partnership platforms dominate. Confluent Health reached 609 private practice clinics in 35 states when it added MOTION PT Group in 2023. By October 2025 it reported more than 820 sites of care after adding a six-clinic Kentucky practice.
Public consolidator USPH buys controlling stakes and leaves founders invested. In January 2026 it acquired 50% of an eight-clinic practice generating about $8.0 million of revenue and 66,000 annual visits, with the other 50% retained by the sellers.
Hospital systems are a growing partner type. USPH announced a 10-year alliance under which 60 of its Metro clinics join a New York hospital system's clinical services network. For owners, that means a hospital may be a buyer, a partner, or a competing bidder.
What buyers look for
Clinic productivity is the first KPI. USPH reported average daily visits per clinic of 32.7 in Q4 2025, a record for a fourth quarter. Its net rate per patient visit was $105.76 for 2025, against adjusted total operating costs per visit of $85.56 in Q4 2025. A target's visits per day, rate per visit, and cost per visit are compared to those figures.
Payer mix drives rate stability. In USPH's 2025 book, commercial and managed care was 48.5% of net patient revenue, Medicare/Medicaid 35.8%, and workers' compensation 10.2%. Buyers examine contract terms payer by payer, because government rates are set by fee schedule.
Staffing is the main operating risk. APTA's survey put the national outpatient vacancy rate at 9.5%, nearly double the 4.8% average for all industries. APTA's forecast found a shortfall of 12,070 physical therapist FTEs in 2022, forecast to reach 8.2% of demand in 2027.
What makes a strong company
A practice that draws platform-level interest typically shows:
- Visits per clinic per day at or near the public-operator benchmark, with therapist schedules that are full without relying on the owner's own caseload.
- A payer mix with meaningful commercial and workers' compensation volume, documented by contract.
- Clean Medicare billing. Claims above the 2026 KX modifier threshold of $2,480 need documented medical necessity, and buyers test that documentation.
- Coding discipline under the 50% multiple procedure payment reduction on the practice expense component of certain therapy services.
- Clinic directors willing to stay and hold equity, since platforms like USPH keep prior owners as employees with a non-controlling ownership interest.
- Referral relationships that are not concentrated in one physician group.
Valuation and deal structure
Size sets the multiple. HealthFMV reports 3x to 10x EBITDA for small to mid-size practices and 10x to 16x for platforms with more than $5 million of EBITDA. For one- to five-provider clinics listed for sale, it found cash-flow multiples from 2.12x to 3.56x at the 25th and 75th percentiles, with a median of 2.71x. As a cross-sector proxy, GF Data's healthcare services multiple moderated to 7.7x in 1H 2026, on a small sample.
Partnership structures are standard. Sellers commonly keep a minority interest with put and call rights. At USPH, the price of a partner's interest on a put or call is set at a predetermined multiple of earnings performance. That formula, more than headline price, decides what a rolled stake is worth later.
Medicare pricing is the main external variable. For calendar years 2021 through 2024, the MPFS cut Medicare reimbursement by approximately 3.5%, 0.75%, 2.0% and 1.8%. For 2026, CMS finalized a 3.26% conversion factor increase, with physical therapists receiving a 1.75% increase on average. The conversion factor rose to $33.4009 for non-qualifying APM participants.
Outlook
Expect continued add-on buying and more hospital partnerships through 2027. Platforms are still expanding, and USPH guided to 2026 Adjusted EBITDA of $102.0 million to $106.0 million, including the 1.75% Medicare rate increase.
Two policy items deserve attention. CMS kept the efficiency adjustment list in place for 2026 while removing several therapy codes, including 97140. Telehealth authority for PTs was extended through December 31, 2027, which matters for practices with virtual-visit revenue.
Workforce supply is the swing factor. APTA projects demand for PT services to grow 14.7% by 2037 versus 8% population growth. Owners with stable therapist teams should face the deepest buyer pool.
Own a physical therapy practice and want a sense of what it could be worth before you talk to anyone? Run the valuation tool or see the broader healthcare services M&A picture. See also: how buy-side mandates feed private equity add-on pipelines.