Neurology physician practice M&A overview

U.S. neurology market overview

Strong sector tailwinds and expansion dynamics present major growth opportunity for neurology practices in the U.S.

• Neurological diseases impact an estimated 100 million Americans every year and the annual spending on common neurological disorders is estimated to be around $800 billion.¹
• Neuro-related diseases are a significant concern for health systems.
• Major factors driving the procedural volume growth within neurosurgery and neurology include aging population and increasing prevalence of obesity.
• Neurological disorders disproportionately affect older adults, who are more prone to various central nervous system disorders.
  • An estimated 5.6 million of the 5.8 million Americans with Alzheimer’s are 65 years of age or older.²
  • The number of adults 65 and older is projected to nearly double from 55 million in 2019 to 88 million by 2050.²
  • The aging population is expected to increase the demand for neurology procedures.
• Currently, there are approximately 16,400 neurologists in the U.S., a deficit of 11%³. With demand for services expected to increase, supply is increasing at a much slower rate.
• Coupled with favorable macro tailwinds, neurosurgeons, on average, are more profitable than other physicians.
  • Neurosurgery is one of the highest paying specialties with an average salary of $687,000 per year.⁴
  • Neurosurgery and neurology physicians generate 5.0x and 6.8x, respectively, of their salary for their affiliated hospitals.⁴

Neurology physician practice M&A activity overview

The highly fragmented U.S. neurology physician practice market dominated by groups with less than 3 physicians creates attractive dynamics for consolidation

• The neurology physician practice market in the U.S. is largely unconsolidated and has been relatively untouched by outside investments.
  • There are over 2,400 neurology and neurosurgery physician practices in the U.S. and over 90% of these practices are comprised of five or fewer physicians.⁵
• In the past, acquisition activity in hospital-based specialties has been slower as compared to activity in the free-standing practices space.
• Fueled by the opportunities for diverse revenue streams, increasing outpatient surgical volume, aging American population, and growing importance of neuroscience services to healthcare, M&A activity in the neurology space is likely to accelerate.
  • Government reforms such as the shift from fee-based model to outcome-based model are motivating businesses to consolidate in order to achieve size and scale and remain viable in the market.
  • Private equity investments are also becoming an attractive alternative to strategic acquirers as they present an opportunity to leverage a financial firm’s capital resources, allow physicians to maintain clinical autonomy and experience long-term equity appreciation.