Private equity firms are buying specialty-focused electronic health record (EHR) platforms for their customer bases, not just the software.

Nearly every physician practice already uses an EHR and few switch providers, so vendors increasingly grow by selling additional software around the patient visit, from scheduling and intake before the visit, to billing and payments after it, advisers said.

“Together revenue cycle management, payments, and other add-ons present a sizable total addressable market, typically 2-4x the core EHR TAM itself,” said Anirudh Goel, a principal at EY-Parthenon.

High switching costs effectively turn the EHR into what Lillian Tsinikas, a managing director at Moelis & Company, called a “distribution rail.” A vendor holding that workflow, she said, can cross-sell revenue cycle management, payments, patient engagement, analytics and an AI scribe into that installed base and lift revenue per client without having to win a new logo.

Clearlake Capital Group paid for that thesis in April 2025, taking a 90% stake in ModMed from Warburg Pincus at a USD 5.3bn valuation including debt, ending an eight-year hold. ModMed combines EHR, practice management, billing, patient engagement, payment processing, and analytics across 12 specialties. Similarly, TPG Capital acquired Nextech, which serves ophthalmology, plastic surgery, and dermatology, from Thomas H. Lee Partners for USD 1.4bn in July 2023.

Why specialty attracts sponsors

Specialty EHR platforms are built for a single specialty or care setting, unlike the general ambulatory and hospital systems dominated by Epic Systems and Oracle Health.

Two features concentrate sponsor interest. First, category leaders remain available for acquisition, whereas acute-care EHR is effectively closed to new entrants and most major general ambulatory platforms – such as athenahealth and NextGen – have already changed hands.

Second, specialty-specific billing and reimbursement rules make the added revenue harder for a generalist to displace.

“The big enterprise vendors have long-established positions in the broad, acute-care EHR market, so that’s not typically where a sponsor can build,” Tsinikas said. The fragmented specialty landscape instead lets a sponsor buy a category leader and build around it.

Operators see the market differently. New practices continue to switch in meaningful numbers, said ModMed co-CEO Joe Harpaz, citing dissatisfaction with legacy platforms and demand for modern specialty-specific systems. Add-on uptake from the existing base grows alongside those wins. “The business is fairly balanced in that way,” he said.

Buyers crowd a few niches

Behavioral health and oncology are the most compelling sub-verticals, given recently proposed reimbursement changes, their expansion speed, and their workflow complexity, said Michael Buchanio, a managing director in KPMG’s healthcare and life sciences deal advisory and strategy practice.

Deals for EHRs specializing in behavioral health bear that out. KKR took a majority stake in Therapy Brands, now Ensora Health, in April 2021 for a reported USD 1.2bn including debt.

Sunwave Health and Gallant Capital Partners-backed Lightning Step merged in October 2025 on a growth investment from BVP Forge. They consolidated under the Sunwave name in June 2026, combining EHR, customer relationship management, and revenue cycle management in one system.

“The ultimate goal is to own more of the provider workflow and patient journey rather than just the clinical record,” Buchanio said.

Platforms with durable customer retention, strong specialty positioning, and revenue beyond the core EHR command the premium, Buchanio said, while vendors that remain point-of-care medical records businesses are more likely to become add-ons themselves. Valuations for high-quality assets remain strong, though buyers are more selective and the pool willing to pay top of market is concentrating.

Sponsor ownership of EHR companies, by specialtySource: Mergermarket, data correct as at 18-Aug-26

AI enters diligence

Assessing artificial intelligence as both opportunity and threat is now a core diligence question for any EHR and practice-management targets, Goel said.

Outpatient providers are showing strong interest in agentic tools including schedule optimizers, AI scribes, automated insurance verification, and payment reconciliation. Platforms that fail to modernize risk losing smaller practices, where switching costs are lower, to AI-native entrants.

It is also changing what buyers want to own. Purchasers are shifting from point solutions to integrated specialty platforms, and deep specialty datasets have become a competitive advantage, Harpaz recently told this news service.

AI has also revived interest in revenue cycle management. EHR vendors historically avoided RCM because its services-heavy model generated a different EBITDA profile than software businesses, Goel said. New levels of automation have led many to reassess the category on the view that it can now run at software-like margins.

Recurring revenue quality and retention, the credibility of a target’s AI strategy, and cybersecurity are now the common focus of diligence, Tsinikas said.

Private by choice

Few specialty EHR vendors are likely to exit through an IPO, largely because they lack the scale of the broader EHR companies that previously went public, Goel said. Specialty vendors have instead passed between mid-market and large-cap sponsors.

ModMed started down a sale process a couple of years before the Clearlake deal closed, when the company was smaller and markets were weaker, Harpaz said. It is “easier to operate as a private company during a period of heavy investment into AI and the transition it requires both internally and from a product strategy perspective,” he said.

Sponsors typically understand specialty healthcare IT and arrive with a defined investment and value creation thesis, said Tyler Giesting, a healthcare M&A partner at West Monroe, giving management confidence to commit to programs that “the public markets do not always have the patience to tolerate.”

Increasingly, incoming investors frequently buy alongside outgoing ones rather than replacing them. Nordic Capital took control of ambulatory surgery center software provider Surgical Information Systems in January 2024 from Accel-KKR and Norwest Equity Partners, which kept a minority. At HST Pathways, Novo Holdings made a growth investment in June 2026 alongside Bain Capital and Nexxus Holdings, prior investors who stayed.

The same pattern ran through the general ambulatory platforms first. Veritas Capital and Evergreen Coast Capital bought athenahealth for USD 5.7bn in 2018 before selling the company to Bain Capital and Hellman & Friedman for USD 17bn in November 2021, while retaining a minority stake. Thoma Bravo took NextGen Healthcare private for USD 1.8bn in September 2023, then sold a significant position to Madison Dearborn Partners in 2025 while maintaining partial ownership.

Clean exits do happen, and increasingly to strategics. Private equity remains the dominant buyer group, Buchanio said, though healthcare distributors, life sciences companies, and other healthcare-adjacent businesses are showing more interest.

In April 2025, Roper Technologies closed the acquisition of CentralReach from Insight Partners for USD 1.85bn, net of cash and assumed liabilities. CentralReach completed 14 acquisitions during six years under Insight.

Sponsor engagement around high-quality assets is increasing, Tsinikas said, though activity remains selective rather than broad-based. Giesting expects platform dealmaking to pick up over the next 12 to 24 months.

Source: Mergermarket, data correct as at 18-Aug-26