Nearly half of all physicians are now employed by or affiliated with a hospital system, and the forces behind that consolidation aren't slowing down.

John Pack, vice president of health care finance at Mitsubishi HC Capital America, explains to Physicians Practice Managing Editor Keith A. Reynolds what's driving independent practices toward consolidation, and why mid-size practices in particular get stuck in a lending no man's land.

He walks through what lenders are actually looking at when they evaluate a practice, including EBITDA — that's earnings before interest, taxes, depreciation and amortization — margins, accounts receivable aging and payer mix, and what the cleanest path to funding growth looks like without surrendering equity or clinical control.

Music Credits:
Cozy Evening Coffee Time by BJBeats - stock.adobe.com
A Textbook Example by Skip Peck - stock.adobe.com

Editor's note: Episode timestamps and transcript produced using AI tools.

0:00 – 0:22 | Cold open Pack previews the episode's bottom line: small operational fixes often have a bigger financial impact than simply adding new patient volume.

0:22 – 1:17 | Introduction Austin Littrell introduces the episode and previews the conversation with Pack.

1:17 – 4:09 | What's driving practice consolidation Pack outlines the four main forces squeezing independent practices: rising operating costs, stagnant or declining reimbursements, aggressive acquisition by hospitals and private equity, and the lingering financial aftershocks of COVID-19. He notes that nearly 50% of physicians are now employed by or affiliated with hospital systems, up from under 30% a decade ago.

4:09 – 5:53 | Why mid-size practices hit a ceiling with traditional bank financing Pack defines mid-size practices as those between $10–15 million and $120 million in revenue and explains why they fall into a lending no man's land — too large for local banks, too small for large ones — and why health care's cash flow profile makes traditional bank underwriting a poor fit.

5:53 – 8:03 | What lenders are actually looking at Pack walks through the key metrics lenders use to size up a practice: EBITDA margins (typically 10–20% for outpatient specialties), accounts receivable aging (under 45 days is strong, 90-plus days is a red flag), and payer mix across Medicare, Medicaid, commercial insurance and self-pay.

8:03 – 9:01 | Funding growth without giving up control Pack identifies cash flow-based debt — traditional or private credit — as the cleanest path to growth, with no equity issued, no board seats surrendered and no covenants tied to clinical decision-making. Asset-backed credit lines are a secondary option.

9:01 – 10:02 | P2 Management Minute Keith Reynolds shares practice management tips and invites listeners to submit their own workflow ideas.

10:02 – 11:37 | What makes an acquisition deal financeable — and what raises red flags Pack says verifiable EBITDA is the first thing credit analysts look for, followed by a diversified provider base with no key-person dependency, consistent revenue growth, strong payer mix and clean accounts receivable under 45 days.

11:37 – 13:07 | Cash flow fixes that unlock better financing terms Pack's top two levers: normalizing physician compensation so retained earnings stay in the practice, and tightening accounts receivable management — which he calls the fastest and most common cash flow win lenders cite.

13:07 – 14:22 | How to stress-test your debt Pack advises practice owners to model downside scenarios — not just base cases — asking whether the practice can still service its debt if reimbursements drop, labor costs rise or a key provider leaves.

14:22 – 16:08 | Three steps before expanding your practice Pack's pre-expansion checklist: get a clear picture of your true cash flow stripped of one-time expenses, assess operational readiness and leadership depth, and engage financial partners early — a step he says probably belongs at the top of the list.

16:08 – 17:16 | One tip to improve practice finances today Pack's closing advice: start managing the practice like a business, not just a clinic. Review cash flow regularly, understand where money is leaking and recognize that small operational fixes often outperform chasing new volume.

17:16 – 18:00 | Outro Littrell thanks listeners and reminds the audience to subscribe and visit MedicalEconomics.com and PhysiciansPractice.com.

S1 Ep136: The financial forces threatening independent practice, with John Pack of Mitsubishi HC Capital America

Off the Chart: A Business of Medicine Podcast