For the better part of a decade, healthcare consolidation was fueled by a specific economic condition: cheap capital.
When borrowing costs are low, platforms can afford more inefficiency and growth covers a lot of operational mistakes. If a platform overpays for a practice or carries bloated overhead, cheap debt provides a margin of error.
When interest rates rise, that margin shrinks.
In a high-rate environment, operational pressure increases; and governance and lane clarity get stress-tested.
This is math. When the cost of servicing debt increases materially, the cash available for operations decreases. This applies to any leveraged structure, regardless of who the equity sponsor is.
For physicians inside a platform, or those considering joining one, macroeconomic shifts are not abstract because they'll eventually show up as operational pressure.
The Mechanism of Stress
Most platforms use leverage (debt), which is common, but the structure of that debt matters.
If a platform was built on floating-rate debt during a low-rate period, a rise in rates increases monthly debt service. If operating cash flow isn’t strong enough to absorb that increase, management has to find cash elsewhere.
When financial pressure increases, platforms don’t get many choices. They look for cash.
Refinancing Doesn’t Remove Pressure, It Changes It
When traditional bank debt becomes expensive or restrictive, they refinance.
Sometimes that refinance comes from private credit, non-bank lenders, or minority capital rather than traditional banks.
The terms change, but the underlying math doesn't. Private credit often carries higher interest costs, tighter cash flow expectations, or more frequent performance testing.
Minority capital may avoid near-term amortization but introduce new return targets, reporting requirements, or governance influence.
From the clinic’s perspective, the distinction matters less than the result.
Regardless of the capital source, the organization still has to produce cash. If that cash isn’t generated organically, pressure shifts downstream into staffing decisions, output expectations, capital spending, and operational tolerance.
Different capital structures change how pressure shows up, not whether it shows up.
For physicians, the key question isn’t “Did they refinance?” It’s “What behaviors does the new capital structure require to stay stable?”
What Changes First
When financial pressure moves from a spreadsheet to the clinic floor, it usually follows a predictable path. 4 areas tend to shift first when capital gets expensive.
1. Staffing Levels
Labor is often the largest expense in a medical practice.
The Symptom: Hiring slows, open roles stay open, overtime is reduced, experienced staff are replaced with lower-cost hires.
The Impact: Teams get stretched, burnout rises, patient wait times increase, rooms turn slower.
2. CapEx Delays
In stable operations, equipment is replaced on a planned schedule. Under pressure, upgrades get delayed.
The Symptom: Equipment refreshes, IT upgrades, and facility improvements get pushed from “this quarter” to “next year.”
The Impact: The practice starts to look and feel tired, and physicians are asked to work around aging systems.
3. Output Pressure
If costs can’t be cut enough, volume becomes the next lever.
The Symptom: Sudden focus on “provider capacity,” shorter slots, more double-booking, more clinic days.
The Impact: Days feel more compressed and operational pressure begins to collide with clinical pacing.
4. Vendor Standardization
Under stress, platforms often standardize and renegotiate suppliers.
The symptom: Mandates to switch to cheaper vendors or alternative supplies.
The impact: Friction increases, preferred tools change, and even if quality holds, the team feels the strain.
Questions Physicians Can Ask
If you’re evaluating a partner in a high-rate environment, you don’t need to be a finance expert to ask a few structural questions.
1. Is the platform generating cash after debt service?
EBITDA is not the same thing as cash after paying lenders. If the platform isn’t generating cash after debt service, it may rely on new capital injections to stay stable.
2. What is the philosophy on CapEx and maintenance?
Ask how CapEx was handled over the last 12 months and what’s planned for the next 12 months. If maintenance is being deferred while the platform grows, pressure is likely building.
3. How is debt structured?
Is it fixed or floating? When does it mature? Platforms facing a refinance at higher rates will be under more pressure to cut and compress.
4. Has staffing changed in the last year?
Ask about turnover, open positions, and whether responsibilities have shifted. “Optimizing labor” can mean many things.
5. What is the plan for growth?
Is growth driven primarily by more acquisitions (requiring more expensive capital), or by improving operations inside existing practices? In high-rate environments, operational growth tends to be more durable than acquisition-fueled growth.
Stability Is an Asset
In a low-rate environment, the highest bidder often wins. In a high-rate environment, the best operator often wins.
When capital is expensive, durable platforms tend to have disciplined governance, realistic margins, and a focus on operational execution.
For physicians, the goal is to partner with a structure built to stay stable through the market.
How Verdira Approaches This
Clinical decisions remain with physicians.
MSO scope is clearly defined in writing and tied to real services.
Governance is clarified before signing so expectations remain stable after close.
We build long-duration platforms and do not operate on forced exits.
If you’re evaluating an MSO partnership or successor role and want to sanity-check structure and expectations, we’re open to thoughtful conversations.
This article is for general educational purposes and is not legal advice.
