Which Healthcare Services Segments Have the Highest Margins?


One of the many benefits of tracking healthcare transactions closely and maintaining a very large database of deals where we can get reliable price to EBITDA and revenue multiples is that it provides insight into profit margins for segments where other financial benchmarking information is sparse.

Starting with this sample of healthcare transactions where financial terms were disclosed publicly, we eliminated general acute care hospitals and physician practices since they typically generate low or negative margins, at least once compensation is normalized. We then narrowed the list further to only include segments where the data is robust enough to be reliable.

It’s important to note that there's significant variation in certain segments, like inpatient addiction, for example, based on different payer strategies and operating models. It’s also important to remember that the sample consists of companies that were attractive enough to be acquired, and where financial details related to the transaction were made public through one source or another, so there could be some upward bias.

Highest Margin Segments

Endoscopy centers had the highest average EBITDA margins by far, followed by a group in the 26-32% range that includes inpatient addiction treatment, surgery centers, and the more capital-intensive outpatient facilities like imaging and radiation therapy centers.

Lowest Margin Segments

On the low end were inpatient psychiatric and long-term acute care facilities, and “capital light” segments like physical therapy, home health, and occupational medicine, where investors can earn solid returns on capital despite lower margins.

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