Good morning, {{hc_sub_firstname | friend}}! Param here.

Here's a number that should make you angry: the average American waits up to 30 days for a primary care appointment. When they finally get in, the visit lasts under 15 minutes. And 25% of Americans skip care altogether because of cost.

Meanwhile, US healthcare spending hit $4.9 trillion in 2023 – that's $14,570 per person, up 7.5% year-over-year. Premiums are climbing. Deductibles are climbing. The healthcare experience keeps getting worse.

But there's a healthcare delivery model that's solving all of this and it's one of the most compelling SMB investment opportunities I've seen.

It's called Direct Primary Care (DPC). And if you're looking to diversify into cash-flowing businesses, you should understand why private equity is quietly buying these up.

DPC is membership-based primary care. No insurance. No copays. No complexity.

Patients (or their employers) pay a flat monthly fee – typically $75-$150 – for unlimited access to their doctor. Same-day appointments. 30-60 minute visits. 24/7 physician access via text or phone.

The economics work because doctors cap their patient panels at 400-600 patients instead of the 2,000-2,500 they'd carry in traditional fee-for-service practices. Smaller panels mean better care for patients and less burnout for doctors.

There are estimated to be roughly 2,800 DPC practices across all 50 states right now, up from about 1,000 in 2017. That represents 241% membership growth in four years. And about 9% of family physicians now operate DPC practices, up from 3% in 2022.

The model is spreading because it fixes what's broken on both sides: patients get actual access to care, and doctors get to practice medicine instead of drowning in insurance paperwork.

DPC is membership-based primary care. No insurance. No copays. No complexity.

Right now, three tailwinds are converging:

Patient dissatisfaction is at an all-time high. People are tired of surprise bills, sky-high deductibles, and waiting weeks to see their doctor for seven minutes. The public’s frustration with insurance carriers has spilled over onto the streets. DPC offers a simpler, more predictable alternative.

Physician burnout is real. Doctors are leaving traditional practices because the administrative burden is crushing them. DPC eliminates billing departments, insurance denials, and prior authorizations. It's why physicians are converting to DPC at an accelerating rate – they want their core profession back.

Employer adoption is the fastest-growing distribution channel. Small and mid-sized employers are adding DPC memberships to their benefit plans as a way to cut total healthcare costs while improving employee access. Self-funded employers are pairing DPC with catastrophic wraparound plans and seeing significant savings.

But here's what changes everything: Legislation just unlocked the biggest growth barrier.

At Lynnfield, we are constantly vetting deal opportunities to acquire cash-flowing SMBs. With one such deal around the corner, we are actively looking for co-investors and invite our readers to apply for the opportunity to generate passive wealth.

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On July 4, 2025, the One Big Beautiful Bill Act made two critical changes for DPC, effective January 1, 2026:

First, DPC is no longer considered a "health plan" under IRS rules. Previously, enrolling in DPC could disqualify someone from contributing to an HSA. That barrier is gone.

Second, DPC membership fees are now a qualified medical expense. Patients can pay for DPC with pre-tax HSA dollars – capped at $150/month individual, $300/month family.

This matters because the HSA compatibility issue was the single biggest adoption barrier for employers offering high-deductible health plans. That obstacle just disappeared.

There's also bipartisan momentum behind the Medicaid Primary Care Improvement Act, which would allow states to contract directly with DPC practices for Medicaid patients. If that passes, you're looking at a massive new patient population entering the market.

For investors, this is a demand catalyst wrapped in regulatory tailwinds.

DPC clinics are recurring revenue machines with predictable cash flow and zero claims risk.

A single physician with 500 patients at $100/month generates $600K in annual revenue. The cost structure is lean: physician salary, 1-2 support staff, modest clinic space, basic lab equipment. No billing department. No insurance overhead.

The two metrics that matter most: revenue per member per month (PMPM) and panel fill rate.

Mature DPC clinics hit 20-35% EBITDA margins once the patient panel is full, which typically takes 12-18 months. 

The real opportunity is in building multi-clinic networks with centralized operations – scheduling, marketing, credentialing – and standardized clinical protocols. That's where scalability lives.

Single-physician DPC clinics trade at 2.5-4x EBITDA, consistent with small medical practices. However, multi-site DPC networks backed by private equity command 6-10x+ EBITDA. The premium reflects recurring revenue, platform value, and roll-up potential. Strategic acquirers (health systems, payers) sometimes pay even more for the patient's lives and downstream economics.

The opportunity for investors is in the arbitrage. Acquire individual practices at 2-4x. Build a platform. Exit at 8-12x. The recurring revenue nature of DPC makes this particularly attractive compared to traditional fee-for-service practices.

Shore Capital Partners spotted this opportunity. In November 2023, they invested in Nextera Healthcare as a platform deal – a DPC network founded in 2009 by Dr. Clint Flanagan in Colorado, primarily serving large self-funded employers. In July 2024, Nextera acquired ImagineMD and rebranded the combined entity as Kerix Health.

Today, Kerix has 12+ owned clinic locations and hundreds of affiliate locations, expanding into new states. This is the classic PE healthcare playbook: acquire a founder-led platform, bolt on complementary practices, centralize operations, and build toward a larger exit.

35,000 – The number of patients under the care of Qliance Medical Group, one of the pioneers of the DPC model, at the time of its closure in 2017 (allegedly due to interference by forces deeply invested in the third-party payer system). 

This massive growth, since launching in 2007, was supported by high-profile investors like Jeff Bezos and Michael Dell.

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What I've seen firsthand is that DPC sits at the intersection of a broken healthcare system, regulatory tailwinds, and a business model designed for consolidation. Patients love it. Doctors love it. Employers are starting to get it. And the legislation just removed the biggest adoption barrier.

Full disclosure: At Lynnfield, I am actively working in the DPC space.

So I'm not just observing this market. I'm operating in it. And, over the next few months, I’ll be sharing the details of what I’ve learned there.

For investors in the SMB space, individual DPC clinics are acquirable at reasonable multiples with strong recurring revenue. For those thinking bigger, the Shore/Kerix playbook shows what a scaled platform looks like.

Whether you're looking at this as a standalone investment or part of a healthcare services roll-up, DPC is one of the more compelling niches we’ve identified for our co-investors.

Thanks for reading!

If you're exploring healthcare services investments – or if you've looked at DPC clinics before – reply to this email. I read every response and I'd love to compare notes.

Talk soon,
Param

P.S. In case you’ve joined us late, you can read the previous edition of the newsletter here.