For 20 years, American healthcare consolidation ran on debt. Private equity bought practices using leveraged buyout financing, platform expansions used senior debt to fund add-on acquisitions, and community banks and SBA lenders wrote practice-acquisition loans at 10-year amortization schedules. Private credit funds stepped in where banks wouldn't, layering unitranche facilities onto mid-market platforms. The entire specialty-consolidation thesis assumed that debt would do the heavy lifting on every new platform build, and that era is now ending. The question for anyone thinking about capital deployment into physician-led healthcare isn't whether debt markets will recover, it's what happens to ophthalmology consolidation in a world where the debt machinery that built the category doesn't work anymore.

The Debt Market That Disappeared

The distress in healthcare credit is real even though the bankruptcy headlines have cooled. Healthcare Chapter 11 filings peaked in 2023 at 79 cases for debtors with more than $10 million in liabilities, per Gibbins Advisors, then declined to 57 in 2024 and fell again to 45 in 2025, a 21% drop and the second consecutive annual decline. Physician practices and clinics specifically logged 10 filings in 2024 before dropping to 6 in 2025. That sounds like recovery, and it isn't. Gibbins was explicit that the lower volumes don't signal health, because distressed operators are increasingly acting earlier through out-of-court restructurings rather than waiting for liquidity to run out, and the firm flagged the One Big Beautiful Bill Act's roughly $964 billion in projected Medicaid cuts, signed into law in July 2025, as a pressure that begins biting in 2026 and escalates from there. The filings dipped. The underlying stress didn't.

The credit-market data underneath those filings is harder. Healthcare private equity defaults in Q2 2025 hit 21 companies representing more than $27 billion of debt across the broad US market, up from 15 companies and roughly $15 billion in Q1, per Moody's data reported by Bloomberg. PE-backed firms now default at roughly twice the rate of non-PE-backed firms per Moody's, and about 80% of rated North American healthcare companies now hold speculative-grade ratings, compared to 71% in 2010. The 2.83% Medicare Physician Fee Schedule cut that took effect for 2025 was flagged as a primary driver of practice-level distress, and while the One Big Beautiful Bill Act provides a one-time 2.5% bump to physician payment for 2026, that increase doesn't restore the 2025 cut and doesn't undo the multi-year erosion in real reimbursement that broke the math on debt-heavy platforms.

The Federal Reserve's October 2025 Senior Loan Officer Opinion Survey reported modest net shares of banks tightening standards on commercial and industrial loans to firms of all sizes, with lenders citing a worsening of industry-specific problems and a reduced tolerance for risk as reasons. The survey confirmed what practice brokers have been saying for over a year, which is that the commercial lending environment for new healthcare platforms has structurally shifted. On the SBA side, Standard Operating Procedure 50 10 8, effective June 1, 2025, reinstated IRS 4506-C verification requirements, required historical cash-flow debt service coverage ratios of at least 1.15x with lenders routinely applying 1.25x to 1.50x in practice, and reversed the prior "do what you do" framework that had permitted projections-based underwriting. The practical effect is that SBA underwriting can no longer finance practice acquisitions where the practice is in a turnaround situation or where the buyer's entity has no trailing financial history.

The SBA 7(a) program historically carried a hard $5 million cap per borrower tracked by three-digit NAICS code, which meant any ophthalmology platform acquirer hit that ceiling with a single mid-size transaction and a platform intending to execute multiple acquisitions ran out of SBA capacity after its first or second deal. The SBA announced in May 2026 that it's doubling the cumulative 7(a) and 504 cap to $10 million per borrower, effective July 4, 2026, which loosens that specific ceiling, and it doesn't touch the deeper underwriting problems that keep banks away from first-time platforms, because more headroom on a cap a blank-slate borrower can't qualify for in the first place changes nothing about whether the loan gets approved.

Why the Model Can't Adapt

The standard healthcare cash-flow loan structure requires maximum leverage in the range of 3.0x to 4.5x EBITDA, minimum fixed charge coverage ratios of 1.1x to 1.75x, and a borrower entity with trailing EBITDA that supports the debt service. Middle-market first-lien debt averaged 4.5x leverage in 2024 per PGIM Fixed Income data, and three structural problems break that model for new physician-led platforms. First-time MSO entities have zero trailing EBITDA because the entity was formed to execute its first acquisition, which means there's no financial history to underwrite, and no matter how strong the underlying practice is or how experienced the operators are individually, the MSO itself is a blank-slate borrower that banks route automatically to rejection.

Turnaround practices, which are often the practices that need new ownership most, frequently show declining trailing-twelve-month EBITDA in the year before acquisition, and that's exactly what makes them attractive. A practice with a 75-year-old owner who's reduced hours and hasn't reinvested in equipment can be restored to prior performance by a successor physician and an operational team, but commercial lenders underwrite trailing cash flow rather than prospective cash flow, so a practice showing declining EBITDA in the twelve months before acquisition gets rejected on underwriting grounds even when the turnaround thesis is sound. Compounding both issues, Medicare and Medicaid recoupment risk extends up to six years retroactively per an ABA Banking Journal analysis by Spencer Fane attorneys Jim Lodoen, Donn Herring, and Hillary Martel, and that retroactive exposure makes federal-payor accounts receivable effectively phantom collateral from a lender's perspective. Generalist banks have historically avoided physician practice acquisition lending, and the specialized healthcare lenders who do operate in the space apply far more conservative terms than equivalent non-healthcare operators would face. None of these structural constraints loosen when the Fed cuts rates, because they're baked into how commercial healthcare lending underwrites risk.

What Private Credit Did, and Why It's Not the Answer Either

Private credit stepped into much of the territory commercial banks vacated after 2008. Direct lenders, specialty healthcare credit funds, and unitranche shops built massive books of business funding PE-backed healthcare platforms over the last decade, and that market broke too. TCW's August 2025 analysis reported that 11% of investments valued by Lincoln International in Q1 2025 carried payment-in-kind interest components, where a borrower that can't pay cash interest is allowed to add it to principal instead. TCW and Lincoln International put the shadow default rate on private credit portfolios near 6%, against a reported 2.1% per KBRA, and Moody's own estimate of the 2025 private credit default rate ran between 1.6% and 4.7% depending on whether distressed exchanges are counted. PIK conversion and shadow defaults are evidence of borrowers who can't service debt being papered over instead of restructured, which delays the reckoning rather than resolving it.

EyeCare Partners' April to May 2024 debt exchange is the visible case in ophthalmology. The platform's first-lien debt traded at roughly 54 cents on the dollar ahead of the restructuring per Bloomberg reporting, over 98% of first-lien holders and 91% of second-lien holders participated in the out-of-court liability management exercise, and Partners Group and existing lenders injected $275 million of new super-priority money with maturities extended to 2027. That restructuring didn't fix EyeCare Partners, it bought time, and S&P's own default study recorded the 2024 exchange itself as a distressed-exchange default. The platform's credit trajectory kept deteriorating into 2025, with Moody's moving its probability-of-default rating to D-PD and S&P downgrading to CCC-, which signals the market pricing a second default rather than a recovery. American Physician Partners filed Chapter 11 in September 2023 with $500 million to $1 billion in liabilities, a different specialty running the same structural pattern. Covenant Physician Partners avoided a distressed exchange only when KKR paid lenders at par in Q1 2024 before quietly selling to USPI and Tenet. These aren't isolated cases, they're the pattern of what happens when leveraged healthcare platforms hit operational headwinds.

The Opportunity That the Debt Failure Creates

The end of the debt era doesn't mean ophthalmology consolidation stops. It means the consolidation that continues has to be financed differently. Strategic acquirers like pharma distributors Cencora and McKesson, and specialty platforms like Cardinal Health, all have balance-sheet capacity to do large transactions without requiring external debt financing, which is what drove Cencora's $4.4 billion acquisition of Retina Consultants of America in January 2025, McKesson's roughly $850 million purchase of a majority stake in PRISM Vision in 2025, and Cardinal Health's roughly $1.9 billion cash contribution for a majority position in the urology platform Solaris Health in 2025. Cencora extended the pattern again in December 2025 with a roughly $5 billion cash deal for OneOncology. Strategic corporate buyers are absorbing the trophy assets from PE exits because they can, and they have minimum deal thresholds. Cardinal's specialty platform reaches roughly 3,000 providers across 32 states, McKesson and Cencora operate at similar scales, and these buyers don't transact on sub-$10 million ophthalmology practices because the transaction economics don't work for their infrastructure.

What remains is the long tail of independent ophthalmology practices. A large and growing cohort of solo ophthalmologists is heading toward retirement or transition this decade, with the workforce literature projecting a 12% decline in ophthalmology supply against a 24% rise in demand by 2035, a 30% workforce inadequacy that ranks second worst among 38 specialties studied per a 2024 analysis in the journal Ophthalmology. Most of those practices are sub-$10 million in annual revenue, and none of them will be absorbed by Cencora, McKesson, or Cardinal. They won't be absorbed by PE platforms either, because PE can't finance new platform builds in the current debt environment and existing PE platforms are in forced-seller mode rather than acquisition mode. They won't be absorbed by hospitals, because hospital systems carried a median subsidy of roughly $307,000 per employed physician in late 2024 per Kaufman Hall and are divesting rather than expanding physician employment. That leaves patient capital, meaning operator-investor structures that don't require traditional debt financing, don't require a 5-year PE exit cycle, and don't need to match the transaction-size thresholds of strategic corporate buyers. Permanent-hold platforms built on operator capital deployed as direct investment rather than leverage.

This isn't theoretical. The capital structures that built multi-generational family-office holding companies and patient-capital compounders are the structures that fit American ophthalmology's remaining solo practice base. Patient capital acquiring practices at sub-$10 million transaction sizes, retaining them indefinitely, compounding cash flow over decades rather than exiting to the next fund. The end of leveraged ophthalmology isn't the end of ophthalmology consolidation, it's the transition from debt-financed LBO consolidation to operator-led patient-capital consolidation. Different capital, different structure, different time horizons. For capital that's been looking for a physician-led specialty where patient-capital structures actually fit the underlying asset, American ophthalmology in 2026 is one of the clearest opportunities available.

This article is for general educational purposes and is not legal or financial advice.

Verdira is a healthcare acquisition platform focused on ophthalmology practices. Physician ownership. Transparent structure. No volume quotas. If you're a practice owner thinking about succession or a physician exploring ownership, we're open to thoughtful conversations.

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