As the U.S. healthcare ecosystem continues its digital transformation, Practice Management Software (PMS) has emerged as a mission-critical layer of infrastructure. Designed to streamline and automate non-clinical activities, from billing and scheduling to patient intake and insurance claims, PMS enables providers to focus more on patient care while maximizing operational efficiency and financial performance.

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A fragmented yet saturated market

Despite its maturity and high equipment rate (>80% across SMB and mid-market, >90% in enterprise), the PMS market remains fragmented. This is largely due to the hyper-localized and specialty-specific requirements of U.S. healthcare practices. From primary care to dental, veterinary, and specialist providers, each segment has unique workflows, compliance needs, and billing models that generalist platforms often struggle to address.

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This fragmentation creates both a barrier to entry and an opportunity: while incumbents benefit from high customer stickiness (due to deep workflow integration and data lock-in), newer entrants can succeed by offering tailored, modular, and user-friendly solutions that solve real friction points.

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Business models: license vs. collections-based

PMS vendors typically offer two pricing models:

• License-based, preferred by most providers.

• Collections-based, common in solutions like AthenaHealth or AdvancedMD.

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Enterprise customers often demand volume-based discounts and dedicated support services to manage large claims volumes, while SMBs lean towards annual contracts with transparent, per-user pricing.

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What providers care about

Beyond core functionality, providers prioritize systems that directly impact cash flow and administrative efficiency. Critical purchasing criteria include:

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• Seamless integration with Electronic Health Record (EHR) and clearinghouses

• Automated draft claim generation

• Merchant payment integration

• Short time-to-collect and higher reimbursement rates (e.g., 98% vs. 80%)

• Strong customer support and ease of use

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Notably, providers are not particularly price-sensitive, a 10% cost difference is rarely enough to justify switching, given the operational disruption it entails.

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Regulatory tailwinds and AI disruption

Growth in the PMS space is increasingly driven by regulatory momentum (e.g., the 21st Century Cures Act and mandates for electronic prior authorization) and AI-enabled revenue optimization. Intelligent systems can flag undercoded procedures, recommend compliant upcoding, and reduce manual claim processing errors, delivering immediate ROI for practices operating on thin margins. The shift toward Fast Healthcare Interoperability Resources (FHIR)-based interoperability is another force shaping the PMS landscape, allowing systems to securely exchange data in real time and reduce time to reimbursement.

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While saturated, the U.S. PMS market is far from static. Legacy vendors face growing pressure to modernize and adapt to AI-driven, regulatory-compliant, and specialty-specific demands. For emerging software providers and investors, the key to success lies in understanding the nuances of the market, not just the size, from payment models and customer personas to the small details that drive retention and churn.

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At Dedale, we continue to monitor and engage with the key players and trends reshaping the practice management software space. If you're a stakeholder navigating this complex ecosystem, we’d be happy to share further insights and invite you to contact us.