By Greg Roumeliotis and Carl O'Donnell

(Reuters) - Blackstone Group LP <BX.N> is the lead bidder to acquire Team Health Holdings Inc <TMH.N>, the U.S. hospital staffing provider that has been the target of activist funds, including Jana Partners LLC, according to people familiar with the matter.

The deal would allow Team Health to cope with pricing pressure as a private company, amid a wave of consolidation in its industry. Rival Amsurg Corp <AMSG.O>, whose $5 billion bid for Team Health was snubbed last year, agreed in June to merge with Envision Healthcare Holdings Inc <EVHC.N>. [nL4N1974X1]

It would also be a rare occasion of a private equity firm returning for an investment in the same company. Blackstone acquired Team Health from a consortium of investors that included Madison Dearborn Partners LLC in 2005, and exited its investment following an initial public offering of Team Health in 2009.

Blackstone, a New-York based private equity firm, has prevailed over other bidders in the auction for Team Health, and is in the process of negotiating final terms for an acquisition, the people said on Tuesday, cautioning that it is still possible that the talks end without a deal.

The value of Blackstone's offer could not be learned. The sources asked not to be identified because the negotiations are confidential. Blackstone and Team Health declined to comment.

Shares of Team Health closed up 7.2 percent at $40.25 in New York on Tuesday, giving the company a market capitalization of around $2.9 billion.

The Wall Street Journal reported on Oct. 4, citing sources it did not identify, that Team Health was exploring a sale to a private equity firm, and that Blackstone was one of the buyout firms in discussions with the company.

Knoxville, Tennessee-based Team Health is one of the largest physician services companies, offering outsourcing services, including emergency medicine, anesthesiology and ambulatory care, to hospitals and physician groups.

The physician services sector has been rapidly consolidating, as rising administrative costs due to the U.S. President Barack Obama's Affordable Care Act, and the desire to offer a broader array of services to hospitals, has driven some companies to seek greater scale.

Following its rejection of Amsurg's offer, Team Health in November acquired smaller peer IPC Healthcare Inc for $1.6 billion.

In March, Team Health agreed to add three directors to its board following a deal with Jana, which had criticized its "missteps in critical areas including capital allocation, strategy and governance."

Other activist hedge funds in Team Health's stock include Sachem Head Capital Management LP and Corvex Management LP.

In September, Team Health announced Leif Murphy would be its new chief executive officer, replacing Michael Snow.

(Reporting by Greg Roumeliotis and Carl O'Donnell in New York; Additional reporting by Lauren Hirsch in New York; editing by Diane Craft)