How to Sell a Dermatology Practice

Dermatology has been one of the most heavily consolidated specialties of the last decade, and the buyer market is deep and well capitalised. That means real competition for good practices, and it also means diligence conducted by teams who have bought dozens of practices and know the specialty economics precisely. The starting point for any owner is understanding how a buyer will restate your income statement, because the number they apply a multiple to is rarely the number on your tax return.

How your earnings get restated

A buyer replaces your current compensation with the market cost of the physician who will do your clinical work after you leave, commonly expressed as a percentage of the collections you personally generate. Whatever is left after that replacement cost, and after normalising rent to market if you own the building, is the EBITDA the multiple is applied to. A solo dermatologist producing strong collections but taking all of it as compensation may find the adjusted EBITDA is modest, which is why practices with associate providers generating margin above their own compensation are valued so much more highly. Understanding this arithmetic before you set an expectation is the single most useful thing an owner can do.

• Collections by provider, with each providers compensation and production percentage.
• Revenue split: medical, surgical, Mohs, pathology, cosmetic, and product sales.
• Payer mix with contracted rates, denial rates, and receivable ageing.
• Patient visit volume, new patient share, and appointment wait times.

Medical, surgical, and cosmetic are valued differently

Medical dermatology is the base: recurring, insurance-funded, high-volume, and predictable. Surgical and Mohs work carries strong margin and is valued well, though it depends on the surgeon performing it and on referral flow. In-house pathology adds margin and is valued when it is compliant and properly staffed, but buyers examine the arrangement carefully because pathology billing and referral arrangements sit inside a specific regulatory framework. Cosmetic revenue is cash pay and higher margin per procedure, but it is discretionary, competitive, and more sensitive to economic conditions and to the individual injector, so buyers may apply a lower multiple to it. Present the split clearly rather than a single revenue line, because a buyer will build it anyway and would rather see you did it accurately.

Provider mix and the associate question

The most valuable practices have physicians, physician assistants, and nurse practitioners producing well above their compensation cost, under agreements that survive the transaction. Buyers examine each providers production, compensation structure, contract term, non-compete and non-solicitation terms and their enforceability in your jurisdiction, and how long they have been with the practice. A practice where associates are on expiring contracts, or where a productive associate could leave and open across the street, is worth materially less than one where the team is locked in. If you have associates without current agreements, addressing that a year before a sale is worth more than most operational improvements.

Payer contracts, coding, and audit exposure

Dermatology has particular coding scrutiny around biopsy and destruction procedures, Mohs stage billing, pathology, and modifier usage. Buyers commission chart audits, and findings translate directly into price adjustments, escrow, or indemnity. Payer contracted rates are reviewed against what the buyer achieves elsewhere, since a larger group may reprice your volume upward, which is upside they will usually keep rather than pay for. Expect scrutiny of any history of payer audits or overpayment recovery, your compliance programme, documentation supporting billed levels, and the relationship between any in-house ancillary service and the referrals feeding it.

Deal structure in physician practice transactions

Consolidator transactions in this specialty follow a recognisable pattern. Where corporate practice of medicine restrictions apply, the clinical entity remains physician owned and the buyer acquires the non-clinical assets through a management services organisation with a long-term management services agreement. The selling physician typically signs a multi-year employment agreement at a compensation rate lower than their historical draw, since part of the value has been paid up front, and often takes rollover equity in the platform alongside cash. An earnout tied to retained collections is common. Because the post-closing compensation rate directly affects what your ongoing income will be, the employment terms are as economically important as the purchase price, and should be negotiated together rather than sequentially.

Records, technology, and the practical transfer

Buyers review your electronic health record and practice management systems, whether data can be migrated, contract terms and remaining commitments, and the quality of the clinical and billing data itself. Patient record custody and notification obligations on a change of ownership need planning, since patients generally must be informed and their records handled according to specific rules. Equipment matters too: lasers and aesthetic devices have service contracts, remaining useful life, and sometimes lease obligations, and deferred replacement is priced by the buyer at their own cost estimate. Facility leases require assignment consent, and if you own the building the rent you charge post-closing will be normalised to market in the buyers model regardless of what you put in the lease.

Who buys dermatology practices

Private-equity-backed dermatology platforms are the most active buyers and generally pay the highest multiples, particularly for multi-provider practices with Mohs and pathology. Regional dermatology groups buy for geography and referral network. Health systems buy to secure specialty access. Physician-to-physician sales still occur for smaller practices and are usually simpler but priced lower, often with seller financing. Owners can start privately with a buyer-fit check, or read how businesses like yours get valued.

Preparation that raises the price

• Add associate providers who produce margin above their compensation cost.
• Put every provider under a current agreement with enforceable restrictive covenants.
• Run your own coding audit before a buyer runs theirs.
• Separate medical, surgical, Mohs, pathology, and cosmetic revenue in your reporting.
• Reduce your personal share of total collections so the replacement cost adjustment is smaller.
• Negotiate purchase price and post-closing compensation as one economic package.