Buying a Dermatology Practice

Loan options

• SBA 7(a) Standard Loan

  Full dermatology practice acquisitions including goodwill, equipment, and working capital — the most commonly used structure for buying an independent dermatology clinic with an established patient base and provider team

• SBA 7(a) Small Loan

  Smaller dermatology practice acquisitions or add-on purchases where total deal size is under $500K, such as acquiring a single-provider satellite office or a retiring dermatologist's patient panel and equipment

• SBA 504 Loan

  Dermatology practice acquisitions that include significant real estate, such as purchasing the clinic building alongside the business — the 504 program provides long-term fixed-rate financing for owner-occupied commercial real estate tied to the practice

Eligibility

• The acquiring entity must be a for-profit business operating in the United States, with the buyer demonstrating sufficient management experience in healthcare operations or clinical practice ownership
• The dermatology practice being acquired must have a documented history of positive cash flow, typically demonstrated through 3 years of tax returns and financial statements showing EBITDA sufficient to service the proposed debt
• The buyer must inject a minimum of 10% equity as a down payment, though lenders may require 15–20% for practices with elevated key-person risk, such as single-physician operations where the selling dermatologist owns 80%+ of revenue
• The total loan amount including all project costs must not exceed $5 million under the standard SBA 7(a) program, making it appropriate for most lower middle market dermatology acquisitions in the $1M–$5M revenue range

Step by step

1. Identify and Evaluate a Target Dermatology Practice1–3 months

   Source acquisition targets through healthcare business brokers, physician retirement networks, or direct outreach to independent dermatology practices in your target geography.

2. Engage a Healthcare M&A Attorney and CPAConcurrent with Step 1

   Before submitting a Letter of Intent, engage a healthcare M&A attorney experienced in your state's corporate practice of medicine laws.

3. Submit a Letter of Intent (LOI) and Agree on Deal Terms2–4 weeks after identifying target

   Submit a non-binding LOI outlining the proposed purchase price, deal structure (asset purchase with MSO or stock purchase with equity rollover), down payment, seller note terms, and seller transition period.

4. Select an SBA Lender with Healthcare Lending Experience2–4 weeks

   Apply to SBA Preferred Lender Program (PLP) banks with documented experience financing physician practice acquisitions and MSO deal structures.

5. Complete SBA Underwriting and Obtain Loan Commitment30–60 days

   The lender will conduct a formal credit analysis including a practice valuation (typically using an independent third-party appraisal), DSCR analysis based on normalized EBITDA, and a review of payer contracts, billing history, and malpractice claims.

Other financing

• SBA 7(a) Loan

  The most common financing tool for independent buyers acquiring dermatology practices. SBA 7(a) loans cover up to 90% of the purchase price, making them ideal for physician entrepreneurs with limited upfront capital.

  • + Long 10-year repayment terms lower monthly debt service relative to conventional loans
  • + Widely accepted by healthcare lenders familiar with MSO deal structures and corporate practice of medicine rules
  • − Personal guarantee required, creating personal liability exposure for physician buyers
  • − Lender underwriting can be lengthy, adding 60–90 days to deal timelines
• Seller Financing (Seller Note)

  The selling physician defers a portion of the purchase price, typically 10–20%, structured as a promissory note. Often paired with SBA financing to bridge valuation gaps or reduce buyer cash requirements at close.

  • + Flexible repayment terms can be subordinated to SBA debt, satisfying lender requirements
  • + Aligns seller incentives with a smooth transition, supporting physician retention and patient continuity
  • − Seller assumes credit risk if the buyer defaults post-close, which may deter risk-averse physician founders
  • − Subordination to SBA debt limits seller's recovery options in a default scenario

Lender tips

• Prioritize SBA Preferred Lender Program (PLP) banks with dedicated healthcare lending divisions — look for lenders who have closed dermatology or physician practice deals in the past 24 months and can provide references from similar transactions
• Present a clean, lender-ready financial package that includes 3 years of practice tax returns, a recast EBITDA schedule with add-backs clearly documented, a cosmetic-versus-medical revenue breakdown with margin analysis, and a pro forma showing projected debt service coverage of at least 1.25x post-acquisition
• Include a detailed seller transition plan in your loan package — lenders weight this heavily for dermatology acquisitions, and a documented 18–24 month employment agreement with the selling physician materially reduces perceived key-person risk and can improve loan terms
• Be transparent about the MSO structure from the first lender conversation — provide a one-page summary of how the MSO and PC (professional corporation) will be structured, who holds clinical licensure, and how cash flows from the PC to the MSO, so the lender's underwriter doesn't encounter surprises mid-process

• Asset Purchase with MSO Structure60–70% of dermatology acquisitions involving non-physician or PE buyers use some form of MSO or affiliated PC structure

  The buyer acquires the tangible and intangible assets of the dermatology practice — including equipment, patient lists, goodwill, and contracts — while a physician-owned professional corporation (PC) or professional association (PA) retains ownership of the licensed medical entity.

  • + Complies with corporate practice of medicine laws by keeping the licensed medical entity under physician ownership while allowing non-physician investors to capture economic value through the MSO
  • + Buyer avoids inheriting unknown liabilities such as prior malpractice claims, undisclosed billing irregularities, or legacy employment disputes tied to the practice entity
  • − Structuring and legal costs are significantly higher than a standard asset purchase due to the need for healthcare-specialized attorneys to draft MSO agreements and physician PC arrangements
  • − Payer contracts — particularly Medicare and commercial insurance agreements — typically require re-credentialing and assignment approval, which can delay revenue collection by 60–120 days post-close
• Stock Purchase with Physician Equity RolloverEquity rollover of 10–20% of deal value is standard in PE platform acquisitions; pure stock purchases without rollover are more common in physician-to-physician transactions

  The buyer acquires the ownership interest (stock or membership units) in the existing practice entity directly from the physician seller.

  • + Preserves existing payer contracts, Medicare provider numbers, and state licenses without requiring re-credentialing, reducing the risk of post-close revenue disruption
  • + Equity rollover creates a strong alignment mechanism — the selling dermatologist has financial incentive to retain patients, support staff, and drive EBITDA growth toward a future exit or platform sale
  • − Buyer assumes all historical liabilities of the entity, including undisclosed malpractice claims, tax obligations, billing compliance issues, and employment law exposure — making thorough due diligence non-negotiable
  • − Physician sellers may resist the rollover concept if they are seeking a clean exit, particularly retiring dermatologists who do not want ongoing equity exposure or performance obligations
• SBA 7(a) Loan with Seller NoteSBA 7(a) financing with a seller note represents the dominant structure for individual physician buyers; approximately 50–60% of non-PE dermatology acquisitions in the $1M–$5M revenue range use this approach

  An independent physician buyer or small medical group finances the acquisition using an SBA 7(a) loan — typically covering 75–80% of the purchase price up to $5M — combined with a seller note representing 10–15% of the purchase price, with the buyer contributing 10% equity as a down payment.

  • + Enables buyers to acquire a profitable dermatology practice with as little as 10% equity injection, preserving working capital for operational investments such as equipment upgrades or EMR migration
  • + Seller note demonstrates seller confidence in the practice's forward performance and gives the buyer a negotiating lever — sellers who insist on all-cash deals at closing face longer marketing periods
  • − SBA lenders require the seller to be on standby for the full seller note period, meaning no principal payments during the SBA loan term — sellers needing immediate full liquidity may reject this structure
  • − SBA underwriting for medical practices requires clean financial statements, physician employment agreement review, and compliance documentation that can extend the approval timeline by 45–90 days

Negotiation tips

• Make tail malpractice insurance coverage a non-negotiable closing condition for any asset purchase — require the seller to fund an occurrence-equivalent tail policy for a minimum of 3 years covering all pre-close clinical activity, and document this obligation explicitly in the purchase agreement rather than leaving it to a side letter or post-close negotiation.
• Push for a detailed physician transition plan as a deal term, not an afterthought — specify the number of clinical hours the selling dermatologist will work during the transition period, which patients they will personally introduce to successor providers, and what constitutes a breach of transition obligations, with specific holdback or clawback provisions tied to patient retention below agreed thresholds.
• Scrutinize payer contract assignability before executing a letter of intent — request copies of all commercial and Medicare Advantage contracts and have a healthcare attorney review assignment and change-of-ownership clauses.
• Structure earnout metrics around EBITDA rather than gross revenue to prevent manipulation — a seller who accelerates cosmetic bookings pre-close or front-loads patient scheduling can inflate revenue-based earnout triggers without creating sustainable value.

Physician & Provider Agreements

• Review all physician, PA, and NP employment agreements including term, compensation, and termination provisions.critical

  Provider contracts define post-close obligations and directly impact your ability to retain revenue-generating staff.

• Assess enforceability and scope of all physician non-compete and non-solicitation agreements.critical

  Unenforceable non-competes expose you to total revenue loss if the founding physician departs post-close.

• Quantify revenue attributable to the founding physician versus mid-level providers and associate dermatologists.critical

  Key-person concentration above 70% of revenue is a significant valuation and continuity risk.

• Confirm board certifications, state medical licenses, and DEA registrations are current for all providers.important

  Lapsed credentials can trigger payer contract terminations and disrupt billing operations immediately post-close.

Financial Performance & Revenue Quality

• Obtain and analyze three years of reviewed or audited financial statements, including monthly P&Ls.critical

  Multi-year financials reveal revenue trends, seasonality, and owner add-backs that affect true EBITDA.

• Segment and separately analyze medical dermatology versus cosmetic revenue, margins, and growth rates.critical

  Cosmetic revenue (Botox, fillers, laser) carries higher margins but is discretionary and more volatile than medical.

• Review accounts receivable aging, collections rate, and days-in-AR for the past 24 months.important

  Deteriorating collections efficiency often signals billing staff turnover or payer contract disputes.

Payer Contracts & Revenue Cycle Management

• Request and review all commercial and government payer contracts, fee schedules, and reimbursement rates.critical

  Payer contracts are the financial backbone of medical dermatology revenue and may not be automatically assignable.

• Calculate Medicare and Medicaid as a percentage of total payer mix and project reimbursement risk.important

  High government payer concentration creates exposure to rate cuts and billing compliance scrutiny.

• Evaluate the revenue cycle management process, billing software, denial rates, and claims rework volume.important

  Poor RCM processes mask true revenue potential and require costly remediation after close.

• Confirm no outstanding Medicare or Medicaid audits, RAC reviews, or overpayment demands.critical

  Government audit findings can result in recoupment demands that reduce post-close cash flow materially.

Malpractice, Legal & Compliance

• Obtain a full five-year malpractice claims history for all current and former providers at the practice.critical

  Unresolved or recurring claims indicate clinical risk patterns that will affect insurability and deal terms.

• Clarify whether malpractice coverage is occurrence-based or claims-made, and confirm tail coverage obligations.critical

  Claims-made policies without tail coverage create uncapped post-close liability for pre-acquisition incidents.

• Confirm compliance with HIPAA, OSHA, and applicable state healthcare privacy and facility regulations.important

  Regulatory violations can trigger fines, corrective action plans, and reputational damage post-close.

• Engage a healthcare M&A attorney to assess corporate practice of medicine compliance in the target state.critical

  CPOM laws restrict lay ownership of medical practices and directly dictate whether an MSO structure is required.

Dermatology Practice-specific checks

• Verify that cosmetic revenue is documented with signed patient consent forms, procedure logs, and itemized invoicing to confirm repeatability and margin quality.
• Confirm all laser and aesthetic equipment is owned outright, under warranty, and FDA-cleared — equipment liens or outdated devices reduce acquisition value materially.
• Request state medical board complaint history for all licensed providers, including any prior disciplinary actions, probationary periods, or license restrictions.
• Evaluate the practice's online reputation and patient review volume across Google and Healthgrades — cosmetic dermatology practices are highly dependent on digital word-of-mouth.
• Assess whether the EMR and practice management system is scalable or will require costly migration post-close, particularly if integrating into a larger dermatology roll-up platform.

Red flags

• Founding dermatologist drives more than 80% of revenue with no non-compete, no succession plan, and unwillingness to sign a post-close transition agreement.
• Open or unresolved malpractice claims, a history of multiple settled claims, or an active state medical board investigation against any provider.
• Medicare and Medicaid together exceed 40% of total payer mix with no cosmetic or commercial revenue to offset reimbursement cut exposure.
• Key commercial payer contracts include change-of-control clauses requiring full re-credentialing, risking months of billing disruption post-close.
• Claims-made malpractice policy with no tail coverage funded at closing, creating uncapped liability for the buyer on pre-acquisition incidents.

What the LOI covers

• Parties and Transaction Overview

  Identifies the buyer entity, the seller (typically the physician owner or professional corporation), and the target practice entity.

• Exclusivity and No-Shop Period

  Grants the buyer an exclusive negotiating window during which the seller agrees not to solicit or entertain competing offers. This section is critical in dermatology acquisitions where roll-up platforms may be competing for the same target simultaneously.

• Due Diligence Conditions and Access

  Outlines the scope of buyer's due diligence investigation and seller's obligations to provide access to financial records, payer contracts, employment agreements, malpractice history, and compliance documentation.

• Physician Transition and Employment Terms

  Addresses the selling physician's post-close role, compensation structure, duration of the transition employment agreement, and scope of any non-compete covenant.

• Representations and Warranties Framework

  Sets expectations for the representations and warranties that will be included in the definitive purchase agreement.

Terms to negotiate

• EBITDA Normalization and Physician Compensation Adjustment

  In dermatology practices where the owner-physician earns above or below market compensation, the stated EBITDA may be materially misleading.

• Cosmetic Revenue Attribution and Earnout Linkage

  Cash-pay cosmetic revenue from Botox, fillers, laser treatments, and body contouring often carries margins of 60%–80% and attracts premium buyer interest.

• Non-Compete Scope, Geography, and Enforceability

  A dermatology non-compete that is unenforceable under state law provides the buyer with no meaningful protection against the seller reopening a competing practice nearby.

• Payer Contract Continuity and Medicare Provider Enrollment

  If the selling physician is the enrolled Medicare and Medicaid provider, their departure post-close creates a gap in billing eligibility that can disrupt revenue for 60–120 days while new providers complete enrollment.

Target profile

• Two or more licensed dermatologists or a single dermatologist supported by at least two PA/NP providers, reducing single-physician revenue dependency
• Diversified payer mix with Medicare concentration below 40% and meaningful commercial insurance or cash-pay cosmetic revenue contributing at least 25% of total collections
• Established patient base with documented recurring appointment volume, strong online reputation, and low no-show rates indicating patient loyalty
• Clean malpractice history with no pending state medical board actions, active occurrence or claims-made coverage with a tail coverage plan in place

Platform and add-on criteria

• Minimum $1.5M EBITDAPlatform

  Platform practices need sufficient cash flow to absorb integration costs, support debt service, and fund add-on acquisitions without immediate margin pressure.

• 2+ Licensed Dermatologists On StaffPlatform

  Multi-physician practices reduce key-person risk, enable scheduling scale, and signal an established clinical culture attractive to future add-on providers.

• Diversified Payer Mix Under 40% MedicarePlatform

  Balanced commercial, cash-pay cosmetic, and Medicare revenue reduces reimbursement compression exposure and supports stable, predictable EBITDA through economic cycles.

• Modern EMR and Scalable Practice InfrastructurePlatform

  Platform practices must support centralized billing integration; legacy or siloed systems create costly delays and limit the efficiency gains driving roll-up returns.

Acquisition sequence

1. Define Your Platform Thesis and Geographic Target MarketMarket selection, investment thesis definition, MSO legal structure, and financing pre-qualification

   Before approaching any practice, establish a clear investment thesis: which metro area or regional cluster will anchor your platform, what mix of medical versus cosmetic dermatology revenue you are targeting, and what size practice fits your financing capacity.

2. Source and Qualify Acquisition TargetsOff-market sourcing, financial pre-qualification, physician retirement readiness, and deal pipeline development

   Dermatology practices rarely list publicly.

3. Structure the LOI and Negotiate Deal TermsAsset purchase with MSO structure, seller note sizing, earnout design, and physician equity rollover terms

   Most dermatology acquisitions in the lower middle market are structured as asset purchases with an MSO overlay to comply with CPOM regulations.

4. Conduct Focused Due Diligence on Clinical and Financial RiskQuality of earnings, payer contract review, malpractice audit, non-compete enforceability, and EMR integration assessment

   Dermatology due diligence must go beyond standard financial review.

Value creation levers

• Centralized Revenue Cycle Management and Billing Optimization

  Independent dermatology practices frequently leave 8–15% of collectible revenue on the table due to claim denials, undercoding, and outdated billing workflows.

• Cosmetic Revenue Expansion and Aesthetic Service Line Development

  Medical dermatology practices with limited cosmetic offerings represent significant upside.

• Mid-Level Provider Recruitment to Reduce Key-Person Risk

  One of the most effective ways to increase practice capacity and reduce dependence on a single physician is to add licensed PA or NP providers trained in dermatology.

• Technology Modernization and EMR Standardization

  Standardizing all acquired practices on a single cloud-based EMR and practice management platform — such as Modernizing Medicine (EMA), Nextech, or Athenahealth — creates operational efficiency, simplifies compliance reporting, enables centralized analytics, and reduces IT support costs.

Day one

• Introduce yourself and your leadership team to all clinical and administrative staff; confirm employment status and address any retention bonus commitments made during LOI.
• Verify all payer contracts, credentialing files, and billing system access are transferred and operational; confirm no lapse in claims submission capability.
• Conduct a live walkthrough of the EMR and practice management system with the office manager; document all active patient workflows and pending appointment queues.
• Confirm malpractice tail coverage is activated for the selling physician and new occurrence-based policies are bound for all retained providers under the acquiring entity.
• Distribute a patient communication announcing continuity of care under new ownership; ensure all HIPAA-compliant notices and updated BAAs are executed with vendors.

Stabilization (Days 1–30)

• Execute retention agreements or updated employment contracts with all physicians and PAs; confirm non-compete terms are enforceable in the practice's state.
• Audit all active insurance credentialing and submit re-enrollment packets for any payers requiring provider reassignment under the new ownership entity.
• Conduct one-on-one meetings with each staff member; identify key personnel risks and immediately address compensation or role concerns.

Optimization (Days 31–90)

• Launch EMR migration or integration project with a dedicated implementation lead; schedule off-hours training to avoid patient care disruption.
• Review all cosmetic service pricing, Botox and filler inventory contracts, and laser utilization rates against industry benchmarks.
• Implement centralized revenue cycle management with weekly denial tracking dashboards and monthly payer performance reviews.

Growth (Days 91–365)

• Launch a targeted local SEO and Google Ads campaign promoting both medical dermatology and cosmetic services under the new brand.
• Engage a healthcare recruiter specializing in dermatology to pipeline mid-level providers and reduce dependency on any single physician.
• Compile 12 months of post-close claims volume data and initiate payer contract renegotiations with commercial insurers for rate improvements.

Pitfalls

• Losing the Lead Physician in Month Two

  Failing to lock in the founding dermatologist with a meaningful retention bonus or equity rollover often triggers departure within 60 days, taking patient loyalty and referral relationships with them.

• Billing Gaps During Payer Re-Credentialing

  Changing the legal entity post-close without proactively re-credentialing providers under the new MSO or group NPI can cause payer rejections and weeks of lost revenue that are difficult to recover.

• Ignoring Cosmetic Revenue Infrastructure

  Buyers focused on medical dermatology often underinvest in cosmetic service support staff, marketing, and inventory, causing high-margin aesthetic revenue to decline rapidly post-close.

• Failing to Verify Non-Compete Enforceabilitycritical

  Assuming physician non-competes are enforceable without state-specific legal review is dangerous. Several states restrict or void non-competes for licensed physicians, leaving you exposed.

• Overlooking Corporate Practice of Medicine Lawscritical

  Structuring a direct ownership deal without accounting for CPOM regulations can result in unlicensed practice of medicine violations, voided contracts, and regulatory penalties.

• Misreading Cosmetic Revenue Sustainabilitymajor

  Cosmetic revenue from Botox, fillers, and laser treatments is often physician-specific. Buyers who capitalize cosmetic income without confirming patient loyalty to the practice—not the doctor—overpay significantly.

• Skipping Malpractice Tail Coverage Analysismajor

  Acquiring a practice with claims-made malpractice policies without securing tail coverage leaves you financially exposed to claims arising from pre-close incidents. How to avoid it: Require the seller to purchase tail coverage as a closing condition.

• Underestimating EMR and Billing System Integration Costsminor

  Legacy EMR platforms and fragmented revenue cycle management systems are common in independent dermatology practices. Buyers routinely underestimate the time and cost of integration.

• SBA

  Applying to a general SBA lender without healthcare deal experience, resulting in delays or a declined loan when the underwriter is unfamiliar with MSO structures, corporate practice of medicine laws, or how to value medical goodwill in a dermatology practice

Warning signs

• A single dermatologist generates over 80% of collections with no signed post-close employment agreement in place
• Payer mix shows Medicare or Medicaid concentration above 40% with no commercial contract diversification strategy
• Seller cannot produce three years of clean financials that separate personal expenses from business operations
• Outstanding malpractice claims or open state medical board investigations not disclosed until late in due diligence
• Facility lease expires within 12 months with no renewal option or landlord assignment consent already secured

Phase 1: Financial & Revenue Cycle Preparation (18–24 Months Before Sale)

• Compile 3 Years of Reviewed or Audited Financial Statementshigh

  Engage a healthcare-experienced CPA to prepare reviewed or audited financials for the past three fiscal years.

• Separate and Document Cosmetic vs. Medical Revenue Streamshigh

  Segment all revenue by category — medical dermatology (insurance-reimbursed), surgical procedures, and cash-pay cosmetic services (Botox, fillers, laser treatments, chemical peels). Provide gross revenue, cost of goods, and net margin for each segment.

• Audit Revenue Cycle Management and Collections Performancehigh

  Pull your collections rate, days in accounts receivable, denial rate by payer, and write-off history for the past 36 months. A collections rate below 90% or AR days exceeding 45 signals billing inefficiency that buyers will use to negotiate price down.

Phase 2: Physician & Staff Employment Structure (15–20 Months Before Sale)

• Review and Update All Physician and Mid-Level Provider Employment Agreementshigh

  Ensure every dermatologist, PA, and NP on staff has a current, signed employment agreement that includes defined compensation terms, non-solicitation clauses, and non-compete provisions appropriate for your state.

• Assess and Reduce Key-Person Dependency on the Founding Physicianhigh

  If you personally generate 80%+ of practice revenue, buyers will price in significant key-person risk. Begin transitioning patient relationships to associate dermatologists or trained PAs and NPs.

• Clarify Post-Close Employment Expectations for Yourselfmedium

  Determine how long you are willing to stay on post-acquisition — most buyers require a 12–24 month transition period, and PE platforms may require an earnout tied to EBITDA performance.

Phase 3: Payer Contracts & Compliance (12–18 Months Before Sale)

• Compile and Audit All Payer Contracts and Reimbursement Rateshigh

  Gather every active payer contract — commercial insurers, Medicare, Medicaid, and any managed care agreements — and document current reimbursement rates for your top 20 CPT codes. Identify any contracts approaching expiration or with unfavorable rate terms.

• Verify All State Licensure, DEA Registrations, and Medicare/Medicaid Enrollments Are Currenthigh

  Confirm that every physician, PA, and NP has a current, unrestricted state medical license, active DEA registration if applicable, and up-to-date Medicare and Medicaid provider enrollment.

• Understand and Address Corporate Practice of Medicine Compliance in Your Statehigh

  Most states prohibit non-physicians from directly owning a medical practice, which means PE buyers must use a Management Services Organization (MSO) structure to acquire your practice.

Phase 4: Malpractice, Legal & Risk Management (12–15 Months Before Sale)

• Audit Full Malpractice Claims History and Obtain a Claims Summary Reporthigh

  Request a formal claims history report from your malpractice insurer covering all claims, lawsuits, and settlements for the past 7–10 years. Buyers will conduct a National Practitioner Data Bank (NPDB) query on all physicians.

• Confirm No Open State Medical Board Actions or Investigationshigh

  Verify that no physicians, PAs, or NPs in the practice are subject to any open state medical board investigations, license restrictions, or consent orders. Board actions are publicly discoverable and will surface immediately during buyer due diligence.

• Review All Business Contracts for Assignment Provisionsmedium

  Identify every material vendor contract, equipment lease, and service agreement that the practice is party to — including your EMR/practice management software agreement, equipment finance leases, and any outsourced billing contracts.

Quick wins before a sale

• Request a full malpractice claims history report from your insurer and check your NPDB record — unresolved issues must be identified before any buyer discovers them first.
• Separate your cosmetic and medical revenue in your accounting software immediately — even a rough 12-month breakdown can change how buyers perceive your practice value.
• Pull your current lease and confirm the expiration date and renewal options today — if you have less than 24 months remaining, call your landlord before you call a buyer.
• Ask your billing team or billing service for your current collections rate and days in AR — if your collections rate is below 90%, identify the top denial reasons and address them now.

Questions to ask a broker

• How many dermatology or medical specialty practices have you closed in the last three years, and what were the typical deal structures used?

  Dermatology deals often require MSO structures or equity rollovers. A broker without direct experience may misstructure the deal or undervalue cosmetic revenue streams.

• How do you separate and value medical versus cosmetic revenue when determining our practice's EBITDA and asking price?

  Cosmetic cash-pay revenue commands different margins and buyer interest than insurance-reimbursed medical dermatology. Misclassification can significantly distort your valuation.

• What is your process for managing physician non-compete and retention risk disclosures during the sale process?

  Buyer concern over key-person dependency is the top deal-killer in dermatology. A skilled broker manages this narrative proactively to protect valuation and deal momentum.

Broker red flags

• Broker has no verifiable healthcare or medical practice transaction experience and cannot cite specific closed dermatology deals by deal size or structure type.
• Broker cannot explain MSO structures, corporate practice of medicine restrictions, or tail malpractice coverage requirements during your initial consultation.
• Broker proposes an upfront valuation with no separation of cosmetic versus medical revenue or adjustment for physician key-person concentration risk.