How to Value a Dermatology Practice in 2026

Dermatology has been one of the hottest physician practice acquisition verticals for the better part of a decade. PE firms have poured billions into derm consolidation, and the multiples reflect it. But there's a massive spread between what a solo dermatologist gets selling to another solo practitioner versus what a multi-provider group commands from a PE-backed platform.

I've worked on derm transactions ranging from $400K solo practice sales to $50M+ platform deals. The valuation methodology is fundamentally different depending on which end of that spectrum you're on. Let me break down how it actually works.

Why PE Loves Dermatology

Before getting into the numbers, it's worth understanding why private equity has targeted derm so aggressively. The thesis is straightforward: dermatology sits at the intersection of several characteristics PE firms love.

First, there's a dual revenue stream. Medical dermatology (skin cancer screenings, acne treatment, eczema management) is insurance-reimbursed, providing a stable base. Cosmetic dermatology (Botox, fillers, laser treatments, chemical peels) is cash-pay, providing high-margin growth. No other physician specialty blends insurance stability with cash-pay upside this cleanly.

Second, dermatology is highly fragmented. There are roughly 12,000 practicing dermatologists in the US, most in solo or small group practices. That's a massive consolidation runway. PE platforms can buy 20-30 practices, centralize billing and compliance, cross-sell cosmetic services, and create a platform worth far more than the sum of its parts.

Third, the economics are excellent. Dermatology has high patient throughput (a dermatologist can see 40-60 patients per day), relatively low overhead compared to surgical specialties, and strong reimbursement rates. EBITDA margins of 25-35% are common for well-run multi-provider groups.

Solo Practice vs. Multi-Provider Group: Two Different Markets

Solo practices — a single dermatologist, maybe with a PA or NP — typically sell for 2-4x SDEto another individual dermatologist. The buyer is purchasing the patient panel, the location, and the staff. They're going to step in and be the primary provider. At this level, the valuation is driven by collections, payer mix, and patient volume. Most solo derm practice sales land between $500K and $1.5M.

Multi-provider groups (3+ dermatologists, possibly with mid-level providers) attract PE interest and trade on EBITDA multiples. This is where the numbers get interesting. Depending on size and composition:

• Bolt-on to existing platform: 6-8x EBITDA. The platform already exists; they're adding your practice to their network.
• Sub-platform or large group: 8-11x EBITDA. You have enough scale to be a meaningful addition, often with some management infrastructure.
• Platform acquisition: 10-14x EBITDA. PE is building a new derm platform around your practice as the anchor. Requires 5+ providers, strong management, and a desirable geography.

The arbitrage is staggering. A PE firm buys five solo practices at 3x SDE each, combines them into a group, installs management, and the combined entity is worth 10x EBITDA. That multiple expansion — buying at 3x and creating something worth 10x — is the core of the PE derm thesis.

The Cosmetic Revenue Swing Factor

If there's one number that predicts derm practice valuation more than any other, it's the percentage of revenue from cosmetic services. Practices with 30%+ cosmetic revenueconsistently command premium multiples. Here's why.

Cosmetic revenue is cash-pay. No insurance companies dictating reimbursement rates, no prior authorizations, no claim denials. The margin on a $500 Botox treatment is substantially higher than the margin on an insurance-reimbursed office visit. And cosmetic patients pay at time of service — no accounts receivable aging.

Cosmetic revenue is also growing. The aesthetics market has expanded at 10-15% annually, driven by younger demographics entering the market and broader social acceptance. Buyers see cosmetic revenue as the growth engine that medical derm alone can't provide.

Practices that have invested in cosmetic infrastructure — dedicated treatment rooms, laser equipment, trained aestheticians, a cosmetic patient coordinator — signal to buyers that the cosmetic revenue is systematized, not dependent on one provider's personal following. A practice where Dr. Smith personally does all the Botox and fillers has a cosmetic revenue stream that leaves when Dr. Smith leaves.

Mohs Surgery: The Value Multiplier

Mohs micrographic surgery — the gold standard for treating skin cancer — is the single highest-reimbursed procedure in dermatology. A Mohs surgeon can generate $1.5-3M in annual collections with strong margins. Practices with Mohs capability command meaningful premiums for several reasons.

Mohs is a referral magnet. General dermatologists and primary care physicians refer skin cancer patients to Mohs surgeons, creating a steady inbound patient pipeline. Those patients then often become medical and cosmetic derm patients as well, feeding the rest of the practice.

Mohs is also a competitive moat. Fellowship training takes an additional 1-2 years after residency, and there are only about 1,500 Mohs surgeons in the US. A PE platform that acquires a practice with Mohs capability gains a service line that competitors can't easily replicate.

I've seen Mohs-capable practices command 1-2x EBITDA multiple premium over comparable practices without Mohs. On a $2M EBITDA practice, that's $2-4M in additional enterprise value.

The #1 Deal Risk: Provider Retention

Every derm deal I've worked on comes down to the same question: will the providers stay after the sale? In dermatology, the providers ARE the revenue. If two of your five dermatologists leave within a year of closing, the buyer just overpaid dramatically.

PE buyers mitigate this through employment agreements with restrictive covenants (non-competes, non-solicits) and retention incentives (equity rollover, earn-outs, retention bonuses). But the enforceability of non-competes varies by state — California doesn't enforce them at all, while Texas and Florida generally do.

The practices that command the highest multiples are the ones where provider retention feels organic, not forced. If your associate dermatologists are well- compensated, have some autonomy, like the culture, and see opportunity in being part of a larger platform, that's a much stronger retention story than "they can't leave because of their non-compete."

Buyers scrutinize provider satisfaction during diligence. They'll interview your associates. If there's underlying tension about compensation, call schedule, or clinical autonomy, it will surface — and it will impact the multiple they're willing to pay.

What Drives the Multiple Higher

Multi-site presence. Three locations in a metro area is worth more than one location with the same revenue. Multiple sites provide patient convenience, referral network breadth, and built-in growth capacity.

Mid-level leverage. Practices that effectively use PAs and NPs to extend dermatologist capacity are more efficient and scalable. A ratio of 1.5-2 mid-levels per dermatologist is typical for high-performing groups.

Payer mix quality. High commercial insurance mix (70%+) with strong fee schedules commands premiums over Medicaid-heavy practices. The cosmetic cash-pay component on top of strong commercial reimbursement is the ideal combination.

Clinical reputation. Board certification, academic affiliations, published research, and training program involvement all contribute to practice reputation. PE firms look for clinical excellence because it drives referrals and retention.

Preparing for a PE Sale: What to Do Now

If you're a derm practice owner considering a PE exit in the next 2-3 years, the playbook is clear. Grow your cosmetic revenue percentage — invest in equipment, hire aestheticians, and build a cosmetic marketing program. Add providers, especially if you can recruit a Mohs surgeon. Secure your associates with competitive compensation and, where enforceable, non-compete agreements. Clean up your financials to clearly separate medical and cosmetic revenue streams.

And most importantly, understand that timing matters. The derm PE consolidation wave is mature but not over. Platform multiples have compressed slightly from their 2021-2022 peaks, but 10-14x EBITDA for quality platforms is still achievable in 2026. The window is still open, but the easiest money has been made. The practices selling now need to be genuinely excellent to command top-tier multiples.

The Bottom Line

Dermatology practice valuation spans an enormous range — from $500K for a solo practice to $50M+ for a PE platform deal. Where you fall depends on provider count, cosmetic revenue mix, Mohs capability, and the strategic value you bring to a buyer's consolidation thesis. The spread between selling to another dermatologist and selling to private equity can easily be 3-5x. Understanding which buyer pool you're targeting — and building your practice accordingly — is the most consequential business decision you'll make before your exit.