Private equity activity in physician practices picked up sharply in 2025, with PE-backed PPM transactions rising from 128 to 140 in Q1 2025 alone and dermatology and ophthalmology among the busiest specialties through the year.[a] Q1 2026 came in softer, with healthcare services PE deal count down 16% year over year and deal value down roughly 23%, but most market outlooks for 2026 project renewed movement in physician practice transactions through the rest of the year, with dermatology among the specialties expected to see continued activity.[f] For dermatology practice owners and ASC operators considering an exit in the next 12 to 36 months, the buyer pool is real and the negotiating environment remains workable.
The catch is what happens between accepting a letter of intent and signing the purchase agreement. That window is where Quality of Earnings audits get done, where the Net Working Capital peg gets set, and where aging accounts receivable quietly become a reduction in the cash that hits the seller's account at closing.
Where Dermatology Multiples Actually Land in 2026
The headline numbers in PE coverage of dermatology often cite 12 to 15 times EBITDA, and those numbers are real, but they apply to a narrow tier. The full ladder, based on 2025 transaction data across multiple healthcare investment banking sources, looks like this:[b]
| Practice Tier | EBITDA Multiple |
|---|---|
| Single physician practice | 3x to 5x |
| Small group, 1-4 locations | 4x to 7x |
| Mid-sized established, medical + cosmetic mix | 7x to 10x |
| Top-performing platform-ready | 8x to 12x |
| Large dermatology platforms | 12x to 15x |
The median healthcare services EV/EBITDA multiple across publicly traded comparables compressed to roughly 11.5x in 2025, down from 14.5x in 2024.[c] The compression is real and selective. Buyers are paying premium multiples for practices that meet platform criteria. Practices that don't meet those criteria are facing steeper discounts than they would have during the 2021-2022 peak.
What separates a practice trading at 6x from one trading at 10x in the same specialty isn't usually the patient roster. It's the operational chassis underneath. Clean financials, diversified payer mix, ancillary revenue, and a revenue cycle that produces predictable collections all move a practice up the ladder. A messy A/R profile moves it down.
The 15% Threshold
The high-performer benchmark for medical billing operations is to keep less than 15% of total accounts receivable in the 90-plus-day aging bucket.[d] The 15% number isn't arbitrary. It reflects an observable correlation: claims that cross 90 days collect at meaningfully lower rates, and claims past 120 days collect below 50% in most commercial payer mixes.
The high-performer benchmark for A/R aged 90+ days as a percentage of total accounts receivable. Above this, the revenue cycle is flagged as operationally distressed.
For an independent practice running day-to-day, this is a useful operational metric. For a practice approaching a sale, it's a different kind of number. It becomes one of the first things a buyer's Quality of Earnings team looks at, and it shapes how they think about the practice well before they get to multiple negotiations.
How Aging A/R Becomes a Price Reduction
The mechanism is the Net Working Capital peg, which is standard practice in M&A transactions and well-documented across mid-market M&A advisory literature.[e]
In a typical transaction, the buyer and seller agree on a target level of working capital the business should deliver at closing. That target is usually based on a trailing 12-month average, normalized for any seasonality and irregular items. The buyer's QoE team then audits the actual working capital position at close, and any deficit against the agreed target is deducted from the cash paid to the seller, dollar for dollar.
Here's where aging A/R enters the calculation. The QoE team doesn't accept the gross receivables balance on the books. They apply an allowance for doubtful accounts based on the aging profile, payer mix, and historical collection rates. The older the receivables, the larger the allowance. The larger the allowance, the lower the realizable A/R balance counted toward working capital. The lower the working capital, the larger the shortfall against the peg.
Every dollar of A/R that sits above the 90-day line and can't be realistically collected is a dollar that doesn't make it into the seller's closing wire.
This isn't punitive. It's the buyer protecting against paying for revenue they'll have to chase themselves after they own the business. From the buyer's perspective, it's reasonable. From the seller's perspective, it's a quiet, late-stage reduction in proceeds that's hard to negotiate against once the LOI is signed and the working capital definition is locked in the purchase agreement.
What Buyers Actually Want to See
Buyers acquiring dermatology practices and ASCs in 2025 and 2026 are paying premium multiples for the operational chassis: the systems underneath the clinical work. The chassis attributes that justify higher tier multiples are:
- Diversified payer mix, with commercial concentration above 70% in dermatology
- Ancillary revenue (pathology, Mohs, medspa, in-house imaging) layered on professional fees
- A/R aging in the 90+ day bucket below the 15% threshold
- Days in A/R below 40 days
- Clean denial management with documented appeal workflows
- Multi-provider, multi-location structure with retained management
The first four of those are revenue cycle attributes. They're the most directly controllable items on the list in the 12-to-18 months leading up to a transaction, and they're the items most likely to move a practice up a tier on the multiples ladder if they get cleaned up before the buyer's QoE team starts looking.
The Common Objection
Practice owners considering this often raise a reasonable counterpoint: the buyer is going to bring in their own RCM platform anyway, so why does pre-sale A/R cleanup matter? The buyer rips out the old workflows, plugs the practice into the platform's billing system, and resolves the aging A/R on their own timeline.
The counterpoint is fair on the operational side and irrelevant on the valuation side. The buyer doesn't replace the RCM until after closing. The QoE audit, the working capital peg, and the multiple negotiation all happen before closing, using the financials as they exist on the practice's current systems. The buyer's future ability to fix the A/R doesn't get credited back to the seller in the form of a higher multiple. It just becomes part of the buyer's post-close integration plan.
Put differently: the seller is graded on the books as they look right now, not the books as they could look after the buyer's team has 18 months to clean them up.
Options for Sellers Considering an Exit
The practical question for owners considering an exit in the next 12 to 36 months is how to move the revenue cycle metrics in time for them to matter to a buyer's QoE team. The realistic options are limited.
One is to invest in additional in-house billing capacity. This works mechanically but takes time. Hiring, training, and ramping a new biller in a high-cost-of-living metro typically runs 90 to 120 days before measurable A/R improvement shows up. The new hire also becomes a permanent cost line item that the buyer will likely cut after acquisition, which means the practice is absorbing the ramp cost for capacity that exits with the transaction.
A second is to bring in external capacity through an Employer of Record arrangement, in which certified specialists work inside the practice's existing EHR under the practice's direction on a contract that maps to the pre-transaction window. This pattern has emerged across the RCM services market specifically because it solves the timing problem: capacity scales up in weeks, not quarters, and contracts can be sized to end at or near the closing date without the practice carrying the cost forward.
A third is to do nothing, accept the working capital adjustment at closing, and absorb whatever multiple compression the QoE audit produces. This is a legitimate choice if the math works for the seller. The point of the article is just to make sure that choice is being made knowingly rather than learned about for the first time during the closing call.