DealScape | Dermatology M&A: Core Drivers and Ancillaries
Dermatology remains one of the most active specialties in healthcare M&A. It’s a $9B market with nearly 85% of practices still independent, making it highly fragmented and ripe for consolidation. What makes it so attractive is the balance of medical necessity and aesthetics, a combination that consistently draws buyer interest.
At Sierra Pacific Partners, we see buyers valuing practices that demonstrate scale, procedural diversity, and operational leverage. Here are the factors most likely to shape valuations in dermatology transactions:
Core Value Drivers
Procedural mix: Especially the profitability of cosmetic and aesthetic services
Integrated ancillaries: In-house pathology, Mohs surgery, and medspa capabilities
Operational scalability: EMR systems, billing platforms, staffing models, and efficient workflows
Depth of team: Both clinical providers and professional management
Payor & referral diversity: To reduce concentration risk and enhance durability
The Role of Ancillaries
Beyond the core drivers, certain non-core revenue streams often show up in the EBITDA story. Two common examples are:
Superficial Radiation Therapy (SRT)
SRT offers attractive reimbursement and strong patient demand as an alternative to Mohs for non-melanoma cases. Once equipment is paid down, margins can be high. That said, buyers typically discount this revenue due to variable payor acceptance and compliance risks.
Skin Substitutes
Biologic grafts like Apligraf and Dermagraft generate strong reimbursement in wound care but have narrower dermatology applications. Documentation challenges and frequent denials mean most buyers only give credit if a practice has established a true wound care niche.
Bottom Line
While SRT and skin substitutes can meaningfully enhance revenue, they’re generally viewed as add-on ancillaries, not core EBITDA drivers. Valuations in dermatology remain anchored to aesthetic strength, procedural diversity, integrated ancillaries (like Mohs and dermpath), and the practice’s ability to scale.
At Sierra Pacific Partners, we help physician founders position these elements strategically so that non-core revenue supports the growth story, without undermining valuation.