Merged practice
Best for: Dermatologists looking to expand geographic reach, diversify services, and increase access to capital by combining practices.
Quick summary: Merge your practice with another to achieve economies of scale, expand your service offerings, and access greater financial resources. Ideal for those ready to grow or transition while managing potential risks like cultural clashes and liability for predecessor debts.
Practice merger overview
A practice merger involves combining your dermatology practice with one or more other practices to expand your geographic reach, diversify services, and gain access to greater financial resources. This model offers opportunities for economies of scale, improved operational efficiency, and stronger negotiating power with payers. While mergers can enhance growth and access to capital, they also carry risks such as potential loss of autonomy, cultural clashes, and legal responsibilities for predecessor debts. Valuing a practice merger often involves calculating EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization), which helps estimate profitability and business worth. Ultimately, merging practices requires careful consideration of financial, operational, legal, and cultural factors to ensure a successful integration and maximize long-term benefits.
Why dermatologists choose this
Increases geographic scope and diversity of services offered.
Achieves economies of scale and expands access to capital.
Enables growth by combining resources and infrastructure.
Provides an opportunity to streamline operations and improve efficiency.
How this model works
Structure
Combines two or more practices into one legal entity, which may be a corporation, LLC, or partnership. This results in full integration of operations and ownership under a single entity.
Reimbursement model
Billing and payer contracts are typically consolidated under the merged entity, allowing for unified negotiations and potentially stronger reimbursement rates.
Valuation and financial considerations
In mergers, practice valuation commonly relies on EBITDA, which estimates profitability by excluding financing and accounting variables, allowing clearer comparison and negotiation of purchase price or ownership stakes; investors often apply a multiplier to EBITDA (e.g., EBITDA × 5) to estimate overall valuation, but it should be considered alongside referral patterns, reimbursement trends, and the economic climate for a complete assessment.
Patient care model
Patients receive care through a fully integrated group with unified branding, operational protocols, and clinical standards.
Administrative support
Centralized governance, business systems, and protocols are implemented to manage operations consistently across all merged sites.
Compensation and benefits
Dermatologist compensation and benefits are restructured based on ownership shares, employment agreements, or profit-sharing arrangements within the merged entity.
Technology and operations
Systems such as EHRs, billing platforms, and scheduling tools are unified to improve efficiency and patient experience.
Legal considerations
The surviving entity assumes responsibility for predecessor liabilities. Legal work is extensive to manage contracts, antitrust compliance, and integration agreements.
Career growth
Physicians may gain leadership roles in managing larger, more complex organizations, including strategy, operations, and culture integration.
When this model makes sense
When practices want to fully integrate clinical and business operations.
For those seeking economies of scale and expanded geographic reach.
When access to capital and operational efficiencies are priorities.
If willing to accept some loss of autonomy for long-term growth and stability.
Opportunity to realize fair market value for the practice based on EBITDA calculations and industry benchmarks.
Success factors
Careful planning to integrate cultures and operations to avoid “culture clash.”
Strong leadership to guide the merged practice through transition and change.
Clear agreements on governance, profit-sharing, and management roles.
Effective communication with patients and staff to maintain trust and continuity.
Potential challenges
Risk of culture clash and loss of individual practice autonomy.
Surviving entity may inherit debts and liabilities from predecessor practices.
Legal complexity and time-consuming due diligence during merger process.
Potential conflicts over governance, compensation, and clinical standards.
Early career advice
Understand the full legal and financial implications before merging.
Ask about governance structures and how decisions will be made.
Clarify compensation and roles within the merged entity.
Learn how EBITDA is calculated and consult financial and legal advisors to interpret its impact on deal terms.
Be prepared for change and focus on aligning patient care goals and culture.
Related AAD resources
Practice types: See our full menu of resources on practice types, from solo to institutional.
Get started: Access our guide to getting started in practice, with resources on practice types and policies and procedures.
Employment guide: See all our resources on contracts, questions for employers, and more.
This content was created with the particular needs of early-career dermatologists in mind. See the rest of our Career Launch resources for young physicians.
