Private equity ownership
Best for: Dermatologists looking to offload administrative burdens, access capital, and join larger practice groups with streamlined operations and stronger payer leverage.
Quick summary: Join a private equity-backed dermatology group to gain financial incentives, reduce business management duties, and access better infrastructure. Ideal for those nearing retirement or seeking operational relief but comes with potential trade-offs such as lower ceiling for compensation, reduced autonomy, and dependence on corporate strategy. Careful legal and financial planning is essential.
Private equity overview
Private equity (PE) and venture capital (VC) groups have increasingly invested in dermatology practices, attracted by the specialty’s fragmentation, growth potential, and multiple revenue streams. These firms acquire independent practices, consolidate them into larger groups, and apply skilled management to improve efficiency and profitability. While this model can offer financial incentives and administrative relief to dermatologists, it also brings challenges such as a potentially lower ceiling for total compensation and reduced autonomy.
Why dermatologists choose this
Shifts administrative and management duties to professional management teams.
Access to upfront capital or financial incentives through practice sale.
Potential bonuses to attract younger dermatologists.
Opportunity to be part of larger, consolidated practice groups with better payer contracts.
Relief from business operations and increased focus on clinical care.
How this model works
Structure
Private equity firms buy dermatology practices and manage them through corporate-backed entities, often combining multiple small practices to form larger groups.
Reimbursement model
Compensation structures vary but often include lower ceiling for total compensation and bonuses, with the parent company focusing on overall profitability.
Patient care model
Practices maintain clinical care, but operational decisions may be driven by corporate management teams aiming to optimize revenue and efficiency.
Administrative support
The PE-backed group assumes responsibility for billing, compliance, marketing, and operational workflows, reducing administrative burden on clinicians.
Compensation and benefits
Dermatologists may receive bonuses but may have a lower ceiling for total compensation; employment terms may include productivity targets and limited control over financial outcomes.
Technology and operations
Investment in standardized EHRs, operational systems, and centralized billing is common to streamline workflows and improve profitability.
Legal considerations
Physicians should carefully review employment contracts, non-compete clauses, and sale agreements, often requiring professional legal and financial counsel.
Career growth
Opportunities for younger dermatologists may include bonuses and defined career pathways, but autonomy and decision-making can be limited.
When this model makes sense
When ready to exit ownership and shift administrative duties to corporate management.
For practices seeking capital infusion and operational support.
If interested in joining larger groups to leverage payer contracts and economies of scale.
When attracting younger dermatologists with financial incentives is a priority.
For those willing to accept a lower ceiling for total compensation and less control over business decisions.
Success factors
Clear understanding of sale terms, compensation structure, and future financial risks.
Effective communication with corporate management to align clinical and operational goals.
Legal review of contracts and Letter of Intent documents before committing.
Willingness to adapt to standardized corporate policies and procedures.
Strategic planning around patient care and practice growth under corporate oversight.
Potential challenges
Reduced clinical and financial autonomy post-sale.
Possible lower ceiling for total compensation.
Possibility of parent company changing strategy or ownership.
Possible pressure to increase productivity and profitability over patient-centered care.
Complex contracts requiring professional legal and financial advice.
Loss of practice identity and independence.
Early career advice
Consult attorneys and financial advisors before selling or signing contracts.
Understand the implications of capped compensation and productivity targets.
Evaluate the stability and reputation of the private equity firm.
Balance short-term financial incentives with long-term career goals and autonomy.
Stay informed about the evolving landscape of corporate dermatology groups.
Consider a group that allows dermatologists to remain involved in the PE / VC group’s operations, decisions, and strategy.
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.
