Build the Practice a Buyer Would Want

Most independent dermatology owners have heard from a private equity firm or consolidator. In our 156-owner survey, 86% said they had been approached. The useful point is not whether every owner should sell. It’s that buyers keep calling because they see value, and the buyer's lens is useful even if you’ve got a long way to go and never intend to sell. Build the kind of practice a buyer would understand, and you usually build a stronger practice for yourself.

The list asks for the same things every time: 12 to 24 months of claims, remits, and AR aging, payer contracts and fee schedules, credentialing rosters with effective dates, provider productivity, employment agreements, and a full EHR export. Buyers run two linked workstreams against it, a financial quality-of-earnings review and an operational review, both reconciled back to source data, and the exercise tests whether last year's earnings repeat under someone else's ownership. That is a different question from what holds up a defensible valuation, and it comes first.

The point of the buyer lens is leverage, but not only at the exit. A likely seller walks into the first conversation knowing what the buyer will test. A new owner or committed independent gets the same benefit: fewer hidden leaks, less key-person risk, cleaner financials, and a business that can keep compounding without a transaction. Value is not only what someone else would pay. It’s what makes the practice more durable while you still own it.

The benchmarks buyers apply are broader than billing. Yes, they look at aged AR, claim liquidation, net collection, clean claims, and denial patterns, the same short list behind the four metrics high-performing practices already monitor. But they also ask whether the practice is actually growing: year-over-year revenue, seasonality, provider capacity, procedure mix, payer mix, patient demographics, and whether EBITDA holds up once one-time items are stripped out. That is the heart of a defensible valuation. Buyers are not just asking whether money came in. They are asking whether the business can keep earning it.

Buyers do not give full credit for money they may never collect. If a large share of AR is more than 120 days old, they may treat it as doubtful, carve it out of the deal, or discount the cash you receive at close.

They also do not pay you for problems they believe they can fix. If the practice collects 88% of what payers owe, the buyer prices it like an 88% practice. If they can move that number closer to 96% after close, that upside belongs to them.

Key-person dependency gets the same scoring treatment: provider age profile, production concentration, non-compete and buy-in terms, and turnover history. If the practice depends solely on you, you have a job, not a business. When one aging Mohs surgeon carries most procedural revenue, buyers answer with an earn-out, retention package, or equity roll. 

Every item on that list is a leak the practice is already absorbing. If a practice runs 1,000 encounters in a month and only 960 claims go out, the missing 40 are uncaptured charges, held claims, or data entry errors. That revenue is gone whether or not an offer ever arrives. If 120 claims deny in a month and most trace to eligibility gaps or cosmetic-versus-medical determinations, the fix lives in verification and financial-policy scripting at scheduling and check-in. A provider who starts in March but is not effective with a payer until June leaves three months of claims that were held, billed out of network, or submitted wrong. And a biopsy that pays contracted rate minus the same delta every time is a contract loaded incorrectly, a modifier problem, a bundling policy, or a stale fee schedule.

Owners closest to their numbers often see more leakage because they measure more. Buyer-style diligence turns vague unease into a short list of fixable problems: missing charges, payer drift, credentialing gaps, denial clusters, and stale fee schedules.

Full buyer diligence is built for a transaction. It takes weeks, pulls staff into detailed requests, and can create the wrong signal if no deal is on the table. It can also make routine coding or documentation review feel more punitive than useful.

The self-audit keeps the discipline and drops the transaction theater. Five areas cover most of what a buyer eventually prices: AR, payer contracts, coding and documentation, credentialing and enrollment, and EHR data hygiene. Pick one area per quarter, start with AR, name an owner, and set a recheck date. That pace fits a 2-4 provider practice without turning the year into a diligence project. The durable frame is risk-ready, not sale-ready.

If you outsource billing, some of this may already be happening in the background. A good partner should be helping you see AR aging, payment posting speed, net collection, and the handful of issues most likely to turn into leakage before they become a bigger problem.

Clarity RCM manages revenue cycle for 200+ dermatology practices across 42 states. It's all we do. See how we work.