Guide to Selling a Dermatology Practice in Rhode Island

If you are a dermatology practice owner in Rhode Island, you have likely thought about your eventual transition. Selling your practice is one of the most significant financial and professional decisions you will ever make. Navigating the process requires a clear understanding of Rhode Island’s unique market, its specific regulations, and the key drivers of value. This guide provides a direct overview to help you understand the landscape and the opportunities available for maximizing its value.

Market Overview: A Time of Consolidation

The market for medical practices is active, and dermatology remains a highly attractive specialty for buyers. The biggest trend we see is consolidation. Private equity-backed groups have been acquiring practices across the country to build regional and national platforms. This has created a competitive environment where well-run practices can command premium attention.

A Consolidating Landscape

Nationally, private equity firms and their dermatology platforms have acquired hundreds of practices. They are sophisticated buyers who look for practices with strong, consistent earnings, growth potential, and a great reputation. Their goal is to build scale, create efficiencies, and expand services. This trend is active and presents a specific type of opportunity for practice owners in Rhode Island.

What This Means for You

For you as a seller, this means you may have more options than just selling to another local physician. These larger groups often have the resources to pay a strong price and can offer different structures for your transition. Understanding this buyer landscape is a key first step. You need to know who is buying, what they are looking for, and how to position your practice to attract their interest.

Key Considerations for Rhode Island Sellers

Selling a practice in Rhode Island is not like selling one in Massachusetts or Connecticut. Our state has a specific set of rules that you must navigate correctly. The Rhode Island Department of Health has requirements for closing or transferring a practice. More importantly, Rhode Island’s Corporate Practice of Medicine (CPOM) law is a major factor. This law generally dictates that only licensed physicians can own a medical practice. This directly impacts how a sale to a non-physician entity, like a private equity group, must be structured. In addition, since 2016, traditional non-compete clauses in physician agreements have been largely prohibited, which changes how buyers protect their investment and how your post-sale commitments are defined. These are not small details. They are fundamental to a successful and legally sound transaction.

Market Activity and Buyer Appetite

Despite the unique regulatory environment, buyer appetite for Rhode Island dermatology practices is strong. The key is understanding how to connect with the right buyers and create a competitive process. The primary buyers in the market today fall into a few categories.

1. Private Equity-Backed Platforms. These are the most active buyers for practices of a certain size. They have experience with CPOM laws and use specific legal structures, like Management Services Organizations (MSOs), to operate in states like Rhode Island. They are looking for profitable, well-managed practices to serve as a foothold or add-on to their network.
2. Hospital Systems and Large Regional Groups. Local and regional health systems are sometimes acquisitive, looking to expand their dermatology service lines. Their motivations and deal structures can be very different from a private equity firm.
3. Individual Practitioners. The traditional model of selling to a younger associate or a local doctor still exists. This path often prioritizes legacy and patient continuity but may not always yield the highest financial return.

A successful sale often involves evaluating interest from all these channels. You do not want to be in a position where you are only talking to one potential buyer.

The Anatomy of a Practice Sale

Selling your practice is a multi-stage journey, not a single event. It begins long before a buyer is ever contacted. The first phase is preparation, where you work to get your financials in order, optimize your operations, and build a clear story about your practice’s value. Next comes the marketing and negotiation phase, where your advisor confidentially approaches a curated list of potential buyers to generate interest and solicit initial offers. Once an offer is accepted, you enter due diligence. This is an intense period where the buyer verifies every aspect of your practice, from financial records to regulatory compliance. It is the phase where many deals encounter unexpected challenges. Finally, you move to closing and transition, where legal documents are signed and the handover of ownership is executed.

How Your Dermatology Practice is Valued

A buyer will not value your practice based on revenue alone. The most common method for valuing a dermatology practice is based on a multiple of its Adjusted EBITDA. EBITDA stands for Earnings Before Interest, Taxes, Depreciation, and Amortization. It is a measure of your practice’s cash flow and profitability. “Adjusted” is the important word here. We calculate this by taking your reported profit and adding back owner-specific or one-time expenses, such as an above-market salary for yourself, personal car leases, or other non-business costs. This gives a true picture of the practice’s profitability for a new owner.

That Adjusted EBITDA figure is then multiplied by a number, or “multiple,” to determine the practice’s enterprise value. This multiple is not fixed. It changes based on several factors.

Getting this right is the foundation of a successful sale. A comprehensive valuation tells you not just what your practice is worth today, but how you can increase its value before a sale.

Planning for Life After the Sale

The transaction is not the end of the story. A successful exit strategy must account for what happens to you, your staff, and your legacy after the papers are signed. Do you want to retire immediately, or would you prefer to continue practicing for a few years with less administrative burden? How a deal is structured has major implications for your after-tax proceeds. An asset sale is taxed differently than an entity sale. Structures like an “equity rollover,” where you retain a minority stake in the new, larger company, can offer a second financial reward down the road. Protecting your dedicated staff and ensuring your patients are cared for are also critical parts of the plan. These personal, financial, and legacy goals should drive the entire process from the very beginning.