A medical or dental practice is worth what a buyer will pay for its patient base, its providers and its cash flow, but health care sales carry rules most small businesses never face. Patient records, state licensing, payer enrollment and corporate ownership limits all shape who can buy the practice and how the deal is built. Dental service organizations (DSOs) and private equity backed groups have changed the market by paying higher multiples in exchange for the seller staying on.
Key points
- Small practices often sell to another clinician on a percentage of collections or a multiple of SDE. Larger practices sell to DSOs or private equity groups on a multiple of EBITDA.
- Group buyers usually require the selling doctor to keep working for several years, and pay part of the price in equity or earn-outs.
- HIPAA allows patient records to move with a sale to another covered entity, but state law sets notice and retention requirements.
- Medicare and Medicaid enrollment, commercial payer contracts and licenses do not simply carry over. Changes of ownership have filing deadlines.
- A growing number of states require advance notice to regulators before certain health care transactions close.
Who buys health care practices
The basic sale process is covered in our business sale guide. In health care, the buyer type shapes almost everything else.
Individual clinicians
A younger dentist, physician or chiropractor buying a solo practice is the classic buyer. These deals are often financed by banks that specialize in practice loans. The seller usually stays for a short transition, sometimes a few months, to introduce patients.
Groups and DSOs
Dental support organizations, physician practice management companies and regional groups buy practices to add locations. Many are backed by private equity. They pay more for scale, profit margin and specialists, and they nearly always ask the seller to keep practicing.
Hospitals and health systems
Health systems buy primary care and specialty practices to feed their referral networks. These deals face federal fraud and abuse rules, discussed below, and often come with employment agreements.
Private equity platforms
In optometry, dermatology, med spas and physical therapy, investor-backed platforms buy a large "platform" practice and then add smaller ones, much as consolidators do with trade and service businesses. Sellers of the first practice often roll part of their proceeds into equity of the larger company.
How practices are valued
Percentage of collections and SDE
Small practices are often quoted as a percentage of annual collections. For general dentistry, brokers commonly cite a range of about 60 to 85 percent of trailing collections, with some specialties higher. These are broker-reported ranges, and some major dental transition firms decline to publish a single percentage because the spread is so wide. A practice with 40 percent margins is worth far more than one with the same collections and 20 percent margins.
Buyers are really paying for the cash flow the practice can produce for a new owner. For that reason, a broker or appraiser will rebuild the profit and loss statement: add back the owner's pay above a market salary for a replacement clinician, personal expenses and one-time costs, then subtract any costs a new owner would face, such as market rent.
EBITDA multiples for group buyers
DSOs and private equity groups price on EBITDA after paying a market salary to the selling doctor. That adjustment matters. A doctor who takes home most of the profit as salary may see a much lower EBITDA than expected once a fair clinical salary is deducted.
Advisory firms publish broad ranges. For dental practices, published figures run from about 3 to 6 times EBITDA for smaller general practices to high single digits or more for multi-location groups sold to large DSOs. These ranges come from brokers and advisers, not audited transaction data, and they move with interest rates and investor appetite. Treat any published multiple as a rough reference, never as a price you can count on.
What moves value up or down
- Payer mix: fee-for-service and well-paying commercial plans are worth more than heavy reliance on low-paying plans or a single payer
- Provider dependence: a practice where associates and hygienists produce much of the revenue is easier to transfer
- Active patient count and new-patient flow
- Location, lease length and the right to assign the lease
- Equipment age, technology and records systems
- Clean billing and coding, which buyers will audit
Deal structures you will see
Most practice sales are asset purchases, for the reasons explained in our guide to asset and stock sales. The buyer acquires equipment, records, phone numbers, the practice name and goodwill, and leaves behind the seller's liabilities. In states that restrict who can own a practice, a group buyer may purchase the non-clinical assets through an MSO while a licensed professional owns the clinical entity.
Group deals typically combine several pieces:
- Cash at closing
- Rollover equity in the buyer's company, which pays off only if the group later sells at a good price
- An earn-out or holdback tied to future revenue or EBITDA
- An employment agreement, often three to five years, with productivity-based pay
- A non-compete and non-solicitation agreement covering patients and staff
Read the employment agreement as closely as the purchase agreement. It controls your schedule, your pay after the sale, what happens if you leave early and whether you forfeit part of the price.
Patient records and privacy
HIPAA's definition of health care operations includes the sale, transfer or merger of all or part of a covered entity with another covered entity, and the due diligence for it (45 CFR 164.501). In practice, that allows a buyer to review records during diligence (under a confidentiality agreement and with only the information needed) and to take custody of records at closing.
State law adds layers. Many states require notifying patients when a practice closes or changes hands, set minimum retention periods for records, and give patients the right to obtain copies or have them sent elsewhere. The purchase agreement should state who keeps the records, how long, and how the seller can get access to them later to defend a malpractice claim or audit.
Licensing, payers and Medicare
Professional licenses belong to individuals and never transfer. Facility permits do vary. Ambulatory surgery centers, radiology equipment, controlled substance registrations, laboratory certifications and home health licenses each have their own change-of-ownership rules.
For Medicare, changes of ownership must generally be reported within 30 days of the change, and Medicare contractors advise not filing more than 90 days before the expected sale date. Buyers sometimes enroll as a new provider instead of taking over the seller's enrollment, which can mean a gap in billing. Plan for that gap in working capital.
Home health agencies face a stricter rule. If a home health agency has a change in majority ownership within 36 months of its initial Medicare enrollment or its last majority ownership change, the provider agreement and billing privileges generally do not pass to the new owner, who must enroll and be surveyed as a new agency, subject to limited exceptions (42 CFR 424.550). Check this before marketing a young agency.
Commercial payer contracts usually cannot be assigned without consent, and some payers require the buyer to credential its clinicians from scratch. Credentialing can take months, so start early.
Fraud and abuse rules
When the buyer is in a position to receive referrals from the seller, such as a hospital buying a physician practice, the price must reflect fair market value and cannot reward future referrals. The federal Anti-Kickback Statute and the physician self-referral (Stark) law both apply to these arrangements, and many states have their own versions. Hospitals and larger groups usually obtain an independent fair market value opinion for this reason.
State transaction notice laws
A growing list of states require advance notice to the attorney general or a health agency before certain health care transactions close. California, Indiana, Massachusetts, New York, Oregon and Washington are among them, and some states, such as Oregon, can review and approve deals rather than just receive notice. Thresholds, covered entities and timing differ widely, with notice periods of 30 to 180 days before closing depending on the state and transaction. A small solo sale may fall below the thresholds, but private equity platform deals often do not.
Corporate practice of medicine rules are also changing. Oregon, for example, passed legislation in 2025 to tighten limits on management company control of medical practices. Ask a health care lawyer in your state whether these rules affect your buyer before you sign a letter of intent.
Specialty notes
Dental
Dentistry has the most active DSO market. Hygiene production, specialist services and lease terms carry heavy weight.
Chiropractic
Most chiropractic practices sell to individual chiropractors. Cash-pay and personal injury caseloads are valued differently from insurance-based revenue, and buyers will look at how personal injury receivables are collected.
Optometry
Buyers look closely at optical sales and managed vision plan contracts. Investor-backed platforms are active buyers.
Med spas
Ownership rules matter here. Many treatments are medical procedures, and in states with corporate practice restrictions a non-physician cannot own the medical side outright. Our hospitality business guide covers the retail and service side of similar businesses.
Home health and hospice
Licensure, certificate of need rules in some states and Medicare enrollment dominate these deals, and home health sellers need to check the 36-month rule described above. Hospice buyers should confirm the current CMS ownership-change rules, which have been under revision.
Preparing to sell
Start two to three years ahead if you can. Clean books matter as much here as in an accounting practice sale, where buyers also pay for recurring client relationships. Bring billing and coding into compliance, reduce your personal production share by adding associates, and secure a lease you can assign.
Check the insurance side too. Malpractice coverage on a claims-made policy usually needs a tail endorsement after you stop practicing, and the purchase agreement should say who pays for it. Our guide to insurance agency sales explains how books of business are valued, which is useful background if you are comparing offers that pay over time.
For a practice-specific valuation and buyer outreach, a medical and dental practice broker can compare individual, DSO and private equity offers side by side. If you also own the building, value the real estate separately from the practice. Owners of dental labs or medical device shops should note that those are priced more like manufacturing businesses, on equipment, contracts and regulatory status.
Health care regulation changes often, at both federal and state levels. Confirm licensing, payer and notice requirements with a health care lawyer licensed in your state, and have a CPA model the tax effect of any structure before you sign.