How Much Is My Medical Practice Worth?

The Short Answer

Most medical practices sell for 40%–80% of trailing annual revenue in private-buyer transactions, or 2.5x–5.0x SDE (Seller's Discretionary Earnings). Private equity-backed physician management organizations (PMOs) and hospital systems pay more — often 4x–8x EBITDA — when a practice fits their network strategy.

But these ranges are wide because specialty type, payor mix, associate physician count, and ancillary revenue streams move the number substantially. A cash-pay dermatology practice with two associate physicians and an in-house procedure suite is a fundamentally different asset than a solo Medicaid-heavy primary care practice — even if both report the same top-line revenue.

Valuation Multiples by Specialty (2026)

Specialty type is the single largest driver of medical practice valuation multiples. The table below reflects 2026 private-buyer transaction ranges. PE acquisition multiples run higher across all specialties.

The Four Biggest Value Drivers

1. Payor Mix

Nothing affects medical practice value more than who pays the bills. The hierarchy, from highest to lowest value:

• Cash-pay / concierge: No insurance friction, highest margins, most transferable. Commands maximum multiples.
• Commercial insurance (PPO/HMO): Standard — the baseline most buyers expect.
• Medicare: Accepted by most buyers; known reimbursement schedule, predictable revenue.
• Medicaid: Discounts value significantly. Reimbursement rates 30–50% below Medicare, billing complexity, and potential for regulatory audits make Medicaid-heavy practices less attractive to buyers.

A practice with 40%+ Medicaid revenue will typically trade at the low end of multiples — sometimes below them. A practice with 30%+ cash-pay or out-of-network revenue will trade at the high end.

2. Associate Physician Count

A solo physician practice is highly exposed to key-person risk. If you are the practice, buyers price that heavily. Every associate physician on staff reduces this risk and adds transferable revenue capacity. Practices with 2+ associate physicians command materially higher multiples than solo practices, all else equal.

3. Ancillary Revenue Streams

In-house ancillary services — imaging, lab, minor surgical procedures, infusion, physical therapy, optical — generate revenue at margins far above professional services. They also represent recurring revenue tied to the facility rather than a specific physician. Ancillary revenue is often the difference between a mid-range and top-range multiple.

4. Value-Based Care Contracts

ACO participation, capitated managed care contracts, and PCMH designations add strategic value to primary care practices, particularly as hospital systems and PE-backed platforms look to build value-based care networks. A primary care practice with a strong quality track record in value-based care arrangements is a more attractive acquisition target than one billing purely fee-for-service.

What Private Equity Looks For

PE-backed PMOs have been active acquirers across specialties for the past decade. Their evaluation criteria differ from a private physician buyer's in important ways:

• Size threshold: Most PE platforms require minimum $800K–$1.5M in EBITDA to justify transaction costs. Solo practices typically don't meet this threshold alone — they're often acquired as part of a geographic roll-up.
• Scalability: PE pays for platforms, not practices. They want facilities that can add physicians, services, and locations.
• Physician retention: Post-acquisition physician retention is the biggest risk PE buyers face. Earn-out structures, employment agreements, and partnership tracks are standard deal terms.
• Real estate: PE buyers prefer leased facilities — they don't want to own real estate. If you own your building, structure this as a separate asset and negotiate a favorable leaseback.

How the Valuation Calculation Works

Medical practice valuations use three methods, with results triangulated into a final range:

Revenue Multiple Method

Apply the specialty-appropriate multiple to trailing 12-month collections (not billings — collections is the number that matters). For a primary care practice collecting $1.4M annually at a 0.6x multiple: $840,000 enterprise value.

SDE / EBITDA Method

Start with net income. Add back: physician owner compensation (all forms), depreciation, amortization, one-time expenses, and any personal expenses run through the practice. The result is SDE — what the practice generates for its owner. Apply the specialty multiple. For the same practice with $350,000 SDE at 3.5x: $1,225,000.

Asset-Based Floor

Medical equipment, leasehold improvements, supplies, and accounts receivable minus liabilities. For most practices this produces the lowest value and is used only as a floor, not a primary method.

What Reduces Medical Practice Value

• Solo physician / no associates: The practice walks out the door with you. Buyers discount heavily for key-person risk.
• Short lease with no renewal option: A facility lease expiring in 12–18 months with no renewal creates immediate uncertainty. Leases with 5+ years remaining are strongly preferred.
• Declining patient panel: A shrinking patient panel signals something is wrong — competition, reputation, access issues. Buyers will ask probing questions and adjust offers accordingly.
• Billing and coding issues: Medicare/Medicaid audits, RAC inquiries, or known billing irregularities create contingent liabilities. Address these before entering any negotiation.
• Aging, owned equipment: Outdated diagnostic equipment needs to be replaced by the buyer — a cost they'll factor into price.

A Quick Example: Primary Care Practice

The range reflects the meaningful difference between how buyers weigh revenue vs. earnings-based methods for this practice type. A solo physician practice would land at the lower end; one with an associate MD would justify the higher end.