Question 1

What drives revenue growth for a medical practice?

Accepted Answer

Practice revenue grows through a combination of: increasing patient volume (more appointments), adding providers (more chairs or exam rooms generating revenue), expanding service lines (adding higher-revenue procedures), improving collections rate (billing efficiency), and fee schedule increases. For a DSO or PE acquisition pitch, showing which levers have driven historic growth — and which have room to run — is as important as the growth number itself.

Question 2

How do acquirers value medical practices?

Accepted Answer

Most healthcare practice acquisitions are valued as a multiple of EBITDA (typically 4-8x for dental, 5-10x for specialty medical, 3-6x for primary care, depending on size and market). Revenue growth rate influences both the multiple (fast-growing practices command premiums) and the EBITDA denominator. A practice with 15% annual revenue growth for 3 consecutive years will be valued significantly higher than one with 3% growth, all else equal.

Question 3

How do I show growth trajectory for a DSO acquisition?

Accepted Answer

Show 3-5 years of annual revenue with CAGR (compound annual growth rate) labeled. If growth has accelerated in recent years, highlight it — acquirers pay attention to trajectory, not just averages. Annotate major growth drivers: new provider added, expanded hours, new procedure line, moved to larger space. DSOs specifically want to understand what drove growth and whether it's replicable across their platform.

Question 4

What revenue growth rates do acquirers look for?

Accepted Answer

Healthcare practice acquirers (DSOs, PE groups) look for practices growing at least 10-15% annually in revenue. Practices growing 20%+ are highly sought after and command premium multiples. Flat or declining practices may still be acquired for strategic reasons (geography, patient base, provider talent), but at lower multiples. Consistent growth is more valued than a single breakout year — it signals repeatable processes and a growing patient base.

Question 5

How do I present revenue in a practice valuation meeting?

Accepted Answer

Present total revenue alongside collections rate (revenue collected as a percentage of charges billed) and revenue per provider. These three metrics together tell the full story: revenue size, billing efficiency, and provider productivity. Show the trend across all three metrics over 3-5 years. If you have room to grow in any metric (e.g., below-average collections rate, or new provider recently added who hasn't reached full patient load), highlight it as upside potential for the acquirer.

Practice Revenue Growth Chart

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FAQ: Practice Revenue Growth Chart