Study Findings Signal Some PE-Backed Dermatology Practices May Not Be Performing Well


Public financial statements from 9 dermatology groups backed by private equity (PE) were analyzed by the researchers, who described a significant decrease in debt valuations of these groups both before and during the COVID-19 pandemic.

Results of a new study published in JAMA Dermatology indicate that some dermatology groups backed by private equity (PE) firms may not be performing well financially, with findings showing a lower probability of these loans being repaid in full.

With a heavy presence of dermatology PE-backed groups (DPEGs), researchers of the cross-sectional study are urging dermatologists to be aware of the financial status of DPEGs and understand the potential risks involved with PE.

“During the past decade, [PE] firms have fueled the consolidation of dermatology practices, with more than 30 [DPEGs],” wrote the researchers. “Dermatology is an attractive target and has been recession-resistant during past economic downturns. Dermatology PE-backed groups state there is safety and security in economies of scale; however, dermatologists are concerned about PE’s effect on their profession and patients.”

Public financial statements on 9 different DPEGs from 2016 through 2021 were analyzed by the researchers, who described a significant decrease in debt valuations of DPEGs both before and during the COVID-19 pandemic. However, the group did caution that their findings may not be generalizable, as they were able to collect data on only 9 of the more than 30 existing DPEGs.

Across their sample set, some valuations of debt instruments were discounted in 2018 before significant decreases were seen in the middle of 2019. Between 2016 and 2018, valuations were relatively stable for most DPEGs.

As the COVID-19 pandemic hit the United States in the first quarter of 2020, debt valuations for all studied DPEGs decreased further and more prominently, although modest improvements were seen following the arrival of effective COVID-19 vaccines at the tail end of the year. Between February and June 2020, a significant decrease in debt valuation of 9% was observed. Some of this loss was ameliorated by the announcement of the vaccines, which coincided with an improvement of 2.3%.

“Although DPEGs were able to receive CARES Act provider relief funds and Medicare advance payments, the government structured the Paycheck Protection Program (PPP) so most PE-owned businesses would not qualify,” wrote the researchers. “However, at least 8 DPEGs navigated the affiliation rules of the Small Business Administration, and each received $720,805 to $10,000,000 in forgivable PPP loans.”

According to the researchers, the US Dermatology Partners’ business development corporation’s debt valuation continues to be discounted despite receiving a $10 million forgivable Small Business Administration PPP loan in May 2020 after the group defaulted on a $377 million loan earlier that year. In November 2020, the group dropped to the lowest valuation of the studied DPEGs (Golub BDC, –39.7%; TCG BDC Inc, –48.8%; TCG BDC II, –48.8%).

Other DPEGs analyzed in the study included Platinum Dermatology, Pinnacle Dermatology, West Dermatology, Dermatologists of the Central States, PhyNet Dermatology, Riverchase Dermatology and Cosmetic Surgery, Advanced Dermatology and Cosmetic Surgery, and Oliver Dermatology & Dermatology Associates.

The researchers noted that PE firms have historically underwent highs and lows since the 1980s. For example, in the early 2000s, 8 of the 10 largest publicly traded physician practice management groups declared bankruptcy.


Memon R, Memon A, Francis J, Konda S. Trends in debt valuations of private equity-backed dermatology groups before and during the COVID-19 pandemic. JAMA Dermatol. Published online March 9, 2022. doi:10.1001/jamadermatol.2022.0009

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