The dermatology space comprises practices that are mainly involved in the medical treatment of skin for disorders such as acne, skin cancer, psoriasis, eczema, cold sores, dry skin, psoriasis, vitiligo, contact dermatitis, rosacea, melasma, and warts. Dermatology practices also perform cosmetic procedures such as facials, skin rejuvenation, Mohs surgery, and dermatopathology. According to the American Association of Medical Colleges (AAMC), as of 2019, there were about 12,516 dermatologists in the US, of which 11,747 were involved in providing patient care1. As per a report by IBISWorld, there were 5,513 dermatologists’ businesses in the US as of 20222. Dermatologists work in group practices or as solo practitioners. The industry is highly fragmented with the top four industry players accounting for only 2% of the total market share3.  Approximately 40 percent of dermatology practices are solo practices and 73 percent have less than five physicians4. Some of the leading players currently operating in the market include private equity-backed companies such as Pinnacle Dermatology (with 90 dermatology practices across the US), Forefront Dermatology (Over 100 clinics), Advanced Dermatology & Cosmetic Surgery (Over 150 locations), and Anne Arundel Dermatology (Over 60 locations). 

Key Demand Drivers 

The aging US population is one of the key factors driving the demand for dermatological care. The population of the United States is aging and according to the US census bureau, the 65-and-older population is projected to reach 83.7 million in the year 2050, almost double in size from the 2012 level of 43.1 million5. A large part of this growth is due to the aging of baby boomers (individuals born in the United States between mid-1946 and mid-1964), who began turning 65 in 2011 and are now driving growth at the older ages of the population. By 2030, the government estimates that more than 20% of the U.S. population will be comprised of individuals over the age of 65, a 50% increase compared to the population in 2010. This is an important demographic tailwind for dermatology practices as an aging population would lead to an increase in skin cancer patients. As per, skin cancer is the most common cancer in the United States and worldwide. Approximately 1 in 5 Americans will develop skin cancer by the age of 70 and more than 2 people die of skin cancer in the U.S. every hour. In addition, more than 5.4 million cases of nonmelanoma skin cancer were treated in over 3.3 million people in the U.S. in 2012, the most recent year new statistics were available6. More people are diagnosed with skin cancer each year in the U.S. than all other cancers combined. An increase in awareness of skin health is also driving demand for dermatologists. 

Source: US Census Bureau 

Shortage of Dermatologists 

It takes approximately 12 years of extensive and specialized training and experience for a dermatologist to become competent in their field. With supply not keeping pace with the rising demand, there has been a shortage of dermatologists in the market. This has led to significant increases in patient waiting time. According to a survey by Merritt Hawkins, a physician search and recruiting firm, the average wait time to see a dermatologist is 32 days in a large metropolitan area, and as much as 35 days in smaller cities. In fact, wait times for a dermatology appointment have increased 46% over the last 10 years7.  According to projections released by the American Academy of Dermatology Association, the country is likely to witness a shortage of dermatologists ranging from 3,800 to 13,400 physicians by 20348.  

The demand-supply gap has resulted in significant burnout among physicians. As per a recent Medscape report, about 29% of dermatologists reported burnout in 2021. A 2015 study in the Mayo Clinical Proceedings found that burnout among dermatologists from 2011 to 2014 rose from 32% to 57%, which happened to coincide with the height of electronic health record (EHR) implementation (2015; 90(12): 1600-1613)9. While 58% of respondents to the Medscape report cited too many bureaucratic tasks as the primary reason for burnout, 28% cited increasing computerization of the practice10.  

In response to the growing physician shortage, practices are increasingly hiring “physician-extenders” (NPs and PAs) to see dermatology patients. The Society of Dermatology Physician Assistants has grown from 49 members in 1994 to more than 4,000 members as of the date of this report. The growing usage of “physician extenders” to treat patients could result in a lower degree of diagnostic accuracy and an overall decline in quality of care. On a positive note, this could lead to reduced wait time for patients and better cash flow for practices.  

This trend of using “physician-extenders” is more prevalent among private equity-owned practices as compared to non–private equity practice. As per a study conducted in 201711, private equity-owned practices employed four advanced practitioners for every ten dermatologists compared with three (3-to-1 ratio) for non–private equity practice.  

Growing Private Equity Interest 

The dermatology sector has garnered significant interest from private equity players over the last decade. As of 2020, there were more than 30 private equity-backed dermatology groups in the country and approximately 15% of dermatology practices were private equity-owned12.  Several factors have contributed to this trend including (1) The healthy growth in volume in the industry driven by the demographic shift in the US, (2) the fragmented nature of the industry with room for consolidation, (3) the recurring nature of some of the procedures and favorable payor dynamics with a stable reimbursement environment, (4) increasing proportion of physicians that are close to retirement and (5) opportunities for achieving economics of scale by using a roll-up strategy. From the buyer’s standpoint, easy access to capital and availability of cheap debt have driven valuation multiples.  

As per a recent study, seventeen PE-backed DMGs acquired 184 practices between May 1, 2012, and May 22, 201813. These acquired practices accounted for an estimated 381 dermatology clinics. Total PE backed DMG acquisitions for the last two years stood at 19. Typical characteristics of a suitable acquisition target include (1) a larger chain with a strong presence in the regional market; (2) a diversified revenue base with exposure to all lines of business including general dermatology, Mohs surgery, aesthetics, and dermatopathology; (3) strong growth prospects and good quality patient care; and (3) dermatology businesses that are scalable and accretive.  


Overall, the underlying fundamentals for the dermatology industry appears positive as of the date of this report. Factors such as the rising geriatric population in the nation coupled with the increasing shortage of dermatologists are likely to fuel demand. As per IBISWorld, the current size of the dermatology market is $7.7 billion. The industry is expected to grow at a CAGR of 3.8% to $8.6 billion by 2026. 

[1] “Active Physicians in the Largest Specialties, 2019.” AAMC,

[2] “Industry Market Research, Reports, and Statistics.” IBISWorld,

[3] “Investment and Consolidation within Dermatology.” Providenthp, Provident Healthcare Partners, 1 Aug. 2019,

[4] Ibid

[5] US Census Bureau, “An Aging Nation: The Older Population in the United States”


[7] “How Long Do Dermatologist Referrals Take? – Walk-in Dermatology.”, 29 Nov. 2021,

[8] “Running Dry:  Identifying the Steps Needed to Ease the Looming Physician Workforce Shortage.”,

[9] Ibid [10] Ibid

[11] Braun RT;Bond AM;Qian Y;Zhang M;Casalino LP; “Private Equity in Dermatology: Effect on Price, Utilization, and Spending.” Health Affairs (Project Hope), U.S. National Library of Medicine,

[12]“’Get That Money!’ Dermatologist Says Patient Care Suffered after Private Equity-Backed Firm Bought Her Practice.”, NBCUniversal News Group, 20 Dec. 2021,

[13] Braun RT;Bond AM;Qian Y;Zhang M;Casalino LP; “Private Equity in Dermatology: Effect on Price, Utilization, and Spending.” Health Affairs (Project Hope), U.S. National Library of Medicine,