The Feasibility Study Consultant's Role in Medical and Dental Practice Feasibility Studies

Healthcare is the safest broad sector in SBA lending. Dental offices charge off at roughly 3.76% and physician offices at 4.75%, against a whole-programme average near 15.8%. That statistic is true, and relying on it is the most common analytical error in practice finance — because loan size predicts default better than sector does, and the variation hiding inside "healthcare" is wider than the gap between healthcare and everything else.

The number that actually predicts default

The sector figures are real. Analysis of SBA loan records puts offices of dentists under NAICS 621210 at a 3.76% charge-off rate and offices of physicians under 621111 at 4.75%. PeerSense's 2026 database of more than 1.28 million resolved 7(a) loans puts the whole-programme average near 15.8%, with food service above 20% and healthcare the lowest of any sector.

Two caveats belong on those figures immediately. The dental and physician charge-off rates track originations from 2008 to 2012 monitored through June 2023 — a Great Recession vintage, published in August 2023, and now more than two years old. And they are sector averages weighted heavily by larger, stronger loans.

Loan size is the stronger predictor. From the same PeerSense data:

• Loans under $150,000 charge off at 20% to 30% regardless of industry
• $1 million to $2 million: 10% to 15%
• $2 million to $5 million: 8% to 13%

A first-time dental buyer taking a $1.2 million acquisition loan sits in a genuinely low-risk cohort. A $140,000 startup loan to a de novo practice does not, and the sector average tells you almost nothing about it.

For a feasibility consultant this is the framing that matters. The engagement is not to confirm that healthcare is safe. It is to establish which cohort this specific transaction belongs to — and the variables that decide it are provider concentration, payer mix, panel transferability and capitalisation, not the NAICS code.

What changed on 1 June 2025

SOP 50 10 8 reset the rules for practice acquisitions, and any model built on pre-2025 structuring assumptions is describing deals that can no longer be done.

A mandatory 10% equity injection on all startups and complete changes of ownership, computed on total project cost.

Seller notes count toward that injection only on full standby — no principal and no interest for the entire life of the SBA loan — and are capped at 50% of the required injection. On a 10% requirement, that means a seller note can cover at most 5%, documented on SBA Form 155.

Partial buy-ins must be structured as stock purchases, and any seller retaining equity provides a two-year personal guarantee. This is a substantial change for the associate-buys-in transactions common in both dental and medical practice.

Tax transcript verification and hazard and life insurance requirements reinstated.

Full US citizen or lawful permanent resident ownership.

The SOP broadly reinstates pre-2021 underwriting. The practical effect is to narrow the buyer pool for thinly capitalised first-time buyers, and to reduce the flexible seller-financing and rollover-equity structures that had been closing the gap.

The lending picture

Dental is one of the largest categories in the programme. In calendar year 2025, dental practices under NAICS 621210 received $739.0 million in SBA 7(a) approvals across 811 loans — an average of $911,000 at an average interest rate of 9.19%, roughly 1.13 points below the 10.32% national average, per GoSBA Loans' aggregation of SBA disclosure data published February 2026.

In FY2024, dentists ranked as the fifth-largest industry in the entire 7(a) programme, which funded over $31 billion across 70,242 loans that year. The dental loan-size distribution: roughly 39% under $250,000, 14% between $250,000 and $500,000, 17% between $500,000 and $1 million, and 30% over $1 million.

Offices of physicians under 621111 drew an estimated $318.6 million in 7(a) funding in CY2025. That figure is less well corroborated than the dental data and should be treated as indicative.

The lender field is concentrated and specialised. Live Oak Bank accounted for 31.6% of dental SBA-guaranteed dollar volume from FY2020 through partial FY2026 per Private Practice Research, and led all dental lenders in CY2025 with $259.4 million across 138 loans. The bank states it has financed over $1.5 billion in dental practice loans. The rest of the 2026 field includes Provide by Fifth Third, Bank of America Practice Solutions, Huntington, and Panacea Financial, the ADA Member Advantage provider aimed at younger dentists.

That specialisation matters to the consultant. These lenders have financed thousands of practices. They will test provider concentration and payer mix without being prompted, and a study that does not address both has left the two central questions to the credit analyst.

Current pricing. Prime stood at 6.75% as of March 2026. Practice acquisition 7(a) loans price around Prime plus 2.25% to 2.75%, typically ten-year fully amortising, with the strongest dental borrowers negotiating toward the lower end and some lenders offering up to 100% financing on the best credits.

The acquisition market in 2026

Consolidation is real and smaller than the coverage suggests. Per ADA Health Policy Institute, 16.1% of US dentists were DSO-affiliated in 2024 — an 8.9 percentage point rise from 7.2% in 2015 — with over 30% in some group or DSO arrangement. DSO platforms complete an estimated 800 to 1,200 affiliations a year, roughly 5% to 8% of practices annually, with specialty practices outpacing general dentistry.

Private-equity penetration specifically is lower than most people assume. Research by Nasseh and ADA HPI puts PE-affiliated practice share at 3.0% in 2021, up from 1.6% in 2015.

Heartland Dental, backed by KKR and Ontario Teachers', is the largest platform, reporting more than 1,900 affiliated offices across 39 states and the District of Columbia, roughly 3,100 supported doctors, 11.5 million patient visits in 2025, and 75 de novo openings that year.

Transaction volume: PitchBook logged roughly 340 US dental M&A transactions in 2024 and 310 in 2025.

Dental valuation multiples in 2026:

• Single-doctor and add-on practices: roughly 5x to 8x adjusted EBITDA
• Associate-led groups at $1 million to $3 million EBITDA: 7x to 9x
• Emerging multi-location platforms at $3 million to $5 million: 9x to 11x
• Platforms above $5 million: 10x to 12x and higher

Large Practice Sales reported 2024 outcomes ranging from 6.75x to 11.25x EBITDA, reaching up to 375% of collections at the top.

Private-buyer and SBA transactions are usually expressed differently — commonly 60% to 80% of trailing twelve-month collections. A practice collecting $1.5 million typically attracts a private-buyer offer of $900,000 to $1.2 million.

DSO offers are composite structures, typically 60% to 80% cash at close plus rollover equity or an earnout. Comparing a DSO headline multiple to a private cash offer compares two different things.

Medical practice valuations run on different arithmetic. Median enterprise value to EBITDA for publicly traded healthcare services fell to approximately 11.5x in 2025 from 14.5x the prior year per FOCUS Investment Banking. Physician practices sell for roughly 0.5x to 1.0x revenue at the smaller end, or 6x to 12x EBITDA. Primary care groups run 3x to 6x. Surgical specialties command roughly a 26% premium over primary care. Cardiology, ophthalmology and gastroenterology see the most aggressive bidding, and practices above $5 million EBITDA trade two to four turns above smaller add-ons.

Per FOCUS, "Private equity remains the dominant buyer in physician practice M&A, representing more than 90% of transactions," and "in 2025, private equity firms executed at least 1,029 tracked healthcare deals in the U.S." Global healthcare PE deal value exceeded $191 billion in 2025, a record.

Multiples compressed from the 2021 peak and stabilised through 2025 and 2026. The compression reflects higher debt cost and more disciplined underwriting, and it shows up as a widening gap rather than a uniform markdown: buyers now discount owner-dependent, thin-hygiene and short-lease practices far more aggressively than they did in 2021.

The succession pipeline is real but slower than marketed. There were 202,485 professionally active US dentists in 2024, at 59.5 per 100,000 population, ranging from 40.2 in Arkansas to 103.2 in the District of Columbia. Per HPI's 2025 workforce update, "In 2024, the average age of retirement among U.S. dentists was 68.7, up from 64.7 in 2001. The average career span in 2024 was 41.3 years." Some states have over 40% of dentists aged 55 and above.

Dentists are retiring four years later than they did in 2001. The wave is coming; it is arriving more slowly than the transition-services industry implies.

Provider concentration: the deal-killer

This is the single most consequential variable in a practice transaction and the one a generic commercial analysis misses entirely.

Practices where the owner produces more than 90% of doctor production trade at a discount, and owner concentration became a leading reason corporate buyers walked away in 2025 and 2026. The buyer is acquiring a revenue stream that leaves the building on closing day.

Adding even a part-time second provider materially reduces the risk and is one of the cheapest pre-sale improvements available to a seller.

Hygiene is the other half of the answer. The ADA baseline puts hygiene at roughly 25% of production; consultants target 30% to 33%; the value sweet spot sits at 30% to 35%. Hygiene revenue is recurring, systematised and does not depend on the departing dentist. It is the practice's recall engine, and a strong hygiene programme is simultaneously a valuation driver and a genuine risk mitigant.

Healthy staffing ratios as a share of net collections: doctor compensation 22% to 25%, hygiene compensation 8% to 9%, assistants around 8%, front office 7% to 8%.

Short lease runway suppresses value. Under five years remaining is a documented multiple-suppressor, and it is frequently overlooked until diligence.

Non-competes: the regulatory position has settled

This changed materially and the resolution favours transaction certainty.

The FTC's 2024 nationwide non-compete ban never took effect. A Texas federal court set it aside in Ryan LLC v. FTC in August 2024. The FTC voted 3 to 1 on 5 September 2025 to drop its appeals and accede to vacatur. In February 2026 the rule was formally removed from the Code of Federal Regulations at 16 CFR Part 910.

Enforceability now rests entirely on state law, which ranges from near-total prohibition in California and by statute in Minnesota to broad enforcement elsewhere.

For feasibility purposes this restores the seller and associate non-compete as a transition-protection tool wherever state law permits, and removes the regulatory uncertainty that hung over 2024 and 2025 transactions. It also means the analysis has to be state-specific rather than assuming a federal position.

Transition

Acquisitions typically experience 10% to 20% patient attrition on transition, steepest where the seller exits abruptly, with practices generally stabilising within six to nine months.

First-time buyers frequently do not immediately replicate seller production. The defensible assumption is a temporary dip followed by twelve to twenty-four months to return to prior levels — not a straight continuation of the seller's numbers from month one.

Payer mix, and the quiet profit-killer

Two practices with identical patient volume and identical procedure mix can collect materially different revenue. The variable is payer mix, and the conventional wisdom about which payer causes the problem is wrong.

PPO write-offs run 30% to 45% of the full fee schedule. Dental Intelligence puts the average PPO adjustment at 42% to 45% across general practices; the ADA Survey of Dental Fees basis is more commonly cited at 30% to 40%. Veritas Dental Resources estimated in 2025 that a career dentist writes off $3 million to $6 million in PPO adjustments.

Medicaid reimburses below 50% of dentist charges and below 60% of private insurance, per ADA HPI's December 2025 analysis. Dentist Medicaid and CHIP participation stands at 41% as of 2024 and has been stable for a decade, despite 38 states and the District of Columbia expanding adult benefits. State variation is extreme — Minnesota adult reimbursement runs around 38.6% of charges.

And here is the counterintuitive part. Levin Group data cited by Veritas Dental Resources in 2025 indicates that heavy PPO participation reduces profitability by more than 20%. A practice collecting $1 million gross may net only $600,000 to $700,000 after adjustments.

Medicaid is the visible discount. PPO is the invisible one, and at scale it costs more. A "clean commercial PPO" practice is not automatically a strong practice, and a consultant who treats PPO participation as neutral has skipped the analysis that most affects the earnings the loan is sized against.

Payer concentration is a separate risk. Medicaid or HMO concentration above 40% of collections compresses multiples by 0.5x to 1.0x, and any single plan above roughly 40% of collections is a genuine underwriting concern.

On the medical side, one distinction is worth stating carefully because it is routinely conflated. Medicare Advantage plans are widely reported to be overpaid relative to traditional Medicare — MedPAC has put the figure around 20% in recent analyses. That is a plan-level benchmark reflecting favourable selection and coding intensity. It is not what physicians receive. The best available research on physician payment, by Trish and colleagues in JAMA Internal Medicine, found MA paying 91.3% to 102.3% of traditional Medicare rates for physician services, against commercial at 107% and above for office visits. That study used 2007 to 2012 claims and no newer peer-reviewed replication was found, so it should be treated as dated — but the direction is the point, and the plan-level figure should never be used as a proxy for practice revenue.

On whether DSO affiliation actually delivers better reimbursement, the evidence is mixed. Scale negotiation is real in some markets and materially overstated in DSO marketing. An independent buyer's projection should not assume reimbursement available to a fifty-location group.

What the consultant actually does

Establishes demand, and corrects the shortage narrative

The dentist shortage story is largely wrong, and getting it right is analytically useful.

HPI projects dentist supply per capita to be stable to rising through 2040. The shortage is a distribution problem, not an aggregate deficit.

The distribution problem is severe and measurable. Per HRSA data as of 31 December 2025:

• 7,443 dental Health Professional Shortage Areas, covering 63.7 million people, with 32.93% of need met and 10,744 additional dentists required to remove the designations
• 8,467 primary medical HPSAs, covering 92.3 million people, with 48.18% of need met and 15,604 additional practitioners required

The primary care HPSA threshold is 3,500 residents per full-time-equivalent physician, or 3,000 to 1 in high-need areas.

So the demand analysis targets designated shortage areas rather than invoking a national shortage. National ratio: 59.5 dentists per 100,000, ranging from 40.2 in Arkansas to 103.2 in DC. But a favourable ratio with universal open capacity is not an underserved market — the analysis combines the ratio with HPSA designation and travel-time work, of the kind HPI uses in its fifteen-minute-to-a-dentist geographic analysis.

Establishes the panel and its transferability

Active patient count means patients seen within the last eighteen months, not everyone in the records.

New patient flow benchmarks at 20 to 30 per month for a solo general practice, with the acquisition source identified — referral, insurance directory, online, or physician referral for specialty practices. A practice dependent on the departing owner's professional referral network is buying relationships that may not transfer.

Recall and reappointment rates distinguish a practice with systems from one with a following.

Production benchmarks in current use: production per visit $250 to $350; production per hour $350 to $500 and above; collection rate target 98% or better against an industry average around 95%; case acceptance 60% to 85%.

Models the ramp, for de novo and for acquisition

De novo: break-even at twelve to twenty-four months, with some sources putting it at eight to eighteen. Stabilisation at eighteen to thirty-six months. Most practices need 1,000 to 1,500 active patients, or roughly 80 to 150 visits a month, to break even.

Two findings materially change de novo outcomes. Overstaffing is the single most common reason startups struggle to reach break-even — a lean two to three FTE opening team shortens the timeline substantially. And pre-credentialing with eight or more plans before opening roughly doubles the month-twelve break-even rate.

Acquisition: stabilisation typically within six to nine months, with 10% to 20% transition attrition modelled explicitly and a 45 to 60 day collections lag.

Builds the cost structure

Dental overhead runs 59% to 67% of collections, with a national median around 62%. Healthy sits at 55% to 65%. Above 70% indicates distress. Below 55% may signal underinvestment rather than efficiency — which is a genuinely useful two-sided test.

By category, as a percentage of collections: staff 25% to 30%, facility and rent 7% to 10%, dental supplies 5% to 8%, laboratory 5% to 8%, marketing 3% to 5%, equipment and technology 3% to 5%, administrative 4% to 6%.

New practices run 70% to 80% overhead in the first twelve to twenty-four months, moving toward 60% to 65% within roughly two years. Large groups can push below 55% on scale.

EBITDA margin is the valuation lever. Healthy sits at 18% to 22%. A 2024 analysis of 847 acquisitions found practices above 25% EBITDA margin commanded multiples roughly 2.3 times higher than those below 20%.

Specialty varies the benchmark. Paediatric dentistry commonly runs 48% to 55% overhead; prosthodontics 55% to 65% on laboratory dependence.

Occupancy should run around 5% of production, with anything above 7% to 8% a concern. Marketing at 3% to 5% for an established practice, higher for a de novo.

On the medical side, MGMA's 2025 Margin in Motion report shows operating costs outpacing revenue across ownership models. A June 2026 MGMA Stat poll found 84% of groups reporting higher year-to-date costs with only 47% reporting revenue growth, and MGMA estimates practices may need 6% or more additional gross revenue simply to hold margin. Hospital-owned practices reported the highest operating costs for a third consecutive year.

Tests what actually moves the outcome

Generic sensitivities are not useful here. The ones that are:

• Provider departure — coverage if the highest-producing associate leaves in year two, including recruitment cost and production downtime
• Panel attrition — coverage at 85%, 80% and 75% of the seller's collections retained
• Buyer production shortfall — where the buyer is a first-time owner, coverage if they produce at 85% of the seller's rate
• Payer contract renegotiation — what a 10% reduction in the dominant PPO fee schedule does
• Credentialing delay — for de novo, what an additional ninety days before in-network billing does to working capital

Capital cost and the credentialing gap

Dental buildout runs $150 to $400 per square foot, and dental-specific construction runs 30% to 50% above standard commercial because of plumbing, vacuum, compressed air and lead shielding.

Per operatory: $35,000 to $55,000 for buildout excluding chair and equipment; $75,000 to $140,000 turnkey. Equipment runs $50,000 to $100,000 per operatory, with the major line items being chairs and units, digital radiography and CBCT imaging, CAD/CAM, sterilisation, and practice management software at roughly $100 to $400 per month per provider.

Total de novo dental project cost typically runs $600,000 to $950,000 and above in 2026, against an ADA baseline nearer $500,000 that construction and equipment inflation has overtaken. The budget splits roughly: equipment and technology 43%, buildout 24%, working capital 19%.

A de novo medical practice varies widely by specialty but generally sits in a comparable $500,000 to $1 million-plus range once buildout, equipment and working capital are included.

Working capital of six months or more — $100,000 to $150,000 — is essential, and it is the line most commonly cut. It is also the line that most reliably causes failure when it is cut.

The credentialing gap

This is the sharpest cash-flow risk in a de novo practice and the most avoidable.

A practice cannot bill a payer in network before it is credentialed with that payer, and credentialing routinely takes months. Starting late is described in the practice-management literature as the single most costly error available to a new owner. Even where credentialing is timely, a 45 to 60 day insurance payment lag follows.

A revenue model that begins collecting in month one from plans the practice has not yet joined is wrong in a way a specialist lender will identify immediately. The gap has to be funded explicitly, and pre-credentialing with eight or more plans before opening is the mitigation with the best documented effect.

Technology

CBCT, CAD/CAM and AI-assisted diagnostics carry real capital cost and real refresh cycles. They pay back only where the case mix — implants, aligners, restorative conversion — actually monetises the capability. Technology purchased as marketing rarely returns its cost, and a technology-heavy projection needs the procedure volume behind it.

Where practice projects fail

De novo failures are driven, in order: wrong location, which is cited as the single most common cause; overstaffing; undercapitalised working capital; and late credentialing.

Acquisition failures come from inherited team dysfunction, outdated equipment requiring immediate capital reinvestment, transition attrition, and embedded billing and collections problems that were invisible in the seller's summary numbers.

The most common reason deals re-trade downward in diligence is aggressive EBITDA add-backs that do not survive scrutiny.

One distinction worth holding onto. SBA charge-off rates measure loan performance, not business survival. A practice can fail without a charge-off where collateral or personal assets cover the balance, and a loan can charge off while the business continues. The two questions are related and they are not the same, and a feasibility study answers the second.

How the programmes differ

SBA 7(a). The dominant route below $5 million, with a specialist lender community that knows this sector well. SOP 50 10 8 sets when a third-party study is expected — including changes of ownership and businesses under two years old, which covers most practice transactions.

SBA 504. Applies where the transaction includes real estate. A practice buying its building alongside the practice may use both programmes, and the analysis has to support the property as well as the operation.

USDA B&I. Available in communities of 50,000 or fewer under 7 CFR Part 5001, the consolidated OneRD rule effective 1 October 2020. Current guarantee tiers: 80% for loans up to $5 million, 70% from $5 million to $10 million, and 60% above $10 million. Standard ceiling $25 million, up to $40 million for certain rural cooperatives. There is no credit-elsewhere test, but collateral is generally required at 100% or more of loan value with personal guarantees from owners holding 20% or more. FY2025 saw a record $3.5 billion appropriated.

Medical and dental practices are explicitly eligible, and the borrower's headquarters may sit in a larger city provided the financed project is in an eligible rural area. Given 7,443 dental HPSAs covering 63.7 million people, the community impact argument for a rural practice is unusually strong rather than stretched.

USDA's coverage definition is stricter than commercial practice — EBITDA less reasonably expected replacement capital expenditures over total debt service. On an equipment-heavy practice with imaging and CAD/CAM on a refresh cycle, that deduction is material.

Rural Health Clinic and Federally Qualified Health Center status changes the analysis fundamentally, through enhanced or cost-based Medicare and Medicaid reimbursement and access to USDA Community Facilities financing, which prioritises populations up to 20,000. FQHC look-alikes and RHCs meeting National Health Service Corps site requirements are automatically designated in HPSAs. Designation status has to be resolved before revenue modelling begins, not after.

Conventional. Specialist practice lenders understand provider dependency and payer mix without prompting and will test both.

In all cases the study must be prepared by an independent third party with no financial interest in the transaction — which excludes the practice broker, the seller and the equipment vendor.

What a lender is reading for

Who produces the revenue, and are they staying? Owner production share, hygiene share, associate arrangements, and the transition plan. This is the first question and frequently the whole question.

What does the practice actually collect, and from whom? Gross production is not revenue. Collections by payer, net of write-offs, with PPO adjustment quantified rather than assumed.

Is the equity injection sourced correctly? 10% minimum, with seller notes on full lifetime standby and capped at half.

Does overhead sit in the band? 55% to 65% for a mature practice, with anything below 55% questioned rather than praised.

Has the credentialing gap been funded? For de novo, this is the working capital question.

Can the buyer produce at the level assumed? Particularly a first-time owner stepping into a founder's book.

Does it cover through the transition, not only at stabilisation?

Frequently asked questions

Sources

• SBA Standard Operating Procedure 50 10 8, effective 1 June 2025.
• SBA 7(a) loan disclosure data, as aggregated by GoSBA Loans (February 2026), CapTec USA and PeerSense (2026).
• Private Practice Research, The State of Private Practice 2026, 15 May 2026.
• American Dental Association Health Policy Institute — U.S. Dentist Workforce 2025 update; Dental Care in Medicaid Programs, December 2025; Financial incisors, December 2025; DSO affiliation data.
• Nasseh, K., and ADA HPI, private-equity penetration in dental practice.
• FOCUS Investment Banking, Physician Practice M&A Multiples 2026.
• PitchBook US dental M&A transaction data, 2024 and 2025.
• Large Practice Sales transaction outcome data, 2024.
• Health Resources and Services Administration, Health Professional Shortage Area designation data, Q1 FY2026, as of 31 December 2025.
• Dental Intelligence PPO adjustment data; Veritas Dental Resources, 2025, citing Levin Group.
• Trish, E. et al., JAMA Internal Medicine, 2017, Medicare Advantage physician payment analysis (2007–2012 claims).
• MedPAC Medicare Advantage benchmark analyses, 2025 and 2026.
• Medical Group Management Association, Margin in Motion, 2025, and MGMA Stat poll, June 2026.
• 7 CFR Part 5001, USDA OneRD Guarantee Loan Initiative.
• Ryan LLC v. FTC, and Federal Trade Commission non-compete rule proceedings, 2024 to 2026.

Prepared by feasibility-study-consultant.com. Several figures carry vintage caveats stated in the text — in particular the dental and physician charge-off rates, which reflect 2008 to 2012 originations, and the Medicare Advantage physician payment analysis, which uses 2007 to 2012 claims. Valuation multiples, overhead benchmarks and buildout costs are drawn substantially from brokerage and advisory sources with a commercial interest, and vary by market. Non-compete enforceability, Medicaid reimbursement and dental practice regulation are state-specific. Programme requirements are set by SBA and USDA and are periodically revised; confirm current requirements with the participating lender. This is not legal, tax or lending advice. Last updated: August 5, 2026.