“Corporate Dentistry” is the term used to describe the
second wave of effort by industrial corporations to operate dental
offices. In the late 1980s – early 1990s
the phenomenon was called “Dental Practice Management Companies” (DPMC). At that time few practitioners were willing
to sell their practice to a DPMC, but quite a number were willing to sign a
contract with a DPMC, allowing the management company to take over the
administration of their practice, making all business decisions and the
majority of clinical decisions as well.
It was the interference with clinical decisions, specifying the type of
equipment, instruments, materials, and medicaments to be used, the lab of
choice, the referral pattern, etc., that finally called a halt to large growth
of the corporate effort. The DPMC
concept faded but did not disappear entirely.
In the last few years, the corporate world has again mounted
an effort to turn the practice of dentistry into a corporate profit center,
this time as “Corporate Dentistry” seeks to buy practices and then hire
dentists to provide services, much as any business would hire employees. Active since the early 2000s, the corporate
takeover of entrepreneurial-based dental practices is now a reality. “Corporate Dentistry” is attracting many
new-to-practice, deep-in-student-loan-debt dentists as well as seasoned
practitioners nearing retirement, eager to sell their practices.
The success of “Corporate Dentistry” is supported by
facts---the four largest dental corporations grew by 85% between 2011 –
2015: Aspen Dental grew from 240 offices
in 2011 to 497 in 2015; Heartland Dental grew from 300 offices to 670 during
those years; Pacific Dental increased from 200 offices to 400; and SmileBrands,
from 325 to 400.⃰
Several reasons for such explosive growth:
- A steady supply of venture capital from investors interested in the health care arena.
- A growing number of newly-minted dentists eager for immediate employment so they can begin repaying student loans. Signing bonuses and re-settlement allowances sweeten the corporate offers.
- Corporations have inflated the value of existing practices to encourage practice sales by dentists approaching retirement or those practitioners who simply want to be free of the rigors of practice management.
Mistakenly, many of the dentists who decide to sell are
convinced it will be a benefit to sell to a dental corporation and remain in
the office as an employee without the stresses of practice management. Little does the dentist realize he/she will
just exchange one set of stresses for another; i.e., meeting the
production/collection goals set by the new owner/corporation, delivering care
under regulations set by the new owner; using materials and supplies that are
chosen and purchased by the new owner, working days and hours set by the new
owner, and so on.
Any dentist considering going to work with a dental
corporation or selling his/her practice to a corporate buyer should consider
the following list of questions and concerns and obtain answers before signing
on the dotted line. If you consider sale
of your practice to a dental corporation, I urge you to use this list of
questions as the starting point for any number of additional questions that may
occur to you. Make a written list of all
questions. Get answers in writing or in
a recorded conversation. For you
seasoned dentists, seek full counsel from the professionals who have advised
you through years in practice. For those
of you considering beginning practice as a corporate employee, do your
homework. Calculate your prospective long-term
compensation in private practice VS the more limited compensation you will
receive long-term in a corporate setting, and seek professional advice from
advisors fully knowledgeable about the business aspects dental practice,
associateships, employee status, contract negotiation, and so on.
Key Questions to Ask About Corporate Dentistry
How long has the
dental corporation been in business? Is
it offered for public sale? On which
stock exchange? What is the performance
history of the stock? How was the
corporation funded initially? Who was
involved and are they still associated with the corporation?
Who are the corporate
officers? Managers? What is their background, experience, fiscal
responsibility, location? How is their
remuneration calculated?
How is this dental
corporation different from other similar companies that purchase dental
practices?
May I have the names
of several other dentists who have sold to this corporation or are employed by
this corporation? May I discuss their
experience with them?
Will a neutral
professional do the evaluation of my practice?
Who?
Which practice
management responsibilities are retained by the dentist who remains as an
employee? How is practice management
advice given to the dentist? By whom? What experience, expertise, and credentials
does the manager/administrator of the practice have?
May I see an
employment contract at the same time I receive a purchase-offer contract?
If I am to remain as
an employee, will there be a confidentiality agreement? Will it apply to the corporation as well as
to me? Describe the restrictive
covenant.
What will be the duration of my
employment? What happens if I do not
wish to leave when my employment contract ends?
When I am ready to
retire from practice, how will my replacement be recruited? If employment of my replacement is delayed,
will that affect my departure date or process?
How am I to be
compensated as an employee? Once the
sale is completed, will my compensation remain the same? For how long?
Which benefits may I continue to run through the practice? Which benefits will I receive as an employee?
Will I receive all
fees generated and due prior to the date of closing? Will this be in the sales contract?
If one or more additional dentists or more
auxiliaries are hired, will that affect my compensation?
Will I receive full
purchase price at closing? If not, why
not? If full payment of the practice
evaluation depends on my meeting certain production goals, what happens if I do
not meet those goals for some period of time?
Will my current staff
remain employed when the sale is finalized?
Will current computer, telephone, dental equipment, etc., remain in
place? For how long?
Does the purchasing
corporation operate dental practices on cash or accrual accounting
systems? (If an accrual system is used,
charges are counted as income when made/produced rather than when
collected. This could affect a computation
of compensation based on a percent of production/collection.)
If one of the
advantages of a practice owned by a dental corporation is volume buying of
supplies, what happens if I prefer different brands or different materials than
on the contracted product list?
If I, the practicing
dentist, disagree with some decision or requirement of the owner or
administrator, how is the disagreement mediated? Settled?
Sale of your practice to a dental corporation and/ or
employment by a dental corporation is an important, potentially life-altering
choice. I urge you to seek answers to
these and other questions that may occur to you. This is not a decision to be made hurriedly
or unadvisedly. Get counsel from a
professional familiar with all aspects of your practice and/or the corporate
dental world before you leap into the arena of dentistry as a public profit
center. It will be well worth the time
and any fees involved.
⃰ The McGill Advisory, The Hidden Threat of
Student Loan Debt, Volume 30, Issue 7, July 2015
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