Monday, April 11, 2016

CORPORATE DENTISTRY---LOOK BEFORE YOU LEAP!

“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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