Practice transitions in 2011 and beyond

I can’t remember there ever being a more interesting time for practice transitions. There are so many things for the transitioning dentist to pay attention to ...

Sarah K. Lynch

For more on this topic, go to www.dentaleconomics.com and search using the following key words: ADA Survey on Dental Practices, transitioning dentist, Sarah K. Lynch.

I can’t remember there ever being a more interesting time for practice transitions. There are so many things for the transitioning dentist to pay attention to and take advantage of – tax law changes, compliance issues, credentialing issues, electronic health care records, digital assets, and banking changes to name a few.

According to the 2008 ADA Survey on Dental Practices, over 29% of all general dental practices had gross revenues of over $1 million! It is absolutely essential to have a skillful transition and financial advisory team focused and ready to assist the transitioning dentist. This way no one ends up on the short end of the stick or with unsavory issues to contend with in the future. Some nuances to pay attention to and investigate are highlighted below.

Digital assets

In addition to the tangible assets and goodwill in a professional practice, many practitioners who have a presence on the Web or use social media must now contend with digital assets. Conveying the practice domain name, Web site URL, and other practice-related social media accounts should be included in the purchase agreement between the parties.

Maintenance and control procedures, passwords, instructions, and proper notification protocol must be documented to protect the parties to the sale and preserve the integrity of the digital assets.

Credentialing

It is essential to be on top of this issue immediately if you are about to purchase a dental practice or join as an associate or partner. Delays in credentialing mean delays in getting paid! Don’t let this issue derail your transition success.

It’s great that you can apply online and secure an NPI number within 24 hours; however, insurance companies can cause delays of three weeks or more to get credentials approved, even though a practitioner may have already been credentialed with that same insurance company while working at a different practice. Improper credentialing or using another provider’s credentials can be construed as fraudulent and can cause problems for all parties.

Electronic health records

For most dental practices this will not be a mandatory issue. The ruling right now is if a practice has a heavy volume of Medicaid patients, it will have to comply with the deadline of year end 2014 to convert to electronic health records or the practice will be penalized with lower reimbursement.

For practices with a heavy concentration of Medicaid patients, there are stimulus funds available from the American Recovery and Reinvestment Act (ARRA). To learn about how to qualify and apply, visit HIMSS.org (Health Information and Management Systems Society), and read the full final ruling as of July 2010.

Banking news

Turn off your televisions. There is no banking crisis in the dental practice lending world. There is still plenty of money available for practice transitions, provided a buyer has excellent credit, and the practice he or she is interested in has adequate cash flow and solid practice metrics.

Seasoned commercial banks and specialty practice lenders provide expeditious service and know the dental market well. SBA lenders are making loans; however, they still take longer to underwrite and approve.

It is important to note that lenders are asking for up-to-the-minute financial statements and balance sheets to get loans approved. There is a 60-day shelf life on those items, so they need to be refreshed. Lenders track the current viability of each and every practice.

If the real estate where the practice is located is being purchased, a qualified professional should prepare a real estate appraisal to facilitate loan approval and a smooth transition. Do not be surprised that with the recent mortgage crisis, lenders insist on hiring an independent appraiser to value any real estate being transferred as part of their own due diligence.

So be well and prosper into the next decade of dentistry. I am looking forward to sharing more insight as new things develop.

Sarah K. Lynch is managing partner at Jim Kasper Associates, LLC, a practice brokerage and transition firm that serves dentists in New England and New York State since 1981. She is coauthor of Profitable Practice. She is the past president of ADS Inc., www.ADStransitions.com. Lynch can be contacted at (603) 355-2260 or sarah@jimkasper.com.

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