Danger: consolidators ahead!

Consolidation is a new term in the area of dental-office organization and management. Consolidation refers to the linking together, or networking, of separate dental practices. Dentists are not the typical instigatiors of this consolidation process. Rather, nondentists entrepre-neurs have recognized a potential income source in uniting the growing managed-care market need for providers with dentists who are disillusioned and stressed by private-practice problems.

Carol Tekavec, RDH

Consolidation is a new term in the area of dental-office organization and management. Consolidation refers to the linking together, or networking, of separate dental practices. Dentists are not the typical instigatiors of this consolidation process. Rather, nondentists entrepre-neurs have recognized a potential income source in uniting the growing managed-care market need for providers with dentists who are disillusioned and stressed by private-practice problems.

Many consolidated dentists are recruited from practices which have been faced with the choice of avoiding managed care and losing patients or joining plans and losing money. The primary purpose of a consolidated dental network is to provide "one-stop shopping" for the managed-care industry and intensified market leverage (deal-making ability) for the consolidator.

Consolidators understand that managed care works better in a network situation. Instead of dealing with many dentists with many personalities and priorities, the managed-care executive contracts with a consolidated network administrator when providers are needed.

How the network functions

The network administrator evaluates the proposed contract, negotiates the terms and sets up the agreement. Network dentists and their staffs perform as salaried workers of the consolidation company, although some consolidators pay dentists on a percentage of collections or production, with additional monetary incentives offered for reducing expenses.

The medical arena already has seen intense activity in the area of consolidation. Physician practice-management businesses, as publicly-held companies, have been steadily increasing. These physician networks have established themselves as bargaining entities, sometimes bypassing existing managed-care plans and negotiating contracts for care directly with employers.

In dentistry, the consolidating companies are just beginning to grow, fueled by venture-capital investors who expect dental-practice management to be the next area of potential quick profit. Most consolidation companies look to purchase group practices first, with the acquisition of smaller or solo practices next. The management of these practices is under the control of the consolidator, who makes decisions concerning expenses, practice goals, staff composition and managed-care contracts. Decisions regarding actual treatment remain with the dentist, although the parameters for accomplishing that treatment may be under corporate control.

Volume and utilization

Consolidators understand that concepts of volume and utilization are the keys to making a profit under managed care - volume in that many more procedures need to be accomplished when reimbursement is low and utilization in that the fewer managed-care contract patients who receive noncopay treatment, the better the practice bottom line. In addition, the use of the least expensive dental staff (fewer hygienists, more dental assistants), laboratories and materials is important.

New dentists do not seem to be a current target of the consolidators, who typically focus on existing-practice acquisitions; however, it is easy to see that recent graduates might find the concept of working for a network appealing. The problems and expenses associated with setting up a practice would be eliminated, as well as the necessity of dealing with business decisions.

Specialists under a consolidated network system are in a unique position. Rather than receiving referrals from dentists throughout the community, specialists within the network must be supported by the network generalists. (Typically, non-network generalists avoid referring to network specialists.) By having all dental services available, consolidators can save money for managed-care companies.

Consolidators also focus on Oeconomies of scale,O which translates into Osaving money by buying large.O If a consolidator has 10 dental offices within a given location, supplies, lab expenses and equipment costs may be reduced by volume purchasing.

Obstacles to consolidation

Consolidation is not without obstacles. While physicians have been faced with almost complete assimilation into managed care, dentists have not accepted the plans on a large scale.

The fact that dentistry has many elective aspects ? and that most dental treatment is performed by general dentists ? has allowed dentists to provide many cost-saving aspects of managed-care principles without becoming involved in managed-care plans.

Questions regarding legal liability for treatment also remain to be explored. Managed-care companies usually cannot be directly sued for malpractice because they do not practice dentistry, but rather OarrangeO for treatment or pay for services. Consolidation companies may work with network dentists as independent contractors or employees. If a dentist is an employee or OagentO of a company, that company may be held liable.

There also are questions in many states concerning the legality of nondentists owning dental practices. Each state Dental Practice Act has statutes regarding such ownership. Challenges to the law are expected to be made by consolidators in Odentist-ownership onlyO states.

Carol Tekavec, RDH, is the author of two insurance-coding manuals, co-designer of a dental chart and a national lecturer. Contact her at (800) 548-2164 or at www.steppingstonetosuccess.com.

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