Question:
I want to know if a seller has had any legal or ethical issues before I get married to their practice. Is there a way to run a background check on a dentist?
Preston Lovelace, JD, MS
One of the main assets acquired in a practice sale is goodwill, which is basically the reputation of the seller and his or her practice. Consequently, an important part of the due diligence process is determining whether the seller's clinical and personal lives merit the price being asked for the goodwill.
The place to start is with the seller and his or her office. Review patient charts and ledgers to verify proper clinical and billing procedures. Inquire directly about any restrictions on the seller's license or other disciplinary matters. Ask about his or her community involvement and review the practice's social media pages. Search the Internet for the name of the practice and the seller's name and review the results. Inquire about the seller's reputation with other dentists in the area.
The second place to go is your state's dental board. Even if you've already asked the seller about board matters, you should verify his or her answers. Disciplinary matters are public record in most states, so the dental board will inform you of any issues they may have had with the seller. Many board websites allow you to search for the status of a dentist's license and will often have direct links to any consent decrees or other disciplinary paperwork. If your state board does not digitize disciplinary information, call the board office directly to inquire.
Finally, legal or disciplinary matters for the seller do not necessarily make his or her practice undesirable, as this can be a great opportunity for a buyer to go bargain hunting. Owners of distressed practices are often forced to sell their practices in a short period of time if their licenses are suspended. Similarly, bad publicity, particularly the viral Internet kind, can greatly diminish the goodwill of a practice. However, there is still value left in having an equipped office and trained staff. A savvy buyer can often obtain these practices for less than the cost of similarly equipping a new office.
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A. Lee Maddox, DDS, JD
Purchasing a dental practice is not as big a leap of faith as one might expect. By reviewing the financial records of the practice, you can determine trends associated with the practice. While it is not an absolute barometer as to whether the seller has legal or ethical issues, it would be a significant surprise if such issues existed if the annual gross production and collections, number of active patients, and number of new patients remained relatively consistent over a period of time.
If the practice financials and income statements do not tell the whole story of the practice, and you're precluded from communicating with the staff and referring doctors or business partners (e.g., laboratory technicians, etc.), you can perform a public records search. First, check the status of the seller's dental license on the state dental board's website to determine if the seller has any reprimands or suspensions. If dental board problems are listed, many times the accusation and judgment are available for review.
Another method of public searches involves doing a judgment search on the website for the county court system. Finally, a lien search will expose unpaid liabilities, including taxes and judgments. Thankfully, most dentists in this country are ethical people who follow the law. By performing a thorough due diligence of the operation of the practice, you will identify any potential issues, concerns, and/or problems.
Preston Lovelace, JD, MS, is the president of ADS Lovelace and Associates Inc., a practice management and transition firm based in Louisiana. He lectures at the LSU Dental School and many state and local dental associations. Contact him at (225) 614-7700 or [email protected].
A. Lee Maddox, DDS, JD, is the regional director of the western US for Henry Schein Professional Practice Transitions. He can be reached at (888) 685-8100 or [email protected].
