How many times have I heard the retiring doctor say, “When I sell my practice, how long do I need to stay with the practice in order to have a successful transfer of my patient base?”
Most host doctors want to transfer their patients successfully to the purchasing doctor with little or no difficulties. Their patients have trusted them for 25 years or more with their dental care. If host doctors tell them to see “Dr. New,” the patients believe them. This puts pressure on an ethical dentist, who respects and accepts the trust that patients have placed in the dental team. The host doctor wants to transfer that acceptance and trust to the new doctor.
The answer to the question of how long the exiting doctor needs to stay with the practice (following the sale in order to facilitate an outstanding transfer of the patient base) is this: until all staff members respect and believe that the new doctor will continue the care that the existing doctor has given to the patients. All staff members must be on board with this transfer.
TRANSFERRING PATIENT LOYALTY
Unfortunately, many purchasing doctors are not privy to the relationship the selling doctor has with the staff. My experience in the field of transferring patient loyalty from one doctor to another has shown that staff/dentist relationships, patient/dentist relationships, and the philosophy of practice directly determine the percentage of patients who will continue to remain with the practice after the sale. Unfortunately, these factors do not show up in the traditional Proforma, patient charts, equipment inventory, and other measurable commodities the selling dentist reveals to the purchasing dentist. It is important to realize that the staff usually understands the subtle and not-so-subtle components that have created and contribute to the overall unique success of the transferring practice.
Of course, there are exceptions to this model of transferability, but be assured that goodwill, which encompasses most of the monetary value of any business, must be perceived by the patient as transferred to the new doctor. An understanding that the staff is “on board” with the transfer can only increase the success of the sale. So, that brings us to the logical question any purchasing dentist needs to explore, which is this: What is the transferability of this practice?
In a perfect world, most purchasers would like to work in the office at least 2 or 3 days before purchasing the practice. Unfortunately, if every purchaser decided to work in the practice, both staff and patients would soon be confused as to who their doctor was and who was going to treat them when they came in for a dental procedure. A revolving door of different doctors in the practice is the quickest way to destroy any goodwill and loyalty patients have toward the selling doctor.
Doctors who understand the mechanics of transferring a patient base spend time and effort communicating with their staff regarding its importance in helping the new dentist. My experience has been that it is impossible during the first month following the sale to have too many staff meetings discussing the roles of everyone and how important implementing verbal skills is to the successful retention of patients. It probably seems obvious to most that when introducing patients to a new doctor, avoid phrases like “Dr. New has purchased the practice,” or even worse to say that “Dr. New has purchased the patient base.” It is best to be honest and straightforward, but state the practice transition as follows: “Dr. New and I, Dr. Retiring, have decided to transfer ownership responsibilities. Dr. New is here today and would like to meet you when I finish cleaning your teeth.” Most patients are not going to say, “Oh no, I don’t want to meet Dr. New.” If they say they would like Dr. Retiring to see the tooth that needs work, then the hygienist can say, “That will be fine Mr. Jones, we can set that up for you in 2 weeks when Dr. Retiring will be scheduled. Of course, Dr. New can examine the tooth and give his opinion to Dr. Retiring.”
FINANCIAL AND BENEFITS CHANGES
Another area to consider, and one that is frequently left to the last minute, is the impact of the change for the staff in its present and hard-earned financial and benefits packages. The selling doctor’s employees often ask me how the new employer will handle retirement plans, office schedule and salary issues, annual reviews, and other compensation arrangements. My more successful clients face this issue head on when informing the staff of the expected sale. Introducing the new doctor to the staff as soon as possible following the sale is paramount for the following reasons:
(1) The staff needs to get to know the new doctor to ensure a successful introduction to the patients. Many patients will ask the employees, “What is Dr. New Like?” Does Dr. New have any children? Where does Dr. New live? Where is Dr. New from?” Patients seldom ask if he has any specialty training or where he graduated from dental school.
(2) If Dr. New is introduced early in the process, most employees would rather work for someone they know than begin to look for another job. Most people enjoy change in the abstract, but when it comes down to even adjusting the days worked, I prefer not to change. Many employees will need to adjust personal schedules to accommodate the purchasing doctor’s schedule. However, there is usually more stress and change when searching for other employment opportunities.
(3) It gives the staff an opportunity to discuss its retirement, insurance, or medical reimbursement plans, salary, and bonus plans. I encourage every purchasing doctor not to adjust or change any of the employee’s benefits. Of course, it is imperative for employees to understand that when a business sells and the new owner begins, all contracts and agreements with the employees of that business are renegotiated. Never assume anything will remain the same.
Most 401K plans and retirement contributions that have been put aside for employees can be rolled over to other retirement investments of the vested employee’s choosing. The new owner is often encouraged to address each employee individually regarding his or her compensation and particular benefits program.
Many times, staff members try to negotiate a raise or increase their benefits during this transfer time. I would not recommend this approach to the transition. At this point, the new doctor is assuming a heavy debt and overhead and cannot appreciate each employee’s positive attributes. Postponing for 6 months before negotiating for a raise is the better approach and often the most successful one.
Further, let’s examine what usually happens with accrued sick days and vacation. These expenses are negotiated in the sale of the practice but usually are allocated between seller and buyer based on the day of closing. If your doctor’s year runs from January through December and the sale occurs in June, the selling doctor is responsible for paying you for any vacation days that you have earned but not taken up until June. The purchasing doctor is responsible for paying you for the future vacation days that you earn.
ACCOUNTING ISSUES
Collections that occur at the front desk and the accounts receivable (A/R) will have to be handled differently, too. This is another negotiated agreement between the new owner and exiting doctor. Changes will need to be addressed in the first staff meeting. If the A/R are purchased by the buyer, then it need not be addressed at all because all money collected goes into the newly created bank account. If the A/R are not purchased, then the front desk or receptionist/bookkeeper simply deposits money into the selling doctor’s old bank account for procedures performed prior to the sale. If the procedure was performed following the sale, then the collected money is deposited into the newly created bank account.
In the majority of retirement sales, the selling doctor works for the purchasing doctor. A bank account is set up for the new practice and the purchasing doctor’s name is on the account. (One way to avoid confusion is to create a new name for the practice other than the new doctor’s name, for example, South Pacific Dental, Smiles for Life, or Atlantic Dental, and make it the name of the new bank account.) If the selling practice has a generic name other than the doctor’s name, the practice name is usually purchased at the time of the sale.
DEMOGRAPHIC CHANGES
The topic of practice transition is particularly pertinent in view of demographic changes that are taking place. As part of the dental profession, it is important that dentists and staff prepare for these changes. A study done by the American Association of Dental Schools and published in the year 2000 predicted that the ratio of patients to dentists will drastically change by the year 2014. One of the most astonishing discoveries of the study showed that in 1998, we had almost 1,000 more dentists entering the work force than were leaving. In the year 2014, we will have approximately 1000 more dentists leaving the work force than entering. This fact alone clearly will change the manner in which dentistry is currently delivered.
While the US population is projected to increase from 272 million to 394 million by the year 2050, the projected ratio of patients to dentists will go from approximately 52 dentists per 100,000 people to 48 dentists per 100,000 people. The number of patients dental offices are currently treating will drastically increase. How do these statistics affect you as a member of a dental team providing care for patients? With (1) larger dental office facilities, (2) more associates and group practices, (3) more tasks delegated to staff, (4) easier processing of dental insurance claims, (5) one-stop shops for dental service ( various specialists working out of a general dental office), (6) the hygiene department of the practice becoming a larger income producer, and (7) possibly a new degree for professionally trained personnel in the dental field, similar to a physician’s assistant.
These data clearly indicates that if you plan to be in the dental profession for the next 20 years, you will be impacted and challenged to work with larger teams, larger staffs, and multidisciplinary practices encompassing all specialists. The role of staff will not only encompass technical superiority but should encompass working for numerous doctors in a group setting.
ENSURING A SMOOTH TRANSITION
The transition of a dental practice is often a frightening experience for all involved. The doctors are not certain they made the correct decision, and staff members are concerned about how this new transition will impact them and their daily routine.
A smooth transition depends on open, trusting communication. Staff members need to remember that this entire process can be a positive experience and can lead to increased benefits to employees who continue to make positive contributions to the team and its patients. In contrast, a staff member who sees this as simply a way finally to “get more” can become discouraged. Without helping the entire team get through a stressful time, employees should not expect the change in ownership to benefit them.
One sure way to enhance your chances of creating a positive experience for everyone is look for the attributes the retiring doctor gave to the practice over the years. Be sure to discuss them with the purchasing doctor. Show what the unique success model was in this practice and suggest that he or she try to emulate it. As you begin working with the new doctor, look for the attributes he or she brings to the practice that might not have been emphasized by the preceding doctor. Emphasize these positive traits to the patients when introducing the new doctor. You could find your services invaluable to the new practice, and rewards are sure to follow.
Dr. Adams is a graduate of Emory University School of Dentistry and is CEO of Southeast Transitions, which provides services in practice valuation, practice sale, candidate location, and as an associate to buy-in agreements, practice merger agreements, practice asset sale agreements, and negotiation/mediation /practice management. He was a private practitioner in Atlanta for 23 years, where he worked 2 years as an associate, 8 years in a partnership, 13 years as sole owner, and as a host for 3 different associates. He is a member of the Institute of Business Appraisers, Practice Valuation Study Club, and Practice Management Consultants Association. He is a fellow of the Academy of General Dentistry, an alumnus of the Pankey Institute, and a member of the American Dental Association, Georgia Dental Association, Northwestern District Dental Society, and Hinman Dental Society.
