Thursday, June 18, 2015

What’s Most Important To You When Looking To Purchase A Practice ? Part III

This is part three of my five part blog on “What’s most important to YOU when looking to purchase a practice ? In case you missed part I, there’s a great thread on www.dentaltown.com asking this question and it got a lot of great feedback from people with different perspectives. As a reminder, I won’t be telling what SHOULD be important to you, that’s for each doctor to decide and prioritize for themselves. I’m just giving you some food for thought as you contemplate purchasing a practice.
Part I and II revolved around the revenue and expense portion of the practices cash flow and assessing the asking price and practice performance. This blog, part III will address the people issues related to a practice you want to purchase, not only the staff of the practice, the patient base as well.
In part I we addressed the insurers and ppos that these patients may be covered by and how that impacts revenue, however, what about the who, what, where, and how many in terms of the patient base. Lets drill down into these issues and why it may be important for a prospective buyer to consider the details about the patient base.
One statistic that many people feel is important when looking at a practice is what the new patient (NP) count is. Instead, sometimes its actually more important to know what the NP count can be. The problem is with some practices the seller has already slowed down and reduced their work schedule and even their production pace. This means they likely won’t be aggressively looking for NPs and really don’t have the need for them. Therefore the NP count that the seller has may seem terribly low, too low to even consider the practice. What you should be considering if these are the facts is what the NP count can be and do to get an idea of this you’ll need to do some form of demographic analysis of the area. This can be way more enlightening and important in certain situations than what the NP count was.
Another issue involving the patient base is the “active” patient count and there’s a lot of importance placed on it, rightly so. However, there’s really no set definition of an “active” patient that the dental industry can agree on and many times the seller and their selling advisor will exaggerate what the “active” patient count is. When assessing a practice here’s my suggestion on determining what the “active” patient count is, JUST for purchasing a practice. Look at the hygiene schedule ! To me, an “active” patient is one that comes in regularly for their hygiene recall appointments. So take a look at the past six or twelve months and count the number of unique patients that have come in for their recall appointments and identify any that are first timers. The rest are likely your “active” patients. That doesn’t mean there aren’t many more patients of the practice, those that still view the practice as their dental home, however, these patients only come in when they have an issue or need something, I don’t consider them an “active” patient….they’re just a patient of the practice. The other benefit of identifying the “active” patients is to understand the size of the patient base which becomes important as it impacts the buyers ability to thrive within the practice after the purchase.
You should also look at other demographic aspects of the patient base- A. Where are they coming from (zip code analysis), B. What are their ages (an age analysis), C. Their social economic background , D. Ethnicity, and E. Education and income analysis. A and B can be assessed thru the practice management software whereas C, D and E will likely come from a demographic analysis of the area.
Of course there’s other “people” related to the purchase of the practice, there’s the seller, their advisors and the staff. We’ll address the advisors in a later blog so we’ll end this blog on the team of the practice, the seller and their staff.
With respect to the seller, you should learn as much about them as possible. Why are they selling, what kind of personality do they have, what is their practice philosophy and does it match yours, after the sale what are their plans, so they need to continue to work – do you want then to continue to work, are your personalities similar and lastly, how did they approach treatment planning and how does that compare to your approach. This becomes very important as you begin to meet the patients. If you have a very passive seller who took a “wait and see” approach to treatment planning you might offend a lot of patients if you’re completely opposite and try to push a lot of treatment immediately onto the patient. If your personalities are vastly different you may also find it difficult working with the staff as they’ve become use to working for the seller.
Speaking of the staff, while we addressed their wages and expenses in part II of this blog series lets talk about some of the other staff issues you need to know about.
You want to learn as much as you can about each staff member as well. Who are they, how long have they worked at the practice, how many hours they work, what’s their pay rate, what benefits to they receive, etc. You also need to know if they’re related to the seller or have any other type of relationship with them. Generally you want to provide them a ninety day probationary period after settlement to see if they’ll be able to work with you. While it’s generally advisable not to make any drastic changes to the staff after you settle, if you find you have a very toxic person that’s one of the exceptions to the rule….you have to let them go.

The people surrounding a transition can go a long way to make or break a practice so you need to make sure you have an understanding of the people that can impact the practice and the people you will impact when you take over the practice. Part IV will cover the facilities aspect of the practice purchase transaction, not only the physical space, but where it is and the demographics of the area.

 Written by Tim Lott, CPA, CVA

Send your questions to tlott@dentalcpas.com
For more information on our services, please feel free to contact one of the members of the Dental CPA team by calling or emailing info@dentalcpas.com.

Friday, May 15, 2015

What’s Most Important to You When Looking to Purchase a Practice? Part II

This as part two of my five part blog on “What’s most important to YOU when looking to purchase a practice ? In case you missed Part1, there’s a great thread on www.dentaltown.com asking this question and it got a lot of great feedback from people with different perspectives. As a reminder, I won’t be telling what SHOULD be important to you, that’s for each doctor to decide and prioritize for themselves. I’m just giving you some food for thought as you contemplate purchasing a practice.
Part I revolved around the revenue portion of the practices cash flow and assessing the asking price and practice performance. We will discuss the expense or overhead portion of the practices cash flow in this blog.

You’ll want to assess the cash flow that you will have available for the practice in which you’re considering, not necessarily what the seller had. While there are expenses you’ll have very little control or will have very little impact on YOUR cash flow, like rent, utilities, malpractice insurance, merchant services, etc., there are other expenses you’ll have the ability to control. Some of these are non-discretionary expenses like advertising, dental supplies, lab and the like and others are more discretionary ,for instance, retirement plans, computer expenses and support, office expenses and supplies, some continuing education and dues and maybe wages (I’ll elaborate more on practice wages below). There are also other purely discretionary expenses or owners perks that we don’t consider as required to operate a dental practice like the owners automobile expenses, meals and entertainment, some travel and maybe some family wages. Some of these purely discretionary expenses are easy to identify, others maybe be buried in categories like office expense and support, advertising, telephone, insurance, etc. . As a buyer, part of your due diligence is your ability to dig deeper and drill down into certain categories to make sure you understand which expenses are truly needed to operate the practice and which may not be necessary.

You need to verify exactly what YOUR overhead is going to be since it has a direct impact on the practice cash flow, which you’ll need to service the debt on the purchase price. Of course it also affects the practice price and it will help you assess the practice performance issues related to overhead. Some of the expenses are directly impacted by the procedures the seller was doing and the procedures you will be doing, they may be the same, maybe not. This is why you need to understand how the revenue is generated and how those procedures may impact your overhead.

So we spoke about the fact that there are some expenses you have very little control over and others you’ll have a lot of control over. While some believe a buyer has the ability to easily control labor costs, it’s an area where a buyer needs to tread lightly. There are many reasons a buyer may not want to hire an existing staff or let them go in short order. Maybe they think the practice is overstaffed or the employees aren’t needed for as many hours anymore. Maybe the employees’ hourly rate is too high (very common with long term employees) and\or maybe their benefits are too rich. Whatever the case is, we believe part of any goodwill of a practice relates to the staff and the buyer needs to examine every staff member currently employed with the practice and how much impact they may have on the stability of the goodwill. For example, in a very rural area, where everyone knows everyone, you may have a front desk person who’s been employed with the practice for a VERY long time, knows every patient in and outside of the practice and may be a real detriment to the retention of goodwill if a buyer were to NOT agree to hire them when they purchase the practice. On the other hand, there may be an assistant that’s only been at the practice for a month, chances are if they don’t return the patients won’t even notice. Then there are the hygienists and once again, the buyer really needs to assess each hygienist and whether or not they’ll have a significant impact on the goodwill if they aren’t hired for any reason.

The other area of labor costs that a buyer needs to tread lightly is employee benefits. We see practices where the seller has been able to afford to be VERY generous to their staff. They might be paying 100% of their family’s health insurance, providing them with four to five weeks paid time off for sick leave and vacations in addition to paid holidays and offering a very generous pension benefit. A buyer would be foolish to think they can simply go in and begin slashing these benefits without any repercussions from the staff. That’s NOT to say a buyer can’t control these benefits overtime, again, each practice and each employee is different.

There are many other areas of overhead that a buyer needs to examine as part of their due diligence, we’ve just touched upon a couple of them to get you thinking. Part three of our five part blog will talk about “people” side of a practice and the purchase transaction from a brief discussion again on the staff, to the patients and the advisors surrounding the transaction.

 Written by Tim Lott, CPA, CVA

Send your questions to tlott@dentalcpas.com
For more information on our services, please feel free to contact one of the members of the Dental CPA team by calling or emailing info@dentalcpa.com.



Monday, May 4, 2015

What’s Most Important to You When Looking to Purchase a Practice? Part 1


My good friend and fellow townie (that’s what we call members of dentaltown.com, the forums board) Dr. Tom Bonsack posted a great thread on dentaltown with that question, “What’s most important to YOU when looking to purchase a practice?” It got a lot of great feedback from people with different perspectives so I thought I’d blog about it. Keep in mind, I won’t be telling what SHOULD be important to you, just giving you some food for thought as you contemplate purchasing a practice.

Since I am a CPA/CVA that represents buyers across our great nation I thought I’d start with some of the financial aspects that you, the buyer, may find important. This is part one in a series of five.
SO what’s the first thing you think a buyer considers when it comes to a practice they may want to purchase? Price, right? What’s the price? While this is very important, I will tell you that many times it’s NOT the most important financial piece you should be looking at. In fact, I gave a presentation at the 2014 townie meeting in Vegas on this very issue and you can actually still view that presentation here.

So what could be more important than price when it comes to the financial aspects of buying a practice? What about cash flow? Sometimes both buyers and sellers get so focused on price that they overlook cash flow, after all, that’s what’s going to service the debt to pay the purchase price isn’t it? What makes up cash flow? Collections and expenses. So to understand the cash flow that YOU will have, you have to dig a little deeper and drill down into the collections and expenses.

For collections, you need to understand how they’re generated…collections can only be generated from the production of the providers. For this blog I’m going to focus on a GP practice. You have to look at the production by providers, the doctor and the hygienists and analyze who’s doing what and understand their relationship to each other. As the doctor buying the practice you need to ascertain what procedures the seller is doing, what procedures you do, are they the same? Does the seller perform procedures that you don’t & vice versa? Can you increase production by adding procedure the seller doesn't offer?  Is the hygiene department performing the same procedures that you want them to? What about the frequency of those procedures? What about their recall system? All of these impact the collections.

What about the payors? Is it a fee-for-service (FFS) practice? Is it a PPO practice? Maybe a 60/40 mix of PPO & FFS? Do they accept Medicaid patients? Which PPOs do they participate with? Are you familiar with the delta premier issue? Again, all these things impact collections.

What about their fee schedule? How do the procedure fees stack up to the other practices in the area? When was the last time they raised fees? Even if their fees seem to be where you’d want them for the area, what about the fees for procedures they rarely or never offer and you do, where to they stand?
These are all the issues a buyer needs to consider when evaluating the revenue aspect of a practice and decide what’s most important to him/her with regard to these revenue issues. Part II will talk about the overhead aspect of the cash flow-financial aspects of the practice you’re looking to purchase.

Written by Tim Lott, CPA, CVA

Send your questions to tlott@dentalcpas.com

For more information on our services, please feel free to contact one of the members of the Dental CPA team by calling or emailing info@dentalcpa.com

Wednesday, April 1, 2015

QuickBooks Tips Reloaded- Part 2

Here is Part 2 of Deana’s QuickBooks Best Practices Tips:

4. Data Input

One of the major challenges about maintaining accurate QuickBooks records is keeping the information organized.  When you have been in practice for a while and have a long list of clients, it’s easy to get busy and backed up with correctly organizing your records. Over time, renaming and adding accounts to your chart of accounts may become a problem when your balance sheets and profit-loss statements become difficult to read. As the balance sheet shows the practice’s financial position.
  • Importance of balance sheets
    •  Balance sheets shows your practice’s financial position at a single moment in time and also show a lifetime of results. It should always be accurate. Here is a helpful article on some QuickBooks balance sheet basics.  

As far as keeping your records organize, always enter as much detail as possible- its saves time later on if there is ever a discrepancy. It’s always best to choose a quiet time or designate an hour or two without any distractions to prevent any errors. Be sure to identify and correct any code errors you catch in the system as this can affect your practice’s income. Simple awareness of your funds can really have a positive impact on your bottom line.
  • QuickBooks Tip
    • With QuickBooks, regularly recurring transactions are saved and can be automatically entered at your regularly scheduled times. This reduces the amounts of mistakes, saves time and increases the accuracy of your bottom line. 

5. Bank Feeds
A newer option for QuickBooks is the ability to download the transactions right from the bank or credit-card company. This has become a huge timesaver. Once the transaction has been coded it will be memorized for future transaction download. Here are some instructions on how to use the QuickBooks bank feeds in versions 2014 or later. 
  • Options Available
    • Downloading by Most recent transaction or by statement
    • Banks now offers the option to download information into QuickBook

6. Lock Down
A common issue we see with our clients is entering or editing a transaction in prior periods. Whether intentionally or unintentionally, changing prior-period data can cause a huge mess with the books. Known to have driven many accountants crazy over the years, posting into prior periods can actually be controlled by using the closing date feature within QuickBooks. It’s easy to set up a unique username and password for each user's preferences to prohibit them from changing items once past the closing date. You can also lock down the prior-period date as the year progresses.  
  • Here is a screen shot:

Read the full instructions here.

7. Reporting
Another option for organizing information in QuickBooks is through the applications’ memorized reporting function. This will save you the trouble of having to re-create the reports every time you need to access them, it will also make it easy for you to access these reports quickly. QuickBooks also provides a feature called Process Multiple Reports, which enables users to group together dozens of reports and print them in a single step.


With QuickBooks, and a trusted Dental CPA on your side, being organized and ensuring that your practice’s finances are accurately managed is simple. Regardless of the size of your Dental practice, you want to ensure that you are running your business efficiently by having good bookkeeping and accounting practices. 

Stay tuned for our 3rd and final portion of this series on Ten Tips to Stay Organized and Efficient. You can also check out Deana’s original Dentaltown article here

For information on questions specific to your practice’s accounting needs, contact Deana or reach out to any of our Dental CPAs by emailing info@dentalcpas.com


Thursday, February 26, 2015

What All Dentists Need To Know About Medicare Enrollment

Does your practice service patients 65&over who have medicare coverage? 

Here are some important details that our friends at Veros Dental recently shared about the 2015 Medicare Enrollment

 Any dentist, including a specialist, who treats Medicare beneficiaries must either enroll in the Medicare program or opt out in order to prescribe medication to their qualifying patients with Part D drug plans. Most every patient 65 years of age and older is a Medicare beneficiary. 

This decision should be made promptly and the process should be undertaken now to ensure implementation by the June 1, 2015 deadline.

Only those dentists who do not treat Medicare eligible beneficiaries (65 years or older patients and certain disabled individuals) are free from making a decision and acting. By not acting (creating a formal status with Medicare), Medicare eligible patients will not be covered for prescriptions you write for them (this will tend to irritate them as their coverage should cover most all prescriptions and will not be covered solely because of your failure to act).

If you treat Medicare beneficiaries and must make a decision, there are actually two decisions you have to make. The first is whether to enroll or opt out. The second, if you enroll, is whether to enroll as a Medicare provider or enroll as an ordering/referring provider.

ENROLL - Medicare Provider

By enrolling as a Medicare provider, you are agreeing to accept the Medicare fee schedule for covered procedures you perform for these patients. Dentists perform few of these services but may include biopsies, some TMJ services and sleep apnea. If you do enroll, you'll have to follow Medicare procedures for claim submission. This enrollment then also allows your Medicare patient prescription to be covered.

ENROLL - Ordering/Referring Provider

If you do not perform any Medicare covered services, you may choose to enroll as an ordering/referring provider. This allows service providers to whom you refer Medicare patients to get paid (labs, imaging services, other procedures). It also allows your Medicare beneficiary patients to have their prescriptions covered. You will not be able to perform Medicare-covered services under this status, however. 

OPT-OUT

At first take, choosing to opt out sounds like it would be the easy approach. It isn't that simple. By choosing to opt out, your practice will actually be required to send an affidavit to the Medicare carrier in your region. The opt out affidavit lasts for two years. At the end of the two-year period, you are faced with the same decision again -- to enroll or opt out.
In addition to the document you must file with Medicare, you also need to inform your Medicare beneficiary patients and have each of them enter into a written private contract. This contract is an agreement that you are not an enrolled Medicare provider and that the patient won't submit any covered treatment claims to Medicare. These contracts will need to be kept as records of the practice and also need to be renewed every two years. This contract must follow all of the specific Medicare stipulations (even including the appropriate font size!) for it to be valid.
By having these contracts in place, the practice can follow their own fee schedule for the Medicare covered procedures, and the patients can have their Part D prescriptions covered under Medicare.

How to Decide?

Each practice will need to formulate their best approach to what to do. Here are some considerations:
  • Do you or will you see a Medicare eligible patient in the next two years? If yes, you have to make a decision. If not, there is nothing for you to do from here.
  • How many Medicare eligible patients will you see? Run a demographic report to learn how many active patients you have over the age of 65. If this is low, consider opting out. Opting out actually will result in more work, as every patient over 65 will need to sign an agreement with you every two years. So depending on the numbers, opting out could possibly cost a lot of time.
  • Do you perform Medicare procedures? If you do, you'll need to consider whether you want to accept their fee schedule (enroll) or not (opt out). If you do perform these procedures, a thorough analysis of your fees and the Medicare fee schedule should be considered.
  • If you do not perform the Medicare procedures but don't want the ongoing burden of the opt-out paperwork, then enrolling as an ordering/referring provider is likely the best option. You won't be able to send claims to Medicare, but your referred service providers will get paid and your patients' prescriptions will be covered. You can enroll later as a Medicare provider, if necessary.
If your your patients are affected, be sure to make the implementation by the June 1, 2015 deadline

For additional information and/or questions specific to your practice,contact one of our Dental CPA team members at 800-772-1065 or info@dentalcpas.com. Don't delay your decision, give us a call and we can help guide you to the best solution that works for your practice. 

Also visit the ADA website as well as DentistryIQ for additional articles related to the medicare enrollment