Monday, November 30, 2009

What are 500 Dental Patient Records Worth?

The economy has been tough on a lot of offices here in Las Vegas. I just got a call from a nearby office and the doctor is closing down his practice due to the bad economy here in Vegas. He wanted to know if I would like to buy their patient records. He said that he has 500 patients, 70% of them are insured, and he has collected 288,000 in the past year. I have no idea what 500 patients are worth or how many we would lose in the transfer. Anyone have ideas on how to put a value on these patients? Is this a good idea?

20% of collections from those patients for each of the next two years.

This first appeared on Dentaltown.

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Wednesday, November 25, 2009

New Dentist has Questions about Insurance Checks and 1099 Reporting

I recently started at a Medicaid office 2 days per week as an independent contractor. I work 2 days at another office as an employee and 1 day at a third office as an independent contractor. (Can you guess what city this is?) I have always done my own taxes with turbo tax (I enjoy it???). At the Medicaid office I will receive the Medicaid check, via my SSN and Medicaid ID number. I then will deposit it, keep my percentage and write a personal check to the office I am working at for their percentage.

I never received an insurance check directly before so what happens at the end of the year? Does Medicaid issue a 1099 to me?

Sounds like you will receive the 1099.

The office said I can deduct the amount I give to them. Is this true? What type of expense? What type of documentation would I need in case of an audit to prove this expense?

How does your contract define the payment back to them, rent? If so, it's rent expense. Your contract should define what this payment is and that's how you'll know how to report it. Yes, it should be deductible. Your proof if audited will be your contract and your cancelled checks.

I’m trying to plan now since my first Medicaid check is on its way.

As long as you're depositing ALL of your income, don't worry about what the 1099 says. It sounds like your gross income will exceed that since you're also getting income from other sources. Simply report ALL of your income and make sure you take every bit of deductible expenses you can and you'll be fine. DOCUMENTATION IS THE KEY.

This first appeared on Dentaltown.

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Friday, November 20, 2009

Dental Practice Brokers

Tim, can ask you what types of qualifications you recommend that your clients look for when seeking a broker? Does a broker typically have to be licensed or have a particular type of education for you to recommend them?

No problem. What do I look for in a broker to whom I may refer a client?

First and foremost in my opinion is experience in brokering dental practices.

For example, there's a broker here in Maryland who's been in the business for as long as I've been doing this (which is 26 yrs). He's not a dentist and never was; however, he's done thousands of deals and that experience is priceless.

A good brokerage will have a HUGE inventory of sellers so that, as a buyer, you will know you'll be able to be somewhat selective with respect to where you want to look and the type of practice you want to buy.

For sellers, knowing that a broker has a HUGE inventory of practices for sale may scare you; however, simply know that because of this, they will also attract many more buyers than a broker with very few practices for sale. So you want to be listed by someone who can get you the most exposure, again, in my opinion.

I think the license thing is a state-by-state regulation. Still, having the license won't necessarily get a referral from me. I’m licensed to sell life, disability, health, annuities and certain investments. I'm not really active in those areas, and I wouldn't expect anyone, even my family, to refer someone to me for those products simply because I have a license. It's not what I do everyday, so how can I really be "good" in those areas? Again, experience!

"Formal" education isn't necessarily a factor. Certainly I expect a good broker to stay abreast of the current economic conditions, changes in transition structures, and tax issues that may impact specific structures. I don't expect them to know the tax code. Again, similar to me with insurances, I know enough to give me a base of knowledge to help provide clients direction in where they need to go for accurate advice. They don't expect me to know the finer details about each life insurance product by each life insurance company. I would expect a broker to know in general terms the impact of an asset purchase vs. a part stock\income shift purchase.

Does this help?


 It is my experience that Attorney's and CPA's bill hourly, so they don't get commission on the price of the practice. So, they have no interest in blowing up the price of a practice as a Broker would, I would assume they work in the best interest of the party paying them aka the seller or buyer.

This may be an incorrect statement.....only my experience thus far in dealing with 3 CPA's and 2 Attorneys, so limited experience admittedly.

I'm glad I didn't assume, I thought you meant we didn't care if the practice was overpriced.

You're correct though, most do bill by the hour and I agree, they have a duty to work in the best interest of their client.

However, this is where we differ to most. Our buyer rep engagements are fixed price engagements structured in such a way that basically lets the buyer pay us for services received and there is an absolute cap. While we track our hours like every other CPA, we prefer to work with fixed price engagements when we can. There are consulting engagements where we simply cannot fix a price because there is no way to know what our involvement will be. With buyer rep engagements, we've done enough to know what we should charge. Most buyers are surprised when they learn this....actually pleasantly surprised.

Should a dental broker have experience in what they sell. Yes, that may be a good idea and a good reason to pick a dental broker that is a dentist and has experience at what they do.

A dental broker doesn't need to be a dentist to have the experience in what they sell.

That said, I have NO problems with a dentist that has learned the brokering trade with years of experience in that trade.

Again, I'll use me as an example: I'm a licensed insurance rep, but that does NOT make me a good insurance professional. I believe I would need many, many years of active insurance sales activity with a lot of training to make me a good insurance professional.
Just the way I see it.

This first appeared on Dentaltown.

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Monday, November 16, 2009

Merging Two Dental Practices with Differing Amounts of Debt

I share a building with another dentist and his associate. We have discussed merging our practices. My concern is that I have much more practice debt than he does. Some of the debt is equipment/ operatory related and should not be an issue. But I have significant other debt related to start up and cash flow issues in the past.

Are your practices similar with respect to revenue?

How can this issue be reconciled should we elect to merge?

It depends on how you decide to "merge". You could simply decide to maintain your separate practice entities and form a third entity to be the main operating entity for revenue and shared expenses. You could elect at this time to keep your assets and debts in your separate entity until such time as the debt is no longer an issue. Similar to a space sharing arrangement, I would think. Any new asset acquisitions would go through the new entity.

We have a great location and if we combined and marketed the practice as a whole it could be very profitable I believe but I am just not sure how the difference in debt can be overcome.

I'm not sure it needs to be "overcome" at this point, you have yours, they have theirs. You form the new entity and decide how net profits will be split after operating expenses. You'll receive your share and use it to pay back your debt and\or any of your personal professional expenses and they'll do the same.

It doesn't have to be that complicated. It just needs careful planning and a lot of due diligence. The other benefit of keeping your assets and debts separate initially is that IF the merger fails, it should be easier to know which assets go where and the only assets you'll have to worry about are those that were purchased after the merger.

The point that I was trying to make was the logistics of the deal. All three doctors will have to form a new corporation and their compensations will have to reflect what debt each of them has.

I think you mean they'll have to form a new entity and I agree (corp, LLC, etc.).

However, I'm not sure why their respective debt would HAVE to determine their compensation. I think their compensation can be driven by their production, as is the case with most "partnerships" and in this case, how they "contribute" to the new entity and "what" they contribute will most likely impact their respective "ownership" interests in the new entity moreso their compensation.
Our friend, Jason Patrick Wood, the Dental Attorney adds:

Why do you keep saying "three"? The original post is owner and associate. I don't let associates into my business without paying, I don't think this doctor would either which leads me to the conclusion there will be 2 owners, not 3.

I also agree with Tim. Debt shouldn't even be a consideration when entering into a compensation formula, unless the debt is at a level which may materially interfere with the value of the asset being transferred into the partnership.

Another question I have however is, where is the cost savings? What are you going to do with your respective practices? What is the short/long term goal after the merger? If you are just going to tear down a wall and merge your practices, great. However, you still will most likely be overstaffed which should be another fun discussion. All of these issues IMO need to be worked out before you even start contemplating an actual agreement. Partnerships, when formed correctly, take time and openness to create a model that will work for you.

Yes, I meant that all three of them will form a new entity. And once their compensation agreement is set up, the doc with debt could use his salary as pre-tax dollars to pay off that debt. What're your thoughts?

Each partner (who could still maintain their existing entities to form a new one) could use their respective profits from the "partnership" to pay their respective debts and professional expenses. The expenses would naturally be tax deductible, debt would not.

This first appeared on Dentaltown.

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Thursday, November 12, 2009

The Ugly Truth: Minimizing the Risk of Dental Office Embezzlement

Here is an article from our friend Sandy Pardue which we found timely. It is reprinted with permission of

Nicole was a loyal employee for 18 years. The doctor relied on her and she made his life easy. He believed that if she were not there, everything would fall apart.

Nicole was the first to arrive in the mornings and the last to leave in the evenings. She worked through lunch and came in on weekends. She never asked for a raise or to be paid overtime. She knew more about the computer software and front desk protocols than anyone in the practice. She never took vacations and she wouldn’t dream of the doctor’s having to make the bank deposits. The patients loved her.

Things changed quickly one day when a patient stopped by to speak with the doctor. She had been in for surgery a few weeks earlier. When she pulled out her checkbook to pay for her visit, Nicole told her that she would stamp the check with the practice’s name and not to worry about filling it out. When the patient received the check back from the bank, she noticed the word “cash” written in place of the practice name. The check had not been deposited. The doctor had been missing cash from his wallet and this confirmed his suspicions that something was terribly wrong. He started investigating and learned that Nicole had embezzled several hundreds of thousands of dollars.

This true story may seem all too familiar to many readers. Embezzlement in dentistry is becoming more common. The longer you practice, the more likely it is that you will become a victim. This is an uncomfortable subject for most dentists, but it is the ugly truth. Embezzlement is costing U.S. businesses $652 billion annually, according to the Association of Certified Fraud Examiners. Dental groups are particularly vulnerable, since they rely on office managers and front desk staff to handle collecting, depositing, and disbursing money.

Do you...

** Perform background checks when hiring?

** Run credit checks on new employees?

** Drug test?

** Have bank statements and credit card statements sent to your home?

** Personally review the day sheet and adjustments?

** Compare the actual deposit receipt with the computer reports?

** Visit the financial area of your practice during the day?

** Have one person handling receivables and another person handling payables?

If you answered "No" to any of the above statements, you may be an easier target for the embezzler.

Attributes of embezzlers:

** Efficient

** Often long-term employee

** Loyal employee

** Doctor trusts them

** They are often part of doctor's extended family

** Intelligent

Symptoms of the embezzler:

** Receives telephone calls from creditors

** Having wages garnished

** Excessive spending, living beyond their means

** Asking for cash advances

** Personal problems such as a divorce, addictions, children with addictions

** Excessive use of alcohol, talk of going out partying and gambling

** Refusing to run a report you requested

** Not allowing others in their area

** Not wanting to miss work or take earned time off

** Employee quits unexpectedly

** Gets annoyed at reasonable questions being asked about bookkeeping

** Resists change

How they do it:

1. They steal cash; it’s hard to prove ownership and it’s easy to steal.

2. They deposit insurance checks in their own account.

3. They set up secret accounts in the practice’s name to which they have access.

4. They open a credit card account where the doctor has personal and business accounts. They pay their bills with the doctor’s checks.

5. They make adjustments on patient accounts.

6. Sloppy bookkeeping makes their theft harder to trace.

How we stop them:

There are ways to prevent staff from getting their hands in your “cookie jar.” I am frequently called in to practices as a consultant to help dentists detect and confirm embezzlement. These practices failed to implement necessary protocols. Don’t be a victim. Execute the following list of safeguards:

1. Hiring: Check references; do background checks, credit checks, and drug tests on every applicant. You should personally call the business owner when checking references. Do not talk to staff.

2. Write a policy on theft: Make it known that the office will have zero tolerance for theft. Let employees know that they are safe to report any suspicious activity. The dentist must set a good example for staff by not doing anything unethical or illegal. The dentist must insist on high ethical standards in the practice. I have seen dentists refuse to fire or press charges against staff for stealing hundreds of thousands of dollars because of their own dishonorable actions.

3. Computer software security: Each person in the practice should have his or her own confidential username and password. You should have a policy in your office manual that employees read and sign off on, agreeing to keep their passwords confidential. Any violation of this policy will result in termination of all parties involved. The policy should state that everyone will sign out anytime they leave their work area. The doctor should have two usernames, one that is used on a daily basis while working with patients and one with a higher security level for maintenance tasks.

4. Receipt book: Utilize a three-part carbon copy receipt book along with your computer receipts. The computer only knows what you tell it. A receipt should be written for every payment, whether cash or check. Most importantly, the receipts should be numbered and stored for future audits. You can use copies of the receipt to compare with the deposit slip and payments that were posted. It is used to verify that everything made it to the bank.

5. Enforce vacation policies: Office managers and staff should take five consecutive days off every year. Beware of any staff refusing to take vacations. I’ve seen a doctor try to give away a Caribbean cruise to have the opportunity to check for theft and the office manager refused the trip. Another red flag is when they never allow anyone in the financial area to help them or they resist anyone put there to monitor their work.

6. Sign your own checks: Always question the expense and do not sign checks without an official invoice attached. Every check should be for a legitimate expense.

7. Throw out the signature stamp: Do not allow a signature stamp in the office.

8. Investigate patient complaints about their account having errors.

9. Purchase a “Deposit Only” stamp: Every check that arrives via mail or presented by a patient in the office must be stamped “For Deposit Only.”

10. Arrange for all bank statements and credit card statements to be mailed to the doctor’s home: Look at the checks to make sure you recognize each one. Look for duplicate payments, extra payroll checks, and any electronic debits or transfers you don’t recognize.

11. Check merchant statements: One of the latest schemes is for employees to credit their own credit cards using the practice’s credit card terminal. You are receiving a monthly merchant statement; check it for credits. Credits should be a rare occurrence.

12. Beware of patient refunds: They process fictitious refunds using a patient’s name or a name they make up. Question all refunds. Ask for a printout of the patient’s ledger attached to the refund request. Also, when an employee gets the idea to refund credits to patients, make sure the unexpected checks end up in the patient’s hands and not the employee’s account.

13. Cash payments: All practices will receive cash from time to time. If cash is never listed on your deposit slips, this is a red flag. When cash is received, implement the receipt book and make it a cardinal rule that everyone gets a receipt. Have a written policy on how this should be handled. You may consider placing a small sign on the counter that patients will receive a receipt for all payments.

14. Cash loans: No one in the practice, including the doctor, is allowed to take cash out of funds received from patients or a petty cash box.

15. Adjustments: Every computer software program has an adjustment report that can be printed. Adjustments should be verified and approved by the doctor.

16. Install a security system and security cameras: Each person should receive a confidential security code. This allows you to track who is going in the practice after hours.

17. Insist that bank deposits are made daily: Deposits should be prepared and brought to the bank every day.

18. Learn your computer software: Know how to access reports, run audit and adjustment reports, and know how to look for deleted items.

19. Have regular audits: Your staff will see you keeping an eye on things and this is a huge deterrent to temptation.

20. Insurance checks: The embezzler takes the insurance checks which are payable to the practice and deposits them in their personal account via an ATM machine where there is no live teller.

21. Keep score: Track office production, collections, and adjustments in Excel. You will be able to detect financial misconduct early on. Look for an increase in accounts receivable without corresponding increase in production.

22. Receive the day sheet and daily deposit information at the end of each workday: This lets staff know that you are watching. Don’t let a day go by that you do not receive this report. If the report is not received, make a big production out of it.

23. Implement a drug-free workplace policy: Give your staff a 30-day notice and start doing routine drug testing.

24. Protect your patients: Take precautions to protect your patients’ personal information. Consider implementing a level of access.

25. Check your personal credit report: Do this at least once a year. Look for duplicate accounts with one creditor and accounts you are not aware of. We recently learned that a doctor was paying for cell phones for an entire family of an employee, unbeknownst to him.

26. Use QuickBooks: It will give you better control over expenses and enable you to detect irregularities early on.

27. Look at lab bills: Make sure you recognize the patient names and cases.

28. Employee termination: Any time you terminate an employee, you must change all security codes and passwords on the same workday.

29. Time clock theft: Review time clock reports before payday. Only one person should be able to make changes.

What to do if you suspect you have a thief in your practice:

1. Keep your suspicions to yourself.

2. Investigate.

3. Contact your attorney.

4. Contact your local police department and press charges. This prevents them from doing the same thing to another practice.

My purpose for sharing this information is to raise awareness in the dental community about a common occurrence in dental practices, and to provide dentists with tools to safeguard their practices. Most embezzlement schemes can be detected and prevented with internal systems, controls, and routine monitoring. Remember, the best defense is a good offense.

Feel free to contact me if you have any questions or need assistance with implementation of these safeguards.

Sandy Pardue is an internationally recognized lecturer, author, and practice management consultant. She has assisted hundreds of doctors with practice expansion and staff development over the past 15 years. She is known for her comprehensive and interesting approach to dental office systems, and offers a refreshing point of view on how to become more efficient and productive in a dental practice. Sandy is director of consulting with Classic Practice Resources. She is also a consultant to leading dental companies for product evaluation and design. She can be reached by e-mail at

The original article can be found here.

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Monday, November 9, 2009

How to Hire the Best Dental Associates

Our friends at ETS Dental recently posted this wonderful blog on their site. With their permission, I am reposting it here.

Confessions of a Dental Recruiter

Written by Mark Kennedy, Managing Director of ETS Dental.

Sooner or later, every practice is faced with seeking a new Associate, Partner or Owner. In the past twelve months ETS Dental has recruited and placed more than 200 Dentists with independent practices and clinics around the country and some of the lessons we’ve learned may be beneficial to you when it comes time to bring a new dentist into your practice.

The best candidate already has a job

As a whole, the population of Dentists is truly at full-employment. Most great candidates are employed, but passively seeking a better long-term opportunity. In fact, only one out of every 20 Dentists we place come as a direct result of an ad…the rest come from networking.

There’s a reason the best opportunities aren’t advertised

The best associate or partnership opportunities are rarely advertised. If a practice is losing a key associate it is typically in the best interest of the practice NOT to advertise this fact until a replacement is found. Some patients and key staff will certainly leave if they know their Dentist is leaving the practice.

The best time to start looking is early

There is an old Chinese saying, “The best time to plant a tree was 20 years ago. The second best time is today.”

Very few good candidates are desperate for change. The vast majority are willing to wait a few months or a few years. Likewise, no one practices forever…there is usually an identifiable window of opportunity when a partner would like to step back or retire…the closer a practice waits until that time, the more they limit their options.

Practice Owners with a plan hire the best Associates

Interview preparation is a two-way street. While much has been written to help the potential hire prepare for an interview, we have found it equally essential for interviewers to have specific communication goals to achieve through the interview process. Let’s face it, most dental practices conduct comparatively few interviews.

If you found the “perfect associate candidate,” I can guarantee you that your perfect candidate probably has multiple options. Have a plan in place. Do you have a sample contract? How will the associate be compensated? Would he or she be offered a buy-in? If you can’t answer these questions, you will lose the best candidates.

Relocation, relocation, relocation

More that 60 percent of the dentists we recruit and place relocate. Many are looking for the opportunity. Many are looking to get closer to the people or places they love. Dentists coming out of a residency or the military are nearly always located in a different city or state. When you are looking for a new associate, you probably won’t find them in your own back yard.

Whether you are a practice owner looking for a candidate or a Dentist seeking a long-term practice opportunity, the moral of the story is the same:

• Start looking far in advance.

• Work hard to find multiple options.

• Be prepared if the right opportunity or candidate comes available.

The best candidate or practice for you may be somewhere you don’t expect.

This blog originally appeared on the Dental Recruiter Blog.

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