Acquiring a Dental Practice? Be Aware of the Challenges and Best Practices

The thought of “…having enough on your plate…” could skew your thinking about expanding your dental organization. 

But when the time comes, you can confidently move on it with an awareness of the challenges and best practices for acquiring a dental practice.

First, let’s explore this line of thinking that things are already complicated enough in dentistry.

Why it’s easy to put growth on hold

During certain seasons of life in general, and in dentistry, pessimism tends to rule-the-day. It’s no wonder given 2020’s pandemic and the reality that it’s continuing into 2021. 

Survival seems the best course of action. And some even consider that to be a bold reach as they consider closing-shop by citing factors such as:

• High and rising dental student loan debt
• The perceived DSO “juggernaut”
• Clinical experience lacking
• Insurance changes threatening profitability

Growth requires bold, adaptive, optimistic thinking…and planning. 

Perhaps it’s time to give yourself and your current dental practice or dental organization some credit.

Assess the challenges and apply the best-practices if you’re in a position to acquire a dental practice

You’re in a better position than you might realize for expanding your dental enterprise. There are indeed challenges and best practices for acquiring a dental practice.

With that in mind, remember that opening a new dental practice or buying an existing one has specific and proven steps. 

Acquisitions require the same level of due diligence…but at somewhat deeper levels.

Deep-dive into the overall health of the practice you’re seeking to acquire

The deeper–and even more random you can be in–sampling their history, the better. Think of this process as an “audit” of their internal workflows, including charts, demographics, patient life-lines with the practice (e.g., how long, how often), etc.

Analyze data about the challenges and opportunities relative to the practice’s health. Your deep-dive audit should include:

• Patient payment habits
  Do they pay with insurance, cash, third-party financing, personal credit cards, etc.?
• Treatment/procedure analysis
  What treatments are being provided, and what procedures are generating the most profit?
• Business-of-dentistry data
  What is producing revenue? How healthy is the production to collections ratio? What’s the impact of overhead and expenses on profitability?
• Improvements needed
  What’s working-what’s not? How current is the technology? What requires upgrading?
• New patient metrics
  How many new patients per month, quarterly, annually? How are new patients attracted? What’s the ratio of new patient growth to retention?
• Online presence and influence
  Is the website up-to-date? Is there a blog page, and is it active? What is their review, referral, and social media engagement? How effective is their overall marketing strategy?

Prioritize cash flow analysis and the factors that are impacting it positively and negatively

This is a somewhat all-important factor to be considered. How that cash flow is achieved (or not) matters to the discussion as well.

• Get clarity on how patients pay
• Clarify the treatment/procedures that are generating the most revenue
• Confirm if you’ll be able to maintain the production-drivers consistently.

The challenge could be how much the asking price is based on provider to profit comparisons. Be willing to flex if you see indications of promising cash flow potential.

Dental Acquisitions: A Better Due Diligence Process

Both the financial and the clinical due diligence are fundamental tasks for any organization considering an acquisition but pulling together dental practice data from multiple practice management systems can be a very time-consuming and tedious task.

Melissa Marquez, COO of Jarvis Analytics explains how a smart dental dashboard could be used during the due diligence process to arrive at an accurate and full picture.

Get to know who you’re doing business with

The current dentist/owner will help or hinder a successful acquisition and your role as the new provider. Remember that you will inherit their problems as well as their successes.

• What is their motivation for selling their practice? Retirement is preferable. Do your homework if other issues are present.
• Can you overcome their challenges with profitability or patient and/or location demographics? Envision your strategies and leadership style in the current context.
• How has the departing provider approached treatment? Are they conservative or aggressive? Get acquainted with their philosophy by asking them, current team members, and colleagues.
• Are there any treatment plans they provide (e.g. ortho, etc.) that you prefer not to provide if you acquire the practice?

Location…location…well, you get the picture…

Acquiring a dental practice isn’t just the patient-base…it’s the area/region too. 

For example, it pays to get an idea about how many other dental providers are within range compared with population data.

A geographical assessment can give you a variety of insightful cues before you make the commitment.

• Marketing spend could increase based on how much competition surrounds the practice.
• Insurance networks (such as PPOs) could expand.
• The ratio of dentists to residents compared with community growth and future planning is an essential assessment.
• Do you have an affinity with the area? You and your team(s) feeling at “home” can make a difference in establishing a fresh practice culture.

Be discerning about everything you’re told about the practice

You’ll perhaps hear the “good” and be wondering if the following statement applies: “If it sounds too good to be true, it probably isn’t.” 

That might be a bit harsh but allow the wisdom to force some discernment.

In matters of profit and loss, it’s especially vital that you look at the facts and figures from all angles. 

What could appear to be profitable could end up forcing you to adapt in less cost-effective ways (e.g. accepting certain insurances, etc.).

• Ask for P&L for at least two previous years (more if you want to gain a higher-altitude perspective). 
• Review overhead costs and its potential to improve by deploying more revenue-enhancing initiatives.
• Determine who they consider to be “active” patients and apply your own filter to get a more realistic picture.

Evaluate these and more informative scenarios based on how willing the provider or broker is to share the data. And engage in open conversation around it.

Create and follow-through on a comprehensive transition plan once you’ve made the acquisition

Keep in mind that a post-acquisition period can last for months. It’s a good idea to be well-planned rather than to rush the process.

Thoroughness applies here too.

• Give patients the space and time to get acquainted with you/your team(s). 
• Be prepared for some degree of patient attrition. Yet, also prepare to trust your marketing initiatives and prior due diligence (related) to fill the gap.
• Anticipate some HR challenges. Employees who stayed might not be on-board for the long haul. Be ready for new hiring processes and for some current employee attrition.
• Plan, be flexible and enjoy the process. You have a fresh opportunity to build a new practice and apply your own proven principles for growth.

An acquisition comes with challenges, no doubt. Following best-practices and discovering new ones along the way helps set you up for success and the ongoing opportunities ahead.

Do No Harm Approach

In the short video below, Fred Ward, CEO of Marquee Dental Partners, explains how a data analytics platform fueled his DSO’s explosive growth and enabled his do-no-harm partnership and acquisition approach.

Data analysis is core to the best practices utilized by independent and corporate dental organizations

Your ability to access, review, store, and use data is an evergreen best practice. Data analytics can energize your organization’s success. 

Check out the following resources to gain insight into how you can use them effectively to grow your organization – perhaps through a dental practice acquisition:

4 Keys to DSO Success Using a Dental KPI Dashboard

How to Choose a Dental Dashboard For Your Growing Organization

An all-in-one dental KPI dashboard for DSO, group practice, and solo private practice success

Managing your metrics, data, and essential KPIs requires an amount of time and energy. Streamline the process with an all-in-one solution that includes the essential capabilities expected from a dental dashboard.

The Jarvis Analytics platform helps assure that you’re tracking the important metrics and staying on-track with your goals as your dental practice and/or DSO grows and expands. 

Jarvis…

• Integrates seamlessly with your chosen practice management software/platform
• Presents the metrics you want and need in an easy-to-view dental dashboard that reduces data complexity for growing dental practices, dental groups, and DSOs

Experience Jarvis in action. Request a demo today!

Or…

Contact us for more information about data tracking that leads to profitability.