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Impact on Practice Transition New Challenges - New Directions to Consider Many dentists today struggle emotionally and financially with the changes happening around them: increased competition for new patients, rising overhead costs, and outside interference from third parties (who usually know little about what dentists really do), and the constraints that we work under! All of these things are now happening in a market being simultaneously impacted by the effects of managed care. General dentists, specialists, fee-for service and non-traditional practices are influenced by the speed and magnitude of these new changes. The result has been chaos and fragmentation, common during business trend shifts like the one we are currently experiencing. Many dentists are succeeding while others fail, and an increasingly large number are caught somewhere in the middle! Emerging New Trends From an economic perspective, enhanced productivity and overhead control are two keys to developing and maintaining successful practices in the future. This includes better use of existing facilities through group practice, mergers, and staggered-hours scheduling. This focus on productivity and overhead control has always been important, but it will become increasingly more important in the years ahead. The value "locked" within most dental practices continues to be a major driving force in the continued planning of practice transitions. The key to "unlocking" this value lies within the successful planning and structuring of practice buy-ins, partnerships, sales and mergers. This fact will continue to make the transition area a "hot" topic of discussion among dentists. The Changing Face of Dental Practice When I graduated from dental school in the 1970's, a few models of dental practice existed other than that of the solo cottage-industry dentist. Few, if any, early-career dentists were purchasing already established practices at that time, because setting up practice from "scratch" was relatively risk-free. Upon graduating from dental school, my direction was very clear, and I was sure that setting up my own dental practice was the only way to go! Group practices, partnerships, and other non-solo practice arrangements were rare in the past. The prevailing attitude among most dentists was one of independence an strict autonomy. Why lose your identity in some partnership, group, associateship, or merger if it wasn't necessary for success? There were plenty of new patients to "go around", so there was little need to "complicate" our lives by getting into business relationships with other dentists. The term employee-only dentist (i.e., the dentist with no desire for future practice ownership) was rarely heard of, and was only common in the non-private sector (i.e., the military, public health, university systems, etc.). Newly graduated dentists looked upon established practices as short-term associateship positions that could serve as "springboards" from which they could leap into their own practices. These new dentists rarely considered established practices as opportunities to buy-in or purchase! Times have certainly changed for dentists. As a result, we've seen a radical reversal from the environment that existed in the past. Some of these changes include the following:Due to the increasing risk involved, few dentists are setting up practices today from "scratch." This avenue does not provide the immediate income security that purchasing or buying into an already established practice can. As the benefits and mechanics of expense sharing arrangements become better known and better utilized, non-solo practices are becoming increasingly popular. With a growing number of dentists opting-out of traditional ownership pathways "employee-only" dentists are now commonplace. Employee-only dentists forego future ownership to concentrate more heavily on the clinical aspects of dentistry. Others reflect on quality-of-life issues, preferring shorter work weeks and less responsibilities. Still others fear the exposure that ownership brings in a rapidly changing environment. Today, established practices serve as a different kind of "springboard," with many early-career dentists taking advantage of buy-in or purchase-opportunities within the practices they are working in. No longer are healthy, viable practices being viewed as short-term employment opportunities and future exit-platforms. We are also seeing the emergence of new and innovative working arrangements to consider for practicing dentistry. Some dentists are down-sizing their existing practices, while others are looking at practice-merging, group practice formation, multi-office locations, space-sharing or one of the myriad of practice buy-in and sale options to consider. Equity Buy-ins, Production-Acquisitions, Deferred Sale and Pre-Retirement Sale are now all part of a new "lingo" in dentistry. With these new winds-of-change, many dentist have chosen not to face the challenges ahead. Many practitioners in their 40's and 50's are abruptly changing careers, while others are retiring early when able to do so. Some owner-dentists have reversed roles with their associates, which frees them from day-to-day management and overhead responsibilities, while enjoying the passive income generated from the equity in their practices. Needless to say, dental practices today are no longer represented by the homogeneous model that existed twenty years ago. A Multi-Layered Delivery System Several distinct layers now exist in the way dental services are provided and reimbursed, with each layer representing a uniquely independent niche in the marketplace. Fee-for-service dentistry still very much alive and well today, co-existing side-by-side with neighboring managed care practices. Mixing fee-for-service dentistry with managed care dentistry within the same practice is now commonplace; dentists who have "learned the system" are prospering well. But those who entered the managed care arena without thoroughly understanding its' dynamics are failing at this new form of hybrid-practice.The greatest hybrid-practice success stories however, belong to those dentists who have physically separated their fee-for-service practices from their managed practices. This successful division process has set the stage for the dental entrepreneur -- the practitioner who owns two separate practices; one providing fee-for-service dentistry, the other providing dentistry for those in managed care groups. Birth Of The Absentee-Owner Dentist Absentee-ownership of practices by dentists is on the rise. These are dentists who own a practice but have minimal, if any, clinical involvement in the practice. Some of these absentee-owners have multiple offices within limited geographic locations. Others have offices scattered throughout a given state or entire regions of the country. The growth of absentee-ownership has led to the birth of dental management companies, how now "own" multiple practice. Through networked systems they centrally manage and operate these locations from a single corporate center. As a result of outside parties seeking out new ventures to invest in, some of these companies have gone public. Those dentists "absorbed" by these companies have expressed a wide variety of feelings about heir present situations. Responses depended largely on how happy (or unhappy) they were with their "pre-sale" practice situations, what their goals were after the sale, and their overall attitudes about change. Physicians have experienced a similar metamorphosis in the marketplace ( and have had similar reactions), as their practices have been acquired by hospitals and other health care companies. Increased Competition & Its' Impact On Transition Increased completion among dentists has caused many to expand their hours and services in an effort to enhance their marketshare access to patients. Other practice expansion modalities such as merger and associateship-to-buy-in also are enjoying a "rebirth" of interest. Dentists are becoming less vested in the idea of autonomy as they venture into one or more of these popular non-solo practice arrangements. As dentists focus on the benefits of consolidating individual efforts into well-structured groups of one type or another (a group being defined as two or more dentists sharing the same space), the naturally occurring transition-out-of-practice process by dentists within the group will become much more easily facilitated. The retirement desires of one dentist in the group will naturally balance the practice-expansion desires of another. All that is needed is an equitable "win-win" plan constructed early in the formation of the group. This marriage of mutual interests will occur much more frequently in the future, particularly among those groups who considered age-staggering at the onset of formation. Age-staggering involves the joining of dentists into groups which are at different career pivot points, such as an early or mid-career dentist joining with a late career dentist. This arrangement allows transitions to occur more naturally among the different members of the group. With all of the many transition issues surrounding staff and patients, what could be better (for all parties concerned) than to have them occur among the members of a group. This direction will allow some dentists to be less dependent upon practice buyer/seller "brokers" who offer successor-locating services. This new approach will also allow dentists to have their own unique "dental firm," much like we see in the practice of law or accounting. Have you ever noticed how other professional firms often have the names of their founders and previous partners on their stationary, and often display their portraits or photos in the hallways of their offices? Why shouldn't we look at our practices with the same degree of pride and perpetuity in mind, and be equally as proud of our past as well as our present? Maintaining Market share One of the keys to a successful practice lies in quality new patient flow. For dentists to maintain the integrity of their existing patient base, as well as enhance their marketshare of new patients, they must begin a relentless exploration of all available practice-enhancement options. As dentists educate themselves through access to the vast highway of new information sources available, they will enhance their ability to make clear and more financially and emotionally rewarding decisions as they transition throughout their career. Maintaining Balance Dentists should seek out practice options that will provide the benefits of both practice-enhancement and life-enhancement in order to maintain "balance". (What is financial success without the balancing force of happiness?). I often meet with dentists who feel as if they are simply production-machines on an assembly line; unless they constantly produce, they are unhappy with themselves! Many dentists still believe that they alone are responsible for all day-to-day clinical production (aside from what their hygienist is producing). They are unclear (and even fearful!) of how to step beyond the limitations of practicing solo. But the tide is changing, and those willing to examine some of the new-practice-options available will be rewarded by an enhanced bottom-line, and an enhanced quality of life. |