Retiring Dentists might sell their practice to the highest bidder.

Retiring Dentists Might Consider Selling Their Practices To Any Highest Bidder!
By Dr. Jeffrey D. Dorfman*

(Published in: Dentist Quarterly-The Official Publication of
the New York County Dental Society – January 1999
and the ADA Legal Advisor – January 1999)

Retiring dentists have historically always sold their practices to other dentists. This is not easily accomplished because the dentist-buyer is usually younger and has limited access to capital. The attraction of DMSO’s to dentists is they are ready buyers with access to capital and the Wall Street allure of riches.

The problem with selling a practice to DMSO’s is twofold: 1) Selling a dental practice to any unlicensed person or group could expose the dentist-seller to unwanted litigation which could lead to revocation of their dental license; and, 2) Most DMSO purchases of dental practices are accomplished with some cash and mostly company stock.

In the table below, it may be seen that the stock price of nearly all DMSO’s listed are selling below their initial offering price; the few apparent winners appear not to have kept pace with the S&P 500 index even though they represent a much higher risk. All that glitters is not gold.

So what should a retiring dentist do? Why not sell your practice to any highest bidder. Offer to sell your practice to your lawyer, accountant, bank manager, stock broker, cab driver, barber or doorman. Sell your practice to anyone who offers the most cash. If the non-dentist-buyer were to hire a young dentist at a low salary they could make a nice return on investment.

Let’ s say that a bank manager was getting tired of working at Chase so he decided he wanted to buy a dental practice. He could make the best cash offer to a retiring dentist. The bank manager need only execute a ‘hard asset buyout’ of the dental practice to buy it. This is the same legal subterfuge used by DMSO’s.

Imagine what our profession would be like in a generation if anyone were allowed to own a dental practice. Imagine lawyers, accountants, bank managers, stock brokers, cab drivers, barbers and doormen all owners of dental practices in competition with dentist-owners. That is exactly what is happening now when a DMSO buys a dental practice and the equity is in the hands of stockholders. How will priorities in healthcare change?

New York County Dental Society members need to contribute PAC (Political Action Committee) money when they receive their annual dues statements. Our members should double or triple the local FDDSPAC requested and include a note to our state dental leadership asking them to modernize the education law to specifically deal with keeping DMSO’s out of New York State.

Dentistry does need to create a mechanism that allows an easier transition of practice ownership from retiring to new dentists. Dentistry also needs to consolidate. This should occur in a manner similar to the legal profession, not medicine. Let’s keep dentistry for future dentists and their patients. If not, then retiring dentists should now consider selling their dental practices through a hard asset buyout to anyone offering the most cash. Who will stop you?

Please get out your checkbook and give to our local FDDSPAC today.

*Chairman, Dental Benefit Programs, New York County Dental Society

Categorised in: Dr. Dorfman Says

This post was written by Interns