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Start Up of a New Dental or Medical Practice?

If you are a dentist, a doctor, a chiropractor, or a veterinarian and you have the entrepreneurial spirit that helps you thrive in business settings and dealing with the business aspects of running of a practice, then there is little downside to owning your practice. Once you answer that threshold question, the next question is whether you should buy an existing practice or start a new practice of your own. There are pros and cons to both approaches, and this article will discuss the most important factors in deciding whether you should start a new practice from ground up.

Starting up your new medical or dental practice provides you the opportunity to implement your own vision of how you would like to run your practice. This includes creating the work environment that you always envisioned, hiring and training employees that you believe will best suit your future practice and patients, the type of services that you would like to offer to your patients, and whether you want your practice and patients to be more insurance or out-of-pocket oriented.

Another obvious advantage of starting your own dental or medical practice, as opposed to buying an existing practice, is that you have the option of picking the location of your new practice as well as the demographic of your patients based on business surveys and analysis that include the population growth and other trends in your desired locations, the cost of leasing or buying office space, and a location that is both more convenient for you and fits the vision of the practice that you plan to run. If you decide to buy an existing practice, your options with regard to the location of your future practice is limited by the practices that are in the market and then further limited if you find a location that you like but the purchase price is overpriced or simply above the range that you are willing to pay to purchase a medical or dental practice.

Another advantage of starting up a new medical or dental practice is owning new equipment, software, furniture, etc. You will be spending a substantial amount of your life in your office so it will be much more rewarding if you feel at home and are comfortable there, not to mention that with brand new equipment you will not have to worry about fixing and repairing older equipment and the cost and headaches related to them.

The biggest disadvantage in starting up a new practice is obviously having significant overhead and paying the costs and expenses of running your office and practice while you don’t have any patients on the first day you will open for business or not having enough patients for months after your grand opening. You should therefore anticipate that and have enough funding in place to survive between 6-18 months. In my opinion, this is not as significant of a factor as it once was because more and more dentists and doctors build up their practices and patient-base by signing up with various insurance companies and becoming part of networks where patients find you or are referred to you. Due to the dental and medical industry becoming more insurance-oriented, the length of time that you need to survive with fewer patients is therefore shortened; of course, this also depends on your field of practice and the more specialized you are the longer and more difficult it becomes to be fully booked.

The other concern that I don’t necessarily consider to be a disadvantage is the flip side of the coin in that whenever you start and embark on a new project or business, you lack experience in various aspects of running that business even though you were well trained in school for treating patients. Depending on your personal preferences, however, there are a lot of material that you could study and learn how to develop business systems for billing and communicating with patients, hiring and training employees, and other aspects of practice management. If you are not one to do your own research and learn from books and videos, you can certainly hire practice management consultants that are experienced and can help you catch up in these areas; you just have to consider that as part of your budget and funding.

If you are considering starting a new dental or medical practice, I can help you with all aspects of starting your office whether it is obtaining your permits and licenses, negotiating a lease or purchasing office space, purchasing new dental equipment, introducing you and/or supervising contractors with expertise in building out dental and medical offices, and companies that will assist you with your insurance credentialing, and other aspects of starting a new practice and establishing a patient-base that will help you grow and succeed. Feel free to contact me (301-309-9002; ask@dentalmedicalattorney.com) if I can be of assistance in reaching your professional goals and objectives.

Have a Strong Advocate on Your Side!
A. Shane Kamkari, Esq.

Finding The Right Attorney for Your Medical or Dental Practice.

There are a number of questions that you should ask yourself and consider when embarking on buying or selling a medical or dental practice. There are likely hundreds of thousands of dollars, if not millions of dollars, at stake depending on the size of the practice, and the attorney that you choose to represent you plays a major role in the success of your transition in or out of a practice.
The ADA Center for Professional Success has issued an article titled “A Dentist Guide to Selecting A Lawyer” that provides excellent guidance on choosing the right attorney. As part of this article, the ADA lists some questions that you should ask your attorney to see whether they have the required knowledge and experience in handling these types of matters and to see if the lawyer is the right fit for you; these questions are:

“(a) Are you experienced in this kind of matter?
(b) Will you be the lawyer handling this matter, or will an associate be handling this?
(c) How long do you estimate it will take to complete this matter?
(d) How much do you estimate your services will cost me?
(e) What is your fee structure?”

These are all valid questions to ask, but the article further emphasizes that you should also consider the attorney’s reputation and communications practices with their clients. Please keep these considerations in mind because transactional attorneys that handle buying and selling run-of-the-mill businesses do not deal with issues that are specific to buying or selling of medical and dental practices and they are not as adept in healthcare transactions as an attorney that is experienced in this field.

Whether you are interested in buying or selling a practice, I highly recommend that you contact an attorney even before contacting a broker or an agent. First, as a seller, you will be entering into a legally binding contract with the broker and you should have legal advice before signing the broker’s contract. Also, it is common that the buyer of a practice will informally discuss some parts of the contemplated transaction and tacitly accept terms and conditions without knowing that those terms could have far reaching consequences both financially and legally. Even if the terms do not become legally binding, they create expectations in the other party that become difficult to overcome in the course of negotiations.
Feel free to contact me (301-309-9002; ask@dentalmedicalattorney.com) if you are contemplating buying or selling a medical or dental practice and I am happy to answer all of your questions and then some so you can decide whether I am the right attorney to represent you in one of the biggest transactions of your professional life.

Have a Strong Advocate on Your Side!
A. Shane Kamkari, Esq.

Medical-and-Dental-Practice-Attorney-for-Stark-law

Medical and Dental Practice Attorney for Stark law

Stark law is applicable to any dentist, physician, and/or medical practice that accepts Medicare and Medicaid patients. It prohibits dentists and physicians (the definition of which includes chiropractors) from referring patients to any facility where the practitioner and/or their immediate family own, are invested, or have an interest, for certain “Designated Health Services” (“DHS”). In addition to penalties for the referring dentist or doctor, Stark law also prohibits the referred facility to bill for services rendered for such DHS. There are certain services that do not trigger Stark law, and there are also exemptions and exceptions that may be applicable under certain circumstances.

 

Designated Health Services (DHS) Under Stark Law.

The following is a list of some of the DHS that are regulated under Stark Law:

  • Clinical laboratory services
  • Physical therapy services
  • Speech-language pathology services
  • Radiology, radiation therapy services
  • Durable medical equipment and supplies
  • Occupational therapy services
  • Parenteral and enteral nutrients, equipment and supplies
  • Prosthetics, orthotics and prosthetic devices and supplies
  • Home health services
  • Inpatient and outpatient hospital services
  • Outpatient prescription drugs

 

Penalties under the Stark Law.

  • Denial of claim: must refund any payment
  • Civil monetary penalty: $15,000 per claim, possible triple damages
  • Failure to report: $10,000 per day
  • Exclusion from Medicare and Medicaid programs
  • Civil law, strict liability with no “intent” requirement
  • Excluded from Federal Health Programs

 

Attorney for Dentists Doctors & Chiropractors.

With a wave of relatively new federal and state statutes that regulate the dental and medical industry as well as the entire medical industry being in the spotlight from the law enforcement perspective, it is imperative that you, your practice, and your contracts are in compliance with these rules and regulations and that you are properly represented by an attorney that is experienced in this field of law.  Kamkari Law offers legal representation in the following commercial healthcare transactions:

  • Buying or Selling Medical and Dental Practices
    “Partnership” and Buy Into Medical and Dental Practices
  • Start-Up of Medical and Dental Practices
  • Buying or Leasing Office Space for Medical and Dental Practices
  • Associate Employment Contracts for Dentists and Physicians
  • Litigation of Commercial Disputes Including Breaches of Contract and Partnership Lawsuits

Feel free to contact me 301-309-9002, 202-309-1156, or ask@dentalmedicalattorney.com to schedule a consultation for an attorney regarding these commercial healthcare matters.

Shane Kamkari, Esq.
Attorney-at-Law
Lawyer for Dentists Doctors
And Other Medical Professionals

What is the transition period?

Transition period refers to the length of time that the selling dentist or physician agrees to stay onboard and be employed by the buyer after the Closing. Depending on the type of practice this may be a very important part of the negotiations and contract including the length of transition period and the compensation paid for it. The importance of the transition period stems from the fact that the buyer does not want to meet the patients of the seller without any introduction by the seller that normally comforts the patients and is a conduit for the patient to return to the office after a nice introduction.

Many patients may not have the incentive to return to the same office once a new dentist or doctor has taken over and having the selling dentist or doctor that is well familiar with the patients and is willing to give a nice introduction to the buying dentist or doctor goes a long way to increase the chances of the patients returning to the same office in the future. For the same reason, the transition period plays a big factor in determining the purchase price. A selling dentist or a doctor that has no intention of returning to the office immediately or shortly after the Closing could lose a great deal of leverage in setting the purchase price.

As previously mentioned, a factor in determining the purchase price is the predictability that the buying dentist or physician will have the benefits of certain amount of revenues and/or profits which could be substantially affected if the selling party is not willing to return to the office for a specified amount of time, the transition period. The parties must also negotiate the compensation for the selling party throughout the transition period that may trigger Stark and/or Antikickback statutes.

The structure of transaction: Should you buy the stocks or assets of a practice?

It is rare when a buyer or the buyer’s attorney would or should accept structuring the deal as a stock purchase (when the seller is a corporation) or interest purchase (when the seller is a limited liability company LLC). The main reason is that in stock purchases usually all the previous liabilities of the corporation or company are automatically transferred from the seller to the buyer, whether said liabilities are known or unknown.

When you purchase the stocks of a shareholder in a corporation or an interest of a member in a LLC, you are stepping in the shoes of the previous shareholder or member from whom you purchased the stocks or interest; therefore, the corporation or the LLC remains the same entity that had the previous liabilities and you will now be holding the bag as the new shareholder or member of the same old corporation or LLC that carries these liabilities.

There are also tax consequences that should be carefully considered in deciding how to structure the deal. Conversely, in an asset purchase, the buyer usually remains liable for certain liabilities that s/he accepts to be responsible such as the remainder of a loan for certain equipment or other contracts that buyer expressly agrees to adopt; otherwise the contract should include a language that avoid all other liabilities. The above is not an exhaustive list of the pros and cons of structuring a transaction as a stock purchase versus an asset purchase and it is highly recommended that you have the benefit of legal counsel for taking any action that may be cause severe irreversible damage to you.

What are the various stages of transactions for selling or buying dental and medical practices?

The first step is obviously finding a practice for sale that is well suited for you; that includes the location and size of practice, the seller’s demand for purchase price, and your over all goal and objectives. Once a suitable seller is found, the process starts with sending a letter of intent to the seller or the seller’s agent which expresses your interest in purchasing the practice. The letter of intent should include both binding and non-binding provisions. Generally speaking, the non-binding parts of a letter of intent include the business terms such as the structure of the deal, whether you are interested in buying the stocks or assets of the practice, the purchase price, any offers of employment, etc. Until and unless you are satisfied with the business records, tax returns, the legal due diligence, and other matters, you should not make a firm offer to purchase the practice. Throughout my practice I have been surprised by potential clients that contacted me after having sent a letter of intent themselves, without the input of an attorney, believing that anything and everything in their letters are non-binding only because the letter states it is a letter of intent. A letter and its terms do not automatically become non-binding only because a letter states it is a letter of intent and a seller may be able to force you to follow through and purchase the practice based on a letter of intent that does not specify it is non-binding. The binding terms usually include a “no-shop” provision by the seller and non-disclosure agreements (NDAs) that protect the confidentiality of the seller, the buyer, and the information and documents that are exchanged by the parties.

After forwarding a letter of intent, the seller usually makes the necessary disclosures that would give the buyer a window into many aspects of the practice so that the buyer can determine the terms that s/he is willing to offer to the seller. These transactions normally include intricate negotiations over many weeks and sometimes months regarding the business and legal terms that will affect both the buyers and sellers for years to come. These negotiations are usually done by exchanging offers and counter-offers in form of elaborate contracts until both parties feel comfortable signing the contract. Your attorney should conduct and complete business and legal due diligence that may differ in scope; the risks involved and the cost of completing such due diligence and your comfort level on accepting the risk are some of the factors in deciding to pursue a certain line of inquiry. Once due diligence is satisfactorily completed, the parties will proceed to the Closing.

What are the benefits of buying a practice versus starting up a new practice

Buying dental and medical practices offers many benefits to a potential buyer. The most important factor is having the financial predictability of buying an ongoing practice and knowing that immediately after the Closing you will have patients that will be waiting for you at your new office. This factor is more prominent in certain types of practices depending on whether your practice lends itself to patients that will be returning patients or is your practice heavily relies on other medical professionals referring patients.

This is true because in valuation of practices and setting the purchase price you should investigate the gross revenues and net profits of the subject practice in recent years as well as the potential of that practice to generate the same or more revenues and profits. Buying a practice also allows dentists and doctors to expand their practices without the legal red tape involved in opening a new practice including obtaining new permits and building out a new office. Ultimately, various factors should be carefully considered in determining whether you should purchase a practice or start up a new one, the least of which are the viability of practice, its potential to generate revenues and profits compared to the premium that you will pay in form of the purchase price.

What are some of the reasons why dental & medical professionals sell their practice?

There are several reasons why dentists or physicians decide to sell their practices. Many medical practitioners sell their practice when they decide to retire and rightly so they leverage the value that they have created into their practice through their hard work over many years as a way to support their retirement and the activities that they would like to pursue during retirement. There are occasions when a dentist or a doctor may have over extended themselves by expanding and running so many offices that they feel overwhelmed managing all of them and they would like to consolidate their time, financial responsibilities, and practices.

Should you retain a medical or dental practice attorney to represent you in selling or buying a practice?

I have received many calls and requests for consultation and representation from the parties to a transaction for selling or buying of dental and medical practices that have realized months after the Closing that they are liable for certain claims, contracts, and damages that was not intended to be a part of the transaction, but the contract was not drafted in such a way to protect them. This is particularly important if the other side is represented by an attorney, agent, and/or a broker. First, there are certain claims and liabilities that may automatically transfer from the seller to the buyer, whether those claim(s) were known or unknown during the negotiations, and whether the contract specifically provided for such transfer of liability or not. Additionally, attorneys can be very crafty and use short, simple terms that may seem completely meaningless and/or innocuous to you but could affect the entire contract and all of its terms. For example, if there is a sentence buried in a contract that states “the terms of this contract will merge into the Closing documents” all of the benefits that were included in the contract will be lost the moment the Closing documents are signed; essentially, the terms of the contract will cease to govern the parties rights and responsibilities to each other upon the execution of the Closing documents. Depending on the terms of the contract and Closing documents this could substantially affect one side more than the other.

Parties to a contract often believe that because they can read and write well they should not retain an attorney and “waste” their money for legal representation. Based on my experiences I highly recommend that you retain an attorney that is experienced in buying and selling of dental and medical practices and you should ask penetrating questions from the attorney that you intend to retain to see whether they have the requisite knowledge and can work well with you throughout the various stages of the transaction.