Transitioning or Running for the Exit?
Dr. Damon called me this week in a panic. He and his wife, also a dentist, had recently purchased a practice from “Dr. Comfortable.” The young couple have been practicing for about five years. Their newly purchased office is located in an affluent area of town in a midsize city, which is often described as a “big small town.” So why the alarm?
The seller had been in practice for 30 years. As is common practice, he introduced the new owners to patients via a letter before the New Year. Most of the patients had been with Dr. Comfortable for several years. Although they appreciated the kind words that Dr. Comfortable used to describe the new owners in his letter, Drs. Damon and Damon were an unproven commodity. Being new to the area, the Damons didn’t have an established reputation in this “big small town” where everyone knows everybody or someone who does. It gets better - or worse as the case may be.
Shortly after patients learned the news, the phone began to ring - not to schedule or congratulate staff, but rather to cancel and request that records to be sent elsewhere. The employees weren’t exactly trying to talk patients out of their decisions either. Unfortunately, they were blindsided by the news. In fact, they learned about Dr. Comfortable’s retirement by accident when his wife let the news slip at the office Christmas party. Within days, the office manager and one of the longtime assistants gave their two weeks’ notices.
It is an unfortunate example of how common transition procedures can create challenges for purchasing doctors. Drs. Damon and Damon had no opportunity to meet patients, establish relationships, and most importantly build trust before Dr. Comfortable’s abrupt exit. One day he was there, the next he was retired. He didn’t stay on for a few months to build goodwill between the new doctors and existing patients or staff. Patients in the middle of treatment plans were simply expected to let one of the new doctors complete them.
At a minimum, Dr. Comfortable should have hosted an open house at his practice in which patients could come meet the new doctors. While the introductory letters are common, they can raise more questions than they answer. If a letter is the only option, make sure you know what the selling doctor is saying in it, and include your own letter welcoming patients to your practice. Better yet, send them one of your new practice brochures outlining your excellent credentials and your commitment to them.
Sadly for the Damons, these challenges were only the beginning. Dr. Comfortable had scaled back to three days in the office in the years before retiring. While the purchasing doctors were a little concerned, they were assured by the fact that Dr. Comfortable did have nearly 3,000 patient records on file, 2,700 in fact, many of which they were hoping to reactivate. The problem: only 35%, 945 patients, were active, and many of the remaining records were years old. Two doctors and 945 patients, you do to the math.
Too often, well-meaning doctors make major life and work decisions based on faulty or limited information. They may not want to spend the money on outside consultants and advisors who can help ensure that they don’t make a tragic and costly mistake. Yet oftentimes, newer dentists don’t understand practice numbers or which reports are most important. They want to trust the selling doctor, who may be well intentioned but also poorly informed. The buyer may not feel comfortable questioning practice statistics. Few dentists fully understand overhead ratios and fewer still have a good sense of where accounts receivables should be. They don’t understand how to evaluate key management systems, such as recall, patient retention, new patient numbers, etc.
Drs. Damon and Damon realized they had made a huge mistake in not seeking outside counsel before purchasing the practice. However, it is in an excellent location near the town’s main shopping and restaurants, close to family neighborhoods and good schools. There is potential here, but as the initial patient exodus and anemic patient base demonstrate, there are no guarantees. The Damons have much work to do.
Next week, you have a new practice, now what?
For more information on this topic, visit my blog: The Lighter Side
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