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What Went Wrong: The Practice Wasn’t Ready for an Associate

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Dental practices can grow slowly over several years – then suddenly reach a tipping point where an owner feels they need to hire an associate ASAP. But it is important to prepare the practice before hiring anyone.

If you are considering hiring, review Chapter 9 of the “Joining and Leaving the Dental Practice” ebook, which includes an Associate Needs Analysis, sample formulas for calculating associate compensation, an interview guide, and several questions to help you plan for the transition.

Review these scenarios to help avoid two of the most common pitfalls of bringing in an associate without a plan.

Scenario 1: The owner lacked a plan (and the desire) to integrate the associate into the practice

Dr. Ethel was just busy enough in her small practice that she thought she was ready to bring in an associate and scale back her hours. She hired Dr. Lucy, who was from the area, to work in the practice. Together, they established production targets that would determine Dr. Lucy’s salary.

Six months in, Dr. Lucy was frustrated. She was not reaching her production targets because she had only one operatory to work out of, no designated staff, and not enough patients. This was reflected in her paychecks, which were less than she had anticipated. She was struggling to pay back her student loans.

The reality was that the practice simply did not have enough patients or physical space for two full-time doctors – and Dr. Ethel was not scaling back her hours as originally planned. The relationship was going sour for several reasons:

  • Staff kept scheduling long-term patients with Dr. Ethel rather than transitioning some to Dr. Lucy.
  • Ethel was not ready to relinquish patients to another dentist – even though Dr. Lucy’s work was excellent. After all, Dr. Ethel reasoned, it was her reputation on the line.
  • Ethel did not want to invest in additional staff or operatories until she was convinced that Dr. Lucy was going to work out – and this hesitation hampered Dr. Lucy’s ability to succeed.

Dr. Lucy tried to salvage the relationship by suggesting ways to bring in new patients. She proposed a marketing campaign, but Dr. Ethel did not want to spend the money. Nor was Dr. Ethel interested in paying staff to stay late two evenings a week or come in on Saturday mornings.

After three more frustrating months, Dr. Lucy left for another practice and Dr. Ethel decided that associates were not right for her.

How this could have been avoided

In this case, Dr. Ethel really needed to understand herself and her willingness to relinquish control of the practice. She was not ready to have another dentist treating her patients. Ultimately, she sabotaged this relationship from the beginning by not fully supporting Dr. Lucy’s success.

Build a plan to help the new associate succeed.

Before she considered hiring, Dr. Ethel should have reviewed her practice statistics to determine if the practice could support an associate. If the numbers did not immediately justify an additional full-time dentist, she could have simply maintained the status quo. Otherwise, she could have made one of three choices:

  1. Grow the practice first, then hire. Ethel could keep working her regular schedule while marketing to get to her target numbers – and then hire an associate to support the larger patient base.
  2. Hire a new dentist but commit to cutting her own hours. Ethel would need to switch some long-term patients to Dr. Lucy. A personal hand-off and introduction would reassure patients. Staff would help make sure that both doctors were busy with the appropriate mix of procedures.
  3. Develop a plan to recruit new patients and involve the incoming dentist from the start. This planning would be part of the interview process. Together, the two doctors could discuss how to attract new patients, whether they would extend hours, and how much additional space and staff time might be needed. This would include a plan to divvy up the new patients.

This decision should have been made before she even began the hiring process. Putting these decisions and plans into writing – along with associated production targets – could have helped both sides move forward with confidence.

Scenario 2: I didn’t understand how I was getting paid – and got an unwelcome surprise in my paycheck

Right out of dental school, Dr. Vern joined a practice in a busy urban area. From the beginning, his paychecks were much smaller than expected. The owner reminded him that the contract indicated that his salary was based on collections rather than production. Dr. Vern would be paid as soon as patients (or their insurance) made payments.

However, as weeks and months passed, Dr. Vern’s paychecks never increased by much. One day, he rhetorically asked the office’s part-time administrator, “Do people ever pay their bills?”

It turned out that the practice had very weak collection policies, with fully 30% of accounts in arrears. The practice only sent patients a single invoice and never followed up if they did not pay. The whole office operated on paper and a series of spreadsheets rather than a modern billing system.

Over the years, the practice had gradually accepted more and more insurance plans. This further complicated the collections process, and some of the plans were not even paying for the overhead, much less providing a profit. 

To make matters worse, claims were submitted manually rather than electronically and often rejected due to incorrect CDT codes or other clerical errors. Every few months, these rejected claims were corrected and re-submitted, but there was no process to make sure it was done in a timely manner. 

Luckily, Dr. Vern was a dentist who was able to take control of the situation – and the owner was thrilled to have someone help him to increase his profit margin. Dr. Vern created a plan to increase collections and evaluate the insurances accepted by the practice

At the same time Dr. Vern approached the owner and insisted that, if his plan was able to increase collections over the next 3 months, he would have the opportunity to buy in to the practice as a partner. The owner agreed. The two dentists ended up working together for another 12 profitable years before the owner sold the rest of the practice to Dr. Vern.

How this could have been avoided

The owner should have reviewed his collection policies, financial practices, and accepted insurance plans before deciding to hire someone. This would have given him good information about how well the practice was functioning and ensured he set reasonable expectations with his new hire.  

If the owner had discovered how broken his financial practices were, he could have made changes. For example, electronically submitting claims to third-party dental benefit administrators can help ensure they are paid within 7 to 10 days. (Experts recommend targeting to collect 90% of fees within 30 days and the remaining 10% within 60 days, since payments more than 90 days in arrears will most likely never be collected.)

Examine practice financials before hiring (or joining) a practice. 

The practice might also amend its financial policies. The ADA Center for Professional Success has advice on establishing stronger collections policies, including sample letters and scripts. One simple change might be requiring patients to sign a pre-authorization form allowing the practice to charge a credit card for any remaining balance after the third party pays their share.

All these changes might take hiring a dedicated financial administrator, but the boost in collections could more than compensate for their salary.

Periodically reviewing accepted dental plans would also be smart. A potential new hire should ask which plans are accepted to better understand how the practice’s finances work. Owners can use the ADA’s Contract Analysis Service to assess a plan’s financial implications.

Finally, Dr. Vern could have asked to be paid based on production rather than collections to reduce the delay between treatment and his paycheck. See some of the different ways to structure associate compensation agreements.

 

Hiring a new associate can be exciting, but make sure you have a plan. If you are an owner, think through your goals and prepare your practice before beginning the process. If you are an associate, do not hesitate to ask questions during the interview process to make sure that you will be able to succeed in the practice. Both sides will benefit from a more successful transition.  

At ADA Practice Transitions, we can help you take the next step in your career, whether it’s finding the right associate to help your practice grow or helping you find a practice where you can thrive. Start your profile today.

Topics: "find an associateship", what went wrong


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