When the time comes for a dentist to move, retire, or transition to another career, they will often choose to sell their patient records to another dentist in the area. When conducted correctly, this transaction proves beneficial for both parties. The transitioning dentist not only enjoys financial compensation, but they also help their patients continue to receive good care.

The purchasing dentist, on the other hand, greatly increases their chances of having those patients move over to their services. There is no guarantee that all of the patients will follow you over to your practice, which is why buyers must conduct their due diligence before a purchase. This article takes a look at six key tips to consider before investing in patient records.

Purchase Records on a Contingency Basis If Possible

As investments go, patient records tend to be quite volatile. This volatility stems from the inherent uncertainty in acquiring patient records. In some cases, the vast majority of those patients may move over to your practice. Yet in other cases, only a small percentage may end up choosing your services.

For this reason, many experts recommend that you should only purchase patient records on a contingency basis. In other words, you will only end up paying for a record if the patient moves over to your practice. Sellers often shy away from contingency sales, since it usually delays the payments they receive. However, when sellers ask for a down payment, it is usually expressed as a percentage of the charts' total value.

Don't Be Scared to Haggle When Purchasing Outright

Of course, it isn't always possible to purchase records on a contingency basis. If the selling doctor has died, then the records are usually sold outright. In that case, you must investigate the patients even more closely. If the investment seems risky, you can always offer an amount lower than the market value.

A motivated seller may be glad to get the records off their hands — even if they make as little as 50 percent of the market value. Yet you must trust your instincts. If the risks seem too great, don't hesitate to pass on the opportunity, especially if the seller doesn't show a willingness to compromise on price.

Conduct Financial Due Diligence

One of the trickiest things about purchasing patient records is determining how much to pay per record. Be aware that there is no single fixed price for a record.

The seller and buyer must ultimately work together to set a fair price. A number of factors will influence the price, including the number of patients, the demographics of the patients, and how aggressively the selling doctor's treatment philosophy. If the selling doctor was a strong proponent of preventative dentistry, you may end up with less work than you expect moving forward.

Purchasers should estimate their potential earnings as carefully as possible before setting a price. Remember that the price per chart that you pay will not be the same as the price per patient, since not all of the patients will end up in your care. For a conservative estimate, assume that you will end up taking on roughly 30 percent of the patients whose charts you acquire.

In that case, the amount you pay per patient will actually be more than three times greater than the price you pay per chart. You should also calculate the amount of money you will have to spend to acquire a new patient. These costs involve any promotional literature you mail out, as well as any complimentary visits you offer prospective patients.

Some sellers and buyers choose to pursue an alternate type of agreement, in which the purchaser agrees to pay the seller a percentage of production for whatever patients transfer to their care.

Know the Applicable Statutes in Your State

Once you have agreed on a price and paid the seller, you may begin sending letters out to the patients. The seller may cooperate in this process, recommending your services either verbally or via written means. Yet no matter how smartly you pursue those patients, there is simply no guarantee that you will make a return on your investment.

To protect themselves, many buyers try to include clauses in their sales agreement that they will only pay the seller for the patients who they ultimately retain. Unfortunately, formalizing this kind of structure often violates state anti-kickback statutes. Be sure that you understand what kinds of laws and regulations apply to you.

Understand the Importance of Location

Location is one of the most important factors when judging whether a record purchase is wise. The key thing here is the difference between the seller's office and your office. The greater the distance between the two, the riskier the purchase becomes. Of course, there is a good deal of relatively involved in making this call.

For instance, if your practice is located in a densely populated city, records from an office just two miles away may present a significant risk. Those patients may have numerous other choices located closer than you. In smaller towns, or in rural areas, the acceptable travel distance increases, since there will be fewer competing practices.

Beware of Reduced-Fee Plans

Finally, when evaluating the charts for sale, pay close attention to the number of patients on reduced-fee plans. These may include PPO, HMO, or other reduced fee arrangements. Simply put, these kinds of patients will not bring in as much revenue for your practice.

That doesn't mean that you shouldn't take them on, of course — just that you shouldn't pay the selling doctor as much for those records. Look closely and figure out the exact percentage of reduced fee records, and alter your offer correspondingly.

To protect themselves against unwanted losses, doctors must always conduct due diligence when purchasing patient records. Those who correctly analyze all of the factors discussed above stand a much greater chance of getting a good return on their investment. If you have questions concerning dental practice transitions, please don't hesitate to contact the experts at Dental & Medical Counsel, PC.