Clinical Due Diligence

Welcome back associates. In this module we're going to talk about clinical due diligence and because practice CFO is so focused on dentists, we naturally have uncovered some important areas to review during your clinical due diligence. But while practice CFO doesn't actually perform clinical due diligence, we have some great practice management resources that do and we would be happy to assist you in this area. The goal of clinical due diligence is to make sure that a the seller of the practice you are buying isn't performing procedures that you're not comfortable doing. Now, a few procedures may not exclude you from continuing with the purchase, but if there's a material amount of production that you can't replicate, then you're better off finding a practice that aligns more with your skill set because ultimately the the fair market valuation of this particular practice, if that was the case, wouldn't represent the value to you. Now maybe the doctor's doing some extractions and you're not comfortable doing those, or at least not yet. An extraction is the only thing the doctor is doing that you're not. Example, let's say the doctor is doing about 30 to 75,000 a year in extractions. That's probably not enough to keep you from purchasing the practice. But on the other hand, if the doctor is doing 150 to 200,000 extractions and that may be an amount in excess of what you'd like to buy into.

And the next thing that we're going to want to look at is treatment plans, case acceptance rates, patient charts, X rays of those patients. And the reason why is because you need to understand how aggressive the selling doctor is in their treatment plan, how receptive the patients are to those treatment plans, and more importantly how much treatment is still outstanding. And if you can quantify a substantial amount of treatment still outstanding, that's pretty confident that you're going to be able to create a lot of value Day one through production, through some excess production. Also, if you notice that the doctor is a little bit more passive in their treatment planning relative to the X rays and the charts that you review for those patients and you know that your clinical from your clinical cilset, you're a bit more aggressive in your treatment planning style, you can typically surmise that there is quite a bit of production available for you as the new owner just from a treatment planning style difference. Moving forward, you will want to review the billing process. As a new owner, you're likely not going to have a lot of knowledge on the billing process. There's a lot of nuances that go into billing and it takes a lot of time to understand that thoroughly. But hopefully what I recommend is that you have a practice management consultant reviewing this with you. If not, one of the best things that you can do in the first three months is to hire a dental billing consultant to review your insurance fee schedules, the code you're utilizing in each procedure to make sure you're not missing any codes, and lastly to make sure you're utilizing any non covered services to maximize the patient experience but also your cash flows. You'll quickly know if the practice runs a tight ship in terms of how they enter data and utilize the practice management system. If it's not clean, you can add that as an action item and a day one expense to get that cleaned up. Understanding the current front office procedures is important. Ideally a practice management consultant is helping you again here identify any weaknesses in the front office processes, creating a plan to fix those ineffective inefficiencies and and once you become an owner, creating a more streamlined process for the patient and the patient experience. You want to understand the effect of losing Delta Premier, which we spend a lot of time on during our financial due diligence section. And lastly you want a written analysis from your practice management consultant with all of the recommendations that they are proposing. In my experience, I think it's a great idea to at a minimum, employer practice management consultant to continue working with you during the first 90 days after the transaction. There's so much work involved in getting credentialed with insurances, working with staff, all while you're trying to be a producer, getting settled with the staff, learning all of the new responsibilities that it comes with being a business owner. That practice management consultant, having them by your side during that time is instrumental. In our next module we will discuss legal due diligence. I look forward to seeing you all again shortly. Stay tuned.