Not as Busy as You Would Like? Try Looking Around the Dental “Neighborhood”

By Dr. Rick Huot

According to the ADA Health Policy Institute’s recent research brief, statistics show that dental offices have been lagging behind other business entities to recover from the Great Recession that started in 2008. Except in rural and urban areas that have a numerical shortage of dentists, most dental practices are reporting flat earnings and are just keeping up with the increasing costs of running an efficient practice.

The measure of growth in a practice due to internally referred patients and patients obtained by external marketing is called organic growth, since it is “home grown” from the efforts that the present office has done all along.

Another “fast track” of achieving growth is to purchase an existing practice in your practice neighborhood, by either merging into the larger office, or purchasing the existing patient base and obtaining the services of the present dentist, and many, if not all, of the doctor’s staff members.

This is the first year that millennial dentists will outnumber baby boomer dentists, and many of the boomers are approaching their 70s, which is past the traditional retirement age of 65 for the majority of America’s workforce for the last generation. However, people (and dentists!) are living longer, and quite possibly need to work longer, as they are financially short of their retirement goals.

For a young dentist (Dr. Millennial), buying an existing practice from a nearby colleague (Dr. Boomer) is a win-win situation, and some of the immediate benefits include:

  1. Purchasing an existing patient base is a more efficient way of securing new patients. The patients that belong to Dr. Boomer are existing “vetted” patients with a track record of seeking care, and a desire to keep their doctor-patient relationship with a young dentist, knowing it won’t be long before they have to choose a new dentist. Retaining upwards of 90 percent of the patient base is not unusual in this type of practice purchase, especially if Dr. Boomer occasionally practices in the new office.
  2. Every dental practice has a core of outstanding staff members, and the ability to retain those staff members will give Dr. Boomer’s patients a “familiar face” to see when they come in for dental treatment.
  3. The small equipment and additional supplies purchased with Dr. Boomer’s practice will increase efficiency in terms of instrument turnaround, such as extra handpieces and instrument setups, and reduce the future need of high-cost items, such as extra digital sensors and computer workstations.
  4. Dr. Millennial has a ready-made “temp service” in Dr. Boomer, which keeps the practice open for longer periods of time during vacation times and in the case of a female dentist, maternity leave. Having the practice open for more days and longer times increases the profitability of a business, as fixed costs are already accounted for and variable costs are less.

For Dr. Boomer, this also is a win-win situation, as some of the benefits include:

  1. The ability to take time off without the worry of provider coverage, and paying the costs of running a practice at a time in life when we physically slow down.
  2. If Dr. Boomer becomes a solo independent contractor to Dr. Millennial, the pension laws for someone reaching 50 years of age dramatically allows the older doctor to get a direct tax deduction for a considerable amount of retirement funds ($215,000 for a defined benefit plan, and $54,000 employee contribution to a defined contribution plan not including the matching provision), while taking a reduced amount to live on, since the practice sale would have provided funds for living expenses.
  3. Since Dr. Boomer is now a self-employed solo dentist, a Subchapter S corporation would allow practice profits to “flow through” their normal tax return (1040), and could provide tax bracket benefits.

As with any financial and business transaction, all of these practice purchase sales should be done with competent financial and legal advice, and might include a transition specialist who could facilitate the merger.

So, Dr. Millennial, it is time to look “around the neighborhood” and find someone compatible to your practice and business philosophy. The decision you make may prove to be the most financially astute one you will make in your entire practice career!

 

Dr. Huot is a general dentist in Vero Beach and the founder of Beachside Dental Consultants Inc., a dental practice management consulting business. He is on the FDA Board of Trustees and can be reached at rhuot@bot.floridadental.org. 

Do You Have Good Financial Controls to Protect Your Practice? (video)

Recently, the Florida Dental Association put together a video with the assistance of Thomas Howell Ferguson P.A. CPAs. The purpose of the video was to provide ways smaller associations (component and affiliate dental societies) could implement good financial controls. After reviewing the video, FDA leadership thought much of what was presented would be valuable for our members’ dental offices as well.

5 Ways to Conquer Your Dental School Debt

By Elyssa Kirkham, Student Loan Hero Contributor

Graduating from dental school without six-figure debts is hard, not to mention pretty uncommon. Only about one in five dental students manages to graduate with under $100,000 in student loans. And the typical dental school graduate’s debt is around $237,500, according to the American Dental Education Association.

To make matters worse, the federal student loans that can be used to finance dental school are 1.55-2.55 percentage points higher than undergrad loans. To put this in perspective, if a dentist has the typical $237,500 in GRAD Plus loans with interest rates averaging 6.31 percent, $1,249 of monthly payments will go straight to interest.

With higher student loan rates and even higher balances, being proactive with dental school debt can have big payoffs. Dentists who get rid of student debt faster will save thousands of dollars. Plus, they’ll more quickly achieve financial security and build real wealth.

Sound good? Here are five things Florida dentists can do to knock out their dental school debt.

1. Pay More Than the Minimum

Pay ahead of the 10-year Standard Repayment schedule whenever possible. Doing so will shave months or even years off of your repayment period and save thousands of dollars in interest.

Take the average $237,500 in dental school debt, for example. Assuming the borrower has GRAD Plus loans, that debt will cost a total of $82,610 in interest. Put an extra $500 a month toward these loans, however, and you’d save more than $18,000 in interest. You’d also pay off the loan in eight years instead of 10.

You can play around with a student loan prepayment calculator to see how much extra payments could save in interest and time.

Chances are that your dental school debt is made up of several loans with varying interest rates. If you decide to make extra payments, strategically apply them toward the highest-interest loan for the biggest cost savings.

2. Keep Your Lifestyle in Check

As you earn more, you can afford to pay more toward student debt. The tricky part is making sure your lifestyle doesn’t inflate with your income.

After living cheap through an undergraduate degree, dental school and even residency, the typical Florida dentist’s pay is an impressive $156,000-$172,000 per year (according to the BLS). That probably feels like a fortune – it’s tempting to upgrade spending to match a higher income.

But maintaining a frugal lifestyle will enable you to put more money toward prepaying student loans. Instead of spending a pay raise on more “wants,” keep spending at the same level and apply raises to making extra monthly payments toward dental school loans.

That’s how one orthodontist, Dr. Blake Hillstead, repaid $380,000 in dental school debt in just under two years. He weighed his student debt repayment options and was tempted to upgrade is lifestyle.

Instead, he “decided that we’d save a lot of money and stress if we could just pay my student loans off quickly, even if it meant making some short-term lifestyle sacrifices,” Hillstead told Student Loan Hero.

3. Put Bonuses Toward Student Loans

In addition to your regular income, you can also use “extra” money earned outside of regular paychecks to take chunks out of your student loan balance.

If you’re a new graduate or looking to switch practices, for example, ask for a signing bonus (these can range from $10,000-$50,000) or other work benefits that help with student debt. Signing bonuses, annual bonuses or even a nice tax refund can be used to painlessly pay extra money toward student loans without squeezing your monthly budget.

Dental health professionals also can work a side hustle to generate more income to throw at student loans. Hillstead, for instance, worked as an associate orthodontist at other practices in addition to seeing patients at his own private practice.

4. Consider Refinancing Dental School Loans

When you refinance student loans, you take out a new private loan to pay off your existing loan(s). The goal is to consolidate college debt and achieve a lower interest rate and/or a more favorable repayment term.

Dentists are great candidates for lowering the costs of their student loans through refinancing. They are more likely to have higher rates, so they are more likely to save significantly on interest. Plus, their higher incomes also will help them get approved for refinancing and qualify for the best interest rates.

Remember the 6.13 percent interest rate on GRAD Plus loans? Many dental graduates face rates as high as that, or higher. However, some of the best private lenders can refinance student loans with new rates as low as 1.97 percent APR.

In real dollars, that would lower monthly payments by nearly $500 a month and save around $57,000 over the life of a typical $237,500 balance.

5. Look into Student Loan Forgiveness for Dentists

Last but not least, dental professionals can look into programs that offer student loan forgiveness for dentists. Because the costs of dental school are so high, many public and nonprofit organizations offer loan forgiveness or repayment assistance to ease the burden of dentists’ student debt.

Dentists who serve in the Army Corps, for instance, can get up to $120,000 toward repaying dental school loans. Or you might take a position in an area with a high need for dental professionals and qualify for state-level loan repayment assistance programs.

When weighing this option, make sure to find out what kind of commitment you’ll be expected to make for the student loan forgiveness or assistance. You might have to relocate or take a lower-paying position to qualify for these programs. Weigh the loan repayment or forgiveness benefits against other scenarios, such as taking a higher-paid position and repaying loans out-of-pocket.

Compare your options to ensure you’re choosing the most effective path to conquer your student loans. And then follow through and execute your strategy. A student-debt-free life takes some work and sacrifice, but it’s well worth it.

 

 

 

It’s Not OK to Call Someone a Deadbeat and 18 Other Things Dentists Need to Know About Debt Collection

By Graham Nicol, Esq., Health Care Risk Manager, Florida Bar Board Certified Specialist (Health Law)

Q: In Florida, what is the definition of debt collection? If I have a patient who owes me $100 can we call that patient and ask for payment?

A: Chapter 559 regulates consumer debt collection. There is a difference between a “consumer collection agency” and a “creditor.” Consumer collection agencies must register with the state, but the registration requirement does not apply to “an original creditor.”

As a dentist extending credit for dental care either yourself or through your practice (i.e., not through a bank, credit card or financial services company like CareCredit), you are an original creditor, not a consumer collection agency. So, if a patient owes you a debt of $100 for services rendered or as a deductible, then you can, in general, call and ask for the money as a creditor.

However, no person — it doesn’t matter whether you are the original creditor or not — may do any of the following 19 prohibited acts when collecting consumer debt:

  1. Pretend to be law enforcement.
  2. Threaten force or violence.
  3. Disclose the existence of a disputed debt to another so as to affect credit worthiness.
  4. Threaten to tell the debtor’s employer that you are owed money by one of their employees.
  5. Provide information that you know is false.
  6. Disclose information about the debt without also disclosing that the debtor disputes owing it if you know that they do.
  7. Communicate with the debtor or his family with such frequency as to harass them.
  8. Use profane, obscene, vulgar or willfully abusive language.
  9. Attempt to collect a debt that you know is not legitimate or assert that you have legal rights that you know you don’t have (a lien on their property).
  10. Simulate the judicial process.
  11. Simulate that you are an attorney at law by using law firm stationery or instruments that only attorneys are authorized to prepare.
  12. Orally communicate with a debtor that you are an attorney or work for one.
  13. Advertise, or threaten to advertise, for sale a debt as a means to enforce payment unless you have legal authority to do so.
  14. Refuse to identify yourself when asked to by the debtor.
  15. Mail a bill in an envelope or postcard with words on the outside calculated to embarrass the debtor.
  16. Communicate with the debtor between the hours of 9 p.m. and 8 a.m. in the debtor’s time zone without the prior consent of the debtor.
  17. Communicate with a debtor if you know they are represented by an attorney.
  18. Cause a debtor to be charged for communications by collect telephone calls or telegram fees.
  19. Publish, or threaten to publish, individual names or any list of names of debtors, commonly known as a “deadbeat list,” to the public.

This blog is for informational purposes only and is not intended to be a substitute for professional legal advice. If you have a specific concern or need legal advice regarding your dental practice, you should contact a qualified attorney.