Group Practice

MICHAEL A. BLAU DDS

One aspect of the rapidly changing delivery system in dentistry is the association of orthodontists with general or pedodontic group practices. Large debts accumulated by students, the high cost of opening a practice, and the difficulty in finding a suitable office location are factors contributing to the increasing popularity of this arrangement.

Even when a primary office is established, it is difficult to acquire a full-time patient load in a reasonable time period, owing to the competitiveness of present-day orthodontics. In the past opening a second office was a common solution, but this alternative has become less feasible because the cost of establishing and maintaining the first office is high, and maintaining a second office for one to two days a week may be inefficient. The association of an orthodontist with a group has, therefore, become quite attractive.

The proliferation of shopping center dental practices, large multidisciplined practices, Health Maintenance Organizations, and closed panel practices has created opportunities for orthodontists to participate in a group practice.

Offering patients the full spectrum of dental health care, rather than referring them to outside practices, the increased utilization of the dental practice facility, and the extra income are sufficiently attractive reasons for a group to make such arrangements.

Advantages

There are a number of advantages to orthodontists in joining a group practice:

1. Guaranteed source of referrals. In this era of diminishing practice size, a guaranteed source of patients cannot be undervalued. As anyone who has conducted a referral-based practice can attest, dependence upon referring dentists can create great insecurity, and a guaranteed source of patients is most reassuring for a stable income.

2. Association with general dentists and other specialists in the same of office. In view of the increase of adult patients, collaboration between generalist and orthodontist enhances cross-specialty consultation and can be important for the successful outcome of treatment.

3. Some degree of emergency coverage at all times. Although generally only one orthodontist is associated with a group practice, the other dentists will at least be able to handle an emergency.

4. Access to or ability to purchase large equipment, such as a panoramic x-ray unit.

5. Access to specialized personnel, such as hygienists and laboratory technicians.

6. Independence within the group. Since the orthodontist actually conducts a solo practice within the group, he can adhere to his own quality standards, choose supplies and instruments, and practice in the manner he wishes.

7. Close peer review. In a group practice, the other dentists will be examining the results of the orthodontic treatment.

8. Fewer administrative burdens than in a solo practice.

Disadvantages

Disadvantages of associating with a group practice may be:

1. Fewer outside referrals to the orthodontist. Dentists will not refer into another general practice (although there will still be patient referrals).

2. Lack of orthodontic coverage within the group in case of illness, disability, or death (although coverage can be arranged with the orthodontist's coverage group).

3. Some loss of individuality, because the orthodontist will have to use chairs and units available in the group office. Likewise, no change can be made in office decoration, and permission may be needed to purchase an expensive item.

4. Lack of interchange and consultation with other orthodontists within the group.

Steps Before Joining

Before joining a group, several important steps must be taken:

1. Investigate the practice carefully. This will require spending several days on location. Find out whether an orthodontist is really needed, by determining the number of patients referred to outside orthodontists during the past year. Assess the quality of patient care of the practice and survey the physical facilities carefully. Determine the attitude of the people working in the office. Attempt to analyze the practice by breaking it down into socioeconomic considerations, adult-children ratio, and religious, racial, or ethnic composition. Seek information about the practice from ex-members of the group and nearby general dentists or specialists.

2. Discuss all aspects in detail during a meeting with the members of the group practice. Three methods will be enumerated by which an orthodontist can join a group practice. Depending upon which one is chosen, different points will have to be pursued, but the discussion must focus on joining the group (buying in if necessary), and also the procedure for dissolving the association.

3. Have a contract drawn up by a lawyer and signed by both parties. Eventually, the orthodontic aspect may become very successful, but the group may decide to discontinue this service or even to replace the orthodontist. Conversely, the orthodontist may desire to leave the practice before a replacement can be found. Therefore, a contract should be made covering all eventualities, in order to protect both sides and ensure continuity of treatment for the patients.

Regardless of the type of arrangement contemplated, a number of issues must be resolved:

Method of remuneration-- percentage, rent, or salary

Provision of equipment, supplies, and instruments -- including orthodontic supplies as well as cotton rolls, paper goods, etc.

Payment of the dental assistant

Responsibility for collections

Determination of the orthodontic fee

Hours and days per week available for orthodontic treatment

Insurance needed and provided-- malpractice, life, disability, health

Pension and/or profit-sharing plan eligibility

Provision of uniforms and laundry

Vacation, holidays, sick days, and convention and continuing education time

Definition of the orthodontist's complete responsibility for his services to patients and guaranteed freedom of interference with clinical standards

Proximity of location of a private office to the location of the group practice (since the practices are generally only intramural, there should not be any type of non-competitive covenant)

"Ownership" of patients if the orthodontist leaves

Handling of contracted fees in case of a split

Terms of a buy-in fee (should be discussed before joining the group)

The orthodontist can join the group either as an employee or as the owner of an orthodontic franchise. When he joins strictly as an employee, the success and continuity of the arrangement will probably be poor. As soon as his main practice is built up, he will discontinue his association with the group, leaving it with the unpleasant task of finding another orthodontist who is compatible with the technique and supplies being used. Transferring patients in midtreatment is also most undesirable, and if such changes occur every two or three years the orthodontic aspect of the group practice will be continually in disarray and confusion, and probably yield poor results. The possibility also exists that another orthodontist cannot be found, and all patients must then be transferred to an outside office, resulting in the loss of the orthodontic aspect of the practice.

By selling or giving away the orthodontic franchise, the group will still receive the same percentage; however, it will now be guaranteed continuity and the knowledge that the orthodontist has a motivation for its success. In case the orthodontist wishes to leave, it will be his responsibility to find a replacement.

If the orthodontist joins the group as its first orthodontist, the buy-in fee should be minimal or nothing. If orthodontics has been an ongoing part of the practice, the value will of course be higher, but still nowhere near the sale price of a private practice because there is no office, equipment, or other fixed assets involved in the sale.

Remuneration Methods

Percentage

A percentage of the orthodontic gross is probably the best arrangement, since it is the fairest and easiest to handle. The percentage will vary depending on who provides what. If the group assumes responsibility for the initial cost of equipment and supplies, provides a dental assistant, and pays the laboratory bills, the orthodontist will generally receive 45-55% of the gross production. For each of the items the orthodontist provides, the percentage should increase by approximately 5%. Calculating the percentage on collections is cumbersome and also increases the orthodontist's percentage by 5%. The orthodontist is usually classified as an "independent contractor"; therefore, taxes and Social Security are not collected, unemployment insurance and Worker's Compensation are not paid, and benefits such as vacations, sick days, pension, and insurance are not provided.

This arrangement has the advantage that the orthodontist remains independent and is free to cancel out days, take vacations, set hours, and take sick days without consulting the group. Another important advantage is that the orthodontist can devote all his efforts to his patient care, becoming a pure orthodontist and not having any involvement in the financial aspects of the practice. About the only problem that can develop relates to the purchase of orthodontic supplies, instruments, and equipment, but these are minor expenses that should not create problems.

The most important and most difficult point that must be settled is whether the patients belong to the group or to the orthodontist in case the association is dissolved. The group has to guard against the possibility of the orthodontist leaving and being unable to find a replacement, and also being unable to terminate the arrangement if the orthodontic service is not successful. Likewise, the orthodontist must be protected from being replaced once the practice has become very successful. Suggested ways of handling this situation are:

A. If the group initiates dissolution of the association:

1. If orthodontic treatment is to be terminated within the group, the orthodontist has the following options:

-- a) to complete all active patients in the group practice office, which would be especially advantageous if the orthodontist's own office was far away, or

-- b) to transfer all patients to the orthodontist's own office with all remaining contracted fees directly payable to the orthodontist.

2. If orthodontics is to be continued in the group practice office, the orthodontist should have the right to sell his franchise.

B. If the orthodontist wishes to leave, it would be his responsibility to find a successor, subject to the approval of the group. If a replacement cannot be found, all active patients must be completed by the orthodontist.

In case of death, a written agreement should be available, stating that the gross income from the orthodontic aspect of the group practice can be considered, along with the income from the solo practice, to establish a selling price.

Renting

When renting office facilities from a group, the orthodontist is in effect opening an additional practice, but in a general dentist's office. As with the percentage arrangement, no problems should arise regarding hours worked, rate of work, vacations, etc. Additionally, the patients are clearly the orthodontist's, and in case of a split they are automatically transferred to him.

The only disadvantage is the difficulty in setting the rent. Under this arrangement the orthodontist usually provides all orthodontic supplies, instruments, equipment (such as a portable cephalometric unit), and the dental assistant. Moreover, the orthodontist does his own billing.

The office supplies the unit, x-ray equipment, dental supplies, dental instruments, and use of the facilities. The receptionist of the group practice schedules orthodontic patients on the days the orthodontist is not present in the office and functions as the receptionist when he is practicing. A separate telephone is an option, but is usually not necessary.

Salary

Advantages of receiving a salary include the guaranteed income, which is particularly useful in the first year, since the gross production will be low and neither expenses nor the collection of fees will be of concern.

Disadvantages include the difficulty of setting the salary level, the lack of incentive to work harder, and the requirement to work set hours.

Generally, the orthodontist is considered an employee, and all taxes are taken out of his salary, including Social Security. Worker's Compensation and unemployment insurance are paid by the group practice. The orthodontist may receive benefits based on the amount of time he spends in the group practice (e.g., 50% of insurance, vacations, etc.). As usual, all arrangements are negotiable. The group pays all orthodontic expenses.

Conclusion

The author has been associated with a nine-member group practice (5 generalists, 4 specialists) since 1973. He can attest that the association of an orthodontist with a large general dental group is an excellent and workable concept. When mutual respect, security, and a pleasant relationship prevail, the delivery of orthodontic care becomes very enjoyable. When the guaranteed source of referrals, excellent income, and lack of paperwork and worrying about collections are included, such an arrangement becomes almost ideal.

ACKNOWLEDGEMENT -- The author wishes to express his gratitude to Dr. Coenraad F.A. Moorrees, Chairman of Orthodontics, Harvard University, for his critical review of the manuscript.

(The following is a sample contract between an orthodontic professional corporation and a general dental group practice. It was prepared by Attorney Ralph J. Rivkin, of Rivkin, Baker and Golden, P.C. of Boston, Massachusetts.)

AGREEMENT, made this _______ day of ____________ , 19______ , by and between Dr. ____________________ doing business as DENTAL GROUP (hereinafter GROUP), and JOHN SMITH, DMD, INC., a Massachusetts Professional Corporation with principal offices in ____________________________ , Massachusetts (hereinafter SMITH).

The parties hereto, intending to be legally bound, hereby agree upon the following terms.

1.TERMS. SMITH agrees to practice dentistry in the office provided by GROUP as an independent contractor, commencing on July 1,1985 and continuing for an indefinite period unless either party shall give written notice of its intention to terminate as provided herein.

2. DUTIES. SMITH, through its employees, shall perform such professional duties as are generally associated with the practice of orthodontics and such administrative responsibilities, including regular attendance at GROUP meetings as may be requested by the GROUP. SMITH further agrees, and it is an express condition of this Agreement, that it will at all times have approved employees who are duly licensed to practice dentistry in Massachusetts.

3. COMPENSATION.

(a) All fees from production, as defined below, shall be the property of SMITH. Production shall be defined as the normal and customary charges for procedures performed, including new starts and monthly payments due and payable from active patients (whether or not reimbursed by or payable directly from insurers). Production shall also include, but not be limited to, diagnostic workup fees, examination fees, and fees associated with retainers. The GROUP will do all billing and collection work and provide the other services, as provided herein. In consideration thereof, the GROUP shall retain all except an amount equal to fifty percent (50%) of production. Such funds payable to SMITH shall hereinafter be known as Compensation.

(b) Such Compensation shall be paid on a monthly basis and be paid in full on or before the tenth (10th) day following the rendering of a bill by SMITH. Said bill shall set forth the charges for production for the calendar month just completed and shall be rendered on or after the last day of said calendar month. Failure to pay said fees when due shall constitute a substantial breach of this Agreement.

4. EQUIPMENT, SUPPLIES, and ASSISTANCE. GROUP shall provide all of the necessary equipment, supplies (disposable or otherwise), and staff to operate the orthodontic practice at the principal location of GROUP. GROUP will continue to provide such equipment, supplies, linens, and employees, as may be necessary to maintain a first-class professional practice. All laboratory fees shall be the responsibility of GROUP. The hygienist or assistants shall be the sole employees of GROUP, but shall be hired, retrained, or terminated with the advice and consultation of SMITH.

5. BILLING and COLLECTIONS. GROUP is entirely responsible for the billing and collection of all receivables. SMITH shall assist GROUP whenever possible in its duties under this Paragraph. SMITH shall permit GROUP to obtain a facsimile stamp of its professional employees' signature for insurance and welfare billing purposes, provided, however, that each and every document to which such stamp is affixed shall be reviewed and initialed by SMITH prior to its use. However, GROUP shall only use such stamp for actual services rendered; and SMITH does not indicate its approval of the accuracy of the services provided on the form. GROUP releases and shall hold SMITH harmless for any responsibility of such accuracy.

6. FEE SCHEDULE. All fees for professional services shall be established by SMITH with the advice and consent of GROUP.

7. PROFESSIONAL LIABILITY POLICIES. SMITH agrees to maintain its own professional liability policy with umbrella policy in a minimum of $1,000,000. SMITH agrees to require the insurer to provide GROUP with proof of same and any changes thereto, including impending termination thereof.

8. USE OF JOHN SMITH, DMD AS APPROVED PROFESSIONAL. SMITH agrees to supply JOHN SMITH, DMD as one of its employees so long as he is practicing dentistry in Massachusetts. GROUP also agrees that SMITH may provide alternative orthodontic specialists in conjunction with JOHN SMITH, DMD in order to fulfill its obligations hereunder. Neither death nor disability of JOHN SMITH, DMD shall terminate this contract nor affect it in any way.

9. STATUS - INDEPENDENT CONTRACTOR. It is understood that SMITH will practice dentistry as an independent contractor and that SMITH agrees that all Federal, State, and Social Security taxes payable as a result of its compensation shall be its sole responsibility.

10. BOOKS AND RECORDS. GROUP acknowledges that all files, patient records, lists, books, records, literature, products, and other materials owned by SMITH or used by it in connection with the conduct of its business shall at all times remain the property of SMITH, and that upon termination of this Agreement hereunder, irrespective of the time, manner, or cause of said termination, GROUP will surrender to SMITH all such files, patient records, lists, books, records, literature, products, and other materials.

11. SUBSTITUTE DENTISTS. GROUP acknowledges that the retention of JOHN SMITH, DM D as an employee is not a condition precedent to the continuation of this Agreement. Therefore, SMITH may assign or otherwise sell this Agreement or hire substitute qualified professionals, with the consent of GROUP. Such consent shall not unreasonably be withheld.

12. BENEFIT. This Agreement shall be binding upon, and inure to the benefit of, the respective legal representatives of the GROUP and the successors and assigns of SMITH.

13. CONSTRUCTION. This Agreement is being delivered and is intended to be performed in the Commonwealth of Massachusetts, and shall be construed and enforced in accordance with the laws of that state.

14. AMENDMENT. This Agreement may not be amended or supplemented at any time unless by writing executed by the parties hereto, and all such amendments and supplements shall, except as otherwise provided hereinafter, be binding upon all other persons interested herein.

15. SEVERABILITY. In the event any term, condition, or other provision of this Agreement is adjudicated invalid or voided by a court of competent jurisdiction, the remaining provisions of this Agreement shall not be affected in any way as a result of such adjudication.

IN WITNESS WHEREOF, the parties have duly executed this Agreement.

By ___________________________

President, JOHN SMITH, DMD, INC.

By ________________________________

President, DENTAL GROUP

Journal of Clinical Orthodonics