> Acquisitions
Go Forward Acquisition secrets that will have your new practice moving in the right direction from day one.
In order to move forward with an acquisition, you need to have a clear picture of where that practice has been. In a recent DSO Secrets podcast, guest host Ken Kaufman tackled the topic of acquisition strategy secrets. Kaufman recommends creating a 12-month, Go Forward Pro Forma. You could also call it a forecast.
“When you do your due diligence, you’re going to get a lot of different information, financial statements, reports out of the practice management software, and a lot of other anecdotal information about what’s happening in the dental practice,” he said. “You may be hearing all sorts of things about growth and opportunity and where the practice has been. This 12-month, Go Forward Pro Forma, is your best estimate. So day one, after you purchase the practice, what is actually going to happen in the practice? And
under your leadership/ownership, where do you foresee it going?” The following is a list of items to include in the Go Forward Pro Forma: Gross production. What are you expecting the gross production of the practice to be? Questions to ask include: What are the insurance companies that the practice is credentialed with? What are those contracted reimbursement rates? How much of the patient base is fee-for-service? What are the patient visit numbers? What does that
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patient flow look like? How many first visits are coming in each month on average? What is the recare base, and what is the retention from a historical perspective up until that point? What you are going to do as the new owner needs to be captured in the Go Forward Pro Forma. Reductions. Are there any insurance write-offs or bad debt from patients you won’t be able to collect? Often, one dental practice that doesn’t have a sophisticated revenue cycle system may be collecting 85% to 90% of its gross production. Maybe you have a billing team or solution that when you look at who the payers are, and the contracted rates, and what types of claims are being denied and what issues you might find in your due diligence around the billing side, you might be able to collect an extra 1% or 2%, or 5%. In your 12-month Go Forward, forecast out what you think collections are going to be relative to the gross production that’s being generated. Provider. Who is going to be the provider? Is the current doctor an associate? If so, will they convert to your associate agreement? Or will they keep their existing situation, and are there any challenges with that? You need to think about what their skill set is, and how long they want to stay. Will they be unmotivated
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