Class 2: External Support
What is external support?
As any business, dental offices are not operating in isolation. We reviewed in the last class about various external environments (economic, technological, sociocultural, domestic business, global business, and political-legal). We will primarily focus on the domestic business environment in this class, although there will be elements of other external environments. The domestic business environment is how the business operates and creates revenue. So, an example would be the relationship with our suppliers, dental labs, or specialist offices.
As you can see from the graphic above there are many groups that support our operations. The role of a dentist in a dental office many times is the CEO, CFO, COO, manager, and operator. With so many roles the dentist needs to be able to delegate these to staff members or outsource these tasks to a different company. However, it is important to remember that the dentist is the leader of the office and ultimately responsible.
The next portion of this class will review the different groups that support dental offices.
Accountants
Accountants play multiple roles in organizations. An accountants role is to collect, analyze, and disclose financial information to the owner, public in some instances, and regulatory agencies. Though analyzing financial records the accountant can help the company assess the overall financial strength.
There are two fields of accounting:
1) Financial accounting: this is more focused on providing outside entities financial information. For example, taxes are prepared as an overview of the company to be reviewed by the government.
2) Managerial accounting: this focuses on providing financial information internally. Managers/leaders of departments or levels should have financial information to inform their decisions to monitor progress and plan for the future.
There are also multiple types of accountants. Public accountants have independence from the company that they are doing financials for. This independence reduces biases. Public accountants can take an exam to be a certified public accountant (CPA). These accountants are able to provide their services for auditing, tax, and management advice. Some businesses hire a private accountant to perform day to day financial operations - their roles might vary. Some of these accountants might perform internal audits or provide help with projects, financial planning, payroll, or taxes.
Interested in financial statements?
Lawyers
In the class before we reviewed the importance of ethics in business. While ethics is not the same as the law they are similar and operate in tandem. Let's review some examples of this:
1) Bribery is illegal through federal and state courts. Sam the dentist bribes the policeman to avoid a ticket.
This is both illegal and unethical.
2) Hiring illegal alien workers is prohibited. Patrick owns a dental office and his friend is living in the US. His friend has a family here and with no job and no money his is having trouble supporting and feeding his family. Patrick knows his friend is not a citizen in the US and does not have a visa, yet wants to hire him as a sterilization tech to provide him with some work.
The decision to hire would be illegal, yet ethical.
3) Occupational Safety and Health Administration (OSHA) requires that employees not have ionizing radiation dose above 1.25 rems per calendar quarter. However, Sally the owner dentist is considering purchasing equipment that will further protect her employees.
Sally does not legally need to purchase this equipment since she is already below this level and compliant, however ethics would support the additional cost to purchase the equipment.
Lawyers practice law - which means they represent clients, provide legal counsel, prepare legal documents, interpret laws, or give advice about the law. There are many different areas of law. So, the type of lawyer you hire to represent you for a malpractice suit will likely be a different lawyer that you hire to file a trademark or advise you on employment law.
Business Entities
For dentists the main business entities that might be chosen are:
1) Sole Proprietorship / General Partnership
2) LLC
3) C Corporation
4) S Corporation
Since we are dentists we fall under the professional entity, which is used when designating the business. That is why you might see PLLC (Professional Limited Liability Company) or PC (Professional Corporation) for dentists, physicians, and lawyers.
Mini-Case Review:
Dental Labs
Dental labs allow dentists to provide patients with removable devices, crowns, and other custom-made dental products. Dental labs can also make devices for dentists to allow us to treatment plan better like wax-ups.
Lab communication is important since the dentists is seeing the patient in their office and the dental lab often times has limited access to see the patient. To improve communication the dentist should:
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Include all information (pictures, materials to be used, shade, stump shade, bite record, explain case, note patient's expectations)
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Ensure accuracy of information (proper tray used, tray adhesive)
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Dentist's role to fill out lab slip - not delegated to assistant.
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If lab calls try to talk directly
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Can call prior to sending larger cases.
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Follow up communication is recommended about the case.
Financial Advisors
Money management is important in our personal and professional lives. In the dental field we have a high debt load with the potential to make a large income compared to other trades. We are in a profession where we are the operator and leader. If we are not chairside with a patient we likely are not making money. So, we need to make a decision as to how much income versus personal time we would like.
There are many places to get advise about personal money management. One good website is the White Coat Investor since the information is geared towards professionals with similar financial situations as us. There are many philosophies about managing fianances, do you have any recommendations for your collegues?
Professionally we should mitigate our risks in a number of ways. One way is to have excellent record keeping. See the Texas State Board of Dental Examiners rules on record keeping here.
Financial Lenders
Main types of financial lenders can be a bank, credit union, governmental services, or investors. Typically when we are talking about financial lenders in the dental field we think of a rather large loan that would be used for the purchase of a practice. This loan would be a form of debt to be paid back to the financial lender with interest over a period of time in smaller routine installments. It would be the hope of the person taking out the loan that with this debt (or initial funding) they will be able to make more money. There are also other types of loans that can be taken from a business. For example, if you wanted to purchase a high priced equipment item or wanted to remodel a portion of the building of your office.
Here are some examples of types of ways to get funding for the purchase of a dental office:
1) Banks:
These are the most common sources of funding. There are two types of banks - national and local. National banks are more likely to have specific lenders that only work with dentists or medical professionals. Local banks are less likely to have the dental specific knowledge, so it might take a little extra effort to explain dental specific factors to qualify for the loan (high debt to income ratio for a new grad for instance). To qualify for a loan, the banks might look at credit scores, current debt, current savings, valuation of the practice, tax returns (3 years of seller's and practice), and business plan (cash flow projections, acid ratio, etc).
2) Owner Financing:
For purchasing a dental office the seller/owner of the practice can charge a comparable interest rate (and promissory note) with similar details as a loan the bank would provide. In this situation, the owner assumes the risk if the lender were to default on the loan. Should the lender default it is possible that they would not get the full, previously agreed upon amount for the practice. The lender might have ruined the practice, become disabled, or just not be able to payoff the amount of loan. There might be a situation where the seller is willing to assume this extra risk - if the bank is not willing to lend the full amount (and seller is motivated to sell) or if the seller knows the buyer (within the family for instance). Since the interest can be negotiated between buyer and seller, it might allow for a better deal for the buyer if priced appropriately.
3) Dental Supply Company:
Most major dental supply companies have arrangements with banks or lending institutions that will allow dentists to borrow money. The benefit to the dentist is that if they do not qualify with a bank they might be able to qualify through the special arrangement between the supply company and the lending institution. However, the interest rate will likely be higher for the dentist and it is possible they will stipulate that equipment must be purchased through a specific company.
4) Family Lenders:
The dentist purchasing the dental practice might have friends or family members that would be willing to provide a gift or loan. If it is a family member that will be providing a loan it should be structured as an "arm's length" transaction (transaction where two parties are independent resulting in a close to fair-market agreement). In some cases, the family member could just serve as a guarantor of a loan through the bank. As a guarantor, if the lender defaults on the loan the guarantor is required to finish the payment of the loan and held responsible should something happen to the lender.
5) Small Business Administration (SBA):
This is a section of the federal government that helps small businesses secure start-up funding. This office can help secure funding through a regular bank / lending institution. The benefit of this is that the collateral might not be required and might offer more flexibility to secure the loan. Due to this being a federal program these are more regulated. Loans through this office should be considered only if funding cannot be secured through a bank or other financial lending institution. For more information click here.
6) Sweat Equity:
Sweat equity is where a dentist would work in the office that he/she is wanting to purchase. Through taking less salary the purchasing dentist instead re-invests into the practice as a form of equity.
7) Credit Unions:
These are similar to banks, yet are smaller. They are more likely to offer a better interest rate on a loan, but are less likely to provide a large loan.
8) Credit Cards:
Using a credit card is a form of lending. We purchase an item with a credit card, which delays the time that we need to pay the credit card company back. However, credit card interest rates can be extremely high. This would be the very last resort for borrowing money and in most cases not a good idea.
Regulatory Compliance Specialists
Regulatory compliance while ultimately the responsibility of the owner dentist, can be delegated to a 3rd party for external audits or help ensuring compliance. The regulations are well intended to keep the public and staff safe in order to have more positive outcomes.
One example of a regulatory body that is important is OSHA, which stands for Occupational Safety and Health Administration. The goal is to protect the workers. This office has the right to inspect dental offices and are complaint-driven. OSHA has a number of standards being (1) Blood-Borne Pathogens, (2) Hazard Communication Standard, (3) General Industry.
Another regulation that is important for healthcare is HIPAA, which stands for Health Insurance Portability & Accountability Act. Rules for HIPAA are administered and enforced by the Centers for Medicare & Medicaid Services. This is an act that was enacted into law. These rules represent national minimum standards, therefore if there is a state law that is more stringent then you must follow the more stringent state law. If not compliant, the offender is at risk for criminal and civil penalties. HIPAA is concerned with protecting the patients' health records. Protected health information is any information about a person that can be used to track to that individual. This might include name, telephone number, address, or account number. The sections of HIPAA are (1) Privacy Rule, (2) Security Rule, (3) Electronic Transactions and Code Set Standards Rule.
Radiation control regulations are for dental xray units as written in the Texas Administrative Code (Texas Department of State Health Services). The ADA/FDA's Dental Radiographic Examinations: Recommendations for Patient Selection and Limiting Radiation Exposure is an important guideline as well. This document shows how to reduce radiation (like collimation) as well as other guidelines based on caries risk. If there is ever a discrepancy between ADA policy and state board rules, it is almost always in your best interest to follow the state board rules.
Other regulations / laws that all businesses must follow to name just a few are labor laws, FTC marketing laws, or waste disposal regulations. There are companies that focus on particular areas of regulation that can provide a 3rd party inspection to ensure all rules are upheld.
Technology Specialists
Technology specialists can be IT that will do all computer hardware/software setup, help with email / voice calling / internet / automated CRM / xray software problems, and other day to day technological issues. Or technology specialists could be manufacturers that create dental software or hardware. Sometimes if you are having an issue with a dental software it might be easier to contact the software manufacturer directly. Let's use EHR software as an example. Dentrix is a type of EHR software and they have a paid and non-paid subscription to reach a dedicated customer representative at the company to help solve issues with their software. Depending on you and your staff's comfort level with the software, this paid service might not be of benefit, however if you have multiple staff that are not trained on this software you might be more willing to have this additional service.
Practice Consultants
Practice consultants can provide independent recommendations to improve the dental office. The amount of involvement can vary from providing a weekend CE seminar to continuing services where they do training sessions / phone calls / monitor financial and production data. In addition, if the dentists would like to relinquish more control over the practice management of the dental office there are management services that operate multiple facets of the business. Here is an article detailing the distinction between the types of management services: https://www.dentaleconomics.com/practice/multi-practice-growth/article/14072108/an-introduction-to-alternative-dso-structures
Real Estate Experts
The physical location of the dental office can be owned or rented. If renting there is a landlord-tenant relationship where the real estate agent is the 3rd party that is involved in facilitating the initial relationship. There is a lease which is the rental agreement between the landlord and the tenant. These are generally a written document that is signed by both parties. The duration of a lease is generally around 5 - 15 years. The longer the duration of the lease, generally the lower the monthly rental price and more likely the landlord will allow for initial leasehold improvements. Leasehold improvements are customizations required to the physical space prior to renting. For dentists, this can be expensive due to the number of plumbing and equipment needs that we have, although typically dentists are stable tenants. Specific lease terms can vary based on the tenant. A lawyer can be useful to review real-estate contracts.
Building or remodeling the physical space of a dental office can involve a number of experts. If you have renovated a home or built a home you might know that many people will have been involved with the project by the time it is over! In general, dental offices can require particular building specifications that other fields do not require. Some examples are plumbing for nitrous lines or water for operatories. The layout of a dental office is particularly important for workflow and placement of xray units. Operatories are outfitted with specialized dental equipment and custom cabinets can help with ergonomics, space requirements, and storage of dental equipment.
Putting It All Together
A dental office works with multiple different companies / people to provide quality care to our patients. Each of you are stronger in some areas than others and thus will require differing amounts of help in particular areas.
Ultimately, despite the companies / people that you are working with it is the dentist's responsibility to manage the final outcomes. It is the dentist that is managing the projects that are hired out. Therefore, the ultimate responsibility rests with the dentist.
Self-Assessment
Please use this self-assessment tool to see your understanding of the material. Click on the answer that you feel is the best. If you choose the incorrect answer you can use the arrow on the upper left or click "try again" to go back to the question.
