DOES BUYING PATIENTS MAKE SENSE?
For once, I was asked a question that I could answer with a strong black or white statement of: “absolutely”, “maybe”. Buying patients from a practice that is calling it quits “can be” a great strategy for injecting your practice with new blood. On the other hand, it also has many pitfalls that you must consider before implementing this strategy.
Asking yourself the right questions will make a huge difference where you end up and if you get the right answers, you will avoid a lot of heartache and lost opportunities. Why are you looking to buy an existing practice’s patients? Few or no new patients currently coming in? Why? Has competition increased to the point that you struggle contending? Why? You’ve realized that you have more existing patients leaving or dying than you have new patients coming in? Why? Are you a fee for service practice in a managed care dominated location? Why? So, the first question to ask yourself is “why” you would consider this as a strategy if not for sustainable profit and growth. This purchase has to produce a return on investment and if the answers to these questions in this paragraph hinge on the fact that your current patients don’t really like you, don’t even consider it. Check your own reviews online and make sure they are 4 or 5 (if 3 or less there is a huge problem in your practice). Don’t do it. You should never try to fix an internal problem by throwing money at an external solution. It will never work. Fix the internal problem before looking for an external solution.
Next, we need to know why this doctor is just selling the patients and not the entire practice. Ask and find out if he is losing his lease? Keep in mind that patients are “Sheeple”. They follow habits and I assure you that if his current facility is leased or purchased by another dentist, you will lose a lot of potential patients. Was he unable for whatever reason to attract a buyer for the entire practice so he is settling for getting something for the patients? Is there any reason other than retirement or moving that has initiated this type of sale? Why did others see this sale opportunity as a poor investment? Once you talk to the doctor and get some feeling for the reason for the sale, you need to go to step three.
Do a thorough background check on the doctor: Civil and criminal. No, really do this. Check his track record with the State Board site for your area: Legal troubles from suing patients, board actions against the doctor, and malpractice. Go online and look at his ratings on Google, Yelp, Health Grades, etc. If the ratings are a 3 or less, walk away. You buy his reputation, good or bad, with the patients. Study his numbers: Production, production by procedure, production by provider, number of new patients per month, recall, overhead, and individual staff salaries. Keep in mind that to keep the patients you buy you will probably need to hire at least one key employee from the practice to ensure that the patients follow through with the transition and actually show up. Because this is almost always the case, you want to know what you would have to pay this employee and whether or not they would come work for you. If not, walk away. Take the time to see his practice in motion, noting the culture and esprit-de-corps. The patients that go to this doctor are there for a good reason, from their personal perspective. While you may see a lot of negatives in his practice (poor dentistry, horrible systems, marginal staff), the current patients are there for what the doctor does well. If you want to keep them, you need to know why and make sure you can over deliver.
Before we go any further, let’s deal with some of the facts of buying charts from a practice that is closing, because you don’t know if anyone will come. From my point of view, I would only consider the purchase of current patients. A broker will count anyone who has come in during the last 2 years. For our purposes, I would only buy and therefore only consider them current if they have been in during the last 12 months. In addition to only paying for those who have been in during the last 12 months, I would insist on getting all of the other patients that have ever been seen for free. The sale needs to be contingent on getting that key employee to come work for you unless it is a family member of the selling doctor. Keep in mind that the greater the age difference between the selling doctor and the buying doctor, the fewer the number of patients that will actually make the transition. A 26-year-old dentist buying a 70-year old’s patients is not as likely to retain the patients as a more mature buying doctor. If the seller is female and you are male, there is a greater chance of fewer patients moving to your practice. If the buyer can’t or does not offer the same or more treatment options, there may be fewer patients coming over. Hold back your predilection of making a lot of changes in the first 6 months. Any change will either alienate the staff or the patients leading to fewer patients staying in your office. The bottom line is that if you do everything right, you will be lucky to keep 70% of the patients you purchase. See, buying records is night and day different than purchasing an entire practice and moving into the same facility. Patients hate changes and moving more than 2-3 miles is way beyond most patient’s tolerance for change. If the distance is more than a couple of miles, don’t purchase the charts.
So, you have been able to check most of the boxes so far. That means it is a reasonable strategy with a huge upside potential. This is a business decision, so don’t think of it as a way to rescue your failing practice. Rather, view it is a sound strategy that will provide a great addition to an already super practice.
The final step is deciding on how you plan to onboard these purchased patients, insuring that you have the greatest chance to make a good first impression as you turn them into a new source of direct referrals. In addition, you should make sure you have a plan to drip on your new list of potential clients for the next 12 months. Part of the purchase price should include all the patients of record in the practice and not just the ones that have been in during the last 12 months. You should also have the right to use name of the selling doctor for these patient contacts for the next 12 months if you choose.
Now, what should you pay? Obviously I would let the selling doctor make the first move and find out what they consider to be current patients and what they feel is a fair price. It is at this point that many good ideas collapse by insulting the selling doctor by trying to low ball the price. On the other hand, most doctors have an unrealistic view of what their patients or practice is actually worth. Regardless of the starting point, I would not pay more than $50-$100 per current patient. There is no guarantee for them to come over, and without trying to get them to come to the same office with the same staff, you are further handicapped. Good luck on your transitions, and if you have any specific questions be sure to give me a call or shoot me an email. This is how you Summit.
Michael Abernathy, DDS
PS – My newest book is currently available. The title is Marketing the Super General Dental Practice. If you want/need more new patients, this will show you how to get them. Just click here for more info and to order.