Thirty minutes ago, I got the second email from another doctor. Both were in the middle of purchasing patient records (not the whole practice) from a practice down the street. Both were in the exploration portion of the negotiations. To have two different doctors from two different parts of the US ask the same question in a matter of one day is pretty rare. The strategy of padding your new patient numbers by buying the records of an existing practice can be a wise and very profitable transaction. As with most things, there are a few boxes we need to check off to ensure that our return on this investment pays dividends.
- Proximity: I would only consider the purchase of records if the practice were in close proximity to my own. Anything over about 3-5 miles would be silly to consider. There is the probability that some of these patients might be closer to you than to the selling doctor’s office, but on the other hand it might be double the distance, which just wouldn’t work. Most people will not travel more than about 3-5 miles for professional services.
- Types of patients: I would want to make sure that the mix of patients from an age and income were similar to what I had. It wouldn’t make sense to purchase a general dental practice with a lot of kids if you do not see kids in your own office.
- Types of services: By the same logic, if a large percentage of the selling doctor’s practice is ortho, implants, sedation, or some service you don’t do, then this might not work.
- Insurance: I would want to make sure that if the selling doctor participated as an in-network provider for several insurance companies, that I, too, was in-network. With insured patients averaging 74% in most areas of the country, there is the possibility that the selling office will have that percentage of patients using some form of insurance. Either match up with the insurance profile, or be proactive and get in-network for those patients in order for those patients to actually stay with you. This could take six weeks or so.
- Female selling doctors: This is rarely a problem when a male doctor sells records to a female, but the opposite can be a flaw in your strategy to get most of the patients to stay in your office. In some instances, patients who go to a female dentist do so because they prefer a female and would, by this line of logic, probably not move over to your practice.
- What patients should you have to pay for? I would only pay for currently active patients. The problem with this is that either the selling doctor or a broker will want to say that anyone who has been in within the last 18-24 months or longer should be included. I would not consider anyone to be active unless they had been seen within the last 12 months.
- What should I pay per record? There is no usual or customary dollar amount. Most would say $50-$125 per patient. I would not pay this unless I was pretty desperate. My reasoning is that a large percentage of the “patients of record” will never transfer into your care. It is not like buying a practice, occupying the same lease or office, and hiring most of the staff that the selling doctor had worked with. You should expect to get 40%-50% to transfer if you do everything right. Fall short, and it could be worse. Always base your decision on the worse case scenario and if things go better, awesome. As a starting point, you should determine what you are currently paying for a new patient. Take the average number of new patients per month and write this number down. Let’s say it was 30 new patients a month. Next, determine the average number of direct referrals a month. Your marketing dollars did not drive these folks into your practice. They came in because someone they trusted recommended you. Ideally this should be 50% or better. So, of the 30 NP a month subtract that direct referral number (maybe half) and you now have 15 new patients a month. Next, find the average number of in-network PPO new patients a month and subtract them from what is left: 15 minus 10 PPO patients = 5. Your marketing didn’t bring these folks in either. They chose you off a list their employer supplied. The final number will be the average number of new patients you attracted from all your external marketing. Finally go to your Profit & Loss Statement and find the average dollar amount you spend monthly on marketing and divide it by that last number (in this case 5) and you will have the average cost for a new patient in your practice. That is the number that I would try to be below in your offer for patient records. If you currently spend $50/new patient, then try to beat that. I hope you get the idea. It will vary in every practice and every situation but this should give you a target number to get below.
- What the purchase should include: In the process of negotiating this purchase and transfer of patients you will need to make sure that you also get a couple of other things. First, I would want a backup of all practice management data for the office. This would allow you to drip market in a consistent way to possibly reactivate those people who had not been in during the last 12 months, as well as the active ones. It would also help you understand what treatment had been rendered in the past. Secondly, I would want the use of the selling doctors name and office name for 12 months. This is common even if you purchased their entire practice. This is a force multiplier that will allow you to create the impression of continuity as you market the patients of record you purchased. Finally, I would want the domain name, website, and office phone numbers in order to have every contact to his office routed through the new location. The nice thing about this is that when you add this different phone line to your office and it rings, you know who it is and what you need to do to convert them to a new patient. No surprises here. The current website for the selling doctor can be altered to link to your own and with the use of the selling doctors name, it will add continuity to the hoped-for transition of purchased records.
- Treatment recommendations: Take the time to work with your doctors and staff and help them understand that when one of these patients comes through the office, do not overwhelm them. Take 6 months to a year or so to win their trust before pushing too much treatment. It is probable that purchasing records from a retiring doctor’s office will reveal a lot of “supervised neglect” and undone work. This is why you bought the records in the first place. Part of making this strategy work is to remember that these patients did not seek out the selling doctor for what they did poorly, but what they did well. Make sure you identify what attracted their patients and deliver this as well as what you do better. A great script that will preserve the selling doctor’s reputation and keep you from looking like you’re are just trying to sell them something, is to use this phrase: “ Seller probably told you in the past that he/she was keeping an eye on __________”. This phrase works like a charm. You come across as caring and compassionate while not alienating them by “over diagnosing them” before establishing rapport and trust.
- Notification to patients of record for the selling doctor: Every State Board has a requirement for a selling or retiring doctor to notify his or her patients to ensure that they have not been abandoned. This will also have to be done when buying the records. This is a perfect time to choreograph the transition. Coordinate and participate in drafting a letter from the selling doctor as well as an introduction from you. This can make or break your purchase. My suggestion is to make sure that two letters go into the envelope to every patient of record: The retiring doctor’s letter and your letter of introduction. I would offer to pay for this distribution of notifications. Make sure that the return address has your address and not that of the selling doctor, but has his practice name and his name on the outside. There should be a line typed beneath where the stamp goes that states “Address Correction Requested”. In this way if the old office has an incorrect patient address, the Post Office is required to return the undelivered letters with a copy of the new address. This will allow you to update your records and make sure that everyone receives the letters and ensures that you can reach them again with a drip marketing campaign. On your letter of introduction, be sure to have a photo of you and your family and maybe a photo of your office and staff along with a note of how important you consider it to have them join your practice. You might even include a strong offer for their next cleaning and exam along with a free visit for any emergency they might have.
- Hire staff: Number one strategy to make this purchase work is to hire the hygienist or key person that really held the selling doctor’s practice together. This could boost patient retention by 20% or more, even if the hire is conditional and only for 6 months or so. Consider it part of the purchase price for the records.
- Equipment: Neither one of the two doctors who had emailed me were planning to purchase the selling doctor’s equipment and supplies but I talked one of them into mentioning it. Guess what, the doctor had already sold his building, planned on moving out of state to retire, and had no idea of what to do with his equipment. I mentioned this as a strategy: The buying doctor will take and just donate the equipment and supplies to a charity that does free dental exams for a tax write off donation letter. This more than covered the cost of the records and when you consider that even if the selling doctor donated them instead, he could not get a tax write-off. If he did, he would have to recapture his depreciation. It is a win/win situation.
- Marketing the potential new clients: This is the final step and also very important. Take the time to implement a reactivation/welcome to the practice marketing campaign. I would hit it hard for the first 6 months and then quarterly for the next year or year and a half. Take every opportunity to turn these purchased records into actually paying and referring new clients.
Sorry for this being so long, but this is a great strategy when done properly and a fiasco when done by the average office with no sense of how important every step is.
This is how you Summit.
Michael Abernathy, DDS
PS. We are often asked about upcoming opportunities to hear Mike speak. He will be presenting at the end of September in Portland. For all the details, just click here. (MG)