Common Mistakes DSOs Make When Purchasing Dental Practices
Due to the active market in Utah, dental support organizations (DSOs) frequently continue to purchase practices in the state. These practices present long-term revenue opportunities, but there are also legal complications that are not realized until a transaction has closed. By avoiding some common mistakes, DSOs can also circumvent these complexities. Below, our Utah dental practice purchase attorney explains what the most common mistakes are.
Giving Non-Dentists Control Over Clinical Decisions
Utah does not ban non-dentists from owning dental practices. However, owners who are not licensed dentists cannot direct or interfere with a dentist’s patient care decisions or professional judgment. This means only dentists can diagnose patients, outline their treatment plan, make staffing decisions that impact patient care, and establish clinical protocols.
If operational oversight starts to cross in the practice of dentistry, owners can run into legal issues. These mistakes can include:
- Drafting employment agreements that minimize a dentist’s clinical judgment
- Implementing bonus structures that emphasize the volume of treatment
- Establishing policies that require management approval for clinical staffing decisions or treatment plan approval
Insufficient Due Diligence
It is not uncommon for DOs to largely focus on revenue projections. They may accept a seller’s representations without verifying important information on their own. This can leave purchasers responsible for compliance violations or other issues once the transaction is closed. In addition to financial statements, a comprehensive review should include looking red flags such as:
- Contracts containing compensation disputes or restrictive covenants
- Current management agreements that contradict the proposed acquisition
- Pending disciplinary matters or board investigations
- Coding or billing practices that suggest concerns of fraud
Improperly Drafted Documents
Incomplete risk allocation provisions and vague language can result in both the seller and the purchaser disagreeing over certain responsibilities that should have been resolved during negotiations. Any purchase agreement should clearly outline the following:
- The equity interests or assets to be transferred
- Responsibility for liabilities before closing
- Terms for employment transitions
- Rights to access to patient records
- Any other condition required prior to closing
Failing to Address Risks Posed After Closing
The legal work is not finished once the acquisition is closed. During the integration phase many DSOs run into common compliance issues, which may include:
- Billing mistakes after coding changes or software conversions
- Improperly delegating clinical responsibilities
- HIPAA issues during the transfer of patient data
- Disputes regarding employment classification
- Outdated or missing registrations and permits
Regular compliance reviews and internal audits early can help identify issues before they become expensive claims or require a regulatory investigation.
Our Dental Practice Purchase Attorney Can Help You Avoid Mistakes
If you are part of a dental support organization that is considering the purchase of a practice, it is critical that you have legal counsel to guide you through the process. At AGS Law, our dental practice purchase attorney can help you navigate the transaction and avoid the common mistakes that can create important issues for you right from the beginning. Call us today at 801-477-6144 or contact us online to schedule a consultation and to learn more about how we can help with your purchase.