As an Owner of a dental practice transition company, we often field calls from dentists interested in selling their patient records. Typically, the owners are at the end of their professional careers, they have no on-going lease obligations, older equipment, and very lean, if any support staff
Typically, if the potential seller has already been contacted by an interested buyer which is often the case, the buyer, through their advisors (typically a CPA or attorney) is proposing a price per chart to the seller for those charts that have actually transferred to the buyer’s practice after the sale has occurred. The price paid is usually $100-300 per patient transferred. Adding an additional 100-500 active charts to any practice can be a very strong “shot in the arm” to the practice financials so one can see why this is an often sought out approach to quickly growing one’s practice. Additionally, since the buyer is not incurring the additional fixed costs the seller had, such as rent, utilities, front desk support staff, etc., the profitability generated from these records is far above the industry norm.
When we are brought into a potential sale of records, we take a different and more seller favorable and less risky approach to the seller. Being paid a price per chart based on the actual transfer count requires the seller to “police” the deal after the sale to make sure they are properly getting paid for their former patient transfer. This requires a lot of trust on behalf of selling dentist as it would be difficult to determine whether or not X amount of patients have joined the buyer’s practice. Therefore, when we are representing a selling interested in selling their records, we value the practice based on the profitability from the records, similar to what we do when we sell a practice that is not a chart sale but more of a traditional sale where the buyer moves into the seller’s prior location. Understandably, buyer’s may not prefer this method because in almost all cases, they will end up paying more for the records and will need to actually pay the entire sale price at the closing of the practice, not in small increments after the purchase based on the buyer’s count of the patients who transferred to their practice. Valuing a practice that will be merged into another practice this way, transfers a lot of the risk to the buyer, and this may result in a lower multiplier or cap rate to determine the worth of the added profitability but again, in most cases based on our company’s 25 years of experience, the value paid will in most cases be significantly higher than what they would earn by being paid after the closing on a per chart basis.