Practice Sales

The Short List Before Selling Your Veterinary Practice

There are many steps to selling your veterinary practice and your trusted advisors are here to help. Right now, we want to address just a few items that many veterinarians don’t think about and that can lead to surprises.

Contact your CPA and/or Financial Planner regarding the following items:

1. Are you financially prepared to retire? Your transition specialist (broker) can assist you in determining the potential price of your practice and your real estate (if any).
2. Depending on your entity structure and past depreciation, what taxes will you owe?
3. Depending on your state, what taxes will you owe?
4. If you have any debt against your practice or real estate the debt will be paid at closing from your sales proceeds.
5. What will you do with the final funds? Do you have a retirement plan to maximize or does a 1031 exchange on the real estate make sense for you?

Again, there are many steps to selling your practice, but please address the above items to help reduce surprises.

Veterinary Partnerships

Veterinary partnerships can be great or not-so-great. They can include different scenarios: buying a partnership, adding a partner to your existing practice, or a start-up partnership. To ensure you have the best outcome, financially and emotionally, you’ll need to consider some important questions.

• Are you friends, relatives, or colleagues with the people whom you are considering entering into a partnership with? Are you convinced you can get along in a work environment?
• How will you resolve disagreements and make decisions regarding advertising, patient care, team management, and acquiring new equipment and technology?
• How will you divide up responsibilities within the practice?
• Is there enough physical space for more than one veterinarian? Are there enough patients?
• How will you divide up new patients and exams?
• How are you going to determine compensation, such as 30% of individual collections, then 50% split on all additional income and costs? If one of you performs procedures with much higher lab bills, you may need to consider a lab payment These items will need to be written up by your attorney as part of your partnership documents.
• Do your legal documents include specifics on terminating the partnership? You will need to address details regarding non-compete agreements, disability or death, and how to sell a practice when one or both partners are ready.
• Do you know a good CPA who specializes in veterinary practices and can assist you with setting up the entity or entities that make the most sense?

There are many items to consider to ensure that you make the right decision, but we can help make the process go smoothly with the best outcome for all parties. We have guided many veterinarians through purchasing and selling practices, partnerships, multiple locations, and every size and type of practice. We have the experience and the expertise to help you achieve your goals.

Dental Partnerships

By Megan Urban, Practice Transition Consultant, Omni Practice Group

Dental partnerships can be great or not-so-great. They can include different scenarios: buying a partnership, adding a partner to your existing dental practice, or a start-up partnership. To ensure you have the best outcome, financially and emotionally, you’ll need to consider some important questions.

• Are you friends, relatives, or colleagues with the people whom you are considering entering into a partnership with? Are you convinced you can get along in a work environment?
• How will you resolve disagreements and make decisions regarding advertising, patient care, team management, and acquiring new equipment and technology?
• How will you divide up responsibilities within the practice?
• Is there enough physical space for more than one dentist? Are there enough patients?
• How will you divide up new patients and hygiene exams?
• How are you going to determine compensation, such as 30% of individual collections, then 50% split on all additional income and costs? If one of you performs procedures with much higher lab bills, you may need to consider a lab payment These items will need to be written up by your dental attorney as part of your partnership documents.
• Do your legal documents include specifics on terminating the partnership? You will need to address details regarding non-compete agreements, disability or death, and how to sell a practice when one or both partners are ready.
• Do you know a good dental CPA who can assist you with setting up the entity or entities that make the most sense?

There are many items to consider to ensure that you make the right decision, but we can help make the process go smoothly with the best outcome for all parties. We have guided many dentists through purchasing and selling practices, partnerships, multiple locations, and every size and type of practice. We have the experience and the expertise to help you achieve your goals.

Settling Credits Before Listing Your Practice

You’ve made the decision to sell your practice, and with that comes the to-do list of tasks that can often feel daunting. One important task that is often overlooked is settling patient credit balances.

What are credit balances and where do they come from?

In many cases, a patient will have a credit on their account when their insurance pays more toward their treatment than anticipated or you estimated a patient portion to be higher than was necessary and collected accordingly.  In these instances, patients paid more out of pocket than necessary; therefore, the difference will show as a credit on their account and on your accounts receivable report or unassigned credit report.  Credit balances can also result from patients mailing in a payment or making an online payment on a balance that they have already paid.  These are duplicate payments typically made in error.  When this happens, we recommend contacting the patients and advising them of the duplicate payment before posting it to their accounts.  Many patients will request that you return their duplicate payment to them and some will elect to leave the credit on their account if they have upcoming treatment planned.  If they have upcoming treatment planned, this can be an effective way to get them on the schedule. It can be difficult to reverse an online payment and, in those instances, you may have to post it to the patient’s account.  In other cases, patients may pay upfront for larger treatment plans and due to unanticipated circumstances, they were not able to complete their full treatment, or perhaps less treatment became necessary.  If you have a practice where patients with insurance are required to pay their patient portion due at the time of scheduling their appointment for treatment, then credit balances will appear on the patient account until the procedures are posted and until insurance has paid their portion, this is just the normal course of collecting patient portions upfront.  The same applies to patients without insurance if you collect the patient portion upfront.

How should I be handling credit balances?

To keep your credit balances at a minimum I would suggest you come up with an efficient protocol with whoever is in charge of your accounts receivable, whether it be your office manager, bookkeeper, or yourself.  Credit balances are typically handled by an office manager.  It is our recommendation that your accounts receivable report or unassigned credit report be reviewed monthly.  If there are outstanding claims on an account, no refund is due yet.  If there is a credit balance and there are no outstanding claims, we recommend contacting each patient and advising them of the credit balance.   And again, if they have been treatment planned for procedures ask each patient if they would like to keep the credit balance on their account and get them on the schedule for treatment.  If they have no upcoming treatment, it is typically best practice to refund the patient as soon as possible to keep your accounts clean.  Make sure to document these conversations about credit balances in patient notes.  This will serve you well in the long run when reviewing your reports each month for credit balances.  Some practices choose to monitor patient credit balances quarterly; however, if you are preparing to sell your practice, we recommend that you do this monthly.  You’d be surprised how quickly credit balances add up and how often they are overlooked.

One important note of caution!  When reviewing the credit balances on patient accounts, do not assume that the refund always goes to the patient!  You want to look back to the last zero balance on each account and look at patient payments made and insurance payments made.  Insurance companies make mistakes and sometimes they overpay and sometimes they make a duplicate payment on a claim.  In these instances, the refund is due to the insurance company and not to the patient.  Some insurance companies catch these errors quickly and request a refund in writing.  Others do not catch them so quickly and they have up to a year to claim their refund (this may vary from state to state).  Pay attention to this detail when reviewing accounts.  Remember to make notes in patient account notes so you don’t have to repeat your efforts every month.

I have not been settling patient credits on a regular basis, I have thousands of dollars in credits now what?

Follow the detailed recommendations above and get your accounts with credit balances cleaned up.  It is essential to do this leg work prior to the sale of your practice.  Make every effort to contact your patients to refund any monies due to them.  If the refunds are due to insurance company overpayments, contact them and ask that they send a request for refund letter.  If you are unable to reach patients with credit balances due to them, these credit balances in many states must be reported to the state in which your practice is located.  For example, in the state of Washington, credit balances over a certain dollar amount must be documented on an “Unclaimed Property Report” and filed with the state before November 1^st each year.  Do some research and find out what your state’s unclaimed property reporting requirements are.

*Disclaimer: The information above is not legal advice. Each state has its own rules and regulations. Be sure to review all rules and regulations as circumstances may vary.

Settling Credits Before Listing Your Practice

By Jen Bennett, Practice Transition Specialist

You’ve made the decision to sell your practice, and with that comes the to-do list of tasks that can often feel daunting. One important task that is often overlooked is settling patient credit balances.

What are credit balances and where do they come from?

In many cases, a patient will have a credit on their account when their insurance pays more toward their treatment than anticipated or you estimated a patient portion to be higher than was necessary and collected accordingly.  In these instances, patients paid more out of pocket than necessary; therefore, the difference will show as a credit on their account and on your accounts receivable report or unassigned credit report.  Credit balances can also result from patients mailing in a payment or making an online payment on a balance that they have already paid.  These are duplicate payments typically made in error.  When this happens, we recommend contacting the patients and advising them of the duplicate payment before posting it to their accounts.  Many patients will request that you return their duplicate payment to them and some will elect to leave the credit on their account if they have upcoming treatment planned.  If they have upcoming treatment planned, this can be an effective way to get them on the schedule. It can be difficult to reverse an online payment and, in those instances, you may have to post it to the patient’s account.  In other cases, patients may pay upfront for larger treatment plans and due to unanticipated circumstances, they were not able to complete their full treatment, or perhaps less treatment became necessary.  If you have a practice where patients with insurance are required to pay their patient portion due at the time of scheduling their appointment for treatment, then credit balances will appear on the patient account until the procedures are posted and until insurance has paid their portion, this is just the normal course of collecting patient portions upfront.  The same applies to patients without insurance if you collect the patient portion upfront.

How should I be handling credit balances?

To keep your credit balances at a minimum I would suggest you come up with an efficient protocol with whoever is in charge of your accounts receivable, whether it be your office manager, bookkeeper, or yourself.  Credit balances are typically handled by an office manager.  It is our recommendation that your accounts receivable report or unassigned credit report be reviewed monthly.  If there are outstanding claims on an account, no refund is due yet.  If there is a credit balance and there are no outstanding claims, we recommend contacting each patient and advising them of the credit balance.   And again, if they have been treatment planned for procedures ask each patient if they would like to keep the credit balance on their account and get them on the schedule for treatment.  If they have no upcoming treatment, it is typically best practice to refund the patient as soon as possible to keep your accounts clean.  Make sure to document these conversations about credit balances in patient notes.  This will serve you well in the long run when reviewing your reports each month for credit balances.  Some practices choose to monitor patient credit balances quarterly; however, if you are preparing to sell your practice, we recommend that you do this monthly.  You’d be surprised how quickly credit balances add up and how often they are overlooked.

One important note of caution!  When reviewing the credit balances on patient accounts, do not assume that the refund always goes to the patient!  You want to look back to the last zero balance on each account and look at patient payments made and insurance payments made.  Insurance companies make mistakes and sometimes they overpay and sometimes they make a duplicate payment on a claim.  In these instances, the refund is due to the insurance company and not to the patient.  Some insurance companies catch these errors quickly and request a refund in writing.  Others do not catch them so quickly and they have up to a year to claim their refund (this may vary from state to state).  Pay attention to this detail when reviewing accounts.  Remember to make notes in patient account notes so you don’t have to repeat your efforts every month.

I have not been settling patient credits on a regular basis, I have thousands of dollars in credits now what?

Follow the detailed recommendations above and get your accounts with credit balances cleaned up.  It is essential to do this leg work prior to the sale of your practice.  Make every effort to contact your patients to refund any monies due to them.  If the refunds are due to insurance company overpayments, contact them and ask that they send a request for refund letter.  If you are unable to reach patients with credit balances due to them, these credit balances in many states must be reported to the state in which your practice is located.  For example, in the state of Washington, credit balances over a certain dollar amount must be documented on an “Unclaimed Property Report” and filed with the state before November 1^st each year.  Do some research and find out what your state’s unclaimed property reporting requirements are.

*Disclaimer: The information above is not legal advice. Each state has its own rules and regulations. Be sure to review all rules and regulations as circumstances may vary.