There’s so much more to figuring out the value of your dental practice than putting a percentage on your collections. Even if a transition of ownership isn’t in your five-year plan, it’s best to begin with the end in mind and know what improvements need to be made now to come out on top when the time comes. That’s where the valuations team at Professional Transition Strategies (PTS) comes in. Business Valuation Specialists Jess Williams and Mark Frazzini share some common questions they receive during the valuation process so dental entrepreneurs can boost their bottom line and, ultimately, their valuation for a bigger return on their practice once it’s time to sell.
How can insurance impact your practice’s value and desirability?
Insurance is a scale, and it depends on the location you’re in. Where there’s a medium household income, most of the time, it might serve you to be a fee-for-service (FFS) practice since it won’t deter patients, but in other places, you might not achieve as much growth as you could. If the incoming doctor is not in the same network, then they will be faced with the added responsibility of having to replace that patient base with their in-network provider.
What kinds of insurance are best to accept, and which are less profitable?
It all comes down to renegotiating reimbursement rates with your in-network insurance providers. If a big company in your area offers employees a certain insurance, it’s to your benefit to accept that insurance to get more foot traffic in your door. On the other hand, Medicaid has rigid reimbursement rates, so while you may receive a higher volume of patients, you will receive less return on your investment. Your production-to-collection ratio will be much different than another practice and, therefore, put a ceiling on where your practice can go.
Does what type of insurance I accept change depending on the type of dental practice I own?
If you’re a periodontic practice, all your patients will typically be on Medicaid. Depending on how much you’re accepting, you can counteract the amount of Medicaid by bringing in more cash on hand to make up that difference. Otherwise, if you’re a general dentist, it shouldn’t be a factor.
What’s next?
Every dental practice valuation is unique, which is why PTS uses a proprietary formula that is a cut above the rest. Contact the experts at PTS to get the process started today.