No Images? Click here DENTAL NEWSLETTER January 2019 The dental corporate world is an increasingly unhappy placeVendor dentists and non vendor dental contractors and some at least of the corporate groups are subjected to continuous cost cutting demands (or the impacts of cost cutting of the support services that they need to function effectively). This goes hand in hand with demands to increase revenue. There’s a world of difference between owning a practice and running it efficiently with the owner dentist setting an example through efficient, but ethical, production in their own operatory; and A manager from a corporate simultaneously demanding that both vendor dentists and non-vendor contractors produce more with less support (cheaper materials or less expensive practice staffing) until ethical professional standards are breached. The vendor dentists are often fearful of having their deferred earnout portion of their practice sale withheld and the younger contractors dentists know that alternate dental employment is scarce. Dentists, please if you are able to let us know of your experiences of working for a dental corporate we’d appreciate your comments. If some comments are given on a confidential basis then we’ll treat them as confidential but naturally we prefer to have information which we could quote albeit that we would withhold names. Bitcoin – falling out of favour Bitcoin recently reached its year’s low while lookalikes have dropped from the news. As prices fall, those who operate large banks of computers to “mine” Bitcoin by maintaining the records which enable Bitcoin transactions to occur as part of the blockchain and who get paid in Bitcoin will find that their activity is no longer profitable and turn off the electricity. The blockchain may become the “blocked chain”! Meanwhile regulators are requiring Bitcoin-like startups to register and document their activity as if they were conducting an IPO of a public company. Nor will State Stamp Duty Offices accept Bitcoin payments or real estate valuations in Bitcoin terms as a basis for charging stamp duty. Nor will the Australian Tax Office accept a Bitcoin values as a basis for future capital gains tax calculations. Regulators around the world are closing the door on blockchain currencies. Dental numbers outstripping population growth two to one The total number of registered dental providers increased from 19,087 at June 2012 to 23,093 at June 2018, an annual compound increase of 3.23%. This compares to a growth in the population of Australia of 1.57% over the six years. The number of registered general dental practitioners grew at an annual rate of 3.36%! Is it any wonder that there are many dentists working part time who are available to work increased hours per week and many dental surgeries are unutilised or under-utilised. Former ADA Inc president O’Reilly and CEO Boyd- Boland lobbied for dental immigration and more dental schools but ended up with a substantial and growing oversupply of dentists. Last year dental corporate Smiles Inclusive Ltd stated that it had 61 totally spare dental chairs in 52 practices it had recently purchased. It’s likely that in the past those vacant chairs had dental patients. Dividend imputation credit confiscation Dentists who own shares directly or indirectly need to gain an understanding of the impact if a Federal Labor Government is elected and Labor leader Bill Shorten and shadow Treasurer Chris Bowen’s dividend imputation confiscation policy is legislated. Synstrat is advising its clients on measures to take on a client by client basis. For general information refer to Synstrat’s Website. Sale contracts with dental corporates Dentists need to take extraordinary care. Contracts which withhold a significant portion of the practice buyout payment on an earn out basis tied to achieving goals in respect of dental fees or profitability need to be carefully considered. If the corporate concerned varies staffing support, makes material changes to the workplace or forces health fund preferred provider arrangements on the practice at reduced fees, they may be making it impossible to achieve your contracted targets. Dentists need to take particular care with the wording of contracts and make their objection to contracts. They also need to continually monitor the level of support that they are given and make it known to the corporates’ managers if its actions are diminishing their ability to meet contracted targets.
We hear mention of potential legal class actions by groups of former practice owners who believe themselves to have been wronged because corporates didn’t maintain the level of support in their practice which was previously there. Corporate numbers While most practice owners have been approached by a number of corporates the fact is that overall the impact on dentistry appears to be of the order of 8-10% of treatment providers. Australian dentists have been much more cautious considering corporate spin and the corporates have learned that unless they are careful in respect of size of practice and number of dentists, they are at risk of ending up with lemons if for example a single fee producer has had too much influence in a practice or is too specialised and in either case is difficult to replace at the end of their earn out period. Health funds too have had to get used to much negative press in the past couple of years and the public are being better informed as to the lack of value in extras cover. The most successful dentists refuse to be preferred providers and educate their patients about the shortcomings of extras cover. Independent Dental Network (IDN) - Keeping control of your practice IDN provides dentists who wish to retain their freedom from the encroachment of large health funds the tools to market their practice and offer patients an ethical and more beneficial choice of dental insurance, including an ability to switch to a mutual fund which doesn’t interfere with patient choice of dentists by discriminatory rebate setting, and which offers patients superior value for their insurance dollar. Alternatively, patients can opt out of extras insurance and contribute to a savings plan (with accounts run in a major bank) to pay for planned dental treatment. The health insurance industry heavily advertises extras (ancillary) cover because that’s where it makes the big profit. Overall the industry only pays out 78 cents per dollar of extras premium, which in turn covers only 52% of treatment costs. Dentist are aware, that’s a rip-off. Every member practice retains its own identity while belonging to IDN, which gives it the marketing tools to promote itself under its own name. Merv Saultry - Contact merv@independentdentist.com.au Disclosure - Neither Synstrat Group nor Synstrat’s directors have any financial interest in Independent Dental Network other than the interests of our dental clients. Medibank Private loses Defence contract The Australian Financial Review on 4th December 2018 reported that Medibank Private’s share price had fallen 6.1% on November 19 after it confirmed to the sharemarket that it had lost a major Defence Department contract expiring 30th June 2019 which had contributed an estimated $30 million to its operating profit. UK healthcare multinational Bupa is the replacement contractor which the AFR commented was an interesting preferment given Bupa’s suite of unresolved trouble with Canberra’s health bureaucracy. As at 16th January 2019 Medibank Private’s 12 month return was minus 17.76 percent after allowing for dividends. Listed health fund companies are risky investments in a period of falling health fund membership. Synstrat Dental Stories is a 335 page book which is a must read for dentists. It details a series of good and bad practice experiences but names and some details have been changed to preserve identities. It contains valuable insights for practice owners and intending buyers as to what works best and what doesn’t. To obtain a copy of this publication, make a tax deductible donation of at least $30 to the Delany Foundation, a charity which brings hope and opportunity into the lives of young people deprived of education in Australia, Papua New Guinea, Kenya and Ghana. Once you have made your donation, please email confirmation of your donation along with your postal address to dental@synstrat.com.au and a copy will be sent to you. Donations can be made by mail to: Delany Foundation PO Box 429 CASULA MALL NSW 2170 Or via direct debit to the Delany Foundation Ancillary Trust, BSB 062 784 CBA account number 4050 5402. Should you have any difficulties, contact Matthew Mahoney on 0419 202 787 or 02 9600 8184.
Best wishes to all Dentists, Graham Middleton
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