No Images? Click here DENTAL NEWSLETTER August 2018 More Abandoning Health InsuranceAccording to The Australian 31st July 2018 a net 22,000 people abandoned hospital insurance in 2017. With a growing population this meant that the percentage of the population’s coverage was down another 0.8% to 45.7% and is the third straight year it has fallen. Unless government subsidies to health insurance are increased, which appears unlikely, this trend is likely to continue. Dental practices relying on preferred provider arrangements will become more vulnerable to draconian health fund activity designed to protect its lucrative rip-off from excess cover by restricting the number of procedures that can be provided and lending the fees that dentists can charge. The growing trend towards dentists fighting back against the PHI’s is apparent. 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 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 rebates, and which offers patients superior value. 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. Contact Merv Saultry at IDN at: 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. Health fund buyout We note a buyout of a dental practice by a mutual health fund. The fund then poured money into an expensive refurbishment including back office functions which were perfectly OK. The health fund manager was determined to spend a budget and money was poured into replacing serviceable fitout and functioning workstations. The manager was unconcerned as to the impact on the disruption of the practice or whether the refurbishment would make it more efficient. It is probable that the practice will turn into a lemon and eat away at the funds profit margins. It’s amazing how freely managers spend money which is not their own! Paying too much for Life Insurance? Many dentist carry more life insurance than necessary once they have reduced their mortgage and built up superannuation savings. Check whether you can save money on life insurance. Speak to Cameron Darnley, the Synstrat partner who specialises in this area. 10 percent Corporate penetration into dentistry is estimated at 10% – refer recent Abano article on our website. Given the time corporates have been in the market, 10% is a low figure and indicates that their impact may be waning. When a corporate buys a good practice and contracts a leading vendor dentist, it’s a matter of time before they leave. Their performance is difficult to replicate. Corporates are rarely able to start practices and nurse them to profitability. Most corporate dentists won’t achieve the quality of long term patient relationships which practice owners achieve. Maven reported flat revenue in Australia in 2018 which was better than its 4.4% decline in the previous year. To what extent its business model depends on buying additional practices to replace lost revenues is not apparent. It’s not a business model in which an intelligent investor would rely. Dental Practice Valuations Speak to David Collins or Graham Middleton at Synstrat. Dental practices – too big? There is a size at which many dental practices become less profitable. Adding a fourth, fifth or sixth surgery to a one owner dentist practice may appear sensible from a distance but often reduces overall profitability. This occurs as the owner dentist’s own production plummets while they solve everybody else’s problems. Read “How Cleopatra 'the controller' kept Barney 'barnacles' practice poor” at our website under Dentistry Publications. For advice on practice strategies, consult Graham Middleton at Synstrat. The big hole in dental corporates Dental Corporates have a poor record of starting practices and building them up. In reality they try and buy existing practices and contract vendor dentists to work for them as a condition of purchase and sale. When the vendor dentist of the best practices retire, they are in danger of losing both turnover and profitability. This tells us that the dental corporates have a high risk business model. The fact that recent estimates have the dental corporates as having about 10% of the dental market despite the efforts of Dental Partners/Abano/Maven, 1300 Smiles, Pacific Smiles, Ekera and Smiles Inclusive suggest that the spin provided to stockbroking analysts etc has a high degree of fluff rather than substance. Recently listed Smiles Inclusive Ltd net cash flow to 30th June 2018 was $2.279 million less than forecast. We will only know how well this company has performed when they produce their first full year performance figures for the financial year ending 30th June 2019 which will be available in about August/September of next year. In the meantime we regard investment in this company as high risk. Dental corporates are having to buy smaller practices if they wish to stay in acquisition mode. Since they have difficulty in expanding their fee income without purchasing practices we view this as a business model which will run out of steam. To date they have cuddled up to health funds; indeed Dental Corporation is owned by Bupa. With health insurance premiums rising and policy surrenders increasing that element of the corporate business model is under threat. We predict that in 20 years’ time, the best dental practices will still be run by owner operator dentists who allocate their capital tightly and ensure efficient work practices. Dental Practice Business Strategy Are you getting enough out of your practice? Are you wanting to know whether you should buy, sell, bring in a dental associate or buy out your partner? Is your accountant unable to advise you on your practice’s comparable dental performance? To be informed, speak to Graham Middleton or David Collins 03 9843 7777. Practice Start-up Disasters There is a steady failure rate of newly established dental practices; typically started by dentists who cannot get a full time job. We are periodically contacted by a dentist desperate to sell a recently started practice where the dentist has invested substantially in equipment and fitout and has insufficient patients to pay the bills. Nearby established practices with a solid patient base continue to operate successfully and have patients referred to them. Smiles on Site Dental Clinic – Australian Aged Dental Care Pty Ltd According to a Fairfax Press article per Rachel Olding and Angus Thompson of 2nd August 2018, a mobile dental van run by this North West Sydney company has exposed children as young as two to radiation without a licence. Last month, Australian Aged Dental Care Pty Ltd pleaded guilty to administering radiation without a user licence. Fairfax Media states that it has interviewed former staff members, officials with knowledge of the case and dental experts who have accused the company of having under-qualified staff, billing Medicare for procedures not performed, underpaying staff and dismissing staff who questioned its business practices. Staff made the accusation that, until the company was prosecuted, every child was x-rayed as soon as they entered the van by managers who didn’t have radiation licences. Neither children nor staff were given proper protective wear and children were not asked if they had been x-rayed recently. Children would then see a dentist. The ADA advised parents to choose a local dentist who was accessible for future appointments and to make sure that unnecessary x-rays aren’t taken. Best wishes to all Dentists, Graham Middleton
The Synstrat Group are Australia's most experienced Dental practice business advisers, accountants, practice valuers and licensed financial advisers. The information contained herein is of a general nature and no specific action should be taken without individual advice. Synstrat Management Pty Ltd P. 03 9843 7777 ABN 57 006 295 325 If you are not the intended recipient of this communication please delete and destroy all copies of this message and telephone Synstrat on +61 3 9843 7777 immediately. If you are the intended recipient of this communication you should not copy, disclose or distribute this communication without the authority of Synstrat. Any views expressed in this communication are those of the individual sender, except wh ere the sender specifically states them to be the views of Synstrat. If you do not wish to receive this email in future, please reply to the sender requesting termination of service. |