No Images? Click here DENTAL NEWSLETTER February 2018 Health Funds Dirty Tactics A dentist provides treatment to patients in good faith. The dentist invoices are submitted via Hicaps at the counter and a month later a health fund’s clerical administrator demands that the dentist repay the health fund amounts for alleged over-servicing! No health fund employed dentist has ever visited the practice and checked patient records, nor asked the dentist for an explanation. The health funds’ tactics appear to be a bluff. By sending out 100 of such letters, they probably hope to get a percentage of refunds sufficient to make the effort worthwhile. Bit by bit dentists are losing their power to make clinical decisions. Dentists should reply to the health funds saying that: 1. The treatment was provided according to proper clinical diagnosis, and 2. As the payment was made on behalf of the patient, the health fund should contact the patient and ask the patient to repay the amount. IDN success It’s still early days but dentists desiring to ward off their health funds are finding their way to IDN in steadily increasing numbers. Many dentists are in a situation where health funds have not got the percentage grip on their practice that they believe. However they must take action before the health funds tighten their grip on their practice. Contact: Merv Saultry at IDN: merv@independentdentists.com.au. Synstrat Group has no financial interest in IDN except our interest in dental clients warding off unsavoury health fund tactics. Shopping Centre Rorts A dentist leased premises which are part of a shopping centre complex facing outwards in the belief that they would be the only dental practice at that site, only to find that the shopping centre landlord then rented space to a major health fund to open a dental practice inside the complex! It’s a huge kick in the stomach after having outlaid a large sum of finance on fitout and equipment. Synstrat has long found that the best dental practices are not in shopping centres both because of punitive rents and because dentists build and retain better long term patient lists from owned premises with adjacent parking located elsewhere. You don’t find top restaurants in shopping centres but they do sell vast amounts of junk food. Financial Planning and Life Insurance for Dentists Synstrat is experienced at providing financial plans for dentists. These take into account dental practice profitability and benchmarks, as well as ownership of premises and other family assets and other financial issues. Telephone Graham Middleton, Cameron Darnley or Roger Armitage, each of whom are experienced financial planners, on 03 9843 7777. Cameron can also assist with life insurance. Synstrat Management Pty Ltd holds its own licence. It is not obliged to recommend the products of a particular bank or insurance company. Conflict Between Dental Associates What happens when two very different dentists become associated practice owners and their relationship implodes. Read “The War between Lorenzo the Magnificent and Amanda the Amazon: The Cost of Dental Dispute” – refer page 183 of Synstrat Dental Stories, which is a 335 page book that 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 cheryl@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.
Beware practice valuers without basic dental statistics Recently a dentist seeking advice as to whether to purchase a practice sent financial information passed to him by the practice owner. Among the information was a valuation from a director of a leading accounting firm accredited to a bank including a paragraph which said: “I have set out industry benchmarks for dentist practices in the above table. I acknowledge however that there can be inherent difficulties in comparing the results with benchmarks due to variations in the way that results are reported. For example, some practices will record gross fees and dentist labour costs, while others may show only service fees and revenue. In addition, comparability of results can be distorted in the event that practices do not pay commercial remuneration to owner dentists.”
The valuer concerned had no confidence in the so called industry data. Australian Bureau of Statistics is notoriously unreliable in such matters. However that did not deter him from signing off on a valuation containing significant errors which grossly overvalued the dental practice. Synstrat Data Our data is extracted from the actual accounts of dental clients and we take care to organise the accounts in such a way that we can separate clinical staff from non-clinical staff and our valuation process takes care to allow for the opportunity cost of clinical staff in full in order to bring in the proprietor/owner dentist’s opportunity cost (ie what the owner would have been paid to do the same amount of work for another dentist) into the valuation equation. In the valuation we saw, after we worked through the figures correctly, we found that the other valuer had overvalued the practice by a factor of about 60% and that the tendering of his report represented misrepresentation to potential buyers. Practice buyers - be wary about valuations tendered even though in some cases the valuer concerned may have been accredited as a valuer to a bank! After you have bought and found that the practice is a lemon, it is too late to undo the damage. As far as we are aware, Synstrat Accounting Pty Ltd is the only accounting practice in Australia which runs a reliable continuously updating dental practice benchmark database and hence our valuations are far more reliable than others that we see in the marketplace; despite the professional standing and qualification of some of those valuers. For advice when buying a practice, consult David Collins or Graham Middleton (03) 9843 7777. Practice Accounting & Valuation Services Synstrat is the only accounting group in Australia which maintains an active, continuously updating database of dental practice benchmarking performance. This is essential in assessing and advising performance of a practice and in valuing practices. Telephone David Collins or Graham Middleton on 03 9843 7777. Don’t Sell Dental Practices Too Early Dentists who maximise their wealth from their practices are those who have run the practices to within three years of ultimate retirement or better still right up to the date and have sold for the purposes of retirement. They have structured the practice ownership to share goodwill value between spouses, licenced it to a company at the appropriate time, paid themselves via franked dividends and have maximised superannuation contributions for both spouses. Through concessional and non-concessional contributions they will reach the pension fund maximum years before retirement then continue to make concessional $25,000 contributions each year and have growth from existing assets. To top it off they may roll into the fund up to $1,445,000 of proceeds of sale of practice and premises including a tax free amount. This amount is covered under separate legislation and is not restricted by the $1.6 million (indexed) pension benefit limit per person. Some dentists who sold too soon, or have not been well structured or have not optimised their superannuation structure finish up much worse off. There are mixed stories coming from those who sold their practices to dental corporates. For advice on these matters, contact Graham Middleton or David Collins (03) 9843 7777. $20,000 Equipment write-off – take care The ability to write off an item of equipment purchased below $20,000 ends on 30th June 2018. There will be a rush of equipment suppliers pointing out to dentists that they can get this write off. However be aware that this is not an absolute tax saving, but rather a bring forward of the depreciation which would otherwise be claimed over a number of years. It’s a timing issue and yes, since money does have a time value, a $19,999 write off in the present is superior to writing that $19,999 off over a number of years. However, it’s not an absolute saving and the issue is that where an item of equipment still has a significant usable life left in it, it does not pay to replace it immediately with a new item simply to get the bring forward of depreciation on that item into a single year. Before considering replacement of an item below $20,000 consider objectively whether that item might have two or more years of usable life left in it, in which case it is best not replaced in the current financial year. Health Fund Membership There is ample evidence that health fund membership is falling and we note in a recent press report that extras cover is expected to fall by 10 percent in 2018. It may be surprising if it only falls by that amount but a 10 percent fall in membership while the general population is growing would be a significant blow. The health funds’ power over dentists may have reached its zenith. However dentists won’t regain control over their practices until they banish a lot more preferred provider arrangements. The health funds have gotten away with massive rip-offs in this area for too long. As the cost of hospital cover increases it is likely that more people will drop their extras cover and clearly should do so. 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. |