How to run a small group practice and fail miserably

This is the story of how a successful, fee-for-service, solo practice was sold to a small group practice and subsequently failed. It’s a case study of one, so please take that with a grain of salt. But I do think we can reinforce some best practices.

There once was a general practice located in a bustling town with a population of more than 200,000. Its founder and owner dentist had built a reputation for cosmetic services and had ridden the cosmetic boom in the 1990s with in-office whitening and veneers. It was also known as a holistic practice, meaning the owner had introduced protocols for like-minded patients who wanted amalgams replaced with composite and the like. He referred out procedures to the specialists in town who, in return, referred cosmetically driven and holistic patients to his practice. This was a successful business model. It was so successful that the practice was able to remain fee-for-service well into the 2000s.

Then the dentist decided to retire and sell to an emerging small group practice. The group owner owned two other locations and had visions of owning several more. This little practice would be the third jewel in his crown. Little did he realize it would be his last . . .

The group practice owner made a few mistakes with his new purchase.

1. He changed the referral model.

The new owner dentist was a “super GP,” meaning he wanted all procedures for himself and his associates. This upset the specialists, who stopped referring patients. This upset some patients, who’d had positive relationships with certain specialists for years. For example, Mrs. Jones was being told not to see her favorite oral surgeon anymore but to have her implant done with the new dentist.

2. He increased team turnover.

When buying a practice, one wants minimal team turnover for the comfort of the patients and to preserve existing systems. The new owner had a significantly different leadership style and philosophy of treatment, which upset the team that had worked in the practice for years. Hygienists were being told to tell patients that they would lose their teeth to periodontal disease if they didn’t resolve their mild crowding with clear aligners. Calm, bottom-up communicative team huddles were replaced with tense, top-down marching orders. One by one, the team found other employment opportunities in the town, and patients followed.

3. He changed the holistic model.

Patients who seek holistic dental care are not your average patients. They require reassurances that treatment is following specific protocols and that only certain materials are being used for their care. The dentists, hygienists, assistants, and front office personnel must be in lock step. As the team continued to turn over, new hires were not properly trained in the holistic messaging. The significant population of patients in the practice who self-identified as holistic took note and left.

So, what became of this once successful solo practice? It floundered for a few years, with a turnstile of associate dentists and personnel and sluggish patient traffic. Eventually all three offices in the group were sold to a national dental service organization, one of the really big and successful ones. As it turns out, even they couldn’t turn the practice around despite a large marketing budget and polished systems. It would appear the small-town population that had once supported the practice had moved on. Recently, the national DSO sold the practice to a local DSO, which I find quite interesting. I guess they just wanted it off the books. They shuttered one of the other locations and it’s unclear whether they still hold the third.

Thus ends this cautionary tale of a small group practice gone wrong. I think the biggest lesson here is to evaluate a potential practice purchase beyond the profit and loss statements and the EBITDA. Numbers tell you a lot about the value, but one must look deeper to see if it’s a good investment. Goodwill, practice philosophies, team esprit de corps . . .  these intangibles will make or break your growing enterprise.

Chris Salierno, DDS, is the chief editor of Dental Economics and the editorial director of the Principles of Practice Management and Group Practice and DSO Digest e-newsletters. He is also a contributing author for DentistryIQ and Perio-Implant Advisory. He lectures and writes about practice management and clinical dentistry. Additional content is available on his blog for dentists at ToothQuest. Dr. Salierno maintains a private general practice in Melville, New York. You may email him at [email protected].