If You Are Buying a Dental Practice Beware of Caveat Emptor

Caveat Emptor is a Latin phrase translated to “Let the Buyer Beware”. It is the principle that means it is up to the buyer to do their due diligence prior to purchase to know what they are buying. It is the act of discovering the positive and negative attributes of the item they are buying.


Caveat Emptor applies whether you are buying a cell phone, a car, a house or a dental practice.


Dentists could learn some valuable from private equity firms about buying dental practices. Before Private Equity firms buy, they do due diligence (series of assessments) before buying.


Due diligence is intended to verify practice valuation by evaluating quality of care, regulatory compliance, proper coding and billing practices, and so on.


How to do due diligence? Identify all the parts of the dental practice and look closely at all of them. Are all the parts present? Do they all work? Do they work well? Does anything need replacing? How soon? When were they serviced? Is anything missing? What are the opportunities to improve or enhance the practice?


I work with Private Equity firms as a partner in their due diligence processes. For my parts, office review and records audits, it is about identifying proficiencies and deficiencies (or what I call ‘opportunities’).


Is the office compliant with OSHA, infection control, DEA regulations, radiation regulations, sedation safety/medical emergency preparedness, HIPAA, advertising/marketing, dental board rules/Dental Practice Act? What safety mechanisms are in place to ensure patient and employee safety? Does the practice code/bill properly? Using correct codes? Have adequate supporting clinical notes to support what is billed? Any overbilling or fraud issues? If so, are they isolated or systemic?


From these due diligence assessments, we map out and prioritize what changes need to occur immediately upon closing to eliminate or at least minimize the buyer’s liability by discontinuing poor practices, illegal acts, and unsafe actions and replacing them with sound systems to ensure the continued success of the dental practice moving forward.


You see, if you buy a practice that operates ‘outside the lines’ and you continue operating the same way because you don’t want to rock the boat or because you don’t know any better then, you, as the new owner, become directly liable for continuing to break the law.


Before you buy a practice, you need to know everything about it. You need to know about every scratch, dent, and blemish. You need to know all this not so much to decide whether to buy, but to make sure you don’t overpay and that you understand the opportunities the practice represents for you.


You see, dental practices that are compliant with applicable regulations and have effective compliance programs in place are worth more than those that are not. That said, buying a practice that is grossly out of shape and out of compliance is an opportunity ripe with opportunities, but you have to know how to render the vehicle safe before you drive it, or you could drive yourself right into a major wreck.


Regulatory compliance audits, as a substantial part of your due diligence, should be conducted before buying, period. Proper due diligence can help buyers avoid expensive legal troubles later, and they can save you money and headaches. Remember, trust but verify.


Before you buy a dental practice (or anything else of value) pop the hood, climb under and inspect the chassis, and take it for a thorough test drive, so you know what you’re buying beforehand. Don’t be afraid to ask difficult or potentially embarrassing questions!


As a buyer it is solely your responsibility to do your due diligence. Heck, even courts recognize the principle of caveat emptor, so your ability to sue the seller-dentist for your failure to do proper due diligence can be quite difficult.


Due diligence is seldom about whether to buy the practice, but rather about knowing what to change and what to keep in place to efficiently capitalize on the opportunities that the practice presents for you as a buyer.


An ounce of prevention is worth a pound of cure. Consider investing in a few ounces on prevention before you buy a dental practice. You don’t know what you don’t know and what you don’t know can dash your dreams, even cost you your dental license.


If you are looking to buy a dental practice and you need help doing due diligence I’m happy to help. 


CLICK HERE and let's schedule some time to chat!


Be well. Do good. Be blessed. 


About the Author

A former Law Enforcement Officer/ Dental Board investigator, Duane Tinker is the CEO of Dental Compliance Specialists. Mr. Tinker provides compliance consulting, auditing and training services for dentists and Dental Service Organizations on compliance risks including OSHA, HIPAA, Dental Board rules/ regulations, state radiology rules, DEA and state drug regulations, and Medicaid. Mr. Tinker is a frequent speaker for dental societies and study clubs. He also hosts a podcast called Talking with the Toothcop. Mr. Tinker can be reached by calling (817) 755-0035 or through his company’s website

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