Part 3: Finding the Right Dental Associateship

The American Dental Association reports that about half of all associateships fail (Ebert, n.d.). Other sources paint a more drastic picture, claiming that 8 in 10 associateships dissolve (PTS, 2022). Dental associateship failures emotionally impact the owner, the staff, and the associate, making it harder to trust and try again. While there is no guarantee that you will have a successful hire, there are strategies that can increase your chances of making an excellent match for your office. This segment of our series will examine how to hire, train, and manage an associateship to maximize your chances of success.

Finding the Right Person

In the first two segments of our three-part series, we looked at reasons dentists might hire an associate and how to know if the timing is financially right. When owners have carefully evaluated the reasons for the dental associateship and have calculated their office’s profitability and break-even point, they are ready to begin crafting a job description that can be used to identify the right candidate for their unique situation.

The Research Phase.

The owner dentist seeking to hire an associate must begin by researching best practices in hiring and paying an associate. Owners should thoroughly develop a compensation plan while tailoring the associate’s job description. Some models of compensation per the ADA (n.d.) are as follows:

1. Straight Salary: When owners pay a straight salary, payroll calculations are based the total yearly salary divided by the number of payrolls per year or the daily rate times the number of days worked per pay period. For example, if the associate is offered $182,000 annually, paid bi-weekly, the gross or pre-tax pay is $7,000 per pay period.
2. Salary Plus Commission: Under this structure, the associate would have a guaranteed base salary plus earn extra income based on productivity. For example, in addition to the $7,000 base pay, the associate may earn 10%-30% of their gross production. Suppose the associate produces $40,000 in one month. In addition to the $7,000, the associate would earn an additional $4,000-$12,000.
3. Commission: Under this system, associates receive compensation based on a percentage of production, adjusted production, or net collections. An example of paying on commission is provided below.
4. Net Profit: This method compensates associates on adjusted production minus a share of the office’s expenses. Typical expenses deducted are the associate’s pro-rata share of laboratory fees and supplies.

 

When deciding on the associate’s compensation method, remember to stipulate the following:

• How will the associate receive patients?
• Will the associate be allowed to perform all the work they diagnose, or will a more senior dentist do higher-dollar procedures?
• How will contracted insurance reimbursement rates affect the associate’s pay?
• How will hygiene exams factor into compensation?
• How robust is the office’s collection ratio?
• Will the associate have additional compliance or managerial duties?
• What additional benefits, such as health or liability insurance, pension, or continuing education, are part of the total compensation package?
• When and how often will compensation be re-negotiated?

Articulating the compensation method may be the most crucial factor in securing a successful owner-associate relationship. It is essential that neither party feels disadvantaged or trust suffers. It is wise to provide examples for the associate to see how compensation will work in your office. The example below depicts how different commission compensation methods affect an associate’s pay. If associates are paid using another method listed above, adjust the base pay and/or percentages to provide authentic examples based on your unique situation.

Associate Contracts.

Associate contracts are complex documents, so owners should always engage an attorney to write the contract. In addition to compensation, benefits, and perks, the contract should detail working hours, expectations, termination processes, restrictive covenants, contract length and renewal terms (Chelle Law, n.d.).

Worker Classification.

The final compensation decision when adding an associate is determining if the associate will be classified as a W-2 employee or an independent contractor. Owners should not take employee classification lightly since misclassified employees can be costly for the owner and the associate ( Prescott et al., 2017). Owners who misclassify are subject to resolving tax deficiencies, penalties, and interest. Misclassified associates are impacted by self-employment taxes, ineligibility for fringe benefits, and unreimbursed business expenses. Prescott et al. (2017) emphasize that the IRS focuses on the control aspect in its ruling on provider classification (See Revenue Ruling 87-41 for 20 factors that influence the classification of workers). In Dental Economics, Prescott (2017) states the following: “If the practice pays the associate, schedules the associate, requires the associate to follow practice policies, and subjects the associate to a restrictive covenant, the associate is an employee.” Therefore, it is wise to consult a CPA or attorney when making this critical decision.

Crafting a Job Description.

Just as owners might use a job description document for other office roles, they should also list the desired qualifications for an associate. This document should specify the skill sets required, work hours, and office responsibilities. For example, if the new associate will be responsible for all hygiene on a specific day or if they must work some night or weekend hours, list them. Suppose they will be accountable for compliance initiatives within the office or manage certain staff members. In that case, those expectations belong in the job description, too. Beyond these items, however, owners should list values and people skills that the new associate should possess along with any specific personality or work characteristics needed to succeed in the office environment and culture.

This document should encompass the ideal candidate, but no one candidate will measure up to perfection. It may be helpful to order or rank the different characteristics. If certain items are non-negotiable, rank them as such. If others are less critical, indicate that. In this way, owners will formulate a clear picture of what they feel is best for their offices and be able to assess each candidate against the job description. The job description is not a static document. As owners move through the interview process, they may discover areas that need to be added to the description or decide to remove specific requirements that seem less important.

A critical aspect of the job description is identifying the type of associateship offered. Is the owner hoping to hire for an eventual buy-in or buy-out? Is the dental associateship mainly to provide a new revenue stream? Make sure the candidates understand the intention of the hiring. Otherwise, owners may be surprised if the associate has different objectives from their own.

The Interview Process.

Once owners have a clear job description, they can begin developing interview questions for the candidates and envisioning how they will conduct the interviews. Make sure to formulate open-ended interview questions. Yes or no questions rob the interviewer and the candidate of the opportunity to explore intentions and innuendo. Nothing can be worse for either party than to misinterpret answers, so strive to listen well, not just to be polite. Encourage candidates to ask questions of their own. Suggesting that they bring a question set for you to answer may be helpful since the goal of the interview is to discover if both parties want to move forward in the alliance. Uncovering as much information as possible will help everyone make a sound decision.

As the interview progresses, be alert for red flags indicating that the candidate’s goals are divergent or conflicting. Also, avoid asking illegal interview questions about race, gender, religion, age, family status, and other similar demographics. It is also unlawful to ask about citizenship or disabilities. The Great Lakes ADA Center reminds us that the purpose of the interview is to meet the applicant and learn more about their education, credentials, and experience, not to discover if the applicant has a disability or how severe it is. As interviewers relax during the interview, it is not uncommon to over-share about themselves or over-inquire about the candidate. Be vigilant to keep the interview’s tone professional and legal from start to finish.

There is no benefit to hastening the interview process, and setting up multiple back-to-back interviews is inadvisable. Instead, take time to reflect on each candidate’s strengths and weaknesses without the distraction of needing to rush to another interview. Also, be sure to allow trusted staff members to provide their impressions of the candidates. However, it is essential to show respect toward all candidates in front of the staff because one or another candidate will eventually be part of the team.

The Offer and Negotiation Phase.

The offer and negotiation phase is the most crucial part of hiring an associate because it formally sets the stage for how the arrangement will work. Once owners identify the right candidate, they should offer employment. Provide the potential hire with the contract and a written summary of the job expectations, terms of employment,  and compensation package. Give the candidate time to think about the offer and consult their counselors. Arrange a suitable meeting time to enter negotiations.

Chelle Law.com (n.d.) emphasizes that a well-negotiated contract can lead to long-term success and job satisfaction. In contrast, a poorly negotiated contract may result in legal disputes and financial strain. Tips for a successful negotiation phase are as follows:

• Negotiate in person to ensure good communication. Body language is a good indicator of how the meeting is proceeding.
• Expect the associate to have questions. It is not a healthy sign for someone to accept the contract without questions or without asking for stipulations.
• Keep a respectful tone during the conversation.
• Be ready to compromise on some terms. Think carefully about any points of challenge to determine if you can adjust the terms on that point.
• Do not rush the negotiation phase to avoid missing important details of the relationship.
• Be prepared to walk away if agreement to terms is not possible.
• Change contract terms with the help of your attorney.
• Expect multiple meetings to conclude negotiations.

Hopefully, the owner’s careful preparation will yield a successful hire and a fulfilling new relationship for both the owner and the associate.

 

 

 

Resources

For more information about appropriate interview questions, see these helpful resources

https://employeedisabilities.wisc.edu/wp-content/uploads/sites/343/2017/09/Job-Interview-Questions.pdf

EEOC: What you can ask

EEOC: Problematic Questions to Avoid

EEOC: What you CAN’T ask

EEOC: Hiring Tips

References

ADA.org (n.d.). Dentist compensation: What every dental associate should know. ada.org/resources/careers/dentist-compensation

Chelle Law (n.d.). Strategies for dental associate contract negotiation. https://www.chellelaw.com/strategies-for-dental-associate-contract-negotiation/

Ebert, J. (n.d.).5 tips to find the right dental associateship for you. 5 Tips to Find the Right Dental Associateship for You | American Dental Association (ada.org)

Prescott, W. P. (2017, June 1). The dental associate contract. https://www.dentaleconomics.com/practice/new-dentists/article/16389554/the-dental-associate-contract

Prescott, W. P., Altieri, M.  P., VanDenHaute, K. A., & Tietz, R. I. (2017). Worker classification issues: Generally and in professional practices. Practical Tax Lawyer, 31(2), 17-28. https://www.wickenslaw.com/media/i2of55jt/worker-classification-issues-generally-and-in-professional-practices-1.pdf

PTS (2022, December 12). Why most dental practice associateships fail. Why Most Dental Practice Associateships Fail – Professional Transition Strategies

Yang, K. L. & Tan, H. E. (2024). Pre-employment screening considerations and the ADA. In Disability & HR: Tips for human resources professionals. Institute on Employment and Disability. Cornell University. https://www.hrtips.org/article_1.cfm?b_id=17

Part 2: The Right Time

Many practitioners are curious about when to hire an associate dentist to help with the workload. In the first segment of this three-part series, we looked at common reasons doctors consider adding associates, such as capacity issues, a desire to increase profitability, and exiting the profession. In this segment, we will investigate how to evaluate specific office metrics to determine if the timing is right for hiring an associate dentist.

Opinions differ about what metrics indicate readiness for adding a new associate dentist. Most experts distill the discussion around the number of active patients, current profitability, and resources. Below, we will briefly examine these elements.

Number of Active Patients

In our first segment, we discussed capacity in two dimensions: operational and doctor capacity. Capacity refers to the ability of patients to be seen within 3 weeks of requesting an appointment. Capacity is related to the number of active patients in the practice, the provider’s availability, and the office’s operational efficiency. Assuming the office’s operations are excellent and the doctor’s availability is at the preferred level of the individual provider, it is advisable to evaluate the number of active patients in the practice.

The number of active patients is the total of individuals seen in the office for treatment within the last 18-24 months. Patients of record who have not visited the office in more than two years are not contributing to capacity problems, so they should not be considered in determining the need for an associate. Experts suggest that a single dentist can only care for 1,000-2,000 patients.

Gonzalez (2017) suggests that in addition to 2,000 active patients, general dentists should expand when the hygienists are booked 4-6 weeks in advance and there are sufficient financial resources to pay the associate’s salary for 6-12 months. Malcmacher (2005) states that doctors should aim to consistently add 10-25 new patients to the practice per month. Kesner (2018) recommends a higher standard of 35-40 new patients each month. New patient additions below that threshold may endanger office profitability if a new associate is on the team. Kesner (2018) reminds doctors seeking to add an associate that they should be experiencing a case acceptance rate of 80%. Dentists with low case acceptance rates may experience lower profitability. Before proceeding with the associateship, work on operations to improve acceptance rates. Also, Kesner (2018) notes that patient referral rates of 40%-50% indicate that the practice attracts and maintains patients.

Additionally, dental offices lose about 10% of their patients annually, so doctors should carefully watch the patient attrition rate over several months to evaluate their office trend before jumping into an associateship (Remi, 2023). Remember, it will take 18-24 months for patient attrition to manifest in the active patient pool. It is crucial to keep in mind that these are only general guidelines. Each practitioner must decide for themselves what indices best represent their practice.

 

Current Profitability

Measuring an office’s profitability is a complex affair. Associates working in offices not ready to transition owners will be an expense to the owner. However, associateships leading to a buy-out can be structured differently. In their Practice Transition Toolkit, Cain Watters & Associates (n.d.) suggest that one consideration of adding an associate in transition strategies is the ability to eventually share fixed costs between parties. Fixed costs are not affected by how many providers there are in the practice. These costs include rent, insurance, professional fees, and subscriptions. In contrast, variable costs (direct costs) are those that are a result of production. Variable costs include clinical supplies, laboratory bills, and staffing costs. For example, the rent doesn’t change if you add an associate, and your monthly subscriptions remain static. However, laboratory and supply bills will increase with an associate in the practice. If the practice grows, the fixed costs become a smaller percentage of the expenses while profits rise. The direct costs are shared proportionally, which leaves the owner dentist with more profit. Let’s look at an example of an associateship without a buy-out option.

Another financial consideration when contemplating adding an associate is for the owner to calculate their current break-even point. The break-even point gauges your ability to add an associate because it lets you know how much profit is needed to maintain your financial obligations and goals. The break-even point is calculated by the following formula:

Break-Even = Monthly Costs/Gross Profit %

Monthly costs are comprised of three elements:

• Fixed costs (rent, debt service, insurance)
• Owner’s Expenses (lifestyle, taxes, profit sharing, saving)
• Variable Costs (supplies, laboratory, salaries)

Gross profit percent is calculated using this formula:

Gross Profit % = 100% – Total Variable Cost %

Using our example above and assuming monthly owner expenses as $25,000, the monthly break-even point would be calculated as follows:

Fixed Costs: $16,333

Owner’s Expenses: $25,000

Variable Costs: $392.000 (total variable costs ) ÷ $980,000 (total collections) = .40 (40%)

Gross Profit Percent: 100%- 40% = .60

Break Even = ($16,333 + $25,000) / .60 = $68,888/month or $826,656/year

Since the practice’s collections are $980,000, the owner may have enough profitability to introduce an associate into the practice because there is sufficient discretionary profit (Cain Watters & Associates, n.d.). Out of control variable costs coupled with poor collections and high fixed costs may be indicators that the timing is not right to add a provider and that the owner should look for problems in the office’s operations or overhead.

The graph below illustrates how the break-even point is the pivot between profit and loss and how variable and fixed costs relate to this financial indicator. Knowing your office’s break-even point helps you keep an eye on profitability.

Are your Resources Sufficient?

A further consideration for owners wishing to add an associate is determining if they have the necessary space, equipment, and staff to add a new dentist successfully. If space is a concern, Kesner (2018) suggests increasing the office’s operating hours from 8 hours each day to 12 per day. Doing this allows each doctor to work a six-hour shift. If both doctors can work simultaneously, ensure there is enough equipment and supplies to treat the extra patients.

Staffing is another concern to address in associateships. Be sure to carefully evaluate which auxiliary personnel and hygienists will be assigned to the new doctor. If your current staff is not sufficient, be sure to include the costs of hiring new staff members in your break-even point calculation.

Summary

Once you determine you need to add an associate, it is important to take time to consider if the timing is appropriate. Consider the office’s patient characteristics, profitability, and available space as factors to help you gauge if the timing is reasonable. Evaluating these factors before the decision is made will help ensure that your associateship will enrich your practice experience.

Resources:

Cain Watters & Associates. (n.d.). Practice transition toolkit. Financial Planning Resources (cainwatters.com)
Gonzalez, S. (12 June 2017). How to know if your dental practice can add an associate | Dentistry IQ.
Kesner, M. (2 May 2018). How to decide when to hire an associate | Dental Economics.
Malcmacher, L. (1 Aug 2005). The new patient myth | Dental Economics.
Remi. (23 Feb 2023). How Profitable are Dental Practices? Break-even & Profits (sharpsheets.io)

Part 1: The Right Reasons

One of the most challenging decisions facing a seasoned practitioner is whether to add a new associate to the practice. Reasons abound for why dentists may entertain the idea. Often, doctors are motivated by thoughts of cutting back, increasing profits, or exiting the practice altogether.

Most dentists are hesitant to leap into adding an associate. In addition to the concerns that accompany upsetting the office’s status quo, there are unsettling questions to ponder, such as whether there is enough work for an extra dentist, how to distribute the workload, the monetary impact on the practice, and whether the patients and staff will bond with the newcomer. Fueled by their colleagues’ gruesome stories of bad associate relationships, it is no wonder doctors are wary of taking on the challenge of entering into an associateship agreement.

In this three-part series, you can explore your readiness for an associate and discover practical tips for setting up your office for a successful growth or transition cycle. In Part 1, you will learn how to evaluate your reasons for hiring an associate. Part 2 will provide practical metrics for ensuring it is the right time to hire, and Part 3 will explore tips for finding the right associate for your office.

 

It All Starts with Why

While there are many reasons practitioners begin to explore adding an associate to the office, these reasons broadly fall into three categories: capacity, growth, and succession.

 

Capacity

Capacity is the office’s ability to deliver timely and appropriate care to its current and potential patients. If patients cannot schedule within two or three weeks, the office has capacity issues that should motivate the practice owners to find out why. The inability to schedule patients promptly may be a symptom of poor operations. Alternatively, it may signal a need to add a provider. Diagnosing the real problem with the business is critical to enacting a satisfactory solution. Otherwise, dentists may try to solve capacity issues by adding an associate and later discover the real problem is poor policies and procedures.

When evaluating the cause of the capacity problem, practitioners should always begin by scrutinizing their office’s operations.

 

Operational Capacity. Diagnosing problems with operations begins with reviewing the office’s pace and procedures. Pace refers to the rate at which the staff performs daily tasks, such as operatory turn-around times, instrument processing times, checkout times, and scheduling efficiency. Poor systems, lack of automation, untrained or unprepared staff, weak oversight, deficient accountability, and other operations issues lead to unnecessarily long appointment times. As appointment after appointment runs behind due to inefficient processes or unprepared staff members, the wasted time begins to impact scheduling.

Before pursuing the addition of an associate dentist, ensure that these types of issues are not causative. If you uncover inefficiencies, take the time and effort to inform and train staff, establish accountability guidelines, and offer actionable feedback to staff members. Automating office procedures, such as insurance processing and billing tasks, is a reliable cure for procedural inefficiency. The correction for chairside inefficiency comes through increased training and oversight. After resolving the operational issues, owners should re-evaluate the office’s scheduling capacity. If the problem still exists, owners should determine if the problem is provider-related.

 

Provider Capacity. Provider capacity is the work each provider can perform during the work week. Since office inefficiencies are now corrected, owners are more confident that the scheduling issues are due to provider capacity. It is imperative to note that practitioners can create capacity issues because of their unique personal characteristics. All dentists operate differently regarding skill sets, work/life balance guidelines, and how many hours they can comfortably work each week. Consider your business from the perspective of your skills, work/life balance, and work constraints that characterize your practice, and determine if these elements contribute to the problem.

Skill Set. Some doctors enter their careers with additional residency training or continuing education experiences that add valuable skills to their practice. Doctors who enjoy performing advanced or complicated procedures may limit their availability to complete routine procedures, creating an office capacity problem. For example, suppose you operate a thriving implant practice or are heavily involved in sleep appliance therapy with a physician group. Treating these  patients may use so much time that you cannot schedule more routine restorative procedures on other patients. Be aware that ignoring one group of patients’ needs for another is a misstep for any practice. Patients who have entrusted you with their oral healthcare deserve your best efforts to provide prompt treatment. If exercising your favorite skills is hampering scheduling, consider hiring an associate to provide routine care so you can focus on your niche.

Work/Life Balance. All dentists are unique in their quest for work/life balance. Sometimes, the dentist cannot practice full-time due to caregiver responsibilities for children or aging relatives, volunteerism, or other essential or non-negotiable commitments. Each doctor must balance the responsibilities of being an oral health care provider with their personal or life goals. Consider the patient population’s needs and assess how to maintain the optimal work/life balance without diminishing patient oversight. If you cannot see patients promptly, consider an associate to help you support your desired work/life balance and your patient’s best oral care.

Work Constraints. Some doctors may need to limit time at the office due to health concerns that make it difficult to stand or sit for prolonged periods. Others may suffer from ailments that require frequent breaks for nourishment, appointments, or self-care. These necessary constraints may negatively impact capacity. Suppose your work constraints make it impossible to carry a sufficient schedule alone. In that case, it may be time to add an associate.

 

Growth

 Some dentists have excess finished or unfinished operatory space or building space. Maximizing the office’s productivity by utilizing the unused space seems logical. Other dentists may have dreams of opening satellite offices to serve patients in nearby communities. In either case, the office needs extra hands to realize these growth opportunities.

Careful business planning, including demographic studies and financial projections, is essential if owners decide to grow. The growth process will strain the current business due to the demands of planning and executing the plan. Prepare staff members for additional time constraints and scheduling difficulties. Dentists interested in these options must carefully weigh challenges, costs, benefits, and timing of growth. In Part 2 of this series, we will explore these elements in more detail.

 

Succession

 A common reason for pursuing an associate relationship is due to an owner’s succession plan to transfer the practice. Some doctors seek associate relationships to identify and train a quality, like-minded dentist to assume business control in a specified timeframe. In this way, owners perceive they can slowly pass the reins of practice ownership to the associate. This arrangement helps the associate acclimate to the demands of the practice. It provides the staff and patients with access to the new owner during a timed transition. If this is the seller’s intent, it is wise to establish an open relationship from the outset. Avoid using an associateship as a “try before you buy” arrangement. Owners should ask the candidates about their expectations for the associateship and be ready to share their own. If both parties want to transfer the business, independently seek legal counsel to delineate equitable terms. Nothing could be more discouraging than to have unequal expectations from the association. Honest communication is foundational to trust building, and trust is essential to successful dentist-associate relationships. In Part 3 of the series, we will explore how to attract associates interested in purchasing the practice and suggest guidelines for a successful business transfer.

 

Key Takeaways

When considering adding an associate to your practice, consider the following:

• Begin examining associateship options by evaluating why you need an associate.
• Evaluate operational efficiency before assuming adding an associate will solve capacity issues.
• Assess if an associate is necessary due to provider capacity issues.
• Weigh challenges, costs, benefits, and timing when pursuing growth opportunities.
• Develop succession plans encompassing the seller’s desire to transfer ownership to the associate.

Adding an associate to your practice may seem daunting. Understanding your motivations for pursuing the relationship will enable you to proceed confidently through the process.