How to keep dental practice disputes under control

April 27, 2012

No one wants to be involved in a dispute that disrupts the normal flow of business to the dental practice. Disputes harm dentists financially and emotionally and cause turmoil within the practice among employees, owners and patients.

No one wants to be involved in a dispute that disrupts the normal flow of business to the dental practice. Disputes harm dentists financially and emotionally and cause turmoil within the practice among employees, owners and patients. These problems can occur regarding partnership issues, content in employment agreements, divorce proceedings, employee job descriptions and other areas that interrupt daily activities.

As issues foment, a dentist will attempt resolution with rational approaches to the problems. What are some items of dispute? What happens if a dispute cannot be resolved? Where does the dentist go for assistance when efforts for solution fail? Keep reading to find the answers.

Specific issues regarding dental practices

What are some problems that affect dental practices and their owners? Among owners, a common dispute is the determination of the responsibility of each principal regarding the dental practice operations. Which doctor is responsible for personnel matters? Who is in charge of the administrative areas of the practice such as banking relationships? Are accounting reports available for the CPA to review prior to scheduled conferences? When a dispute arises, where does the dentist look for resolution? Is the shareholder or operating agreement up to date? If there are employment agreements, are they current with terms and conditions, especially covenants from associates that are critical to the security of the dental practice?

The answers to most issues involving ownership responsibility should be found in these agreements. The employment agreement contains content to settle disputes involving responsibilities of work related concepts such as vacations, sick days and hourly or daily schedules and reimbursement for business expenses. Of course, this presumes that executed agreements exist. Dentists sometimes feel that the effort and cost for document preparation are so much that these agreements are not implemented. Those unaccustomed to litigation have no idea how expensive it is to conclude these issues through the legal system compared to their preparation while the parties are cooperating.

Let’s compare the process of designing the documents with acceptable language to having no documents because of lack of agreement.

Who assists the dentist with advice for language to be included in the documents

The dentists should find the most experienced consultant available to assist with the content to be included in the documents that will secure the “going concern” value of the dental practice. Since there are many points to consider, a good starting place for advice is a CPA with experience in working with dentists. The reason for choosing a CPA is that this type of professional will have financial knowledge, tax expertise and a good over all understanding of the operations of a dental practice. The CPA can work with all of the owners without conflict and present unbiased opinions of the effect of a particular issue within the practice. An attorney is ethically barred from advising more than one party to a transaction. For those interested in the cost of the engagement, it will be less expensive to engage a CPA with dental expertise than the number of attorneys who have to be involved if there is more than one principal. Also, it is rare to find an attorney with a lot of experience specializing in dental issues. An attorney should review the final contract template but probably not be the consultant to advise the practice about business issues that the experienced CPA will be able to settle because the attorney will probably not have the hands on dental experience of a CPA.

Once the agreements are prepared and kept current, almost all disputes can be settled without the need for litigation by referencing the question within these contracts. While finding the CPA for assistance in this task, it is important to conduct interviews with him or her and to review their resumes. Their knowledge about dental issues will be discovered by reviewing some of their publications and reading of their work experience. References are also a good idea.

What occurs when executed agreements are not in existence?

In the event that agreements are not available and a dispute occurs, here is an example of the time and money involved to bring issues to a conclusion if action results in litigation.

An attorney has to be hired. A business advisor, usually an independent CPA, must be hired to present credible evidence to form an opinion of fairness regarding the issue. An attorney will be hired for the other party or parties as well. A CPA or other expert will also be hired to represent the other dentist(s). All of this takes time and is very expensive. The amount of money involved can be tens of thousands of dollars.

A process called discovery takes place whereby the dentists must find documents for support of their positions. There are questions known as interrogatories that must be answered by the litigants that are sworn statements to be used in court. A dentist inexperienced in the legal process will be surprised to find out that this can take months or years to complete leading to the trial. The financial price is enormous and the emotional price is exacting in terms of frustration and fatigue. While this process is occurring, the dental practice suffers substantially and its “going concern” value decreases. The dentist must take time away from his or her patients and staff in order to feed the litigation process by answering the interrogatories and supplying the documents required in the discovery process and by preparing for court. These sessions take days and while this time is spent in preparation, it is not used in enhancing the value of the practice.

What is the best advice to end the process?

Unless the parties involved in the dispute are so far apart in their negotiations for settlement that no compromise can be reached, the best advice is to forgo the emotional turmoil and the financial cost and conclude the case by agreeing to some compromise that allows the dentists to go back to work.

Any difference in money that is reasonable will be recovered with the peace of mind and increase in “going concern” value that will incur to the dental practice once the resolution to the dispute has been reached and the dentists are practicing their profession again and not preparing for trial and paying attorneys.

Bruce Bryen is a certified public accountant with over 40 years of experience. Mr. Bryen is the Managing Partner of the accounting firm, Bryen & Bryen LLP, based in southern New Jersey. Mr. Bryen specializes in deferred compensation, such as retirement planning design; income and estate tax planning; determination of the proper organizational business structure; asset protection and structuring loan packages for presentation to financial institutions.

He also served as Chairman of the Board of a regional bank. Mr. Bryen is experienced in providing litigation support services to dentists with expert witness testimony in matrimonial disputes cases. He is also a financial writer for several dental magazines and a regular contributor to Dental Product Report. You may contact him at 856?985?8550, ext. 112, or visit his website at www.Bryen?BryenLLP.com.