Orthodontic contract transfer: An ongoing point of discussion
The issue of orthodontic contracts is a topical one at present, with much discussion around the uncertainty regarding partially completed treatment and the sale of a practice. The issue of incomplete treatment arises not just with General Dental Service (GDS) contract sales, but also with Personal Dental Service (PDS) orthodontic contracts.
The difficulty in transferring contracts between buyer and seller, and the issues around dealing with payment are well documented. It is proving to be an ongoing point of discussion, both with my clients, as well as among my fellow members of the Association of Specialist Providers to Dentists and the National Association of Specialist Dental Accountants and Lawyers.
In GDS work, partially completed treatment is paid for pro rata, but in PDS orthodontic work, it is paid to start but not to finish it, raising potential problems around claw-back. When a contract is terminated owing to a sale, the entire caseload is passed to the buyer and next provider, who then picks up the ongoing matter and its associated income. From the seller’s point of view, there is no longer any obligation to finish the cases, so no matter the patients’ stage of treatment (somewhere between appliance fit and debond) all of the cases are transferred and the seller walks away.
For the buyer, he or she needs to take into consideration the caseload he or she will take on as a result of the purchase, while bearing in mind that no units of orthodontic activity can be claimed for finishing the cases. Undoubtedly, this can prove a problematic issue, but is a case in point of why it is essential for both a buyer and a seller to instruct a specialist adviser to act on his or her behalf.
By structuring payment clearly and laying out the terms very clearly in the sale agreement, hopefully the situation will be agreeable to both sides of the sale or purchase.
0191 226 7838