The Dentist's Network #74

Michael Moore, Esq.
Director McKenzie
HR Solutions
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The Nine Risk Factors in Terminations

Today I had a call from a doctor who asked the question: “I need to fire someone – what risks do I have?” In this case, the employee who needed to be let go was a hygienist hired two months ago. She is in her thirties, presented well in the interview, had a good record, and was clearly qualified with a number of years’ experience. Unfortunately, after being hired, she exhibited behaviors that very soon got under the skin of the doctor.

The incident that set the stage for her departure involved a patient who called in for a teeth cleaning. The patient hadn’t been seen for a couple years. The front desk scheduled the patient for a cleaning appointment on a day the doctor was out. When the patient showed up, the hygienist refused to treat him. The patient was sent home without service, obviously not to return. The doctor lost the patient, a couple hundred dollars immediately, and more down the road. He also is at risk for the former patient expressing his dissatisfaction to others.

When the doctor confronted the employee about the refusal, she began to talk about state dental board rules of practice. The doctor had to explain that she was misinterpreting the rule that she was citing, but she remained unconvinced despite him copying the rule and showing her the exact language.

This employee is one of those “dental office lawyers” – ones who are always willing and very able to quote laws and regulations to the doctor or other staff. These folks view the world in a black and white manner, and tend to be rigid and very resistant to change or education. They also most often get the law or rules wrong. Given their righteous world view, they can also be trouble if they believe they have been given a raw deal.

Now, this situation is a poster-child for a discussion on how proper hiring practices can help you eliminate such people from consideration before they ever get in the door. But that is a subject for another day. Suffice it to say here that the doctor spent thousands of dollars in direct and indirect costs in hiring the employee. He does need to terminate her, but he will now face double the costs in finding a replacement after only two months.

He was intent on terminating her. The immediate issue was what risk factors did he face which might impact the decision? The risk factors we’re talking about here are those which relate to a potential for a lawsuit or an administrative charge of discrimination that the doctor might have to defend - at a cost of many more thousands of dollars.

The rule of thumb is that an employer – depending on the state – will incur a minimum of $10,000 in legal fees and costs in dealing with an administrative charge of discrimination. If suit is filed, the charges, even if successfully defended, can exceed $50,000.

The factors relate to the practice and to the individual. Here they are:

Does the practice have a written employment practices policy that includes provisions for counseling and discipline?
Did the doctor document the issues with the employee? Did he/she follow the policy?
Is the doctor a man?
Is the employee a woman?
Is the employee pregnant?
Is the employee over 40 years of age?
Is the doctor aware of any medical issues the employee might have?
How long has the employee been employed?
Has the employee complained about the doctor?

For dental offices, these nine factors are the key issues a doctor must consider when weighing a termination decision. Let’s address them individually.

The first two are policy issues. The risk factor in a termination is higher if there is no policy or procedure in place – and particularly higher if there is one and the doctor has not used it. On the other hand, if there is a policy, and the doctor has used it, this is a major positive – and probably trumps all the other risk factors combined.

The third and fourth risk factors, and the ninth, relate to possible sexual harassment issues. If the answer to the ninth factor is a “yes,” the risk is greater that some complaint will follow.

The fifth factor, pregnancy, is a troubling one. Terminating a pregnant employee can substantially increase risk.

The seventh factor – knowledge of medical issues – can give rise to a claim of discrimination on the basis of disability or perceived disability. Knowledge that the employee has a long-term chronic medical condition can increase the risk of a claim.

The eighth factor, longevity of employment, is a key one. The longer the employee is employed – for example a positive answer to the sixth factor [over 40 years of age] – tends to raise the risk. The shorter the employee is there, the less the risk. The law has a term for this: “the same actor inference.” In most jurisdictions, where the person hiring and firing are the same, and the termination occurs relatively soon after the hiring decision, the courts assume that unlawful motives are not at work. This follows the common-sense proposition that an employer is not going to go through the process to hire someone that he will turn around and fire for discriminatory reasons.

Turning to the situation my doctor presented to me, he had only two positive risk factors – he did not have a policy in place and he certainly had not used it to document the issues. However, the remaining seven factors all favored him, and so I advised him to go forward with the termination. His risk is extremely low for a legal claim.

I did advise him, however, to grant her an additional week’s pay – she was terminated in the middle of his two week pay cycle. It always helps to ease the employee out to grant a small amount of compensation. It’s no guarantee that you will not receive some sort of claim – but a good faith gesture can influence a lawyer looking at the matter even if it doesn’t do so with your former employee.

Mike Moore is ranked among the best in employment law and has been named one of the top 10 lawyers in Ohio. As Director of McKenzie's HR Solutions, Mike is the creator of the Employment Policy and Handbook, geared to providing dentists who are unsophisticated in the legal arena with a step-by-step policy manual.

Click here to hear Mike present “7 Elements of an Effective Employment Policy.” Email Mike at mike@thedentistsnetwork.net.

Interested in having Mike speak to your dental society or study club? Click here.

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Sally McKenzie, CEO
McKenzie Management
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The Patients' Perception is Your Reality

It’s often said that perception is reality, and certainly the patient’s perception has a direct impact on the realities of your practice. The patient’s observations significantly influence their openness to recommended care. Their insights shape their opinions of you and your dental team. The patient’s feelings affect whether they will schedule treatment today, or put it off indefinitely. And understanding your patients’ perceptions is the first step in shaping them.

I’d like you take a short walk in your patient’s shoes. Enter through the front door of your practice and look around your reception area. If you were the patient, what would you think? What image does your practice convey within the first 30 seconds? Is it a cluttered mishmash of magazines and materials? Maybe you have a copy of Golf Digest from 2006 and a few issues of National Geographic that are scattered about. Does the overall feeling of the reception area convey that you are glad the patient is there, and although the wait won’t be long, you want them to sit back and relax in a comfortable pleasing space? Or is this an area that feels more like you’re stopping by the Quick-n-Cheap oil and lube joint for the $20 filter change.

Next consider how the patient is greeted. Would you be welcomed by name if you were a patient walking into your practice? What is the trek back to the treatment room like? Is it a dark and dreary channel linking one room to the next? Is it cluttered and crowded? Can two people pass each other or does one have to step out of the way because there’s not enough room. When you sit in the dental chair and look around the room, what does the physical appearance and technology of your practice say about you and your team? Will patients perceive that your practice is state-of-the-art, or a sorry state of affairs? Sit in the chair and look at the ceiling. Is it dirty and dingy? What about the dental exam light? Is it splattered with water spots that have ricocheted off past patients? This little stroll in your patients’ shoes should give you more than a few insights into what your practice’s physical surroundings say about you.

Without a doubt, today’s patients walk in with high expectations. Many consider themselves “quality experts.” They may not know dentistry, but they know quality and they fully expect a “quality experience” from you and your team. If this is a new patient, you simply must WOW them well before you personally even greet them.

Yes, their expectations are high, but so too is their appreciation of what dentistry has to offer. And just because discretionary income is down, that doesn’t mean you dial back the patient experience or the patient education. Patients remain very interested in what dentistry can do for them. Even if they aren’t spending as much right now, they are still exploring dental topics on the Internet. And they are more aware of new technologies, methods, and products than ever before.

Take these steps to ensure the patient’s perceptions of you and your team translate into improved realities for your bottom-line both now and in the coming months.

Spread the word. Perhaps you and your staff have recently participated in continuing education programs that will benefit your patients. Tell them!
Inform patients about new services you’ve integrated into the practice since their last appointment that are designed to improve delivery of care.
Explain exciting new technologies, such as digital radiographs, digital impressions, etc. Take a moment to tell patients how your investment will directly benefit them and why you chose to use the more advanced technologies.
Educate patients when they are not in the dental chair. Provide professionally written and designed materials that inform them about new services and procedures.
Take time to educate yourself as well. Learn about your patient’s dental interests, their oral health goals. Ask if they have questions about new technologies and procedures. The interest you show in them personally will significantly influence their perceived value in your dental care.

And those perceptions will translate into excellent realities for your practice, both today and well into the future.

Sally McKenzie is CEO of McKenzie Management, a nationwide dental management, practice development and educational consulting firm. Working on-site with dentists since 1980, McKenzie Management provides knowledge, guidance and personalized solutions that have propelled thousands of general and specialty practices to realize their potential.

Interested in speaking to Sally about your practice concerns? Email her at sally@thedentistsnetwork.net or call 1.877.777.6151.

Interested in having Sally speak to your dental society or study club? Click here.

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Thomas L. Snyder, DMD, MBA
Managing Partner
The Snyder Group, LLC
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The Top 5 Things to Include in Your Partnership Agreement

Many dentists today are deferring their transition plans. Most doctors have lost a considerable amount of their retirement funds and are forced to continue practicing longer than planned. In cases where there is an adequate patient base, an increasing number of practitioners are forming partnerships, allowing them to continue to practice for several more years, and then finally retiring at a later date. For those considering a partnership, here are some key points that must be included in your Partnership Agreement.

Income Splitting
Income splitting problems have led to partnership breakups. It’s important that partners be compensated on the combination of personal clinical production and their respective ownership interest. As the senior partner begins to decrease his/her production in the later years, this approach will prevent the junior partner from feeling taken advantage of. This often occurs in cases where partnership income is shared equally. As we stated in prior columns, we recommend an income sharing formula whereby each partner is paid a percentage of personal clinical production, minus lab, with the balance of available partner income being shared based on their ownership percentage.

Spending Authority Limits
We’ve seen some partners attend trade shows and incur large amounts of debt, particularly buying something on impulse. This can be prevented by including clauses in your partnership agreement that restricts the amount of money either partner or partners can spend without another person’s approval. We typically recommend this amount to be between $5,000 and $7,500. Also include in your partnership agreement that no partner can obligate the partnership or corporation to any leases or other substantial debt without the unanimous approval of all parties.

Inefficient Tax Designed Partnership Buy In
Often we see junior partners purchasing a partnership interest with the senior partner being adversely affected on the income tax side. This typically occurs with internally financed transactions, whereby the selling partner receives a management fee that has to be reported at ordinary income rates. The junior partner, however, gets the benefit of a pre-tax buy-in. In this manner, the seller loses, considerably, had he/she sold his/her interest as a capital gain versus an ordinary income tax classification. To offset this imbalance, we recommend calculating the differential between the capital gains rate and the ordinary income tax rate of the senior partner, and that differential will be added to the monthly payment of the senior partner to offset this imbalance. The junior partner still gets the benefit of a pre-tax payment, which is usually more advantageous than overpaying for the partnership interest in after tax dollars.

Mandatory Buy Out
Too often, we’ve been called in to negotiate situations where the senior partner has difficulty in selling his remaining interest to the junior partner. We believe that this is a two part transition process: a buy-in and a buy-out. Clearly defined expectations of the junior partner’s intent to purchase the senior partner’s remaining interest at a specified date are necessary. Of course, a buy-out formula should be part of the Partnership Agreement. In the event that the junior partner does not agree to a buy-out, we suggest that the junior partner be assessed a severe penalty in the form of liquidated damages if he/she fails to buy-out the remaining senior partner’s interest.

Partnership Valuation
Often senior partners expect too much for their practice at the end of their career, particularly if they have not been contributing significantly to the practice in their later years. We therefore recommend that a formula be included in the partnership agreement that will penalize the senior partner if his/her production decreases over the last several years of the partnership. Doing so will at least allow the junior partner to pay a fair price for the efforts of the senior partner. This discount is applied only to the intangible asset portion of the senior partner’s practice value. The tangible assets should not be discounted, as they are an asset of either the corporation or the partnership, and have no bearing on the performance of the senior partner. Of course, the accounts receivable that are credited to the senior partner are also part of the remaining value and would be collected on the retiring partner’s behalf after retirement.

Properly designed Partnership/Shareholder Agreements must be crafted in order to avoid unnecessary problems and legal costs to avoid failed partnerships. An “ounce of prevention” is worth a “pound of cure,” and spending the time and money at the beginning of your relationship to have properly designed agreements will go a long way in solving any future problems.

Dr. Thomas L. Snyder is Managing Partner of The Snyder Group, LLC, a nationwide practice transition and financial management consulting firm. With more than 75 years of experience in the field, The Snyder Group can provide you a full range of services relating to practice transition matters and retirement planning. They can be reached directly at 1.800.988.5674.

If you would like additional help, email Dr. Snyder at drsnyder@thedentistsnetwork.net.

Interested in having Dr. Snyder speak to your dental society or study club? Click here.

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