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Issues with Cost-Share Arrangements between Dentists

By July 13, 2021January 19th, 2023Corporate, Practice Management

Running a dental practice on your own comes with a lot of stress. Managing your space, your staff, your equipment, and providing excellent service to your patients, all while keeping an eye on the bottom line, is a lot to juggle. Maybe you’ve considered reducing some of this load by sharing space with another dentist. This should cut some of your costs, which would surely take many worries off your plate, right? Or maybe you’re in a position where you’ve been unable to renew your office lease and need to find a new location from which to practice. Moving into an existing practice with room to spare might sound appealing. If you have, what you’ve been considering is a cost-sharing or cost-share arrangement.

The ideal outcome of a cost-share arrangement is that you are able to reduce costs by sharing them with another dentist while maintaining sole control over your practice and its growth. Although this outcome is what everyone hopes for, some things can go wrong, and issues may arise when independent practices operate together. Therefore, you need to take care to set out expectations ahead of time to mitigate future problems. In this article, I’ll explain some of the common issues encountered with cost-sharing.

Cost-Share Arrangements: The Basics

Two (or more) dentists operating out of one location could function in several different arrangements, including:

  1. A practice owner engaging an associate dentist
  2. Partner dentists operating a single dental practice
  3. Independent practices operating in a cost-sharing arrangement

In the third scenario of a cost-sharing arrangement, the dental practices remain separate entities. They are not merging into one business, nor are they entering a business partnership. Each dentist retains their particular patients and deals with their finances separately from the other practice. However, overhead expenses, like those related to a lease, equipment maintenance, or staffing, can be split between the dentists. The main benefit of such an arrangement is the ability to share costs, thus reducing each dentists’ overall expenses without reducing production. Other benefits include:

  • making the most of space that is not currently being used
  • having a dentist with different specialties within the same office to refer your patients to, and vice versa
  • retaining complete control over the decision making for your own practice

But with these benefits come some additional issues that a practice operating on its own would not face. Let’s review some of the most common areas you need to be aware of before entering into a new cost-sharing arrangement.

Potential Cost-Share Issue: Team Members

A dental practice’s employees are one of its greatest resources. But, if not managed properly, the employees may also become the most significant source of potential problems and additional costs. Specific issues can arise specifically in the case of cost-sharing dentists:

  1. Integrating existing team members
  2. Hiring new staff members
  3. Engaging associate dentists
  4. Shared vs. Separate Employees

Let’s take a closer look at some of the drawbacks in each of these areas.

1. Integrating Existing Team Members

As an independent dental practice owner, you have likely put a lot of time and care into selecting and hiring your employees. You want to ensure they will work well with you and any other existing team members so that the whole practice operates harmoniously. Integrating the employees from two previously independently operating practices doesn’t allow each owner the opportunity to make sure all personalities will work well together.

Another complication can arise from the fact that one set of staff members will continue to work at their existing location while the other members must move into an office that is new for them. Employees that didn’t have to relocate will have a higher level of comfort with the location, the equipment, and the logistics of that office (e.g. its practice management software, maintenance routines, or supply orders).

2. Hiring New Staff Members

As mentioned, cost-sharing dentists may want to hire staff that will be shared among the practices. These ‘shared’ employee(s) are employed by each dental practice, and the independent business owners share their wages. Who then takes charge of the hiring process? Without a written agreement in place to manage the cost-sharing arrangement, a dentist may end up paying part of the wages for an employee they would not have chosen and do not wish to employ.

3. Engaging associate dentists

As the individual situations and practices grow, one of the cost-sharing dentists may consider hiring a new associate dentist. Since the businesses are independent, each dentist would be free to hire whomever they choose. But what happens if the new associate clashes with the other dentist, team members or is otherwise problematic in the office? Each cost-sharer may want to ensure they have some input into associate hiring decisions. And you can only accomplish that through an accurately drafted cost-sharing agreement.

4. Shared vs. Separate Employees

When operating out of one location, cost-sharers may choose to retain employees separately for each of their independent businesses. These ‘separate’ employees would be solely employed by one of the practices – their wages paid entirely by one dentist and providing services to that employer only. The cost-sharers may also decide to hire ‘shared’ employees who would work for the location as one unit while their wages are split between the owners.

Even though some of the employees may be classified by the cost-sharers and treated as employees of only one practice, there is a risk that the law may not see it the same way. Instead, BOTH of the independent owners could be considered an employer, even if one does not have any written agreement with that employee and the employee was understood not to be a ‘shared’ employee. This outcome means that one of the independent owners could wind up liable for any costs associated with that employee if they are terminated or injured on the job.

Potential Cost-Share Issue: Patients

Operating out of one location in a cost-share arrangement means that each dental practice retains its own patients. But what about new patients who contact the location? If someone who is not currently a patient of either practice requests an appointment, which dentist (or their staff) will see the patient? If the two practices have their own receptionists, this could come down to whomever the potential patient speaks to first. Over time, one of the dentists may end up with an unfair proportion of the new patients just due to chance. A written cost-sharing agreement can cover the logistics of how new patients are to be handled.

Bottom Line: Set Up a Formal Cost-Share Agreement

A cost-sharing arrangement can be an excellent way for dentists with independent practices to reduce their costs and increase efficiency. However, it can also cause confusion, questions, and even frustration if not entered correctly. Without attention to the key details and written documentation prepared ahead of time, there are often unanticipated issues and costs. And understanding the ins and outs of cost-share agreements can be tricky. That’s why we are here to help. We can guide you through the options, paperwork, requirements and risks to put you in the best position to succeed.

Our team is dedicated to ensuring you and your practice are protected and your interests are promoted throughout the process. Send DMC an email or give me a call directly at 416-443-9280 extension 208.

The Content of this post is provided for informational purposes only. It is not intended to be legal, financial, tax, or other professional advice of any kind. You are advised to contact DMC (or other counsel) to seek specific legal advice concerning your individual situation.