MILITARY

One option for employment is to become a dentist in the Armed Forces. The US Army, Navy, and Air Force all recruit dentists to serve as commissioned officers in their Dental Corps. Both active duty and reserve components recruit dentists with a US dental degree and a license to practice dentistry. Students may also be eligible for special programs covering tuition and providing a monthly wage while in dental school. Graduates will serve in the military as dentists for a set time, depending on the program.

Dental Corps members are responsible for the dental health of military personnel and their family members. Many dentists are stationed stateside in the medical clinics of military bases, and others are assigned tours of duty at US military bases worldwide. Responsibilities may include the emergency medical treatment of service members in deployed places near combat or participating in humanitarian missions in the United States and overseas.

As a military member, a dentist will be eligible for all the benefits and privileges that any other service member enjoys (Box 2.1). Military dentists work at modern dental facilities, use modern technology, spend quality time with patients, and maintain a flexible schedule. Additional bonuses and retention incentives are available to dentists.

The Health Professions Scholarship Program (HPSP) is a program that a dental student can apply for that will pay for three years at an American Dental Association–accredited program (DMD/DDS). This scholarship covers tuition, books, equipment, supplies, and a monthly stipend (income). Since the military pays for schooling, it requires a minimum four‐year commitment to military service upon graduation.

The military reserve Dental Corps employs dentists in the armed services. Some reservists are former active‐duty service members, and others have only served in the reserve Corps. There are several scholarship and loan forgiveness programs for Corps participants. Reservists can maintain active employment in the civilian world, using the reserves as part‐time employment. The reserve dentist should remember that they can be called to active duty at any time and with very short notice. This might be a problem, especially for a dentist who owns a solo private practice.

PUBLIC HEALTH

The uniformed dental officers of the United States Public Health Service Commissioned Corps serve in the Indian Health Service, the United States Coast Guard, the Federal Bureau of Prisons, and the National Health Service Corps. The Commissioned Corps is governed by the Surgeon General and falls under the Department of Health and Human Services rather than the Department of Defense. Even though the Commissioned Corps is not an armed service, officers may be called to assist in public health response to man‐made and natural disasters. Officers enjoy the same benefits as their military counterparts.

The Health Resources and Service Administration (HRSA) operates Federally Qualified Health Centers in many areas of the United States. These are community‐based healthcare providers that offer primary care services in underserved areas, both urban and rural. Examples of Federally Qualified Health Centers include Community Health Centers, Migrant Health Centers, Health Care for the Homeless, and Health Centers for Residents of Public Housing. There are strict guidelines they must follow to qualify as a health center. Many include dentistry in their services and have loan repayment and scholarship programs for participants through the National Health Service Corps (NHSC).

Some state and local governments provide dental services for their citizens. They often target these programs at specific high‐need groups, such as homeless populations or underserved geographic areas. There is tremendous variation in the expectations and compensation in these programs. Some of these employment opportunities for dentists are full‐time, while others rely on part‐time area practitioners. Some offer full benefit packages; others use independent contact dentists. Many new practitioners use these opportunities to supplement their income as they build a practice.

OWNERSHIP

A true associateship arrangement involves a senior owner–dentist and an employee dentist. This can take one of two forms.

COSTS

Most associateship arrangements result in increased costs for the owner. The owner must hire additional clinical assisting staff for the employee practitioner. The number of front office staff often needs to expand significantly if they offset hours so that the junior dentist is in the office for hours when the owner is not. Office space may even need to increase. The new dentist is usually not as productive as the owner–dentist, leading to decreased relative revenues. Often the owner–dentist spends time with the new dentist that they formerly spent seeing patients, decreasing income further. For all these reasons, associateships typically lead to decreased income for the owner–dentist for the first year. By the second year, however, the younger dentist’s production should increase and cash flow should improve enough that the owner–dentist can see some profit from the arrangement.

The practice typically pays costs for the associate with a couple of exceptions. (This varies by geographic area.) Before applying the percentage, the owner generally deducts the lab bill and extraordinary costs (such as implant parts) from the production (or collection) amount. This results in sharing these costs on a percentage equal to the percentage income split. (Box 2.3 gives an example of lab bill allocation.) Direct professional costs (such as malpractice insurance and continuing education expenses) are paid by either owner or associate, and the owner usually pays other costs (supplies, staff, etc.).

ADVANTAGES

There are many advantages to associateships for both the owner and junior dentist. The associateship can act as a trial period before a partnership or buy‐in. This gives both sides a chance to decide if they are compatible enough to establish a long‐term professional relationship. The junior dentist invests a minimum amount of money. These people often have high educational debt loads and probably cannot borrow enough money for a practice purchase or start‐up. If they require expansion, the owner–dentist has the financial resources to afford it. There should be few ego conflicts since there is a delineated hierarchy. Associateships should be excellent learning opportunities. The senior dentist can learn new techniques and materials from the new graduate. The associate learns practice management, patient interaction skills, and clinical efficiency in practice. Due to economies of scale, the now larger practice may afford equipment and personnel that would not be profitable or feasible in a smaller practice. If the associateship leads to buy‐in or buy‐out, the owner sells, and the associate buys the practice at the peak of its income‐generating potential.

DISADVANTAGES

Associateships have no incidents of ownership for the associate. It is a job, pure and simple, not a co‐ownership arrangement. Associates often believe they have “helped build the practice,” increasing its value through their efforts. They believe the owner should give them some consideration in compensation or a buy‐in valuation. On the other side, owners contend that they have paid a good wage for the associate’s work. The associate has no more claim on the increased value of the practice than does a hygienist or assistant. This conundrum has led to more than one associate buy‐in offer failing to complete. The answer lies in communication and openness from the beginning.

Associateships face many of the same difficulties as other group practices. With more than one dentist in the office, staff can become disoriented, unsure who to go to for what problem. There are more management problems for the owner because the practice is now larger. These occur in accounting, staffing, and scheduling issues. Often owners see a drop in income for the first year of an associateship. This is due to increased expenses, the extra time required to help the associate (fewer patients seen), and a possible decrease in the patient pool as they share the patient pool with the associate.

Most associateships (80–90%) end without forming a partnership. When they end, many associates find that a restrictive covenant they signed as part of the employment agreement excludes them from a particular area. An associate should be sure that if they cannot live by the restrictive covenant, they do not sign it. (This may mean that they do not begin the associateship.) This problem is especially acute in associateships that have lasted for several years. When there is no real buy‐in, the restrictive covenant forces the associate to uproot from the area, though they have established ties in the community and want to stay.

OWNERSHIP

A common form of ownership is a DGP in which the parent organization owns the individual practices directly. Here, the dentist is an employee of the parent corporation. The parent corporation (DGP) compensates the individual dentist for the dentistry that they do. Supply and demand determine the pay scale. The DGP pays what it must pay to get enough skilled dental providers. Often the parent will provide significant employee benefits as part of the total compensation package. Some DGPs allow more senior dentists to buy an ownership interest in the parent through employee stock ownership programs (ESOPs) or other forms of ownership involvement. They often offer these through a retirement plan or bonus options. Some DGPs have a co‐ownership arrangement with the individual practitioner. The parent organization may own a controlling portion (say 51%) of the practice and the practitioner may own the remainder. When the practitioner leaves or retires, there is a ready buyer for the practice.

A DMSO is an arrangement common in states requiring dentists to own dental practices. Here, the parent company owns most of the tangible assets of the practice (e.g. dental equipment and the building). Depending on state law, the dentist continues to own the intangible assets. The DMSO then has a contract (business service agreement, BSA) with the dentist or professional corporation to provide management and other services for the dental practice. These services often include purchasing or leasing office space and equipment, scheduling, billing patients, filing insurance claims, hiring employees, marketing the practice, and managing bank accounts for the practice. The Professional Corporation (PC) owns the patient records and provides all professionally licensed services (i.e. patient care as defined in the practice of dentistry in each individual state). The PCs often must be owned by a licensed dentist or a dentist licensed in that state. The contracts often have strict buy‐out and restrictive covenants that make it difficult and expensive for the dentist to leave the practice and compete directly with the former DMSO. These arrangements vary by state depending on the individual state’s laws.

The ownership structures can get quite complex, and several investors can own the DMSO. The investors can be internal, usually founding owners. They might be investors from the outside – generally from private equity groups. The investor with the greatest percentage of equity or stock ownership owns the majority control of the DMSO. The minority investors have input into the company’s operation, but the controlling interest determines the final say/control. Most private equity investments in DSOs are majority ownership, although some DSOs are funded by private equity investment taking a minority position. Many evolving DMSOs are founder owned. However, growth and the need for capital to fund it lead to outside investment and the help of a private equity relationship.

COMPENSATION

Dentists often earn a percentage of production or collections in corporate network arrangements. If production is the basis of compensation, then net production (production minus adjustments) is often used, especially in areas where a large portion of the dental market includes managed care (reduced payment) plans. Supply and demand in the area determine the specific percentage. The parent company often offers employee benefits (such as health insurance, paid vacation, or retirement plan contributions) that add to the total compensation value – a typical percentage of compensation runs at 25–35%, with employee benefits added to this. Because there is no ownership interest for the provider, the difference between this and the office profit ratio (typically 40%) is income to the parent company. The parent company deducts corporate costs (administrative, training, etc.) from this to calculate corporate profit. The cost of doing the dentistry (i.e. hiring dental practitioners) is a cost of doing business for the parent company. It is income for the individual practitioner. Some companies offer bonus plans based on set production amounts that give the associate dentist a more significant percentage compensation on these production or collection amounts. Other companies offer bonus plans that allow practitioners to split a percentage of the profits after all expenses are paid, including provider pay and parent company fees. In multiple practitioner practices, the percentage is based on the percentage of production that each practitioner brings into the practice.

OWNERSHIP OPPORTUNITIES

Many DMSOs allow dentists to own stock at the DMSO level. This encourages a partner through the growth and value of the DMSO. The ownership levels and stock distribution vary from one organization to the next. However, the goals of these structures are similar – to enhance ownership/partnership engagement, better align interests with the dentist and with the growth of the business beyond their practice, and enhance retention of the dentist in the organization long term.

Advantages

There are advantages over practice ownership to both new and experienced practitioners for working in a corporate network. The practitioner does not invest, nor is there a long‐term commitment to the practice location. The arrangement can be a good learning experience if the parent company values clinical and management training for practitioners. The practitioner has an immediate “paycheck” without worrying about debt repayment or cash flow. A practitioner might make a higher income than in a privately owned practice because the parent company uses its management systems and expertise to manage the practice. The dentist spends time seeing patients, which helps to generate additional income. There is less of an emotional and time commitment for the practitioner. If the hygienist quits, the parent company will find temporary coverage and hire a replacement. The dentist’s free time is for personal use, without worrying about the practice’s business. Dentists can often move within the network’s practices without losing income or benefits.

Disadvantages

There are also disadvantages (when compared to practice ownership) to working in a corporate network. First, it is a job; the owning parent company is the boss. Many dentists enter the profession to enjoy self‐reliant independence, which does not occur in this practice form. Often the practitioner will work more hours and work the less‐desirable weekend or evening off‐hours than in an established private practice. If a dentist wants to leave the network, a restrictive covenant may severely limit their practice opportunities. The dentist has no ownership interest, therefore no equity build‐up. The dentist has no practice (asset) to sell at retirement or leaving. A corporate opportunity may not be available where and when the practitioner wants. Suppose the dentist is managerially, clinically, and behaviorally competent. In that case, they can make a higher income in an ownership situation because they gain the value of ownership (both profit and equity build‐up). Finally, the parent company may fail or be bought by another management company with a different philosophy.

DIRECT PAY

There are many direct pay formulas, each with advantages and disadvantages for the employer and employee. Most involve some variation of a salary or per diem (daily rate), a wage (hourly rate), or a commission (percentage of collections or production). Each has advantages and disadvantages, but any system should provide profit and incentives for both sides (Box 2.4). These formulas only discuss direct monetary compensation, and employee benefit plans may significantly increase total compensation.

Direct pay is the cash (check, direct deposit) the employee receives for doing the work for which they are hired. Government taxes and requirements reduce direct pay. For example, the federal government requires that employers withhold an estimate of what they will pay at year‐end in federal income taxes from their employee’s regular paychecks. (This required amount is based on IRS tables.) The employer must also withhold a certain amount from employees for Social Security and Medicare taxes. The employer must send this withheld money to the government (with the employee’s name attached). At the end of the year, the employee determines the amount of tax owed and then compares this to the amount withheld along the way. If too much was withheld, they get a refund. If too little is withheld, they owe an additional tax payment. Many state and local governments have similar withholding systems that employers must follow. Owners also reduce pay based on the benefits package that they offer. For example, the employer may have a retirement plan in which it matches an amount that it withhold from an employee’s pay. Alternatively, it may partially fund a medical insurance plan. (Generally, the amounts an employer withholds for these benefit plans are not taxable income for the employee.)