1. Bringing buyers and sellers together in the health industry
Specialist Business
Brokers & Consultants
In my view
www.thehealthlinc.com.auEdition 1, 2015
W
ith most
of the
Health
Funds putting
a halt to more
appointments of
Preferred Provider
dental practices,
we can see problems arising that to
our way of thinking are really not in
the interests of the industry.
An interesting scenario is emerging:
Despite Preferred Provider practices
being vulnerable to the price dictates
of the health funds, there’s no doubt
that newcomers into the industry are
showing a definite preference for this
type of practice.
Maybe they’re wanting a more
guaranteed revenue stream rather
than taking the slower route to
building a practice that can be more
susceptible to the vagaries of the
economy.
Whatever, my view is that the
evolvement of the Preferred Provider
status is causing havoc in the industry
and for its practitioners – but it’s now
a definite fixture that has to be lived
with.
At this point in time prices continue
to be paid for practices according to
their profitability but the writing is on
the wall.
Preferred Provider practices are
going to be the ones commanding a
higher price – whether they’re more
profitable or not.
Brad Potter, Principal
B
uyers of dental practices are
currently showing a strong
preference for purchasing Preferred
Provider practices.
This somewhat flies in the face of claims
made by the profession some time back that
becoming a Preferred Provider could devalue
a dental practice.
The scenario at the moment is that the Health
Funds have put a halt on appointing any more
new Preferred Providers. This could, if current
preferences continue, see these practices
rising in value over non-preferred practices.
This apparent preference could also lead to
fewer new practices starting up due to not
being able to achieve Preferred Provider
status.
There’s no doubt that having Preferred
Provider status makes it easier for a practice to
obtain patient volume.
The draw-back of course is that the income
from each patient is significantly lower – the
income per patient being dictated by the
Fund.
This has led, in some cases to practitioners
who have found themselves in desperate
straits for income, either doing extended
work on the patient – or as has occurred
occasionally, instances of falsifying claims on
the amount of work done.
Despite the income per patient being less,
new buyers are definitely wanting Preferred
Provider practices rather than taking the view
that independent operations treat patients
who tend to be more loyal, more profitable
non-price shoppers.
At present when we examine a practice for its
likely selling value, we’re finding independent
practices tend to be more profitable than the
majority of Preferred Provider practices.
The preference, however, is such that we
can see Preferred Providers commanding
premium prices on what they would normally
sell for, if all things were equal.
Preferred Providers:
causing havoc in the
industry
I
t’s interesting to note that the effects
of bringing in overseas trained
professionals in Medical and Dental
Services is having an impact on jobs
available for local graduates.
We’re observing opportunities diminishing
which is resulting in a considerable
number of graduates only being able to
find part-time work.
Job opportunities on the wane

2. W
ith respect to the Federal Budget there was nothing
that appeared to significantly affect, medical or
dental practices other than the fact that it was
primarily aimed at building confidence in the economy.
According to economists the most important outcome of a Federal
budget is the perception of positive things happening because
it leads to greater confidence. Confidence leads to consumer
spending, which leads to business growth, which leads to stronger
employment which leads to stronger tax collection which leads to
the ability of a government to provide benefits that the population
sees as priorities.
While there will always be areas of disappointment in a budget,
it would come as a surprise if overall consumer and business
confidence doesn’t rise as a result of Federal Budget 2015/16 which
in effect is good news for dental practices in particular, as this
sector of the Health Industry is subjected to a certain amount of
discretionary spending ability.
These measures, combined with the Reserve Bank’s lowering of
interest rates by 0.5% in two bites this year, should encourage
activity through enabling people to have more discretionary
income.
Greater borrowing capacity
From a business perspective the lowering of interest rates gives
greater borrowing capacity which may in time be reflected in more
buyers being able to purchase practices..
The reduction in company tax to 28.5% for corporations with
a turnover of less than $2million, and the allowance of asset
purchases up to $20,000 to be treated as tax deductions rather
than simply depreciable assets may be useful.
They’re not items to become overly excited about – but according
to many pundits on the economy, the very perception of positive
things happening is what leads to greater confidence.
It will be interesting to see how things pan out from here.
Suite 27, 782 - 784 Canning Highway Applecross WA 6153
Ph: 9315 2599 Fax: 9315 3599 Mob: 0411 185 006
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T 08 9214 4506
M 0407 129 526
kate.potts@
boqspecialist.com.au
T 08 9214 4507
M 0400 328 074
debbie.kiely@
boqspecialist.com.au
Kate Potts
Medical finance specialist
Debbie Kiely
Medical finance specialist
BOQS001318 V1 03/15
The Federal Budget – it’s aimed at
building confidence
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Partnerships: They’re
not all made in heaven!
www.thehealthlinc.com.au
A
s specialist brokers in dental
and medical practices we’re
frequently called upon to
provide valuations of businesses when
a partnership or marriage breaks
down.
Just lately we have seen a marked
increase in break-downs of both. The
frequency is such that we were involved
in four separate issues in just one week
recently.
In some instances the catalyst of the
problems has been a reduction in
revenue, brought about by the downturn
in the economy.
While marriage separations have their
own courses of action after the value of
a practice has been established, we have
to tell you that partnership break-downs
would not create half the difficulties that
occur if the partners had the foresight
to set up a simple formal partnership
agreement in the first place.
Partners invariably enter partnerships
with the best will and intention but
it doesn’t take much for things to go
awry, ending in rancour and costly court
actions.
Investing in a formal legal agreement at
the commencement of a partnership can
protect interests and save a considerable
amount of money if dissolution was to
occur.