Purchasing a Dental Practice – Recent Developments You Need To Know About
In June 2012, I wrote a blog post which covered the legal issues surrounding the purchasing of a dental practice. You can view the post here.
In 2013, three significant changes took place that affected the dental industry. They were:
- The abolition of the NHS Primary Care Trust (PCT) and the assigning of responsibility for NHS dental services to the NHS Commissioning Board (NHS CB).
- Changes to the Care Quality Commission (CQC) registration process for dental practices in respect of adding and removing partners.
- The launch of a consultation process for the implementation of the Minamata Convention aimed at reducing the environmental damage caused by mercury
Each of these changes has a direct impact on owners of dental practices. This blog is designed to keep you up to date with these events and help you understand your legal obligations when purchasing / selling a dental business.
NHS Commissioning Board (NHS CB)
In April 2013, under the Health and Social Care Act 2012, the PCT (the entities responsible for the provision of NHS dental services) was abolished. The NHS CB is a single body that is now responsible for commissioning all NHS dental work throughout the UK.
This change brings advantages to both dental practitioners and patients. The main advantages being (but not limited to):
- All NHS dental work is now commissioned by a single body, rather than 151 separate PCT’s. This will create uniformity in standards required by the NHS regarding dentistry and the administration processes surrounding the commissioning of dental services.
- Greater clinical input into the commissioning of dental services practices and procedures. Local Dentist Networks will be set up to work alongside the 27 area teams of the NHS CB, ensuring clinicians have a full say in the commissioning process.
The NHS CB area teams are now responsible for administering all General Dentist Services (GDS) and Personal Dental Services (PDS) contracts. As this change is less than 18 months old, it is still to be seen how each of the 27 area teams interpret the February 2013 ‘Securing Excellence in Commissioning NHS Dental Services’ policy with regards to the transferring of the NHS contract between the buyer and the seller and the buyers Care Quality Commission (CQC) registration.
How NHS GDS and PDS contract transfers are administered
When it comes to purchasing a dental practice, only GDS contracts are saleable. If the seller of the practice holds a PDS contract, then under EU regulations the contract must be placed out to tender. However, a seller can transfer a PDS contract to a GDS contract, which can then be purchased by the new buyer.
And how does the buyer purchase a GDS contract?
The most common way this is managed is by the seller of the practice entering into a partnership with the buyer on exchange of contracts. Once the NHS CB acknowledges the new partnership between the buyer and the seller, the contract is complete. The seller then ‘retires’ from the partnership 58 days later, leaving the buyer with the GDS contract.
Although the above process sounds fairly simple, the buyer runs the risk of having the practice’s Unit of Dental Activity (UDA) or its value reduced. It is therefore imperative to seek legal advice when completing this step in the sale to ensure that, as a buyer, you will not lose potential income on the GDA contract when it is transferred.
Registration with the Care Quality Commission (CQC)
Both the buyer and seller of the practice will have responsibilities regarding the transfer of the CQC registration. The buyer and seller will be required to provide a CRB check of no less than three months old. It is important to be aware that these can take up to eight weeks to obtain so parties should start this process early on in the transaction.
If the dental practice is run as a partnership (either from the outset or through changing a NHS PDS contract to a GDS contract) then be aware that the procedure for applying for CQC registration changed in the early months of 2013. Under the new procedure, if the partnership wishes to add or remove a partner from the practice and the practice was registered with the CQC before the 4th February 2014, then the existing partnership must deregister with the CQC and reapply as a new provider under the new partnership.
To make this clear, below is an example of the sale and purchase of a dental practice called Dial a Smile which Mr Grummer runs as an individual. Mr Grummer has a NHS PDS contract in place and would like to transfer it to Ms Floss, the purchaser:
– Mr Gummer, the seller of Dial a Smile, agrees to form a partnership with Ms Floss, who wishes to purchase the practice for the purposes of transferring the PDS contract to Ms Floss.
– Mr Grummer and Ms Floss both need to apply for their individual CRB checks.
– Mr Gummer transfers his PDS contract to a GDS contract.
– Ms Floss then enters into partnership with Mr Gummer.
– Mr Gummer cancels his CQC registration and then re-registers naming Ms Floss as a partner in the business.
– The sale is completed.
– Mr Gummer retires from the partnership after 58 days, leaving Ms Floss, the new owner of Dial a Smile, with the GDS contract.
The de-registration and re-registration of the individual/partnership can take a further eight weeks. Thankfully, the re-registration will contain a provision allowing for the adding or removal of new partners without the need to de-register with the CQC so Ms Floss will be able to sell Dial a Smile much more expediently.
The Minamata Convention
In January 2013 the United Nations Environmental Programme’s Intergovernmental Negotiating Committee in Geneva agreed a legally binding, world-wide treaty aimed at reducing environmental pollution by mercury. The British Dental Association (BDA) welcomed this agreement, which it felt, “achieves a reasonable balance between environmental considerations and the public health benefits of dental amalgam”.
So what are the implications of the Minamata Convention for clinicians in the UK and what considerations should a buyer take into account when purchasing a dental practice?
Due to strong lobbying by the BDA, countries will be able to slowly phase down amalgam use. This will give the dental industry time to develop a suitable replacement for dental filling materials. The UK phase down schedule will be decided at the EU level.
Of the eight measures outlined in Annex A, Part II of the treaty, the one that has the most practical implications for owners of dental practices, is the “discouraging of insurance programmes that favour dental amalgam use, and the encouraging of insurance programmes that favour use of alternatives”. Because alternative materials are more expensive than amalgam, dental practice’s who hold NHS contracts may find that the current fee structure is not profitable if alternative materials are required to be used in order to take advantage of savings on insurance.
The phase-down schedule is yet to be set, however, it is worth bearing the implications of the Minimata Convention and securing cost-effective insurance when purchasing a practice with a GDS contract in place.
The national and international legislative changes which have affected the dental industry require the buyer of a dental practice to conduct thorough due diligence and ensure that they have taken into account how these developments will affect the profitability of their proposed new business venture.
Due to the complexities of some of these issues it is vital that you obtain legal advice from commercial solicitors experienced in the sale and purchase of dental practices. If you are exploring the idea of purchasing a dental practice or have found the perfect practice already, please call us on 020 3588 3500. We can offer sound, solid, experienced-based advice on these issues and ensure that your interests are protected so your new venture gets off to the best possible start.
To find out more about the legalities of purchasing a dental practice please click here.