As a New Dentist, you have probably received basic information on the various types of commercial agreements / contracts, which dentists can legally enter into regarding the practice of dentistry. For the purposes of this brief article, I will assume you understand the fundamentals of Associate Agreements, Cost-Sharing Agreements, Management Agreements, Preferred Provider Agreements and Purchase and Sale Agreements and offer some important risk management “tips” you should consider in these regards:
Associate Agreements
You may have been told that as an Associate, restrictive covenant clauses (eg. non-solicitation and non-competition clauses) are unenforceable and therefore you don’t need to worry about them. This is incorrect. Remember that when you sign a binding contract such as a written associate agreement, whether or not such restrictive covenant clauses will be enforced by a court of law will depend on the facts of the particular case and the wording used in the specific agreement. Therefore it is unwise and very risky to sign an associate agreement containing such clauses assuming that they will not be enforced in a legal dispute with the principal dentist. Be sure to seek legal advice before signing any associate agreement especially where there are restrictive covenant clauses in the contract.
Cost-Sharing Agreements
If your key goal in working with another dentist is to share the expenses related to running a dental office such as rent, equipment, supplies and staff while enabling you to develop your own goodwill in your own dental practice which you can take with you when the agreement terminates or expires, then you should consider this type of commercial agreement. In these types of agreements, there should be less concern with restrictive covenants. However, cost-sharing “partners” can face serious legal liability issues when employee disputes related to “shared” staff occur and when one or more parties wish to hire associate dentists or wish to sell their respective practices. If you are going to enter into this type of business relationship, be sure to seek legal advice so that you protect your interests.
Management Agreements
Only a dentist can own a dental practice. Therefore be very careful when considering business relationships with non-dentist entities such as management and technical services companies and make sure that the non-dentist entity does not own your dental practice. Dentists can be confused as to what this means. Dentists cannot split income with, or be employed by, such non-dentist entities. Dentists cannot allow such non-dentist entities to have a percentage interest in their dental practice. Be sure to seek legal advice when negotiating these types of agreements and before signing same.
Agreements With Dental Hygienists
With the recent amendments to the Dental Hygiene Act in 2007 allowing dental hygienists in Ontario to self-initiate scaling and root planing procedures without the order of a dentist, dental hygienists are now entering into business agreements with dentists not commonly seen previously. These agreements can be beneficial for both dentists and dental hygienists alike. However, as a New Dentist, if you are going to consider such a relationship, it will be important that you ensure that the dental hygienist not have any ownership interest in your dental practice. Furthermore, your working relationship with the dental hygienist will have to be carefully set out to ensure that you are not committing professional misconduct. Restrictive covenant clauses are very important issues to be addressed to protect your interests. Be sure you understand the terms of any such agreement and obtain legal advice before signing any written contract.
Preferred Provider Agreements
This typically refers to business agreements between a dentist and a business entity wherein the dentist agrees to treat a group of patients using a fee structure which is different from the typical “fee for service” relationship the dentist has with his or her other non-group patients. In Ontario, the professional misconduct regulations set out the rules applicable to dentists regarding financial agreements with patients. If a New Dentist wishes to enter into this type of arrangement, it is important that the dentist seek legal advice to ensure that the dentist is not breaching any applicable professional misconduct regulations before signing any such agreement.
Purchase And Sale Agreements
Generally speaking, when a dentist is purchasing a dental practice, he or she is more at risk than the vendor. This is because the purchaser is investing a large amount of money for the purchase and wishes to be sure that he or she obtains what was bargained for. A New Dentist can be even more at risk because he or she does not have the benefit of practice and business experience and may not know what terms are necessary in the purchaser’s best interests. It is assumed that the New Dentist will perform the necessary due diligence in assessing the assets and goodwill of the vendor’s practice, however there will be issues which that typical New Dentist may not have the requisite knowledge or expertise in (eg. tax, professional and legal matters). In addition, there can be problems which only arise after the completion of the sale transaction (eg. the New Dentist determines that the quality of dentistry performed in the vendor’s practice is not that which was expected or the vendor attempts to solicit patients back again at the vendor’s new practice location). The prudent New Dentist should be aware of the relevant issues which are to be addressed during negotiations with the vendor and before executing the written purchase agreement. Seeking appropriate legal advice at the appropriate time can assist the New Dentist in a timely fashion and save the New Dentist unnecessary anguish and cost by helping the New Dentist avoid mistakes which he or she will regret later.
Caveat: The aforementioned “tips” are not intended to be exhaustive and the reader is reminded that there are a myriad of issues specific to each type of business agreement one can enter into which should be addressed when contemplating such business transactions, which are beyond the scope of this article. You are encouraged to have any concerns or questions you may have answered by lawyers competent in this field of law.
