4 THE ADA PRACTICAL GUIDE TO ASSOCIATESHIPS In the traditional private practice entity, associateship arrangements may be less likely to last if the dentist- owner does not understand these expectations and does not allow the associate to gradually become involved in areas in which he or she is interested. In all cases, it is important to agree to a compensation arrangement that fairly rewards the associate’s efforts. Reasons to Become an Associate Educational debt, the capital-intensive nature and uncertainty of establishing a solo practice, and in recent years, generally difficult economic conditions, may be primary reasons for a new dentist to become an associate, but there are other reasons that dentists consider this option. Some of the reasons may be to: • Transition from the academic environment to clinical practice • Gain time to clarify one’s values, philosophy and goals • Gain clinical, technical, and practice management experience • Buy into an existing practice • Determine local manpower needs and compatibility with the practice location • Enter a particular community where it may be difficult to begin a solo practice • Earn income without the financial risk and management responsibilities of a solo practice • Take advantage of the experience of the senior dentist in professional consultations and treatment planning • Provide part-time practice options for semi- retired dentists, dentists with families who do not desire a full-time schedule, or those who have other positions (such as teaching) that prevent full-time practice Reasons to Add an Associate There are many reasons to add an associate. A common reason is the desire to utilize existing equipment and facilities more efficiently. Another reason private practice owners may add an associate is their future plans to phase down or prepare for retirement. More recently some dentists have added associates for the purpose of treating managed care patient groups. The reasons for adding one or more associates for a group practice can include practice expansion, to replace dentists and to evaluate candidates for potential equity ownership. One of the first factors to consider, regardless of the size or type of practice, is if it makes financial sense to add an associate. If adding an associate is not economically feasible, long-term success is unlikely regardless of all other factors. The “Financial Considerations” section in Chapter 2 contains information on practice financial evaluation. Most dentists in all sizes and types of practices are keenly aware of the costs of establishing a dental practice and the ongoing operating expenses. It is often more efficient to have multiple dentists using the same facility. The fixed costs of operating a dental practice are substantial. Adding one or more associates may increase the use of facilities and equipment, and will also increase the practice net income. Many practitioners have also concluded that phasing out a practice by complete retirement may not be advisable. In the past, some dentists nearing retirement would reduce the time per week they spent in their practices, gradually decreasing the number of new patients accepted, ending by closing the practice and selling only the practice’s equipment. Established practitioners now realize that a well managed, mature practice can have substantial value and its sale can provide additional retirement income. By developing an agreement with the associate to purchase the practice at a later date, the practitioner can then gradually phase out of the practice and receive substantial proceeds from the sale while being assured that his or her patients will receive continuity of care. In contrast, if an associate is not brought into the practice, dentist-owners must sell the practice at its peak if they wish to receive its maximum value.