You’re checking out practices, and you notice some of them will say how much of the revenue is Delta Premier specifically. Next thing you know your banker keeps asking how much it was too. Why the hell does everyone keep asking about this?! It took me awhile until I was deep in the trenches doing deals with heavy Delta Premier revenue for anyone to really speak about it. Most seller brokers won’t even acknowledge the impact unfortunately as they either don’t understand it themselves or don’t want you to beat them up over price.
This network could be your best friend or your unexpected challenge, and many times it depends on what state the practice is located in. If you didn’t know, Delta Premier is a lucrative contract being phased out and isn’t allowing new dentists to join. That is where the real problem comes in because the revenue of the practice is with a fee schedule that you may not be able to get… and the sale price is influenced by the revenue.
I’ve helped dentists in deals where we were able to transfer the status seamlessly, and others where they were not able to get that same fee schedule. The deciding factor is usually not in your control, it really comes down to which states allow it. It is still something you need to know to ask for and how to do so, because an insurance company isn’t going to just hand it over to you even if the state you’re in typically allows it.
If you start to think, wouldn’t that make the practice less valuable if I can’t get that contract? In the buyer’s opinion yes, but in the seller’s opinion no. I wouldn’t say to just walk away even if the price doesn’t budge because it may come down to how much of their business is Delta Premier and what’s the difference in the fee schedule you’ll get. If it’s a significant portion of their business and you can’t get the same fees, then yes I’d look elsewhere. Some states also don’t allow you to contract with other insurances outside of Delta Premier if you’re a Delta Premier office, so again lots to look out for when you come across a practice like this.
It’s also something you won’t be able to hide from banks when getting your loan. They always ask for the 1099s specifically for Delta Premier, which is a fancy piece of paperwork that shows how much was paid out to the practice for the previous year from that insurance. From my experience, most banks require Delta Premier revenue to be under 20% of the total if you’re looking for a benchmark. When I’ve compared fee schedules before, sometimes the fees differ from about 8-12%, but I’ve also seen states where they’re over 20% different, which will add up quickly on large fee procedures.
Long story short is Delta Premier can be a great thing in a practice you’re looking to purchase. Higher reimbursements mean higher margins! However, it is not a slam dunk and most states don’t even allow the transfer of status. Understanding state specific availability and being prepared for potential contract changes are key to a successful transition with the least amount of headaches. The other good news while we’re on the subject is that Delta is generally the quickest in credentialing too.
If you’re looking at a practice that has Delta Premier revenue and you want help analyzing the situation, feel free to reach out and I’d be happy to assist you. Better yet, I’d love to help you look at any practice as they all have different things to evaluate.
As I mentioned before, I’ve helped dentists purchase practices that were able to keep the status and those who weren’t. Each situation is unique and ultimately should not be the deciding factor of a great practice, but should be a key piece that is carefully analyzed. My last piece of advice would be to get the answer before you close the deal, not after.
Kyle Womeldorff
480-690-5200
info@dentalbroker.com