Would you buy this office?

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mailfroggys

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General practice that only sees kids/teenagers for regular treatment, nitrous and oral sedation. Accepts PPO, Denti-Cal, Healthy Families, Cash, Care Credit. No HMO.

Gross:
2011 - $1.5mill
2012 - $1.47mill
2013 - $1.6mill; Estimated net income for 2013 was ~$620k.
Asking price: $1.2mill (~$500k in asset + ~$700 in Goodwill)

Business has been established over 15 years and office was recently completely remodeled ($300k spent). Located in a very popular strip mall. Eight chairs (~$200k in equipment), open 6 days a week,
4 doctors/12-15 staff, 25000 (yes, 25000) active patients seen in last 2 years; 70% are Denti-Cal, 25% PPO, 5% Cash. Transferable ten year lease, with options to renew 3x. Rent is ~$10k/month. Competition is minimal; no one wants to take Denti-Cal or do sedation due to low reimbursement rate so this office gets all the patients.

So....would you buy this office? Why or why not? What kind of things should I be looking out for? What is your outlook on Denti-Cal? I am aware of the recent 10% rate cut. Questions are more than welcomed.

Thanks in advance!

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4 docs open 6 days a week and only producing $1.6 mill seeing that many patients?? I don't like the sound of that nor do i like the sound of 10k a month for just rent in a strip mall! Seems like denti-cal is similar to medicaid? You could easily open your own place and get half their patients over time if its a nicer place and you feel confident in your personable skills with children and parents. You need to find someone who is very equipped to breakdown the financials of a practice and get multiple opinions. I would not buy this practice
 
If gross is $1.6mil, what's the collections (after insurance write-offs)? What's the overhead? What is the doctor's take home pay?

To me, the price seems very high. Like crazy high. Patient base is questionable as it's mostly Denti-Cal and there isn't much goodwill involved if you're a region's only insurance provider. Rate cuts with Denti-Cal and insurance means volume must increase. Your take home goes down since your overhead doesn't change. Rent is crazy high.

Can you service a loan on what you'd be making?

With the uncertainty of government programs lately, I'd pass on this office.
 
No. This is clearly a Pedo-mill. The valuation is obviously the machinations of a slick practice broker.

Denti-cal is not Texas Medicaid.

The state brought back Denti-cal solely to save costs on people going to the ER for a simple extraction. They restored some minimal benefits at a 10% reduction on an already low fee schedule to incentivize GP's to see these patients who would otherwise go to the ER thus saving the state of CA thousands.
 
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