Lawyer for Dentists, Dental
Corporations and Group Dental Practices
By Matt Dickstein
Leaving a dental practice /
closing a dental practice
Thank you for finding my suite of articles on
the basic corporate, business and contract law issues for
dental corporations and group dental practices in
California. The articles in this suite are:
This article gives a very brief overview
of how a dentist leaves or closes a dental practice. The
dentist can’t just walk away – leaving or closing a dental
practice is more complex than you think.
If you want to learn how to prepare your
solo dental practice for sale, read
Preparing to sell a solo dental practice.
Both the dentist and the surviving practice should look over
their contracts when the dentist leaves. Review managed
care contracts, the employment agreement and the
shareholders (buy-sell) agreement if you have one. The
latter 2 contracts become important if the dentist wants to
continue to practice dentistry.
Most dentist employment agreements require a notice
period before termination of employment. The consequence of
failure to give the contracted notice is that the employer /
practice might sue the dentist for breach of contract.
Usually the practice wants to recover the costs of hiring a
temp dentist to cover for the departing dentist’s absence
until the practice replaces him or her. Further, if the
practice must pay deferred compensation, the practice might
try to offset its damages against the compensation to be
paid. Lastly, beware any non-competition or
non-solicitation clauses in the employment agreement; for
more information see my article -
employment and independent contractor agreements.
If the practice has a shareholders buy-sell
agreement, check it for any buy-back of the dentist’s shares
in the practice. Dental groups frequently require a
mandatory buy-back of shares. The buy-sell agreement also
will provide for the share price, either by an accounting
formula or through an arbitration process. Once again,
beware any non-competition or non-solicitation clauses in
the buy-sell agreement. For more
buy-sell agreements for dental corporations.
Compensation after Termination
When a dentist leaves a practice, usually
the practice will pay compensation after the termination
date. First, there is salary owed to the date of
termination plus accrued vacation pay. Second, there might
be (i) compensation owed for the dentist’s share in accounts
receivable or collections; (ii) a pro-rated share in
year-end bonuses; and (iii) a pro-rated share in the
practice’s contributions to the dentist’s retirement plan.
Word #1 to the wise: The latter 2 items (pro-rated
share in bonuses and retirement plan contributions)
frequently create timing issues, specifically, whether the
termination date falls before or after vesting in the
Word #2 to the wise: Consider
using an exit / severance agreement (discussed next) to
require that the practice give financial data, and permit
inspections, that make clear its calculation of
Exit / Severance Agreement
Exit / severance agreements are useful
when a dentist leaves a practice to tie up loose ends and
prevent misunderstandings, all of which can lead to
litigation. Typical matters for an exit / severance
1. The content of any notice that the
departing dentist and the practice give to patients and
referral sources. Both sides should discuss who is
responsible for the mailing, its costs, and the deadline for
the mailing. I talk more below about notices to patients.
2. Mutual access to patient records.
3. Who keeps the patient records.
Retaining patient records is a significant burden. Your
retention period is a product of state law and private
contract (e.g. managed care contracts and malpractice
4. The buy-out of shares in the practice
and post-termination payments (all discussed above).
5. Mutual liability releases.
6. The departing dentist might buy a
malpractice insurance tail.
7. Indemnities in favor of the
departing dentist for any guarantees that the dentist gave
for practice debts.
Word #3 to the wise: Identify and
resolve (as best you can) any personal guarantees that the
departing dentist signed to secure financing given to the
practice. Guarantees are the wild card when leaving a
A dentist who leaves or closes a
practice must notify a host of persons of the change in
Notice to Patients.
A dentist must give notice to patients of his or her
leaving or closing a practice, otherwise face a possible
claim of patient abandonment. The notice to patients should
be a minimum of 30 days. The notice should specify the date
of departure, the dentist’s new contact information if
applicable, and who the patients can choose for future
Be sure to include in the notice a patient
authorization form that states where dental records will be
stored. For example, the notice might have 2 boxes that can
be checked – one that keeps records at the practice, and one
that transfers the records to the departing dentist. As I
discuss above (at exit / severance agreements), it is best
that the practice and the departing dentist agree in advance
to the form of notice and the retention of records.
Notice to Malpractice
insured (whether the practice or the departing dentist)
should notify its insurance carrier of the change.
Notice to Managed
Care Plans and Insurance Networks.
Get this notice out early, at least 60 to 90 days
before the change. If the departing dentist will continue
to practice, ensure continuity in managed care plans.
Notice to Licensing
the Dental Board within 1 month of any change in address;
use the Board’s “Change of Address Form.” Also notify the
Drug Enforcement Administration (for controlled substances)
and any specialty practice groups as necessary.
A tail policy covers malpractice claims
for incidents that occurred while the departing dentist was
still with the practice (even though the claim was filed
after the dentist left the practice). Tail coverage is
expensive but worth the money. Someone must pay for the
tail policy, be it the practice and/or the dentist, and this
is why an exit / severance agreement is so useful. The
practice can consider deducting the costs of the tail policy
from any deferred compensation or buyout amounts owed to the
As I mentioned in the introduction, I’ve
given you only a brief outline of the topic of leaving or
closing a dental practice.
It’s a complex topic, so please get competent legal
counsel to help you.
Call me to schedule a
legal consultation: 510-796-9144