At Lengea Law, we represent buyers and sellers in dental practice acquisitions across the country. While every transaction is different, there are certain issues that come up in almost every deal.
One of the biggest?
Who gets paid for work that was performed before closing but collected after closing?
Many dentists assume the answer is obvious. It isn’t.
In fact, accounts receivable (“A/R”) are often one of the most heavily negotiated provisions in the purchase agreement because they can represent hundreds of thousands of dollars. The way they’re handled can significantly impact the economics of the transaction for both parties.
Here are the three most common ways we see A/R addressed in dental practice sales.
Option 1: The Seller Retains the Accounts Receivable
This is probably the structure we see most often.
Under this approach, the seller keeps ownership of all receivables generated before closing, even if insurance companies or patients don’t pay until weeks or months later. The buyer purchases the practice assets but does not purchase the outstanding receivables.
Why sellers like it
The seller receives the full benefit of work that was already performed and doesn’t have to discount those receivables as part of the purchase price.
Why buyers like it
The buyer doesn’t assume the risk of collecting older receivables or trying to determine what those accounts are actually worth.
The catch
This structure sounds simple, but operationally it can become complicated very quickly.
For example:
- Will the buyer continue submitting insurance claims that relate to pre-closing treatment?
- Who follows up on denied claims?
- Who answers patient billing questions?
- Who pays the administrative costs of collection?
- How long is the buyer required to assist the seller?
These are issues we regularly negotiate because failing to address them often creates disputes after closing.
Option 2: The Buyer Purchases the Accounts Receivable
Some buyers prefer to purchase all outstanding receivables along with the practice.
Because not every receivable will ultimately be collected, they’re typically purchased at a negotiated discount based on historical collection rates and the aging of the accounts.
For example, a practice with $400,000 in outstanding receivables might sell those receivables for $360,000 if the parties agree that approximately 90% are collectible.
Benefits
For sellers, this creates a clean break. They receive payment at closing and don’t have to worry about future collections.
For buyers, it simplifies operations because they own all billing and collections from day one.
The challenge
The hardest part is agreeing on value.
Two receivable reports showing the same dollar amount can have dramatically different collection values depending on payer mix, account age, patient balances, write-offs, and historical collection performance.
Option 3: Hybrid Structures
Many of our transactions end up somewhere in the middle.
We’ve negotiated arrangements where:
- The seller keeps patient balances while the buyer purchases insurance receivables.
- Only receivables under a certain age transfer to the buyer.
- The buyer assists with collections for a defined transition period.
- Remaining receivables transfer after six months.
- Different categories of receivables are treated differently.
The right structure depends on the goals of the parties and the specifics of the practice.
The Purchase Agreement Needs to Address More Than Ownership
One of the biggest mistakes we see is assuming that identifying who owns the receivables is enough.
It isn’t.
The purchase agreement should also answer practical questions such as:
- Who files outstanding insurance claims?
- Who handles appeals and denials?
- Who communicates with patients about outstanding balances?
- Who processes refunds or credit balances?
- What happens if payments are deposited into the wrong account?
- How frequently are collections reconciled and remitted?
- Who pays merchant fees or billing expenses during the transition?
These operational details often determine whether the transition goes smoothly.
Don’t Forget About Treatment That Spans the Closing Date
Dental practices frequently have treatment plans that extend over multiple appointments.
Common examples include:
- Crowns prepared before closing but delivered afterward.
- Implant cases completed over several months.
- Orthodontic treatment.
- Clear aligner cases with installment payments.
We’ve seen these situations become contentious when the purchase agreement doesn’t clearly allocate responsibility for treatment and payment.
Addressing these issues before closing is much easier than resolving them afterward.
The Bottom Line
When clients ask us what issues deserve the most attention during a dental practice sale, accounts receivable is always near the top of the list.
The question isn’t simply “Who gets the money?”
It’s also:
- Who collects it?
- Who pays the costs of collecting it?
- Who handles patient communications?
- What happens when something goes wrong?
Those details can mean the difference between a smooth transition and months of post-closing disputes.
At Lengea Law, we help buyers and sellers negotiate dental practice acquisitions that don’t just get to closing—they continue to work long after the deal is signed.