By now, you are undoubtedly aware the ADA recommended dentists postpone “elective procedures” through April 6 to help “flatten the curve” of the COVID-19 pandemic in the U.S. Since elective procedures are estimated to comprise >90% of modern dental practices, most offices are closing, with dentists coming in only for emergencies. Note that technically, the ADA issued a recommendation and unless your state or some other authority mandates you close, it is technically no more than a suggestion. However, anecdotally, the vast majority of our dental and dental specialist clients have shut down for three weeks.
Closing is likely to help lessen the spread of the disease but will wreak havoc on practice finances and make for difficult staffing and financial decisions. Additionally, what happens if patients are not eager to return after three weeks or if the shutdown is extended?
What to do about your staff during this emergency? Staff could be your most important asset, and some could be living paycheck to paycheck. On the other hand, how are you going to pay them with when you have almost no income?
Most dentists we have spoken to have elected to pay through this week and or have the staff use their PTO, Sick and or Vacation days. Some have already started the process for unemployment, but that nets very little for the staff and may drive up your payroll costs down the road.
Legislatively, the House has passed a coronavirus sick leave/relief bill (HR 6201), but as of this writing, it is stalled in the Senate. If the Senate approves and the President signs, this could further affect what you can do and how you might be helped. In its current form, HR 6201 requires employers to pay employees but includes tax credits to help the employer. The bill surprisingly excludes companies with 500 or more workers. On the other end of the spectrum, companies with fewer than 50 employees can seek hardship exemptions. Obviously, the mechanism for applying for an exemption is not yet known. This is a very fluid situation and there could be significant changes before it becomes law. A good summary can be seen here.
Reducing Practice Overhead Expenses and Generating Cash Flow
Your practice income will almost certainly drop precipitously. We have been asked for advice multiple times over the past week. Here is a summary of things you can investigate:
Current Practice Loans – Call your bank(s). Several banks that have offered up to 2-month forbearances. Others have granted temporary conversion to “interest only” instead of amortizing loans.
Rent – Ask your landlord for a rent reduction. Expect to have to make this up with increased payments over the course of the lease.
Staff costs – If you can’t pay, consider unemployment benefits. Hope and pray Congress can get its act together and or lobby your Senator for relief.
Cash Balance Plan Contributions – Speak to us so that we can discuss with plan actuaries to determine if contributions can be reduced in your case.
Insurance Plans – Disability and or Office Overhead Disability will only pay if you are disabled by COVID-19. However, some BOPs (Business Overhead Policies) may cover business interruption. Speak to your insurance agent to see if this is covered by your policy.
Additional Sources of Funds
- Practice line of credit – First thing to access
- HELOC – Interest might be deductible by practice under interest tracing rules (speak to your CPA)
- 3-month Extension beyond 4/15/2020 for your 2019 1040 payment – details of this program still being disseminated
- Reduce or eliminate your Q1 2020 1040ES due 4/15/2020 – income will be down, as will be your 2020 tax liability (do not skip making payroll tax payments due with staff wages, assuming the staff is still paid).
- The SBA is offering access to its Economic Injury Disaster Loan Program under certain conditions
- Contact your advisor to make sure you have enough cash available and or for other possible ways of raising cash specific to your individual situation.
Without a doubt, certain aspects of COVID-19 will impact the dental profession harder than most other industries. Yet, one thing we know for sure is that the businesses that come out stronger on the other side are the ones that are prepared and can pivot quickly. As advisors who have direct experience working with dental practices, we’ll continue to work in partnership with you and help you find solutions for navigating through these challenging times.
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