The data request
Bluebird’s LOI exhibit asks for the reports below, three years of profit-and-loss statements and tax returns, the lease, an equipment list, a staff roster with tenure and compensation, and every payer contract and fee schedule. Acquire a dental practice contains the full request list. This page shows what Bluebird found.1
The LOI gives Sam and Bluebird’s biller two days of on-site PMS access.
The gotcha: 2,150 “active patients” means seen in 24 months
The prospectus says 2,150 active patients. Bluebird first asks how the seller defines “active.” The term has no standard meaning, and practices variously count patients seen in the last 12, 18, or 24 months.1 Dr. Ellis’s report parameters, once produced, show the count was run at 24 months. Bluebird re-runs the same report at 18 months, its own working definition:
The gap appears to reflect attrition rather than fraud. Dr. Ellis stopped replacing departing patients as he wound down, and the 24-month window still includes hundreds of people who have quietly left. Bluebird’s revenue model uses active patients, expected recall visits, and production per visit. Reducing the active count from 2,150 to 1,480 lowers both projected revenue and post-doc EBITDA.
Sam goes back to the broker with the two report printouts. After a counter, the price moves from 860,000. This is why the LOI said “subject to confirmatory diligence,” and why the active-patient definition is the first thing to force in any deal: an undefined count is unpriceable.
Hygiene: the engine is healthy but under-tuned
Hygiene accounts for 31% of production, within the cited 25–35% range,2 with two hygienists working four days a week. The reappointment report shows that 71% of hygiene patients leave with their next appointment booked, compared with 84% at Bluebird’s first location. Sam treats the gap as a possible operational improvement rather than an automatic price adjustment. It goes into the integration plan.PPO write-offs, plan by plan
Gross production is 948k collected. The practice writes off roughly a third of gross production to PPO contractual adjustments, consistent with the cited 30–45% range.3 Bluebird then breaks the blended figure down by plan:
The 48% plan is flagged: post-close, Bluebird will model dropping or renegotiating it once its own contracts are in hand. One nuance inside the Delta line: “in network with Delta” is really two questions, which network, and at which fee schedule. Dr. Ellis participates in Delta Premier, the legacy network whose maximum-allowable fees run higher than the PPO network’s; Bluebird must confirm which network and schedule its own new contracting will land on, because the answer changes the largest revenue line in the practice.4
Direct vs leased participation
Of the practice’s nine PPO participations, the contract file supports only six direct contracts. The other three came through network leasing. Dr. Ellis’s discounted fee was made available to payers he never contracted with directly, including one plan the front desk knows only from its EOBs.5 Those relationships may not survive the transition, and Bluebird may not receive the same fee schedule. Network leasing explains the mechanics. In the deal model, Sam treats the three leased participations as revenue that Bluebird must earn again.Credit balances and the AR file
The AR aging is unremarkable, but the credit-balance report shows $$18,400 in patient and insurance credits, some more than three years old. Credits are refund obligations; money the practice owes, and stale ones can carry unclaimed-property exposure, so they transfer messily.1 The purchase agreement will allocate pre-close credits to Dr. Ellis and require them to be resolved or escrowed; how the work is actually done is Resolve credit balances.Production by provider
Dr. Ellis personally accounts for 68% of production; hygiene supplies the rest. Bluebird’s 12-month employment agreement gives him time to introduce patients to the incoming dentists. Bluebird also scans production by code for outliers against local norms. Nothing unusual appears here, although the same analysis can serve as an enforcement screen in a Medicaid-heavy practice.What diligence changed
With the price reset and the purchase agreement in drafting, the deal now depends on the clock that has been running since the LOI: credentialing.
Next
Step 3: Close and transition
Credentialing status at close, the no-grace-period rule, and day one.
Sources
- Diligence-item consensus from transition advisories: Dental Buyer Advocates; ADS Transitions diligence checklist; Tanner diligence guide.
- Dental Economics / Levin Group, 2024 annual practice survey; Dental Economics, research report on hygiene.
- Veritas Dental Resources, the true cost of dental insurance participation; Dental Billing Assist, dental billing KPI benchmarks.
- Delta Dental, how our networks work; Delta Dental of Washington, PPO vs Premier.
- ADA, PPO leasing networks (PDF); ADA News, Dear ADA: I’m being paid as a network provider, but I never signed an agreement with that plan.