Ali Oromchian, CEO of HR for Health, joins Bill Neumann on the GDN Show. Ali and Bill discuss the recent DSO Leadership Summit in Nashville. Ali then presents some great information regarding human resource pitfalls and how to avoid human resource surprises as you scale your dental group practice.
In Ali Oromchian’s HR Pitfalls as Your DSO Grows: How to Avoid HR Surprises presentation, Ali highlights:
- Foundational HR Priorities
- Compliance Trends & Pitfalls to Avoid
- Independent Contractors or Employees?
- What is Your HR Risk Profile?
- 2023 HR Handbook Update
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Hey, I’d like to welcome everyone back to the Group Dentistry Now show. I’m Bill Neumann. And as always, we appreciate everybody listening in. If you happen to be listening to this and not watching it, you’re going to want to check out our YouTube channel to make sure you watch Ali Oromchian’s presentation here because he’s got a lot of great information.
We have Ali who is the CEO of HR for Health.
Ali, thanks for being back on the show. We’ve had you on a couple of times now.
Yeah, Bill, thank you. Thanks for having me. And yeah, I feel like we’re both rested now that the summer is behind us. It’s been a couple of weeks, but yeah, we had a great time and our teams did a lot of work to put it on, but it went off really well. I’m glad to be back on today.
Yeah, it was a great event. And more to come on that we’ll do a full recap for the people that were there so you can relive it and for the folks that weren’t, so you don’t miss it next year in 2023. But yeah, it was a lot of fun, a lot of great content. And what we wanted to do, and what Ali wants to share with you today is some of the information that he presented there that had rave reviews and really wants to talk a little bit about from a DSO perspective.
When we talk about DSOs, we’re not just talking about the large platforms out there. This goes for any multi-site group out there, 2, 3, 25 locations. This is important for you. So Ali’s going to cover some of the HR pitfalls, compliance issues, some things that are happening that are really current and going on right now in the DSO space in regards to HR.
Ali, I’ll let you take it away.
Sounds good, Bill. Yeah, thanks. The reason we wanted to do this everyone, is because we got a lot of really great feedback. We’re not going to do the hour long presentation that we did during the summit. It’s going to be a much more condensed version of that, of course. But I want to just hit the highlights because the feedback we got was that it was stuff that a lot of these emerging groups had not heard of really.
They were really concerned afterwards regarding their risk profiles and things. And then there were things that we talked about as far as strategies in terms of valuations, or whatnot that really got people’s attention. So I wanted to bring that to the entire audience, and we’re going to build on this of course next year. But as Bill said, we’ll send some of that stuff out later.
Why did I want to have this seminar that I did there at the summit?
Well, there’s a lot of things. There’s a lot of change happening right now in the marketplace. And as you are growing as a DSO and you’re growing your offices, you’re growing number of employees or whatnot, what we are seeing is this trend where a couple of things are happening.
One is that, there are more and more claims being filed regarding HR against these groups. And part of it I think is because the employee start to feel that they’re part of a larger enterprise as opposed to a mom and pop dental practice. There’s this disconnection between them and the ownership, and so there’s a increased likelihood that they will go to a lawyer if something’s wrong. So we’re seeing a lot of that. We’re seeing a lot of that.
And then we’re also seeing this phenomena where a lot of groups that are growing are getting to a point where they need private equity funding, they need other types of financial assistance to continue growing. Now that might be through a strategic acquisition, it might be private equity, it might be a lot of things. As you guys know, there’s a lot of different variables out there that people can take advantage of.
But one thing that’s holding them back, that might be holding you back, or might hold you back is the fact that if your HR is not in order, that can really impact the investment that you get either from an acquirer or someone a little bit more strategic. We’re going to talk a little bit about that as well.
To start with, I think we got to talk about the basics. What are the basic stuff that you need as an emerging group? And what we see is it really comes down to a couple of things. I said this during the summit, Bill. But this slide should really say so many laws, so little time because the rules are just so complex and the regulations have increased so much.
There was a lot pre COVID, but there’s a lot now as we go during this post COVID world if you will, especially for dental practices. And so it’s really important to understand the essentials of employment law and how those foundational necessities that are required in hiring and so on and so forth, impact your office. There’s a timeline.
The first is, what do you do when you are looking to hire someone? There’s an offer of employment. We went through a lot of things in terms of the offer letter, what can be in there, what should be in there, what should be excluded in the offer letter. Then we talked about, okay, what happens next in terms of hiring? And here, when it comes to hiring, this is where a lot of people are making mistakes. Depending on what state you’re in, you need anywhere from 12 to about 20 documents. These numbers fluctuate state by state. And even throughout the years, they fluctuate. If you had asked me this question four years ago, the number was going to be 12 to 15 or 16, but these requirements keep increasing, so the number of documents keeps increasing.
But this is where it’s really important to think through this a little bit, because a lot of you are using third-party payroll companies, or maybe even your CPAs are doing your payroll. But the Paychexs, ADPs, the Gustos, whatnot, they talk about doing HR, but the reality is that they’re just really giving you the federal documents, which is about four to five documents. You need all those plus all the state documents, plus some additional things that you need from a compliance perspective because you’re a dental practice. And not only that, you are a complex dental practice because you’re a group, you’re a group. This is the foundational stuff.
If you don’t have 12 to 20 documents per employee, those are the minimum required ones, then you need to really think through that step of, “Okay, I can have my payroll with these companies if I wish, but I really need to get my HR house in order, and I need something like HR for Health to help you there.” I think the pre-hiring stuff, which is the offer letter, the questions to ask in the interviews, then the hiring itself, how do you hire them? These are the basic stuff that everyone needs to really think about.
Then we move towards the compliance trends, and this is when you’re in practice. And Bill, I’m sure as a business owner you know how complex this is, and I know how complex it is, of course, as a business owner. But boy, when it comes to dental practices, it’s so crazy.
And then across state lines, how that changes.
Yeah, exactly. Across state lines, that just becomes even more complex. You’re exactly right especially if you’re in a situation where you can just cross a bridge and you’re in a different state, because employees come and go between different states, and in those rules matter. Yeah, that’s exactly right.
And so when we talk about compliance trends, we’re talking about lunches, when you give lunches, how you give lunches, what time you give lunches. Breaks, when are breaks required, how do you document for that? Overtime, how much overtime are you paying? If you’re paying overtime, like the number one culprit against where they file a lawsuit against dentists is the hygienist. And the reason is that in many situations, you’re giving a daily rate to the hygienist, but you’re not figuring out her hourly rate and all that.
And then when the time comes, you just don’t know. You don’t have that figured out. And remember these payroll companies that we were talking about earlier, they don’t monitor any of that for you because that’s just not what they do. And so it becomes a real trap. It becomes a real trap. But these are the really, really complex side of things that everyone forgets about. When do you give lunches, breaks, over time?
I think tied to that is, how do you manage the employees? How do you make sure that these employees are managed properly with performance reviews and violations tracking? Bill, you and I think spoke about this when we were in Nashville. The top issue I think in many, many ways with a lot of these doctors is that the reason they get suited is because the employee feels that they’re not being treated equal. That’s a concern. That’s a concern. And it’s not usually your fault as the business owner, if you’re listening, it’s not you.
It’s because you are hiring HR people and whatnot. Or maybe sometimes you have an office manager doing this work and they’re just not trained. They just don’t know. And so they treat someone differently than someone else in the office and then suddenly, you got a lawsuit in your hands. And remember that lack of connection that we were talking about earlier, that really, really exists.
I don’t want to derail the presentation here, but you talked a little bit about training. How do you ensure that you… And there’s been so much upheaval in the industry.
New people coming in, even HR people that may not be up to speed. What kind of training would you suggest, and how the DSOs go about getting their hands on that training, and then making sure everybody is up-to-date?
Yeah, no, it’s a great question because the training aspect of it is one that is a little bit disconnected from everything else. And here’s what I would say is, early on as you’re growing from a couple of offices to maybe five to 10, you don’t necessarily need someone who is only focused on HR. Although as you approach to 10, you probably should have somebody there. But the reality is that if you’ve got HR for Health as a software, you can give that to one person to manage. And that’s the beauty of the software.
As they go, they should be taking classes, basic HR classes. We provide a lot ourselves where we just have videos, and tutorials, and things of that nature. But there’s a lot of stuff locally that you can probably find too, where you just have them go in and you sit and they learn about basic management like, how do you do a performance review? How do you write down someone, write up someone I should say, who has violated the employment handbook? Those basic things are things that either they have to learn on the job or, you put them through a class or two and they get trained on that, and then they come back and use those skills.
But as you approach 10 offices as a group, you should really focus on having just one person who all they do is HR. It seems like a big task because it’s such a big cost, but you just need one person. There was a group recently that we worked with, they had 30 some offices. I think they had seven or eight people doing HR and recruitment and things of that nature, which is crazy. Which is crazy they had so much money being spent on that when it could really just be managed by one person in HR with HR for Health.
And then you might need somebody for recruitment as well. I think that’s a good idea because that’s such a personal relationship. But I think taking those employees and repurposing them in different roles in the office that maybe generate revenue, or is more marketing based or whatnot, is probably money better spent.
That’s great information. Yeah, I’m sure we’ve got a lot of people watching this that are adding maybe four or five practices. So they should start to think about that as they scale up. How are they going to manage this HR, which can be pretty litigious in certain circumstances. And then cost be a challenge too in an environment where there’s so much demand for on the clinical side or the non-clinical side in dentistry.
Yeah, no, you’re exactly right. You’re exactly right. It’s like HR is sometimes the last thing people think about because of, like you said, the demand on the clinical and non-clinical side. And that’s why I think with our software, you could have an office manager and an office administrator manage it until you get to that point. And then once you get to that point, I think a dedicated person makes sense.
But the good news is that because our software is on the cloud and everything’s stored there, even if that employee quits and goes somewhere else, that data is secure. You know as the owner what data you have and what documents you have so nothing really gets lost.
But when we really talk about compliance and risk, it really comes down to I think three things, and this is what everyone I think should really think about.
One is you need documentation. That is the absolute key. I don’t blame you because a lot of emerging groups are in this position, but if you don’t have good documentation, you don’t know where your employee files are, you don’t think you have the 12 to 20, you don’t have an updated manual or you borrowed somebody’s or you’re still working on it, you absolutely need to get your documentation figured out. And again, ideally it’ll be on the cloud so nothing gets lost, nothing gets burned, or stolen or whatever. It’s all protected. And then you’ve got the employment manual that we give you. I think that comes first.
Now, to get a little bit more detailed about that, we’re talking about electronic time clock, hugely important. New hire documents as far as documentation, performance reviews, tracking benefits. And Bill, people forget about benefits. People forget about benefits because leading up to COVID, this was a nice to have. And people used to say, “Oh well when I can afford it, I’ll give them sick time, or when I can afford it, I can give them vacation or 401(k).” That’s not the case anymore because the rules have changed so dramatically across the country. A lot of places you have to give sick leave, you have to give 401(k) and health insurance and whatnot.
And so the best way to do it is to track all of those with the electronic time clock that we have so that you’re not doing any number crunching yourself, it’s all done for you, if you will.
And then finally, determination documents. So when we talk about documentation, we’re talking about all five of these things. And if you do that, you’re in good shape.
Then you’ve got the independent contractor employee issue. The classification as an independent contractor is largely dependent on federal and state tests, not an employer’s desire to reduce that administrative burden or the payroll cost. I think a lot of people think of it that way. If I just give them a contract, it says independent contractor on top, then they’re an independent contractor. But the reality is that you really have to be honest with yourself and say, “Okay, what am I trying to avoid? And is this person truly an employee of mine? Are they seeing my patients using my instruments? Am I marketing and patients are coming in based on that and they’re just seeing those?”
Nine out of 10 times, maybe nine and a half out of 10 times, a doctor associate is an employee. But regardless, each relationship has to be evaluated individually. It’s not necessarily a law, it’s more like a set of factors that are taken into account. And those 20 factors depending on how it’s evaluated, determines whether someone is an independent contractor or an employee.
Okay, now why are we making such a big deal of this? The reason we’re making a big deal of this is because one, it’s not a one size fits all. Someone may be an independent contractor for your friend down the street, but for you they may not be. And that I think is really important to keep in mind because again, it’s not a one size fits all.
But two, properly classifying these individuals is one of the most crucial aspects of managing a practice. I’m going to get back to what I mean by that in a second. But it’s a crucial aspect of managing a practice, because if you don’t, it can result in some major, major problems, fines, penalties from local state and federal agencies. You can get other penalties which are improper classifications or unpaid overtime, back pay of wages, interest, your time, attorney fees. The things just roll.
Why does it happen this way and why am I bringing it up in your scenario? Because it’s about your risk profile. It’s about your risk profile as an emerging group. And when we talk to private equity groups, when we talk to acquirers, what they will tell you is… And they won’t tell you upfront by the way, they’ll tell you down the road, and I’ll explain why in a second. But basically the issue is that you’re going to get devalued. If you’re getting let’s say seven multiples of your EBITDA from an investor or an acquirer, they’re going to reduce that, a half a point to a point. So you might get six and a half or six multiples if you don’t have your HR house in order.
And the reason is because of all those penalties and liabilities that we were just talking about. How big or large is your risk profile? Let’s reduce it. The smaller your risk profile, the higher the valuation you will get. And Bill, I’m sure you’ve seen this, but we have seen it a lot where people’s values get diminished because of not having their HR figured out.
Absolutely. I don’t think it’s top of mind for sure. So when they’re looking at other factors, other things that they can work on presale to make themself as valuable as possible, so to speak, HR most of the time isn’t on the list.
How difficult would it be Ali, using the HR for Health platform to really minimize that risk profile? Would I come to you and say, “Hey, we’re looking to sell in a year, let’s say. We’re not really sure where we stand.” Is that something that you can evaluate and help them curb that risk?
Yeah. Yeah. You were listening at the summit, so I appreciate that. Yeah, yeah. It’s actually one of the little dirty little secrets in HR that no one really talks about, which is that if you fix your HR before getting a letter from a lawyer, or before being actually sued of having an administrative claim filed against you, if you fix your HR, you could get out of trouble for all the stuff that you’ve done in the past and you could fix it now and be okay. That’s the beauty of it. That’s the beauty of it. Even if you’ve done things wrong, you can make it right by doing it now.
But as soon as you don’t, or as soon as you wait, then it’s too late. What I see a lot and I was saying this earlier, that the reason private equity doesn’t talk about this, the reason potential acquirers don’t talk about this, is because their goal is to buy you at your lowest valuation of course. They’ll offer you 6, 7, 8 multiples, and then when they go in to do due diligence, they start bringing that value down when they find problems. But if you fix it beforehand, they can’t reduce it for those reasons. And so you get the higher multiple.
The reason they do that is because they know that they buy you for cheaper price and then they fix all the HR stuff. They’ll have HR for Health incorporated or whatnot, they’ll fix all of it, and then they have a bigger multiple down the road.
But to answer your question about how to fix, it’s actually pretty straightforward. We do this in a couple of ways. So first is we give you a handbook that’s updated to your office, so we customize that. It’s not a template, it’s customized for you, so it has everything that you need.
Then we make sure you have all the documentation for all the employees. Now remember I said 12 to 20 are required. There’s a lot more that are highly recommended that should be required, but aren’t technically under the law, but they’re highly recommended. And then there’s a lot of nice to haves, but we give all that documentation, makes sure all the employees sign it, so you’re protected there.
Then you start using the time clock where your employees are clocking in and clocking out only at the office. They can’t clock in and clock out anywhere else. There’s no rounding of the time clock or anything like that, that’s no longer allowed. So, that’s good. Then we’ll help you with performance management, performance reviews and whatnot.
This is where it becomes really almost invaluable is we have an entire HR team ready to support you at any point. So any questions you have about hiring, firing, anything at all, our HR team is there and it’s all included as part of the fee. Of course, we have payroll and 401(k) should you want to use it. Our team holds your hand throughout this whole process. And so whether you have one office or you have 30, they will walk you through the whole thing to make it as easy as possible.
And once you have it and you’re fixed, then we talk about stuff in the past and try to make sure that doesn’t come back and haunt you, or if you prefer not to, as long as you’re fixed moving forward, then the statute of limitations starts to tick every day. And so it’s one better day.
Ali, what are you seeing with emerging groups? This sounds pretty much like an all in one solution that I see here. When you typically start to work with groups, I guess they have all sorts of things going on. You talked about maybe an office manager handling HR in some cases, maybe they’ve gotten to the point where they’ve hired somebody outside, but what are some scenarios that you see, and it looks like this solution can help?
Maybe they’re doing some things right like the documentation, and maybe they’ve got payroll, but performance management, or then the handbook might not be complete. Tell me, Ali, I’d love to just hear what you run into?
Yeah, no. It’s a great question because everyone is in a slightly different scenario, Bill. But you’re exactly right. Usually they have either an office manager or an office administrator handling their HR. A lot of times they’re doing 30, 40, 50% of the things they should be doing. They’re doing their best based on the information that they have. And because it’s so hard to learn all of this and be compliant with all of this. It’s not like they’re not doing anything.
They’re doing a lot of things correctly, but it’s that final piece that we fill in the blank for them. And what’s interesting, and I love seeing this, this is probably some of my favorite things that I like seeing, is that they get compliant. They start to incorporate HR for Health. And then suddenly the person that was doing HR has so much more free time than they did before. So suddenly instead of chasing people for paperwork and, “Did you give me the I-9 and was this filled out?”
Now they’ve got so much more free time. And so what do they do? They get back to doing what they’re good at, what they should be doing. So the office managers get back to teaching the staff members and making sure the operations are seamless and inefficient. They go back to collecting AR. They go back to marketing, they go back to just doing different things.
And so then we see this increase in revenue for the office, not because of anything crazy other than you had one team member who got freed up, and now instead of doing the stuff that they don’t like, which is HR, they focus on the stuff that they do know and they know well. It’s a pretty cool phenomenon.
This is great.
I’ve just got one last thing.
If anybody wants a handbook update, if you scan this QR code, we’ve got a white paper on the things to watch out for in your employment handbook going into 2023. That’s a really easy, great thing for you to download and have in your email, especially as we get to the end of the year, and you’re getting ready to update your handbook. Obviously if you’re on HR for Health, we’ll do it for you.
I was checking, it does work. We’ll actually drop a URL link in the show notes if you happen to be listening to this. But if you’re watching it on YouTube, just hold your phone up and be able to download this.
And then here’s my information and Jennifer Fetty’s information who works with all of our groups. Please feel free to reach out to her and she can do a demo for you to see if it’s a good fit for your practice. But we’re excited to seeing all of you in 2023 in Austin.
Yeah, we’re looking forward to that. We had a great time in Nashville. It was a wonderful event. And if you happen to miss Ali’s presentation, this is the condensed version a little bit, but it’s definitely something that you can find out a lot more.
If you’re just listening to this, we have Jennifer Fetty’s contact information. It’s J Fetty, F-E-T-T-Y @hrforhealth.com.
You can always reach out to Ali. He makes it easy. He just has firstname.lastname@example.org. You can reach him.
And then one thing we talked a little bit about earlier is you do have a bunch of training. You have a YouTube channel as well where I know you’ve got a bunch of content, so we’ll drop a link to the YouTube channel as well so you can just click right over there from ours and check that out.
Sounds great. Thanks Bill. I appreciate that.
Yeah. All right. Well, hey, thank you Ali.
And yeah, everybody that is watching this right now, whether you were at the event in Nashville or thinking about going next year, we will have a recap. So just stay tuned for that and Ali and I and some other guests will talk about what you may have missed, and we look forward to seeing everybody in Austin in 2023.
Again, Ali Oromchian from HR for Health, thank you for spending time with us today.
Thank you, Bill. Thanks everyone.
Okay, until next time, I’m Bill Neumann and this is the Group Dentistry Now show