De Novo vs Acquisition: Financial Systems Differences for DSOs

Building a new practice from scratch gives you a blank slate. Acquiring an existing practice gives you immediate production. The financial systems approach for each is fundamentally different.

Two Paths to Growth

DSOs grow through two primary paths:

De novo (new build): Opening a new practice location from scratch. No patients, no staff, no history, no legacy systems.

Acquisition: Purchasing an existing practice. Comes with patients, staff, history, and whatever systems were in place.

Each path has distinct financial system implications. Understanding these differences helps DSOs plan appropriately and avoid costly surprises.

De Novo Financial Systems

The Blank Slate Advantage

Starting fresh means starting right.

Advantages:

Choose your preferred PMS
Implement standard processes from day one
Train staff on your procedures
No legacy data to migrate
No bad habits to unlearn

Challenges:

Everything must be built
No cash flow during ramp-up
Learning curve for new staff
Longer time to profitability

Systems Implementation Timeline

Pre-opening (8-12 weeks before):

Week 8-12:

Select and contract with PMS vendor
Order hardware and equipment
Begin clearinghouse enrollment
Set up bank accounts

Week 4-8:

Install and configure PMS
Configure payment processing
Set up insurance enrollments
Implement accounting system integration

Week 1-4:

Test all systems
Train staff thoroughly
Verify bank connections
Soft launch operations

Opening day:

All systems operational
Staff trained
Processes documented
Ready for patients

De Novo System Choices

PMS selection:

Use your standard DSO platform
Ensures compatibility with corporate systems
Simplifies support and training
Enables portfolio-wide reporting

Banking:

Add to existing banking relationship
Set up EFT enrollment from start
Configure remote deposit if needed
Integrate with treasury management

Reconciliation:

Implement automated reconciliation from day one
No legacy issues to clean up
Standard processes from the start
Immediate corporate visibility

De Novo Financial Setup

Chart of accounts:

Use standard DSO chart of accounts
Ensures comparability across locations
Simplifies consolidation

Reporting:

Standard reports from opening
Immediate inclusion in portfolio reporting
Consistent metrics definition

Controls:

Implement standard control framework
No legacy control weaknesses
Staff trained on expectations
Audit-ready from start

De Novo Challenges

Cash flow management:

Negative cash flow during ramp-up
Corporate funding required
Careful budget management
Monitor against projections

Staffing finance functions:

May not have experienced office manager
Training investment required
More corporate support needed initially

Limited data for analysis:

No historical trends
Benchmarking to other locations instead
Patience during ramp-up period

Acquisition Financial Systems

The Integration Challenge

Acquisitions come with baggage.

What you inherit:

Existing PMS (may not be your standard)
Existing processes (may not be your standard)
Existing staff (may resist change)
Historical data (quality unknown)
Legacy issues (often undisclosed)

What you must accomplish:

Assess current state
Maintain operations during transition
Migrate to standard systems
Clean up legacy issues
Integrate into portfolio

Pre-Acquisition Assessment

Evaluate before you buy.

Systems assessment:

What PMS is in use?
How clean is the data?
What integrations exist?
What will transition require?

Financial assessment:

Reconciliation status
Unidentified deposits
AR quality
Credit balance situation

Process assessment:

EOD procedures
Reconciliation practices
Documentation quality
Staff capabilities

Integration Timeline

Pre-close:

Assessment:

Document current systems
Identify integration requirements
Plan transition timeline
Budget for migration

Preparation:

Order new hardware if needed
Begin enrollment processes
Prepare training materials
Assign integration resources

Close to Week 4:

Immediate actions:

Secure access to all systems
Implement critical controls
Begin daily reporting
Establish communication

Stabilization:

Verify banking information
Implement deposit verification
Begin cleanup of obvious issues
Train on priority procedures

Weeks 5-12:

Transition:

Migrate to standard PMS (if changing)
Implement standard processes
Complete staff training
Clean up legacy issues

Integration:

Full integration into portfolio reporting
Standard reconciliation implemented
Historical cleanup completed
Steady-state operations achieved

PMS Decision: Migrate or Not?

Factors favoring migration:

Current system incompatible with corporate
Data quality is poor
System is outdated
Staff is small/flexible

Factors against migration:

Current system works well
Data is clean and extensive
Migration cost/disruption significant
Staff strongly prefers current system

Hybrid approach:

Maintain current PMS for operations
Extract data to corporate systems for reporting
Implement standard reconciliation overlay
Migrate later when timing is better

Legacy Issue Categories

Data quality issues:

Unidentified deposits
Unreconciled accounts
AR that should be written off
Credit balances needing attention

Process issues:

No reconciliation procedures
Poor documentation practices
Weak controls
Inconsistent operations

People issues:

Staff resistance to change
Knowledge concentrated in one person
Training gaps
Culture differences

Cleanup Priorities

Immediate (first 30 days):

Identify all bank accounts
Verify EFT enrollment is correct
Establish daily deposit verification
Implement basic controls

Short-term (30-90 days):

Reconcile all accounts to current
Research and resolve large unidentified deposits
Review and clean credit balances
Implement standard EOD

Medium-term (90 days-6 months):

Complete historical cleanup
Full process standardization
Staff fully trained
Integration complete

Comparing the Paths

Timeline Comparison

Phase	De Novo	Acquisition
Pre-operational	8-12 weeks build-out	Due diligence period
Go-live	Systems ready day one	Transition period needed
Stabilization	Ramp-up focus	Integration focus
Full integration	4-8 weeks	12-24 weeks

Cost Comparison

De novo financial systems:

PMS setup: Known cost
Training: Included in ramp-up
Integration: Minimal
Cleanup: None required

Acquisition financial systems:

Due diligence: Pre-acquisition cost
Integration: Significant effort
Migration: If PMS change needed
Cleanup: Often substantial

Risk Comparison

De novo risks:

Longer time to cash flow positive
Market uncertainty
Patient acquisition challenge
Staff building

Acquisition risks:

Unknown legacy issues
Staff transition
Patient retention
Systems integration complexity

Best Practices for Each Path

De Novo Best Practices

Plan thoroughly:

Complete systems checklist before opening
Test everything before seeing patients
Have backup plans for critical functions

Implement standards from start:

Do not allow deviations from standard processes
Train staff on "the right way" immediately
Build good habits from day one

Monitor closely:

Daily attention during ramp-up
Quick correction of issues
Regular corporate check-ins

Acquisition Best Practices

Assess accurately:

Thorough pre-acquisition due diligence
Realistic integration budget
Clear-eyed view of challenges

Stabilize first:

Maintain operations before changing
Quick wins on critical controls
Earn trust before major changes

Plan the transition:

Clear timeline with milestones
Communication to staff
Resources allocated
Contingency for problems

Execute systematically:

Phase changes appropriately
Train before requiring compliance
Monitor and adjust
Document everything

Corporate Readiness

For De Novo

Corporate needs:

Systems:

Replicable PMS configuration
Standard integration playbook
Enrollment process templates

Resources:

Implementation team or process
Training materials and capability
Go-live support availability

Processes:

Opening checklist
Timeline template
Quality verification

For Acquisition