There is no denying DSOs are growing at rapid rate. What is not clear is how this will affect the industry and how long this growth will continue. As someone who has been in dentistry almost 30 years, as both a private practitioner and one involved on the business side of dentistry, I have been monitoring this shift in dentistry very closely.
Many industry experts are quick to point out that the DSO growth rate must mean the demise of the solo private practitioner. I do not see it happening as quickly as many experts say, and I also believe that this shift can be viewed as positive for both the groups and the private practitioner.
Let’s take a look. I’ve always maintained that people become dentists for two main reasons. Firstly, they can control their own destiny while maintaining a certain lifestyle. And secondly, they love to use their hands. Dentistry allows them to be doctors who are artistic and mechanical concurrently. In my opinion, these reasons will NOT change in the near future. What IS changing are the economics of becoming a dentist. This change is effecting how careers are taking shape after graduation. Dentists who go to school to be their own boss, and can afford to do so, will still look to go into private practice. There will always be consumers (patients) who want to go to the solo “family” dentist and feel most comfortable in that setting. At the same time, because of finances, we see that the number of dentists who will be able to do this are dwindling. The good news is that DSOs are offering many different employee/ownership models. These DSOs are giving graduating dental students multiple options which were not available to dental students in the past.
For generations, unless you were walking into a family member’s practice, obtaining an associate position was a must. This associate position gave dentists time to gain experience, refine skills, and earn income before they went out on their own or tried to gain equity or outright ownership in the practice. I have heard my fair share of horror stories based on a ‘handshake’. Many times, the agreed upon terms never materialize. For example, a new dentist relocates only to find out later that the senior dentist who hired him didn’t have the funds nor ability to pay them. Now, with the arrival of DSOs/groups there are options and a chance for real stability.
Many of my colleagues (especially those who have been practicing a while) are NEVER going to embrace the groups. They have their minds made up that groups are bad for the industry and bad for their businesses. Just as there are excellent, good, fair, and poor solo dentists, there are excellent, good, fair, and poor DSOs as well. Contrary to what some may believe, all DSOs are not the same. One must review and analyze the group’s structure, philosophy, business plan, etc. This is a complex conversation, but for the purpose of this article, it’s a given that there will never be 100% acceptance. In my opinion, that will not change.
Let us review what dentists’ past and present thoughts are regarding DSOs. My company has been conducting highly accurate surveys from dentists for many years. This sample of over 500 DMDs and DDSs has provided many organizations valuable data and analytics. Here are some results from my most recent survey, which offers some fascinating insights.
When asked what they liked most about being a dentist, 83% said “doing the dentistry” (as opposed to answers like: being my own boss, running a business, making lots of money)
When asked what they are most “frustrated” about being a dentist right now, the top FIVE answers were:
o Running a business/being an employer
o Dealing with regulations
o Dealing with insurance
o Keeping up with technology
o Feeling like they have no leverage in getting good deals on supplies/products
When asked what was, out of the 3 options below, most important to them IF and WHEN they sold their practice and/or retired:
o Getting the highest amount $$$ possible – 34%
o Getting a “fair price” and making sure my patients are going to be well taken care of – 55%
o Having the process be a fast/efficient one – 11%
When asked their “general impression” of DSO/group practices:
o Negative: 76% (this number was 84% just two years ago)
o Neutral: 18%
o Positive: 6%
When asked if they were to look to put their practices “on the market” tomorrow, who would they want/prefer to sell to:
o Another individual dentist only – 71%
o Individual dentist or a group/DSO – 22%
o Group/DSO only – 7%
What can we take from these results?
- We know that running a practice has become much more complicated than it used to be. One thing that hasn’t changed is that dentists truly love the clinical side. In the past, the business side took a great deal of time and energy that the dentist did not want to give. With the introduction of DSOs, this is no longer the case, and is one reason dentists are more open to the idea of becoming a part of a DSO.
- When being ready to sell their practice, in the past, the DDS’ main option was selling to another individual. The process around finding the right person and then hoping they receive financing isn’t as easy as it used to be. Some dentists are starting to recognize that DSOs can easily offer the financial resources for practice acquisition, while also offering state-of-the-art services and technology to also ensure that patients are cared for well.
- Regarding perception, there will never be 100% approval for the DSO model, however, in the past two years there has been around a 10% less negative opinion.
- Dentists are seeing that having the option to sell to an individual or a group is good, and 30% of dentists would now consider selling to a DSO. This is positive news for the DSOs.
It will be very interesting to see how these numbers progress as the DSO presence continues to grow. On the one hand, you will always have the harsh, extreme opinions of current dentists who say things like the following:
“Seriously, have you ever seen a DSO which actually leaves the dentistry to the doctors’? Seriously? What private equity investment group, which has its total responsible to the fiduciary concerns of its investors, gives a rat’s backside about patients or the doctor/patient relationship? Of course these PE firms CONTROL every aspect of their dental practices, which they beneficially own.” (Excerpt from an article discussing a fine given to a DSO from a state Attorney General).
On the other hand, most of my colleagues now understand and recognize that DSOs are here to stay. I’ve heard a number of people say that both sides will learn to “co-exist”, and while that is a fair word to use, I prefer to think that it is more appropriate to say that both sides will actually “thrive” as our great profession moves forward!
Tony Stefanou DMD, Founder of ConnectTheDents – a dental M&A firm
firstname.lastname@example.org; phone: (646) 375.2067