“It’s an elevator drop down,
but it’s going to be a slow escalator ride back up.”
These are unprecedented times, there’s no doubt about that. It’s safe to say that the plans and goals we all had at the beginning of 2020 did not include a global pandemic. Yet, here we are, in the midst of one.
The whole world has dramatically shifted in just a few short months. Inspired by conversations with colleagues and peers, I wanted to touch on the state of the DSO industry post-COVID-19.
DSO 1.0, 2.0 and 3.0
Pre-COVID, I noticed there were three specific ways DSOs operate. I deemed them DSO 1.0, 2.0, and 3.0.
DSO 1.0 centers around ROI and revenue with a strong focus on acquiring new patients, increasing revenue, and maintaining seemingly unattainable financial budgets. DSO 2.0 represents businesses that were more focused on patients, care, and goodwill. There’s an effort towards building meaningful interactions with patients and practitioners, making data-driven decisions and prioritizing the patient experience.
These are the businesses that were in it for the long-haul, that understood the importance of goodwill, and were prepping for the future of the DSO industry. The future, or DSO 3.0, arrived a lot quicker and looks much different than many of us expected.
DSO 1.0 is in big trouble
As I’ve said before, cutting corners to make a budget and have good looking numbers will only get you so far. The businesses that were still stuck in DSO 1.0 and the early stages of 2.0 are having a really tough time right now because of that.
Banking forecasts say that Q3 of this year will be between 50-75% of production and where a DSO falls in that percentage range represents the difference between solvency and insolvency. Their mentality of not feeling the need to establish and develop goodwill with teams, doctors, and patients could mean being closer to the lower end of that range.
Many of the businesses operating in 1.0 and 2.0 mode are going to be pushing production because they absolutely need to — and maybe to a detriment. Not necessarily by making bad clinical choices but by, once again, trying to compensate for goodwill with patient volume and urgency.
Their goal from the beginning has been to maintain the lowest overhead possible and drive profit. Yet now, they are over-leveraged in terms of financial debt and under-leveraged in terms of patient and practitioner goodwill. Teams are furloughed, very little revenue is coming in, and the future is looking very uncertain.
Lack of loyalty will hurt
Eventually, the world will ‘open up’ again. And when it does, it’s going to cost incremental dollars to align with new PPE requirements, sterilization protocols, and whatever other adjustments come with a post-COVID-19 world. It’s also going to cost money to market that these changes have been made and it’s going to take a certain level of trust to encourage teams to feel safe coming back to work and for patients to return too.
Where DSO 2.0 has built up that goodwill pre-pandemic, the DSO 1.0 crew is going to have to scramble. They’re going to need to work hard to convince their teams it’s OK to come back to work because that trust hasn’t been built.
And who can blame them? When their jobs and salaries have been eliminated or halved, there is no sense of loyalty to an employer who’s put the business and money first time and time again.
In terms of COVID-19, dental hygienists are also very high risk and many probably fear their employer will try to mandate bringing them in because of profits, not because it’s actually safe to come back. Not to mention, if the team members don’t believe in their dental group and what they’re doing, they’re not going to be able to convince patients to stick around.
There’s nothing normal about the “new normal”
We will come out of this and there will be companies that prosper, flourish even. People still will need dental care. Things are just going to look a lot different. Post-COVID will generate a smarter consumer and people are going to be extra cautious. It’s going to be less investing in technology and more investing in things that are less sexy and don’t have an immediate ROI, like PPE and increased compliance.
The need for increased PPE (N95 masks, face shields, gloves, etc.) when dentists are completing procedures and overall beefed up sterilization protocols will no longer be optional. Full PPE for a regular cleaning could be the new normal and that could mean that overhead costs go up too, without increased reimbursement from insurance carriers. Showcasing sterilization protocols on a company website to ensure patient safety could even become part of the new normal.
Overall, it’s going to be about who has the goodwill, the dollars, AND the focus on patient care to be on top of all of these changes. Before, a DSO could be compliant, but no one was necessarily watching. Now, everybody is going to be aware of compliance and infection control, including the patients, staff, and even dental associations will be paying closer attention.
The analogy that I started sharing with my teams is that of a post-September 11th era. We continue to take to the skies and fly, but the way we got through the airport and the extra time we have to allot, all changed forever.
How will post-COVID translate to the regular DSO?
The mentality of DSO 1.0 doesn’t change overnight. This pandemic is really just shining a spotlight on all that hasn’t been working. I know that times are hard and most companies have to make difficult decisions right now. However, DSOs who’ve established a solid foundation of goodwill is exactly what’s going to make a difference as we shift into the “new normal”.
Those that have been thinking of the future will be the ones who come out ahead. The DSOs that were already following safety protocols and had patient and team care ingrained in their day to day practice will most likely be fine.
A year from now when we’re all (hopefully) talking about post-COVID-19 times, patients and practitioners are going to remember what was done when no one was looking. No, it doesn’t feel good to spend money in a time like this or focus on things that don’t generate immediate ROI. But people are not going to forget who was there for them during the hard times.
Written by Dr. Roshan Parikh (Dr. Ro)
Dr. Roshan Parikh (or “Dr. Ro”, as he is known in the industry) is a proud graduate from the University of Illinois at Chicago (UIC) – College of Dentistry. In addition to his DDS degree, he also obtained a Master’s in Business Administration (MBA) from Loyola University with dual emphases in finance and marketing. He later capitalized on the opportunity to utilize all three when he purchased his first practice in the south suburbs of Chicago in 2008, where (despite a historically difficult period in the country’s economy) he led the practice on an exponential growth path from three employees operating in 650 square feet of space into a 20+ network of multi-specialty dental group practices with north of 75 dentists and dental specialists.
In 2019, Dr. Ro founded the dental consulting firm DSO Strategy, LLC, which was created to help entrepreneurial dentists strategize a growth plan for their dental group practices that would transform each not only into a thriving DSO, but also an investable platform for institutional capital.
Dr. Ro’s passion lies in building functional and strategically patient-centric business models that help providers to be both first-rate caregivers as well as successful businesses, and he is thrilled at the opportunity to help that philosophy come to light in a nationwide operation as he joins the team at Walmart Health as their Head of Dentistry.
“Good medicine is good business and by doing things the right way (by always putting the patient first), success will follow. In my dental practices, I work to maintain relationships as a reputable clinician and do right by the patients and people I work with each day. My passion for dentistry runs deep, which is why mediocrity is never an option.” – Dr. Ro
In his free time, Dr. Ro enjoys traveling, biking, basketball, tennis, and running through the park with his Goldendoodle, Jordy.
- Click here to read Dr. Ro’s article, Leverage Clinical Management with Metrics and Qualitative Data.
- Click here to read more about Walmart Health.
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