The Group Dentistry Now Show: The Voice of the DSO Industry

🎧Dr. Anushka Gaglani & Dr. Abhishek Nagaraj, Co-founders & Co-CEOs of Areo Dental Group, join the Group Dentistry Now Show. The duo shares their insights on:

Areo Dental Group’s history and their journey
How the economy is affecting their group
Recruitment & retention
De novo or acquisition
Same store sales focus
Much more

To find out more about Areo Dental Group visit – https://www.areodental.com/

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Full Transcript:

Bill Neumann:

Welcome everyone to the Group Dentistry Now Show. I’m Bill Neumann, and as always, we really appreciate you listening in today. Whether you’re on Apple, Spotify, or Google or maybe you’re watching us on YouTube, we really appreciate it. Without a great audience, we couldn’t have great guests like we have today. So you may have seen these two at a DSO meeting, maybe you actually heard of their group, Areo Dental. They just made, for the second time, the Inc. 5000 list. So we have Dr. Anushka Gaglani and we have Dr. Abhishek Nagaraj. So welcome both of you to the Group Dentistry Now Show. Thanks for being here.

Dr. Anushka Gaglani:

Thank you for having us, Bill. Really glad to be here.

Dr. Abhishek Nagaraj:

Yes, likewise, thank you.

Bill Neumann:

And you are both co-CEOs and also co-founders, so it’d be great to kind of get your background, maybe start with you, Anushka, if you wouldn’t mind, maybe take us through, you don’t have to take us through entire dental school, but maybe dental school to the partnership with Abhishek, and then we can talk a little bit about Areo Dental Group.

Dr. Anushka Gaglani:

Sounds good. I’ll basically go back to when I wanted to be a dentist? I’m just kidding.

Bill Neumann:

You can.

Dr. Anushka Gaglani:

Just the little story behind that. My dad wanted me to go to med school, but I’m a rebel, so I went to dental school. Essentially, I went to UIC, it’s a long story how I got there, but I grew up in Florida, went to University of Illinois Chicago, and then graduated and I was honestly a little bit lost. There wasn’t much guidance about what kind of career I should pursue or where I should work, so I ended up in a very heavy Medicaid office, which played its role. I definitely learned a lot. My speed increased. But as most dentists who work in a Medicaid practice will tell you, unfortunately the quality of my work suffered. So it took some time to unlearn those habits I developed over time. The first couple of years, again was very heavy Medicaid.

Then I went to a PPOP for service practice as an associate. Probably about the third year in, I started to get a little bit antsy and I was like, “Okay, I need to look into starting my own practice.” I had this vision behind it. I don’t know that I wanted to really go down the path of multi-practice ownership. But Abhishek, when he moved to Chicago, we decided to open our first practice and then we were like, “Well, there are two of us, so let’s do a second one.” Then it just kind of became very interesting to us and the business behind the dentistry became very… We like the challenges, we like seeing practices grow, and more than anything we like having a landing spot for new grad dentists and dentists maybe that were lost, kind of like I was, to have somewhere to go to get mentorship and develop their skills.

Bill Neumann:

Abhishek, talk a little bit about your background.

Dr. Abhishek Nagaraj:

Yes, thank you. I grew up in India, so I’m the immigrant story, right? I was 23, 24 almost when I moved out to the US. I actually went to dental school in India first. And those two years were pretty hard. I actually went back and taught as a faculty member in India and then finally when I had to move to America, it was probably one of the harder things to be able to do, the process of getting here. And then 2011 went to NYU for a three-year advanced standing program to get my DDS degree. Graduated 2014. Anushka had been practicing for about three years by then. I associated with an entrepreneurial dentist, who actually was in hindsight my mentor, and worked with him for about a year and a half. And then Anushka and I decided that our vision was to elevate guest experience, patient experience in a PPOP fee for service setup, that also had some Medicaid type practice that I practiced in. So we decided to come together. We were only engaged at the time, slightly with keen hindsight, we still opened our first practice at Burbank. And every year since, we’ve done one practice. We’ve bought small district practices, updated them, expanded them into larger practices, hired associates, and grown these practices. We just opened our sixth one recently.

Bill Neumann:

That’s great. So you started in 2015?

Dr. Abhishek Nagaraj:

2015 is when we opened our first practice together. December of 2015. So almost 2016 you can say.

Bill Neumann:

Okay. And talk a little bit about the practices that you’re targeting. So you talked about buying some distressed practices. So you had your own practice, so the 2015, 2016 was your first practice. Second one, was it a distressed practice or was it… Okay.

Dr. Abhishek Nagaraj:

It was. Do you want to take this, Anushka?

Dr. Anushka Gaglani:

You can go ahead.

Dr. Abhishek Nagaraj:

Okay. So yeah, the first practice we bought was probably… We can consider this a startup. It was a practice that barely had any revenues. Dentist was out the door. He was probably doing about 150,000 in revenues for the year, and he probably should have sold maybe five years before that. He was well into his late 60s. We took that over. A lot of people said, “What are you doing taking this practice? It’s completely run down.” We were like, “No, I think this is a challenge.” So we took it on and then grew that practice to over $1 million in our first year. And then that’s when Anushka and I realized, “Hey, there’s two of us, maybe we need to go do this again.”

And we bought a second practice that was even less than that in revenue, and then we ramped that up. I think our third practice was a slightly larger practice, which had maybe a half a million in revenue, but we were able to ramp that, and over the next two years we inherited a team that was in that practice for 30 years and then really started to understand the buy and build model. Then we’ve done a couple de novos after that too. So we’ve had experience in both acquisitions, smaller acquisitions, as well as startup practices.

Bill Neumann:

So what’s easier de novo or acquisition? Or neither?

Dr. Abhishek Nagaraj:

Depends on the day.

Dr. Anushka Gaglani:

They each have their own pros and cons like everything in life. For us, the acquisitions are great because you have a patient base. But I think in dentistry, so many people, they go for the dentist, right? They don’t really care about anything else, they’re following the dentist. So what we found happens is over time, as the dentist leaves, they have such a great relationship with them that you’re kind of fighting to keep that patient sometimes. And if you keep the team, it makes it a lot easier. If you keep the dentist alongside you for a couple of years, that’s even better. But that doesn’t always happen. For us, de novos have been great and that we can do a build out our dream practice however we want it set up. We’re not having to get rid of 30 years of clutter, which has happened to us. So they both have their pros and cons. Again, with the de novo, you’re not starting off with any patient base, but if you get the right location, we find that it’s really great initially.

Dr. Abhishek Nagaraj:

Yeah, and I can add to that. I think with de novos one of the things we’ve seen is there is a ramp process of six to 12 months. But the right location, to Anushka’s point, and the right doctor, you put them in there, it can become really profitable. Those profit margins can look like high 20s, early 30% range, but it’s probably harder to do that when you inherit a team and they have inflated payroll and it’s really hard to make cost reductions. So margin expansion is much harder in those.

Bill Neumann:

So you’re based in Chicago. Talk a little bit about when you look for acquisitions or you’re looking to build out a de novo, how do you choose a location? Are you able at this point with six practices to manage them, so to speak, to be involved? And how have you built a team to help you out as you scale?

Dr. Abhishek Nagaraj:

Yeah, great question. Thank you. Yeah, we actually have a director of operations that we brought on. She’s been super awesome. Caitlin is her name, and I think having the right structure, the right people, our PRS, we are also an EOS company, we operate on entrepreneurial operating system. I think that gives us the structure that we need to get to the next stage or just have the right cadence in terms of weekly meetings. Accountability is huge in the organization too. So yeah, with the director of operations, we are able to divide and conquer. We can play in the recruiting of the doctor side while she can really recruit on the team, the assistants, the PCAs, we call them patient care ambassadors, our front desk associates, managers. So it’s been pretty awesome when you have the right people surrounding us. Anushka, do you want to add anything to that?

Dr. Anushka Gaglani:

Yeah, I think you had asked, Bill, about how do we select the practices. Our processes was fined over time. Initially, our first practice that we talked about, it’s a four up practice. There might be space to expand in the basement. It’s definitely a little bit of a tougher build though. If you asked us now, we wouldn’t pick up a four up practice. It just wouldn’t happen. So our process has become more refined. We look for very busy areas, lots of foot traffic. And parking. That’s something we found out with our second practice. Street parking is very tough. It’s tough to get people to want to park on the street and come in, especially if they’re driving around trying and find that parking. So for us, having a parking lot, little things like that. We want to see that the neighborhood is growing, is it a good socioeconomic demographic, because for PPOP fee for service, we need to make sure that people have insurance and that they can afford their patient portions.

So that’s just our model. And going back to what Abhishek said about the leadership team. Over time, going from one practice to two practices wasn’t too bad, but going from two to three threw a wrench in things, because now there were more practices than us. Going from three to five was more of a challenge. Adding this sixth. And we know that every level we take going from now to 10 is one set of problems, going from 10 to 20 is going to be a completely different set of problems. So we envision our strategy and our leadership team constantly changing over time because we run on EOS, we’re very clear on our accountability chart. We know what Caitlin’s role is, we know what my role is, we know what Abhishek’s role is, and as we add more people with the leadership team, I think for us that’s going to be key in scaling is making sure that we know everybody’s accountability.

Bill Neumann:

This is really interesting. So you’re at six locations. As you start to add seven, eight, what would be the next role or who would you add in? What people or team would you need to help you as you scale?

Dr. Abhishek Nagaraj:

Great question. I think we have the structure right now to probably get to 10 practices, maybe 12 locations. For us, I think we’re more focused on organic growth. Anushka I constantly talk about this. There’s four levers in growth, as you might know. Number one is our organic growth, increase price, increase volume. Insurance reimbursements are not always possible to get increase in price. That’s the area we’re really heavily focused on. I think a lot of groups are after COVID because money is expensive to borrow. Number two is margin expansion, reducing costs, really having great partnerships with our vendors, process efficiencies. Number three is the buy and build model, right? As we do the buy and build, we’ve done a little bit of that in the past, can we buy on larger practices and really get the owners excited to come stay on with us? And of course number four is engaging the right consultants in order to get the right best shared practices because of the experience of the consultants. I think we’re definitely operating in the first two. I think we will start to incorporate number three and four a lot more as we further go along the process.

Bill Neumann:

Great information. So this really leads into the next question that I have here. You talked about organic growth and the importance of that, and I think we’ve seen in the past, oh gosh, if we go back in time three or four years ago, maybe even a couple years ago, it seemed like the industry was in acquisition mode. It was, “Let’s buy. We’re buying EBITDA, so we’re just out there and we’re grabbing what we can.” And then all of a sudden I think there was a bit of an acquisition hangover, and of course interest rates have gone up and I think in some cases some groups maybe had overpaid for some groups or maybe bought groups that didn’t fit the culture. So now there’s a lot of talk about organic growth or same store sales. So you really focused on that, that was the number one thing you pointed to. How do you go about growing each practice organically? Is it the same at each practice? Are you adding on additional services? How do you do that?

Dr. Anushka Gaglani:

Yeah, so exactly what you’ve said. We really want our providers to be very highly skilled. We find that if a provider doesn’t have the skills, what they’ll do is they’ll diagnose to their skill levels. So let’s say they can’t do endo, they’ll tell the patient, “Let’s just pull the tooth.” And leave it as is, right? So we’ve really heavily focused on continuing education and mentorship for our doctors. And true mentorship. I know a couple of them came from past experiences where they were promised mentorship, but they didn’t actually get any. That’s the first thing. The second thing, we’re adding specialists. So we added an oral surgeon recently, all the practices refer to her. We’re going to go into things like endo, perio, et cetera, over time, maybe even ortho. So just adding those providers is the first thing.

The second thing is making sure we have availability. I know we kind of run into this sometimes where we have providers say, “Well, I want to work 9:00 to 4:00 Monday through Thursday.” And we tell them, “Well that’s not realistic. Maybe if you lived in farmland somewhere it would be more realistic. But in a city, urban area, that’s just not realistic.” We have to have availability for patients outside of their work hours. Clear financing options. Patients really come to us because we’re very, very clear about what options they have. We have financing options for even lower income individuals, which is really great to help them pay their patient portions. Abhishek, is there anything you would like to add?

Dr. Abhishek Nagaraj:

Yeah, good points, Anushka. I think just talking about expansion of skills, I think we want our GPs not to just be GPs. We want them to be super GPs at the end of the day, and really where they can do a lot of procedures in-house, not have to refer out every single thing. That’s our main focus right now is just having long-term aligned doctors where they can have a vision within our vision, within the larger vision and really nail down those skills so they’re not diagnosing to their skill sets, where they can actually do what’s best for the patient instead, because now they’ve got all these tools in their toolkit. That’s really the focus. And yeah, I think people are really looking for one-stop shops. I think the world where you start to refer people out for every single thing is over. I think those practices probably struggle a lot more than the ones that can provide out comprehensive care in under one roof.

Bill Neumann:

So talk a little bit about organic growth. How do you feel, because interest rates, and we just heard the Fed may raise them again, so it’s a lot of pressure not just on you because cost of the services that you’re using, materials goes up, but there’s also that pressure on patients, the pressure on the employees that you have there. So maybe from the patient perspective, how do you handle that? Have you seen anything from patients maybe not accepting treatment because of concerns that they can’t afford it? How do you handle that?

Dr. Abhishek Nagaraj:

All the above. Yeah, I think that’s real. I think sometimes it feels like we might be in a little bit of a recession just because of we’ve been doing this for 10 years now and you just know when people are not able to afford it, they can’t get credit approved because their credits are shot. How we tackle that is having just awesome financing options. To Anushka’s point, even if they’re subprime credit scores, can we have the right financing option that’ll approve them? Because it doesn’t mean they don’t have the money to pay on a monthly basis. It just may mean they don’t have the money to pay upfront for treatment. So if we can handle some of that. And also on larger treatment plans, people sometimes want full mouth care, they need full mouth care, they just have no clue where the money’s going to come from.

Also having financing options that can finance them on larger payment plans, but really break it down into affordable monthly payments is going to be absolutely huge and the right training of teams to be able to break it down into, “Hey, look, this is not an all or nothing. This isn’t like if you don’t do all of your treatment, we can’t do any of it, right? It’s not the all or none law. We can break it down, we can do some of it now. We can probably phase treatment.” Training our doctors to really be able to phase treatment where we can now do what’s really essential and then do some of the other work in six months or one year, maybe their financial positions will get a little bit better. Anushka, anything you can add to that?

Dr. Anushka Gaglani:

Yeah, going back to debt and how expensive it is. Definitely on the patient side, we’ve definitely seen an impact. That’s just the reality. Even with the financing options, we’re seeing fewer patients get approved than we’re used to. I’m fully confident that we can come out of this. I think the key is, you mentioned earlier groups having taken a lot of debt, buying EBITDA. I think that’s where the struggle is going to be. We bootstrap a lot, so we use our cashflow to bring on new practices and we just don’t believe in buying EBITDA. So I think just making sure the balance sheets are very strong so that downturns don’t affect the practice or the group as much is where we’re focusing right now.

Dr. Abhishek Nagaraj:

I will add, when we do want to buy EBITDA, it’s really about alignment with those owner docs to be like, “Okay, you’re coming on their journey with us.” This isn’t like a one-time flip where you arbitrage your business and walk away into the sunset. That’s not a thing anymore. I’m sure there’s a lot of that too.

Bill Neumann:

So there you would call it’s more of a partnership model, they’re staying on for the long-term, and that’s great. So are you still looking for partners, the right fit? I mean, is that something that makes sense in your modeling? You talked about focused on organic growth, but the right partner is out there in your market, you’d want to have a conversation with them?

Dr. Anushka Gaglani:

Absolutely. We always want to have conversations with people. We love meeting people and talking to them and seeing what their vision is. On EOS, we have core values, we have a core focus. If we can find partners, whether it’s associates who want to come on board and eventually partner, or even dentists that are maybe tired of the day-to-day grind and having to do the hiring, the recruiting and manage all the HR stuff and payroll, et cetera, those are definitely the people we’d love to talk to.

Dr. Abhishek Nagaraj:

It’s just lonely out there just to be able to do it all by yourself. I think collaborating with the right people is definitely the way forward.

Bill Neumann:

Certainly it’s the trend that we see, from solo to whether it’s multi-site or even a single large group practice with doctors working together looking for whether it’s that mentorship, the education. Things have certainly changed in the dental industry and I don’t think it’s going to go back. I can’t imagine. Especially with costs. And I think some of it’s generational as well. So it’s pretty fascinating the changes out there.

Really this idea of whether it’s an associate that might want to partner with you, let’s talk a little bit about that. So recruitment and retention, it was a huge issue during COVID and it seems to have really continued on, maybe not as big of a challenge as it was then. So can you talk a little bit about how you handle that? I think we talk about recruitment is always an issue, but how do you retain people? Because sometimes that’s almost overlooked, and to me it makes sense that it’s much easier to keep somebody happy and retain them versus going out and finding somebody new. So can we maybe focus on retention a little bit and then we can talk about recruitment challenges?

Dr. Anushka Gaglani:

Yeah, definitely, this is one of my favorite things to talk about because I think what people do, what we’ve noticed is instead of recruiting someone and then realizing they’re not the right fit, we kind of go to square one and find out are they the right fit? Do they fit our core values? Is this someone we can envision working with long-term, right? We don’t just want to bring on a doctor just for the sake of having a doctor and filling a role. We really want to make sure that they fit all of our core values. And it’s worked great so far. In the last four years, we’ve turned over one doctor. And in hindsight, probably was not the best core values fit. All of our core doctors are awesome. Their core values fits. They understand the vision of the company. They’re very aligned.

We’re very, very big, like I said earlier, on mentorship. We provide continuing education to them. And some of them having come from other companies where they were promised this, this is all new to them. They are seeing that we’re not just talking, we’re actually walking. So that’s very key. Keeping them engaged. So we do check-ins, our managers do check-ins with them weekly, “What’s working? What’s not working?” The two of us personally will do check-ins with them every quarter and ask them how we’re doing, what can we do to support them? So I think that’s been really instrumental in helping us retain doctors.

Dr. Abhishek Nagaraj:

And if I can add to that, I think when Anushka talked about quarterly check-ins, we are very open and honest with our doctors. We ask them, “Do you think you’re growing into the organization, growing up or growing out of the organization?” It’s important to know that. And when we facilitate open and honest conversations, our associates will tell us they think that they’re growing in and up. We’ve had one doctor that Anushka was talking about, she was clearly growing out of the company, but we got ahead of it. We were able to recruit a replacement doctor who was excited to be here. I think alignment is key when we even recruit doctors. I think we do say no to about eight out of 10 candidates. So it’s a lot of doctor interviewing that we do. But it’s like really the long-term fit. Those two people that they’re really here to stay, they’re really here to get better, they’re really here to make a great income and be a part of the greater good of the business.

Bill Neumann:

So as we move on from recruitment and retention, it seems like something that’s been talked about in the industry for four or five years, everybody gets kind of excited about it, I think last year or maybe it’s this year, the year of AI. So everybody talks about technologies and how even in challenging times you’re looking for obviously that organic growth. And as you scale up though, you can also leverage things like technology. You talked a little bit about financing options and some of that lends itself to technology, like easier ways for patients to get approval. Do you use any AI? Are there any interesting technologies, cone beam? What are you using out there that gets you excited and maybe what are you kind of exploring some technologies that you’re trying out?

Dr. Abhishek Nagaraj:

Definitely yes to cone beam, yes to scanners, digital scanners. Not every practice of ours will have it. It just depends on where the skill level of the doctor is. Some of our practices are younger, we want the practices to ramp before we can invest in a lot of technology. But yeah, generally I would say a baseline is having a cone beam having a scanner. AI, to your point, I think somewhere like a Videa. Statistically speaking, I think dentists under diagnose, they don’t over treat or over diagnose. I think the statistic is huge. 60 something percent of dentists actually under diagnose. Having something like VideaHealth with AI in our x-rays is crucial. We’re actually going into that progression in the next quarter. We’re going to be onboarding AI. We also are migrating into cloud right now. I think where there’s easy assimilation between the practices, patients can exchange and still not have to create new charts. So there’s a lot of technology we are embracing. We’re actually currently in the middle of it. Anything, Anushka, that I haven’t been able to think of?

Dr. Anushka Gaglani:

No, I think you pretty much got it all. Anything that we can do to make things easier, even like analytics software, even though we’re going to the cloud and they run reports, we still are paying for a built an analytics software we can pull all of the data and have the KPIs tip of our fingers. And again, anything just to reduce human error and people having to make multiple clicks or having to figure out how to diagnose something when we just have it on the screen that, “This is a cavity, let’s do something about it.” That’s what we’re looking for in the future.

Bill Neumann:

So as we start to wrap up this podcast here, I always ask this question, maybe this is a two-parter. So since we talk about the future of Areo Dental Group, maybe short-term future, so what are your plans? You talked about organic growth, but what are we looking to do in the next couple of years? And then what are you looking to do long-term with the organization? Big question.

Dr. Abhishek Nagaraj:

Short term, I think two years we’re focused on continuing to grow organically, bring on a lot more doctors. We brought on five new doctors in the last two quarters. We’re going to continue to do that because our practices do have the capability. Our chairs do need to be optimized more. That’s what we’re focused on. But we’re also looking for the right opportunities to buy and build. We’re not opposed to buying EBITDA, but it just has to be the right EBITDA with the right ownership behind it. We’re going to continue to be opportunistic in that sense. Anushka, maybe you want to take the long-term vision?

Dr. Anushka Gaglani:

Yeah, so our long-term vision keeps changing. When we first started on EOS, we said we wanted to have 50 practices in 10 years. The thing is, you had mentioned earlier, Bill, that everything’s consolidating and it’s just going to be harder to us, unless you really stand out as a single practice dentist, to stay afloat, again, unless you have skills beyond what the people surrounding you do. So for us, we really see it as partnerships going forward and helping dentists be in charge of dentistry. We want to keep dentists at the forefront and keep their autonomy. And I know a lot of people talk about that, but the two of us being dentists strongly, strongly believe in that. But we also don’t want to be left behind as dentists while all the other groups are figuring their way ahead because this is a reality and we either have to accept it or follow.

Bill Neumann:

I guess the last question is, if there are any audience members, whether they’re potential associates or potential doctor partners that have existing practices, how do they contact you? What’s the best way to reach both of you, or one of you? Who handles that?

Dr. Anushka Gaglani:

So Caitlyn generally takes the intake and then we’ll do the interviewing after that. However, areodental.com is our website. My email is dr.g@areodental.com. So that’s d-r.g@a-r-e-o-dental.com. And then Dr. Raj is dr.raj@areodental.com. So we’d love to talk to anybody who’s interested.

Dr. Abhishek Nagaraj:

And you can also send an email at contact@areodental.com. That’ll come out to us too.

Bill Neumann:

Well, that’s great. I’ll make sure that we drop those email addresses and your website URL in the show notes so everybody can reach out. Dr. G and Dr. Raj, really appreciate you sharing your wisdom with us and your journey. It’s some great info. Not every dental group would share what you shared with our audience. So we do appreciate you doing that today and thank you both for your time and thanks everybody for watching or listening in today. This is the Group Dentistry Now Show. Until next time.