The Group Dentistry Now Show: The Voice of the DSO Industry – Episode 6

Our podcast series brings you dental support and emerging dental group practice analysis, conversation, trends, news and events. Listen to leaders in the DSO and emerging dental group space talk about their challenges, successes, and the future of group dentistry.

In this episode, Vance Taylor, North American Special Markets Sales Manager for Henry Schein ONE speaks to Bill Neumann about the critical role technology plays in practice optimization, centralization and growth strategies.

Vance and his special markets team specialize in providing turn-key technology solutions to dental group practices, DSOs, hospitals, health centers, and integrated healthcare providers.

For more information or to get your DSO technology consultation contact Vance.Taylor@HenrySchein.com or call 844.233.2216 . www.DentrixMultisite.com

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Full Transcript

Bill Neumann:
And I’d like to welcome everyone to this episode of Group Dentistry Now. I’m your host, Bill Neumann, and I’m really excited today to have a special guest with us. He has 15 years experience in the dental industry. His name is Vance Taylor.Vance is the North American Special Markets Sales Manager for Henry Schein ONE. What Vance does and his team does at Henry Schein ONE is really help explain and provide critical technology solutions for emerging DSOs and dental group practices. And really what those solutions do is help from a centralization standpoint, they help from an optimization standpoint, and they also help as DSOs scale and grow. Like I mentioned, he’s been in the industry for 15 years. He’s got a great team behind him. They have a turn-key technology solution and they work not just with emerging dental groups and with DSOs. They also work with hospitals, healthcare providers, and integrated health centers. Vance, welcome to the show. Really happy to have you here.

Vance Taylor:
Thank you. Good to be here.

Bill Neumann:
Great. Vance, I think maybe what we should start off with, before we start talking about the technology itself, let’s talk a little bit about who Henry Schein ONE is. I think most of our audience, if not all of our audience, knows who Henry Schein is. But Henry Schein ONE as an organization may be a little bit new to some of our audience. So why don’t we start there?

Vance Taylor:
Yeah, no, I appreciate the question because we get that question often, and I think it is a point of confusion in the marketplace. Last year Henry Schein, I think very strategically saw the need for a real hyper focus on the technology component of the total customer experience, especially in these emerging markets. In the current state of the technology landscape, you see a lot of third party vendors, all trying to pull their solutions together to create this streamlined practice experience, patient experience, et cetera.

So what Henry Schein did is they … This is a massive global dental distribution company with some technology products in their portfolio. What they did strategically is took those technology products, so that’s Henry Schein practice solution, which includes Dentrix and Dentrix Enterprise and Ascend. They took our tech central business, which is our IT business, and some of our international practice management products, and they contributed those to a new Co, a new company, Henry Schein ONE.

On the other side, there was this sort of web technology conglomerate called Internet Brands, which you may or may not have heard of, definitely heard of their brands Demandforce, WebMD, Officite, Sesame. Internet Brands has a whole portfolio of web technologies. Some of those are dental specific. This technology company contributed its dental products to this new company. This dental company contributed its technology products to this company, and now you have a global dental technology company with a singular focus, which is to create a fully automated, streamlined, comprehensive technology platform so that our customers no longer have to go piecemeal these things and cobble them together themselves.

Bill Neumann:
Okay, well that helps explain things. When was the Henry Schein ONE company launched? This is relatively recently, right? That’s why a lot of people don’t know of it?

Vance Taylor:
Yeah, that’s right. The joint venture was formally finalized about a year ago. It was in July of last year. So we’re just coming up on our one year anniversary.

Bill Neumann:
Sounds good. We’re specifically talking to an audience mostly made up of either large DSOs or emerging groups, could be a dentist with one location looking maybe to add one or two practices, or somebody that might have five or six locations. I think the next question should be, as you work with a lot of these emerging groups, what are you really, what do you see as some of the challenges that they’re experiencing? If they’re adding a de novo practice there, they’re building a new practice, or if they’re buying an existing practice that already might have some technologies, as they start to scale up, from a technology perspective, what are the challenges? Or should I say, what are the challenges in general and then how does technology address some of those challenges?

Vance Taylor:
Yeah, it’s a good question. I think the challenges that these groups face as they expand really differ between their models. If they’re de novo versus acquisition. Obviously when you’re acquiring practices, you have a little bit better security in the patient base. You can have a little bit more predictability in the financial return of that practice because there’s an established cashflow already and patient base. But you’ve got massive challenges in change management. You’re inheriting a bunch of capital equipment, technology, x-ray equipment, and you’ve got to figure out how to integrate that into your main or leave it a standalone. So you’ve got some big decisions to make.

For the de novo you’ve obviously got the … It’s a big cash outlay and a little bit of a question mark on the return. So you’ve got to have a really strong market assessment, market analysis team making those decisions on where to build, and then you’ve got to have a really comprehensive go-to market strategy to acquire patients quickly so that those new locations can be viable. But in either case, the big question that all of these groups have to ask themselves at each expansion event is when and to what degree do I invest in infrastructure versus expansion?

And that balancing act is really I think the crux of the challenge that these groups face and leads to one of the biggest mistakes they make, which is putting all of their capital into expansion and none of it into infrastructure. And then they just, they get way too broad without enough depth and the profitability really suffers.

Bill Neumann:
Right. Yeah. And you see a lot of that with the different models. You’re right, all the models are different. So you’ve got some doing de novos only. You’ve got some doing affiliation. And then some that, a lot of them that do a hybrid. What I’ve seen, whether you call that infrastructure systems or whatever it is, some it’s just … It’s a grab. Let’s just scale. Let’s get as many practices started as possible, and then we’ll put the systems in place, the infrastructure in place later. I’ve seen a couple other groups that have done it the other way where it’s build the systems first and they’re very quiet, and then all of a sudden the growth comes afterward. You’ve probably seen both work out. I mean what do you consider the right path, or maybe there isn’t a right path, but what seems to be successful?

Vance Taylor:
Yeah, I mean I think alignment with the vision and understanding your own mission, vision, and culture is critical. You’ll hear most consultants in the space start there. I think there’s a reason understanding your why before you try to build the airplane, so to speak, is critical. And that will inform the path that you take.

That said, I, and obviously I’m biased, but I’m a firm believer that the most important dollar these multi-site dental businesses can spend and invest is in their back-end technologies, because that’s going to give you a framework and a foundation to facilitate all the outcomes that you have to produce in order to be profitable as a multi-site dental group, standardization of workflows, optimization of your staff, your human capital, your greatest expense. If you’re not optimizing your human capital expense, you’re getting the most return out of those dollars spent, then your profitability is going to either stay flat or actually shrink as you expand.

Bill Neumann:
Okay. So the back-end technologies you think should be something that’s really focused on almost from the get go early on. As far as Henry Schein ONE goes, what types of solutions do you have that would address those, that back-end technology, and maybe look at it from merging groups smaller, I’ve got three or four practices and I want to scale and then maybe somebody that’s a little bit more established, that’s weighted, and now needs to kind of plug that in.

Vance Taylor:
Yeah. Yeah. There’s really three, three buckets, three categories. You’ve got the groups that maintain a distributed network. That means they have a separate practice management system running in each of their locations. In those formats, you still want to standardize on that practice management system. You don’t want five practices running five different practice management systems.

We do have a lot of groups that will invest in standardized on our core Dentrix product, which is the number one practice management system in dentistry. But they’ll run one separate database at each location. There’s some serious pitfalls with that. But for certain organizations, depending on their financial model, the relationship between those practices one to another, the way they are either franchising or affiliating, if they plan to grow and sell practices as they expand, for example, there’s lots of variables that will determine whether or not that’s a good fit. It is actually a good model for some that … or a good solution for some businesses. So that’s one.

And then the other two are both centralized models. We have our Ascend platform, which is our cloud-based, web-based, browser accessible platform. So those are for groups that would rather spend a little bit more maybe on the OPEX and a subscription model versus investing heavily in a perpetual license CAPEX type software model. And they want sort of the next-gen new tech type of platform.

And then we have our Dentrix Enterprise product, which is also centralized, meaning single database, all practices are connecting to one. But it runs on more of a client server model, looks very familiar to Dentrix, and it’s a better fit for those customers that are maybe more sophisticated. They need an older, more robust practice management platform. Maybe they want to invest heavily on capital expenditures upfront and get that depreciable asset on the books versus putting it into the OPEX bucket, which is obviously going to affect EBITDA and have other repercussions financially.

There’s lots of variables here when we consult with these customers. But this is why it’s so important because at the size where these groups need to make … be making these decisions, they’re probably not yet big enough to have a CIO or a CTO on staff. So consulting with a technology firm that has the expertise relative to their industry to come in and help them make these decisions is really viable.

Bill Neumann:
Yeah, that’s a great point. A lot of them that we speak to, because we do some HR work with some of these emerging groups, and they’re … They always seem to be the growth outpaces, the human capital that they have. And so they need people like yourself and your team to really lean on to be those experts. It’s good that you have that available to them, that knowledge and expertise. If I was an emerging group or a DSO again that maybe is a little bit more established, just really starting to look at centralization, from an ROI perspective, as I centralize, first off that means different things to different people and there are different things that need to be centralized. From Henry Schein ONE’s perspective and what your experience has been, what do you get, what do you seem to get the most or the best ROI out of when you start to centralize? So where would you focus that time and money?

Vance Taylor:
Yeah. I’ve always said that the low hanging fruit of centralization really comes from billing, your revenue cycle management. It’s such a non-valuable necessary workflow in dentistry. You have to do it because it drives your cashflow, but it has nothing … But it doesn’t add value for the patient experience. It doesn’t add value for production or case acceptance of the practice. It’s a necessary evil. If you can pull that out of the practice and centralize that, you can drastically and immediately reduce your cost per dollar collected.

In a nutshell, the value of centralization is exactly that. It’s a reduction of your cost per outcome. If you look at all the critical outcomes for a dental practice, let alone a dental group, it’s patient acquisition, dollar collected, case accepted, patient acquired. All of those outcomes have a cost associated with them. When you centralize, you can reduce the cost per outcome and improve the consistency and effectiveness of those outcomes.

For example, if I have five locations and I’ve got two centralized billers and all of the claims come back through my central billing office and all of the claim follow up and denial management and patient AR management, if all of that’s happening within that small team, not only am I spending less because I don’t have five people doing it at five different locations, but also those two people are much, much better at it because that’s all that they do. They’re trained billers. They’re killer billers as we call them. And that’s their whole job.

Bill Neumann:
Yep. That sounds good. So that’s, you think billing is definitely number one from an ROI perspective, when you start to centralize, that’s what you would focus on. Moving on to a couple of other questions. How can somebody who’s a novice at this, they’re a clinician, most likely as they start to scale, it’s normally a lot of times doctor-led before the non-clinicians get involved, their friends from business school get involved in the organization a lot of times. Is the clinician who’s focused on providing dental care as they start to look at these types of centralizations or opportunities to centralize, how do they really determine what type of solution is best for them? Because you talked a little bit about, even within Henry Schein ONE you’ve got, you have three different types of practice management solutions. Is it really, is it preference? Or when you get in there, can you say, “Boy, based on what I see after I’ve done this consult, this looks like the best solution,” or are there a lot of times variables, different options?

Vance Taylor:
Yeah. I think this is, you’re really hitting on why it’s so important that you start with a really comprehensive business technology consultation or technical business consultation for that very reason. A lot of times these questions are, the answers to these questions are so far from the doctor’s mind that they’re not even thinking about the question in the first place. Even five years ago we spent, my team and I spent the bulk of our time first educating our customers about these concepts, economies of scale, impact on EBITDA, creating ROI through optimization of your operational model. These were all concepts that were fairly new to the space.

I’ll say it in the last five years, with all the influx of private equity into this space, there’s been a flood of business thinking and a different perspective coming into the space. Generally speaking, dentistry is more educated today than it was five years ago. And so a lot of our customers are already thinking this way. Now they’re asking how, not what.

We spent a lot of time over the last decade teaching the what. And you’ve heard me speak on these concepts for that very reason, to try to get them thinking about centralization as a concept first. That said, in terms of answering your question specifically, absolutely. Starting with the consultation is key. Drilling into what the goals are for the practice, how quickly they want to scale, some of their critical challenges they’re facing today, if they’re already multi-site, those are critical questions that we answer before we make recommendation.

But then to your point, at the end of the day, it might come down to preference. A lot of these younger docs, they’re just going to want cloud because cloud is it. Cloud is new. It’s the thing. And so they might be willing to …

So that’s part of what we assess. Are you an early adopter by definition, you as a consumer? Where do you fall on the technology adoption curve? And that’ll help us inform a recommendation as well. But the good thing is at the end of that consultation, we have alignment with our customers on this is the best solution for our business and here’s why and here’s what the outcome will look like when we deliver it.

Bill Neumann:
Okay. That’s a great explanation. That makes a lot of sense. You work with a lot of groups, all different sizes, all different business models. So there are probably some common pitfalls, but beyond just the centralization, the choices that they have to make or should be making, what are some commonalities when it comes to pitfalls as they start to scale? What do you see? What things can you kind of almost tips of the trade so these groups can avoid them?

Vance Taylor:
Yeah. Well I think we kind of touched on the main one earlier, which is, we tend to measure our success as a multi-site by the number of locations we own. And you’ll hear these doctors and these business owners at these group conference meetings comparing, “How many locations you have?” “10.” “Wow. That’s amazing.” That might not be amazing. That might be terrible. You might have 10 practices operating at 80% overhead. You’ve done it poorly.

I think the race for real estate is probably the biggest pitfall and there’s a couple of reasons. One is even if you’re doing it well, best case scenario, your profitability is staying flat if you’re not investing in infrastructure because your overhead per practice is the same with each incremental addition. You need the same number of head count. You need the same staff. You need the same supplies. You need the same technology and infrastructure. You might get a little bit of cost leverage on volume discounts on the supplies that you buy regularly as you grow, but you’re not getting much in terms of economies of scale, and your ability to produce as you grow will peak and valley. It’s more like a step up because you’re going to have a little bit of a production dip post-acquisition or post-de novo while you ramp up change manager and patient acquisition. And so when that happens, the profitability of the DSO shrinks. It squeezes.

I see this all the time. Groups will grow to 15 or 20 locations in a decentralized model, and after at a certain point they have to start selling off their bottom performing practices because they can’t sustain the dead weight. They don’t have time to ramp them up and make them better because they haven’t done anything to reduce their overhead as they grow. That’s probably the key. And that’s the first critical mistake they make.

I think another is misdiagnosing or misunderstanding what centralization means. We hear this a lot. I’ve got 10 locations, but I’ve got a central business office. They’re all running different practice management systems. But I’ve got people who are remoting in to an Eaglesoft database or a Dentrix database or an Open Dental database, and they’re performing functions within that database related to billing or scheduling. The problem is a) it’s horribly inefficient, b) you’re non-standardized. When you try to aggregate that data after the fact, your naming conventions in each of those databases and systems are different. And so you can’t actually reconcile and consolidate your data effectively. It’s just a really heavy lift for the frontline employees and the back-end central business office employees.

Those are two really critical mistakes that we see groups making over and over again. And that’s why we really focus on getting these emerging groups in front of my team early. Because like I said, a lot of what we do is first educational and then tactical.

Bill Neumann:
Okay. That’s one of the issues. What are some successful things that you’ve seen? So what are some groups doing that really seem to work out well? And that being one. So what are maybe like one thing that you see that’s common that when you see, you go, “Oh, this is great. I’ve seen this work before, and this is going to work out,” whether it’s centralization or something else?

Vance Taylor:
We’ve had a few really interesting success stories where we’ve had customers come to us that didn’t own a single dental practice yet, and they’ve bought a six figure enterprise class practice management system with all the IT and supportive infrastructure to run it. That’s obviously super uncommon and unique, but in those situations what’s happened is, an equity group has partnered with a dentist or dentists to form a DSO, and before their first acquisition, they’ve invested in the infrastructure. And then what we’ll see happen is sort of the typical gradual growth, one office, three offices, 10 offices, and then overnight that group will go buy a 30 or 40 location just in group and now they’ve tripled in size. You can’t do that if you don’t have the underlying infrastructure, if you haven’t worked out the kinks.

The other pitfall that these groups run into Bill is, if they do decide later to centralize, but they’ve already got 30 or 40 or 50 practices, the switching costs are astronomical. Forget the cost of the software. All the change management and swapping out your SOPs, restructuring your back-end procedures, it becomes increasingly more difficult for these organizations the larger they are and the further they’re spread out in geographical proximity to one another.

Bill Neumann:
That’s a great tip. I mean centralize early or the costs are just going to just become astronomical and probably going to lose a lot of good staff over it too. I can only imagine.

Vance Taylor:
Yeah. Look at most of the national DSOs, the really big ones that we all know by name, and they’re running very antiquated Legacy practice management software in most cases for this reason. It’s not that they’re happy most. You talk to the CIOs and they’re miserable. Their challenge is that the change management is well into the seven figures in terms of switching costs alone, though it’s-

Bill Neumann:
Point taken there for sure. So centralize and centralize early. All right. I’ve got two more questions for you. One, from a technology perspective, what’s the future of technology, whether it’s short-term, long-term, and then its impact on emerging groups and DSOs? What do you see kind of coming down the pipe that can really be some game changers possibly?

Vance Taylor:
Yeah. I think the big change evolution that the practice management segment of dentistry is going through now is this metamorphosis from practice management as a software piece. Maybe it’s a platform, maybe it’s really proprietary, but either way it’s a foundation. And then all the other things you need like patient engagement and reputation management, brand management and web marketing and all of the billing, all of those ancillary pieces, digital X-ray are all bolt-ons. Third party contracts with the customer, I’ve got to go negotiate with six or seven or eight different technology providers just to build my ecosystem.

That is evolving into this turn-key native application that really facilitates the full workflow, all of the workflows in the dental space, patient acquisition and onboarding, reactivation and recall, RCM for billing, marketing and brand reputation management, all of those pieces. And this is what Henry Schein ONE is building, is this ecosystem where it’s all self-contained.

Vance Taylor:
That allows us to evolve our relationship with our customers from one of a transactional relationship to one of a holistic technology partnership where you pay a fair flat rate and everything’s included and you don’t have to go shop all of the different parts and pieces and negotiate separate contract. So that’s definitely one, this idea of natively available technologies point products to facilitate the full dental workflow.

Along with that comes automation. Technology is getting smarter. The more that we can replace the need for human intervention with your software, the more able we are to achieve that goal we have, which is to reduce your cost per outcome that we talked about earlier. We’re continually evaluating the effectiveness of our software and its ability to drive down your costs by reducing the number of people required to facilitate that.

For example, if a patient can find your practice online at midnight when their tooth hurts, and then self-register, complete all their health history, self-appoint, get a schedule on your appointment book and the system can verify their insurance and mark them as eligible, and you can communicate with that patient, send them reminders that they can accept and confirm. And if you can get that patient in the door with all their paperwork done, having their data already in your system ready to go, and you haven’t paid a single person yet to engage with that patient, your cost as an organization have gone way, way down compared to the current state.

And then just last thing really quick I think on technology that is definitely trending in an area where we have a sharp focus is data accessibility. These DSOs are getting smarter. We talked about the evolution of the space with the … We’ve got MBAs and CPAs all over the industry now that come with the private equity groups that are investing in dentistry. And they want data. They need it. They’re no longer measuring just your basic recall numbers, production numbers, and collection numbers. They’re diving deeper into the data to find trends that are going to drive their outcomes. And getting them access to that data, helping them visualize it in effective way so that they can make their business decisions, that’s a critical evolution that’s coming in the space.

Bill Neumann:
It’s really actually exciting to think about the future, which is here, right? It may not be completely packaged together right now, but all of these opportunities are available. And sure, Henry Schein ONE is working on putting together this packaged offer for their customers. I really appreciate that peek into the not so distant future of what centralization for emerging groups may look like and the efficiencies that are created from that.

I’d like to thank Vance Taylor, who’s been our special guest today on the Group Dentistry Now Show. It’s been a pleasure and I’ve learned quite a bit as far as what centralization means, what Henry Schein ONE is, and what you’re doing as an organization. So if I’m an emerging group, or an established DSO, and I’m looking to get that consult that you talked about, to really find out what I need, are my systems right, what can I do to centralize, what’s the best ROI, how can I contact you or somebody with your team?

Vance Taylor:
Yeah. So you can definitely go to the Henry Schein ONE website and identify as a multi-site. We have a whole landing page just for multi-sites where you can get information about the platforms and requests for a contact. That goes directly to me and my team. You can also contact. We’re a highly specialized team. I’ve got a group of experts that just do multi-site in DSOs.

Bill Neumann:
Vance, really appreciate it and thanks everybody for watching this episode of the Group Dentistry Now Show. I’m your host, Bill Neumann.

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