Consolidation is considered to be the first wave in the modern dental marketplace, and some believe the second wave has just arrived.
Smile Brands Inc., a DSO which provides business support services to over 400 locations across 17 states, recently announced that it has made a strategic investment in DecisionOne Dental Partners, a DSO with approximately 30 affiliated practices in the Chicago area, to help fund DecisionOne’s continued growth and acquisitions throughout Chicagoland and neighboring states. DecisionOne Dental Partners’ management will continue to lead and operate the business.
This is not the first time a DSO has acted as PE for another DSO. However, this the first time a group is going to be strategically partnering with a DSO while retaining company culture and management. Could this be the model of the future?
Group Dentistry Now spoke with Dr. Acierno about this new model, how it will affect both large and emerging groups, and why he partnered with a DSO rather than PE, which up until now, has been the industry standard.
When DecisionOne, one of Group Dentistry Now’s 2018 ‘Emerging Groups to Watch,’ began to strategize for 2018, they decided they wanted to grow to 50 offices and become a real force in dentistry. Three months into 2018, a harsh reality set in that growing was going to be very difficult and they were unsure how to make it happen. They asked for advice from their small business equity partner who told them that they were going to require help and support, most likely in the form of private equity. Until this partnership, an emerging DSO with 15, 30, 50 offices would reach a tipping point where they would either have to sell to a large DSO or partner with PE.
Often, middle-market dental groups have capital to grow and buy offices, but have to grow their internal support structure. DecisionOne is no different. PE could provide them with capital, but DecisionOne did not have a problem with access to capital. What they had a problem with was developing a great call center, improving the insurance department to create a better patient experience, etc. They needed help with the obstacles and challenges that naturally occur with growth.
As DecisionOne set out to grow its support structure, finding a strategic partner who had already conquered dental support challenges, made sense. A large DSO could offer access to additional capital, and most importantly, experience, knowledge and mentorship.
“When an emerging group builds a call center, they’re not going to build the perfect call center the first time. They’re going to build a call center that is going to have problems. And then they’re going to have to work through the problems, all the while the industry is continuing to consolidate, and they are trying to grow. It puts a stress point on mid-level groups where they start to lose focus on the group’s culture because the group is now focusing on their growing pains. This is where you see groups fall apart or lose their way in regard to their belief in their culture,” said Acierno.
In order to avoid that potentially fatal pitfall, DecisionOne they needed a strategic partner to help them through the obstacles. Most importantly, they wanted to remain in control of the business and maintain their culture.
PE is a viable option for many and will continue to be so, however a key factor with private equity is that it often has a five to seven year vision. Acierno had a forever vision. He, determined to make a difference in the industry and build something phenomenal to influence the profession, decided he could not go the standard PE route. He wanted a partner who shared his vision and could mentor him on best practices; someone committed for the long-haul.
An Association of Dental Support Organization (ADSO) and American Academy of Dental Group Practice (AADGP) board member, Acierno began to talk to other industry leaders about his struggles and his vision. His first conversation with CEO Steve Bilt of Smile Brands was not about the business of dentistry, it was about access to care and patient experience. Their discussions lead to the discovery of enumerable alignments and shared synergies, which eventually lead to friendship.
When the two set out to develop this groundbreaking model, they went against the grain on everything. They didn’t hire a broker or go through any process. This is the first time that we’re seeing a larger group believing so strongly in the smaller group’s culture, that they want to provide assistance without impacting the culture. DecisionOne knew they had found the right partner in Smiles Brands.
Just three or four years ago, larger groups thought they knew best because they had grown such large and successful companies. They wanted to acquire the smaller DSOs and have that emerging dental group fit into their established model. A lot of large DSOs discovered that was not always the best strategy. Now, large groups are witnessing smaller groups having major success. With this second wave, large groups are reevaluating and considering investment in smaller DSOs to learn from them, all while they support them.
I honestly believe that this is the second wave and the future of dentistry. -Dr. AJ Acierno
Acierno thinks that this model for strategic partnernship is going to be awesome for the profession because this is the one thing that medicine missed, “Our colleagues in medicine went the cookie cutter way. Establishing great cultures, doctor autonomy, and doctor-built culture is what is missing in healthcare.” Hospital systems acquired medical practices which they then directed, and informed people they were employees of the system. As we know, that does not always work well, and dental has learned from medicine’s mistakes. Patients enjoy going to see a doctor who knows about their life, family, and has established a relationship with them and the practice has an individual culture that patients thrive on.
When DecisionOne affiliates with an office, they maintain the dentist’s culture while striving to implement efficient systems and improve the patient experience. Similarly, Smile Brands will be doing the same with DecisionOne; they are determining how Smile Brands will support the group without disrupting or impacting their culture and what they do well.
“Each group has its unique affiliation model in terms of financial compensation, business support and management processes, but the success of a partnership comes down to whether the groups share a common set of values. Our investment behind DecisionOne is as much about shared values as it is about business expansion. I am confident that Drs. AJ, Mike and the rest of the DecisionOne team will further our mission of delivering Smiles for Everyone®.” -Steve Bilt, CEO, Smile Brands
Acierno and Bilt have a blank book; they are starting on page one. DecisionOne has a steering committee and a transition services committee and they are learning and strategizing what is best for DecisionOne and what they need from Smile Brands. In the process, Smiles Brands may find some DecisionOne best practices that they will then integrate in their systems and processes. Most support systems will remain at DecisionOne, but they will be learning from Smile Brands support systems. There are going to be synergies that they will utilize to help them grow.
In addition to being humble and kind, Dr. Acierno is brilliant and determined to make a positive difference in the dental industry, building something phenomenal which will influence the profession forever. He believes this partnership will help make his vision a reality.
Acierno concluded, “When I retire one day, I want to walk away from this and know that we made a difference in dentistry. That we actually made our profession better. That the dentist, the team member and the patient are all better based on what we built.”
To read Group Dentistry Now’s ‘Emerging Groups to Watch’ 2018 list, click HERE.
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