Which DSOs have the best chance at success?

A successful DSO is built on three major pillars: the management team, the clinical leadership/doctors who compose the clinical team, and the investors who fund the venture. Many of the DSOs struggling or experiencing hardship/failure right now have structural weaknesses in one or more of these pillars. Some DSOs neglect one pillar and therefore fail at creating a strong platform for their businesses. For example, many DSOs are investor-centered and/or management team based, but neglect to develop profitable, nurturing, successful relationships with the doctors who are the heart and soul of their business models. Without the support of the doctors, without strong clinical and/or professional leadership, a DSO will eventually fail.

Likewise, a DSO without capital support for growth and development is at a high risk for failure. A DSO is a capital intensive business. Capital is needed for equipment, keeping up with technology; de-novos, acquisitions/mergers, training, integration, and infrastructure modernization and expansion. A small DSO may function on the contributions of the founders, doctors or members of the management team for a little while, but to grow, to be competitive in the national DSO market and to obtain market share, a steady source of capital is a requirement for success.

The reality is that a dentist can run a very profitable single dental practice. The same dentist has a great chance at running a second profitable practice without too much hassle. However, once a third and a fourth practice come on board, he or she begins to confront a new set of challenges. There comes a point where the dentist has to have access to qualified management personnel to properly oversee the business side of the practice. An integrated information management system helps establish information flows, but without the proper support personnel the information cannot be monitored and interpreted. At certain stages of growth, management infrastructure must be adjusted and expanded, typically at office numbers 3, 6, 12, 20, 40, 60 and 100. Additional investment in both people and capital is necessary to achieve these growth milestones.

As such, another pillar of a successful DSO is the management team. I’m not talking about a hastily assembled group, but rather a carefully chosen, skilled, and credentialed team with knowledge and experience in the dental field. This is the team that will support the DSO’s daily operations and ensure that the establishment and follow-up of policies and procedures support the DSO’s mission. The management team is responsible for the relationship with banks, lenders and investors; they also monitor and interpret key performance indicators and make administrative, business and management decisions accordingly.

For me, having a strong doctor based and dentist-led organization is essential. I have acquired, developed and grown hundreds of practices. The key to a highly productive and profitable practice is a doctor with excellent leadership, communication and clinical skills. To support the development of professional excellence, a DSO must have a Chief Dental Officer that sets the clinical standards and manages a high level quality assurance program that ensures accountability, training and support for all clinical professionals.

Single dental practitioners are by definition entrepreneurs who manage their practices on their own.  Most dentists are inward thinkers and are not used to working collaboratively. But if they have trust and confidence in the DSO management and if they respect the experience and training of the DSO’s dental leadership, they will buy into the group practice model and become great assets to the practice and the DSO. Open lines of communication between the practitioners and the DSO’s leadership, high standards of care, and policies and procedures that facilitate the practice of dentistry are vital for the success of a DSO.

There is no luck in this business; only hard work, having the right people and team in place. In my early days, I was fortunate enough to have great mentors and see success develop and evolve. I was also happy to be a part of Heartland Dental Care, a true DSO pioneer with a proven history of success in this business.

The successful DSO strives to be a doctor-led, patient-centered organization working in close partnership with its leading clinicians. The platform requires a skilled, experienced, mission-focused management team as well as an experienced, committed investor group who works and communicates effectively with its operational clinical partners. These are the pillars that lead to a strong DSO foundation; All three of them must be solidly in place to ensure success. Take one pillar away and the integrity of the platform collapses.

Written by Alex Giannini, D.D.S. at Blackford Dental Management and reposted here with permission.

 

 

 

This article was originally posted on LinkedIn.