Dr. Jeffrey Grove had taken his Wyomissing dental practice about as far as it could go – while still finding time to practice dentistry – when he met Ryan Jones.
The two men began discussing how to take the dental practice to the next level.
Earlier this year they created Dynamic Growth Dental Support, an entity known as a dental service organization, or DSO. DSOs contract with dental practices to provide business management and support.
“I realized that the DSO model provided the best way for our current practice to expand and grow,” said Grove, who started out as a partner with his father in 2004. “I knew that with Ryan’s leadership, we could scale all of the best customer service and quality of care practices we had developed to other locations, thus serving more patients and more team members.”
It is a model being chosen by a small but growing number of dentists, roughly half of whom are independent practitioners, according to the Health Policy Institute.
In 2016, 8.3 percent of U.S. dentists were affiliated with DSOs up from 7.4 percent in 2015. The percentages are even higher for women dentists (11 percent) and dentists between the ages of 21 and 34 (17.4 percent). Experts expect the growth to continue.
WHY THE SHIFT?
John S. Stoner, a partner in RKL LLP’s business consulting services group, said today’s dentists face myriad challenges, such as ever-changing regulatory requirements, reduced insurance reimbursement rates and increased costs of running a business. “
And many dental school graduates are carrying tuition debt that makes starting an independent practice nearly impossible. According to Dentist’s Money Digest, the average student debt for dental school graduates is $300,000.
“New dentists who leave school with big student loans often just want a paycheck,” Stoner said. “Less want to endure the business risk associated with an independent dental practice.”
At the same time, Stoner said, “Because dentistry is an industry that is less affected by economic changes and offers consistent growth, banks still look at dentists as good lending customers, and dentists are beginning to attract larger investors, including private equity groups.”
WHY A DSO?
DSOs promise economies of scale that can help manage costs and decrease expenses. They can give dentists more power to negotiate with third parties and vendors and allow them to offer stronger employee benefit packages, which makes it easier to hire and retain staff.
“DSO models develop business infrastructure that creates economies of scale, but they also provide platforms for training, development, and professional growth of team members,” said Jones, who has a background in corporate management. He had been looking for an industry he felt could benefit from his experience and focused on dentistry.
Another advantage of a DSO is that it allows dentists to focus on the clinical side of dentistry.
“In the DSO model, the business team runs the business, and the doctors get to focus on excellent patient outcomes,” Jones said.
Some question whether dental care might suffer under a larger corporate entity, Jones added. But, he said, “When done well, best business practices combined with competent clinical practice actually increase the quality of care and the overall patient experience. Additionally, access to dental care for patients is greatly improved when dental practices develop the size and scale to provide care at more convenient hours and reduced costs.”
According to Stoner, DSOs can also make succession planning easier.
“Older dentists often find it difficult to find a younger person who wants to take over their practice,” he said. “It’s a lot easier to go to an institutional buyer.”
But Stoner cautions, “Not all DSOs are the same. If a dentist is considering a DSO, they need to do their due diligence to understand with eyes wide open what it means to be a part of a larger organization. Is the DSO going to mandate a way to practice dentistry that is contrary to their personal approach? How will the DSO compensate them for on-going work? Is it performance based? Before making any decisions, they should talk to other dentists who have been with the DSO for a year or more.”