No matter what you think of corporate dental service organizations (DSOs), they are now a major factor in the dentistry marketplace. DSOs continue to grow and, depending on the market, many dental practices will likely be impacted. Can your dental practice adapt? Some professionals worry that DSOs may change how dentistry is managed as a business. While you may not like the idea of your practice being acquired by a corporate interest, selling to a DSO may be your best financial move.
While DSOs seem to be everywhere, especially in urban markets, the actual numbers belie that belief. According to a recent study by the ADA’s Health Policy Institute, only about 7.4% of practicing dentists are in DSOs. Here at DDSmatch Southwest, we see the potential for growth in that number. However, for various factors beyond the scope of this article, we don’t see DSOs becoming a majority of dental practices. That said, there are certain advantages to selling a dental practice to a corporate dental service organization. Ultimately, it comes down to your goals for transitioning your practice. Whatever those goals our, our team at DDSmatch Southwest is committed to helping you meet them. It’s important to us that the dentists we serve are making an informed choice. To that end, its worth discussing DSOs and how they are changing the landscape.
How DSOs are Changing Small Dentist Offices
DSOs work on the economic principle of scale. The more offices they have, the more name recognition they have with consumers. This translates into more customers through the door. Also, by purchasing equipment and supplies in higher bulk quantities, they can get discounts for volume, reducing their overall costs (although they do have added costs related to a larger corporate structure).
As a corporation with investment capital, DSOs may be able to expand more easily than a solo office. This would include everything from marketing, to opening additional offices, to offering more services, to hiring staff and associate dentists. In fact, in our experience, while DSOs will acquire single practices, they seem to prefer to buy larger group practices that allow them to grow as quickly as possible.
For a small office competing with a DSO, this may mean that the small office will have to make changes to stay competitive. This might mean increasing your marketing budget, investing in the latest technology, and increasing your office hours and services. Without an increase in revenue, however, these changes can be hard. If this seems burdensome, there may be a way for you to adapt without running your business into the ground.
How a Small Office Can Function More Like a DSO
For a lot of solo dentists, DSOs may be anathema. After all, you’ve worked hard to build a practice and reputation for quality, individualized care for your patients. Can a corporate organization ever replicate that? Well, whether a DSO can or cannot do that doesn’t matter as much as whether you can compete against the larger entity. The good news is you can. Here are some ways how:
- Bring on one or more associates. Expanding the number of dentists practicing under your roof will both increase your revenue overall and allow you to offer more services. Bring on associates with diverse specializations and you don’t have to refer work to other offices–keep it in house. Also, these associates may have new ideas that can make your practice better overall.
- Open a second (or third or fourth) office. If DSOs can benefit economically from scale, so can you. Maybe not to the same degree, but it could be enough to make the difference. If you can get similar discounts on volume purchases, you can funnel the savings into increased marketing. If consumers see your billboards or online ads and are as aware of your offices as they are the DSO’s, you benefit from the same kind of name recognition. And remember, you’re local. You were there serving the community before the DSO came to town. Leverage that.
- Combine practices with other small offices. If several dentists own their own individual practices, but operate within a shared space with shared staff, you can greatly reduce your costs. Those savings can be put into other growth-oriented business practices, like marketing or the hiring of associates. Also, you can consider splitting the costs of high price investments like new equipment. If the group sharing the space has a diversification of specialties, you can also have reciprocal referral arrangements, keeping it in house.
Most people get into dentistry to be dentists, not business managers. But a little entrepreneurial spirit can help you grow your practice in ways you might not have thought before. Remember, Goliath wasn’t brought down by the status quo, it was by David’s creative thinking.
Why You Should Think About Selling to a DSO
As mentioned above, at DDSmatch Southwest we want to help dentists get what they want out of transitioning their practice. That is our number one goal. But, the fact is, sometimes that means selling to a DSO.
When we talk to dentists thinking about retirement, we’ve found that every doctor has different expectations for transitioning their practice. That’s why our Trusted Transition Process includes so much more than just the dollar valuation of your practice. While a corporate organization may be solely focused on the bottom line, this has been your life’s work. You have a reputation, relationships with your employees and patients, and a role in your community. Concerned about what will happen to those things after your retirement? At DDSmatch Southwest, we care about your concerns and will put the time into finding you the right buyer to protect your legacy.
On the other hand, because you’ve worked so hard to build something of lasting value, it’s also reasonable that you want the best price you can get for your practice. You deserve to get all that you can out of a sale so you can enjoy the fruits of your labor during retirement.
So while selling to a DSO may not be right for everyone, it may be the right move for you. With capital to invest (rather than relying on financing), a DSO may be likely to offer more than an individual dentist.
Several dentists we’ve worked with are eager to give up the business management hassles, but not ready to be done practicing dentistry, especially with longtime co-workers and patients. DSOs often want the selling dentist to stay on for 1-3 years as an employee. This option allows you to end your career purely practicing your craft, not dealing with administrative headaches.
As DDSmatch Southwest, we’ve helped dentists transition in all kinds of different ways. Your goals are our goals. If you’re thinking of transitioning your practice in the next five years, call us to arrange a free Practice Transition Assessment and find out what we can do for you.