Over and over, I get questions about DSOs from young doctors considering employment as well as doctor owners considering selling. Let’s take a quick look at the facts, current situation, and future possibilities. This will be based purely on interactions I have had with DSOs purchasing practices, the resulting doctor becoming an employee, and conversations with young doctors during the process of interviewing and subsequently working for more than a dozen different DSOs. To set the stage, I have no animosity toward any DSO or any type/style of practice. As in life, there are going to be good ones and bad ones. All of the opinions will be subjective and some will be objective. These thoughts are only based on my experience and second-hand discussion with doctors that have had both good and not so good experiences with DSOs. Whether you are a doctor considering selling to a DSO or a doctor about to consider a job with a DSO, each and every detail will have a lot of value as we go through the DS”Ohs”!
Dental Service or Support Organizations have been around since 1975. Nothing new as far as the legal description is concerned, but there are many things that have changed since the Association of Dental Support Organizations (ADSO) first formed in 1975. We have talked about this before but let me bullet point 40 years of change that has influenced the rise of DSOs.
- Prior to 1998, almost 96% of dental graduates became dental office owners. Fast forward to 2022, and we see less than 50% of graduates are becoming dental owners. This is driven by the ratio of male to female graduates, huge dental school debt, generational lifestyles, and work preferences. Bottom line: We have never had a time in the past with so many “employee” dentists available. This fuels the needs of large corporate groups to have an inexhaustible supply of associates.
- After the triple threat of three back-to-back recessions from 2005 to 2008, we have seen a lot of retired dentists coming back into the work force driven by the reality of a 47% loss of their retirement accounts during the same period.
- Ancillary to the Great Recessions and in the same time period, we have seen older doctors put off retirement from 62 years to 71 years plus of age and many needing to continue in practice until they die.
- During the last four decades we have seen the increase of dental insurance penetration in “average town USA” rise to about 74%-76% with some areas even higher. The “managed care” tsunami has washed through all areas of dentistry and pushed Fee For Service (FFS) practices to minimal percentages. The ADA, through their research department, claims that there are only about 7% of FFS dentists in the US currently. In that group we would also have public health, research, and older dentists that just don’t want to fool with the hassles of being in-network.
- Along with increased insurance coverage, we have seen a consistent decrease in reimbursement amounts for most of our services creating added stress on our practice overhead.
- The cost of doing business has increased every year but because most practices cannot raise their reimbursed fees, we find ourselves faced with cutting costs or increasing production speed and adding more work hours.
- The migration of a majority of dentists into cities where the competition and survivability are more difficult has created areas where most practices will be relegated to being mediocre from a growth and production perspective.
- Generational proclivities of young doctors wanting to work less, make more money, and enjoy more of a nomadic lifestyle result in doctors jumping from one job to the next based on perceived increase in pay or benefits. There just are not any free lunches. Engagement, hard work, continued commitment to a lifetime of embracing change and raising the bar on our business and clinical acumen is just the entry fee for being successful in the new dental economy we find ourselves in.
- The “commoditization” of healthcare in general. This is the trend created by marketing, insurance companies, and even dentists that a cleaning is a cleaning, and a crown is a crown mentality so that a large percentage of the population believes that the wisest thing to do is choose a healthcare provider based on the dollar amount of out of pocket expenses. This subtle shift in consumer attitudes not only affects the buyer of our services and products but also the dentists themselves. They, the dentists, also shop with price affecting their choices. We have already seen the result in vision, chiropractic, pharmacies, and medicine. Shift happens and we are currently in the headlights of an oncoming train.
- The “reality rhetoric gap”. Too often I see doctors boasting about the benefits of a FFS practice, yet they are not truly FFS or what they say and the reality of what they do is in conflict. We still have a majority of dentists that are just average and struggle to pay the bills and retain a team. At its simplest level, these very same FFS doctors don’t want to be in-network for dental insurance patients yet when they buy their medical insurance for themselves or their employees, they purchase a PPO for medical. A Double Standard seems to exist. I am 100% for an FFS practice if it allows you to pay off your debts, save 20% every year, and have a practice where your team is paid well, stay forever, and the patients beat a path to your door.
- Consumerization of health care. As a point of view, remember this has already happened to pharmacies, vision, chiropractic, medical, etc. The same forces we face today have pushed every other healthcare provider to accept in-network fees, rules, and regulations, along with the statistics or reality of consumers wanting to use their insurance as well as becoming more educated purchasers of services and goods. We are a small, consumer driven business where our patients vote with their feet and wallets. They get to choose with whom they purchase products and services, and if you are not growing 15%-20% a year, you must assume you are not meeting your patients needs. Consistent growth is the number one indicator of you doing things well. It’s time to self-diagnose and own our results. Good or bad, we should be accountable for our results. You can’t manage what you don’t measure and you can’t measure what you don’t understand. We, as a group, must elevate ourselves to a new level of business acumen. We need to start losing our excuses and begin to rewrite our future.
- We have never graduated more dentists in the US than we are today.With the lack of graduates becoming owners, we can expect large corporate groups to continue to grow.
- Supply and Demand has silently and consistently foiled our best efforts to do dentistry like we always have. In 1975, 16.4% of the teeth in the average adult were decayed, missing, or filled. It was a time of high demand, with hardly any competition. Fast forward to 2019 and we only have 2.7% of the teeth in an average adult being decayed, missing, or filled. Add to that the vast number of graduates and you can see that supply and demand are taking a nosedive for our profits and possibility of success. Economics is clear: When the supply and demand graphs cross, there will be an enormous correction in survivability of doing business the way we have always done it.
- Finally, but maybe even worse than the first thirteen numbers, our dental schools are turning out doctors that are suffering due to a poor curriculum that fails to prepare them for the realities of the practice of dentistry. Diminished requirements for graduation clinically, little to no practice management training, and an image of dentistry that hasn’t been used in decades is the norm.Recent graduates end up with an insurmountable debt and are challenged to justify the relevance of the education they got to prepare them for practice. The current curriculums are a joke. There is no other reason for GPRs than the inability of our schools to adequately train us to be competitive in the dental economy we find ourselves in. It is time for a change. It will be up to you, as leaders in dentistry today, to challenge the status quo and demand change in our education systems. Rewrite the future for the dentist of tomorrow.
Next time we will go into detail about DSOs themselves, followed by how it affects a selling doctor or the experience you might have working for a DSO.
Michael Abernathy, DDS