Jim Mizouni is Chief Development Officer at Sage Dental.
getty
The dental service organization (DSO) model has grown substantially over the last two-plus decades, and the American Dental Association predicts DSOs will experience a growth rate of nearly 100% between 2018 and 2025 and more than triple their market share by 2035.
DSOs are independent companies that provide business management and operational support to dental offices that are either newly launched by the DSO or are established through the acquisition of a private practice. As a disclosure, my company Sage Dental is one provider of such services.
In this article, I will outline some strategies for the best success for dental practice owners seeking to partner with a DSO.
Where should dental practice owners start when considering a partnership with a DSO?
When selling a practice to a DSO, there is a range of factors for dentists to consider beyond just the asking price. By carefully examining all the components involved as well as valuation, both parties can determine if the acquisition is going to be mutually beneficial in terms of work culture, technological compatibility, administrative and operational expectations and scalability.
For dentists thinking about selling a practice that they have spent years or even decades establishing, the deal should not just be a matter of chasing the shiny object of a big payday.
If the sale to a DSO has been initiated by a dentist who is planning to retire a year or two after the acquisition, getting the most valuation for many years of hard work is typically a top priority in the negotiation process. But legacy may be an important factor as well, aligning with a group that will maintain or even enhance the reputation of the practice going forward, even after the doctor has retired and has already hung up the burnisher.
Conversely, for younger dentists who are concerned not only with monetizing some of their equity but also with building a long-term clinical relationship, there are many details to consider when opting to partner with a DSO.
What other primary considerations need to be made?
In addition to the payout of selling a practice or creating an equity-based partnership, independent practices that join a DSO should closely examine the level of administrative support they’ll receive, the level of marketing support to grow the practice and potential technical upgrades in both hardware and software to enhance the practice’s diagnostic procedures.
As most DSO groups in the U.S. are privately owned, it can be difficult for a practice owner to find public resources to learn more about the financial stability and operational quality of a DSO. Looking at patient reviews online can help, but the quality and quantity of reviews are never definitive, as online reviews can sometimes be manipulated into looking overly positive and rosy.
It is always a wise idea when considering a potential DSO partner to contact dentists who are currently in that DSO network to garner feedback. In addition, it's perfectly acceptable for a practice owner to ask a potential buyer detailed questions about their strategic growth plan and how that DSO is differentiating itself from its competitors in the marketplace.
Weigh all the factors, not just the payout.
As the independent dentist is weighing factors beyond just the value of the practice, they should actively vet more than one DSO during the process to ensure that the partnership they strike is the best cultural match possible. Because the partnership will mark the start of a long-term relationship, it’s more likely to be successful if the corporate culture of the DSO and the acquired practice are aligned and each entity shares similar values.
To ensure a harmonious transition after the deal is signed, during the pre-acquisition phase, both sides should lay out a plan for what the growth expectations of the practice will be. This planning includes how many new team members should be hired and what types of roles within the practice need to be added, whether strategic planning and budget setting will be centralized or decentralized, and the level of marketing and advertising support the DSO will provide to the acquired practice.
Ensure alignment on all parameters.
Other factors to consider include what changes, if any, the practice owner will need to make to their hours of operation, what upgrades will be required to software and platforms for appointment setting, billing processes, and other functions, as well as diagnostic equipment enhancements such as AI technology. And with all of those potential changes, a training program should be provided by the DSO to ensure that staffers are taught how to use new systems and technologies.
Lastly, it’s also important to confirm how the practice will need to adapt to the types of insurance that patients will be using for treatment after it joins the DSO. If the practice had previously only served patients who were covered by certain carriers, it might need to expand its services to patients who are part of certain DHMO plans, PPO networks as well as patients on Medicare or Medicaid.
By taking into account all these parameters when finding the right DSO to partner with, the independent dentist can get a clear picture of how both the business and clinical operations of the practice will function post-acquisition. With expectations aligned and a clear roadmap in place, the practice owner and DSO will form an alliance that is mutually focused on delivering the best patient care possible.
Forbes Business Development Council is an invitation-only community for sales and biz dev executives. Do I qualify?
