The Rise of Dental DSOs: Why More Dentists are Partnering Up
As the dental profession continues to evolve, modern dentistry faces trends and outside forces that began long before the COVID-19 pandemic. It used to be that when a dentist wanted to retire after 30 or 40 years in the business, a younger dentist would buy their already-established practice. However, the rise of a concept known as a Dental Service Organization has affected one of the largest changes in the industry during the past few years. As dentists seek more efficient ways to manage their practices and make profitable departures, DSOs have become an increasingly popular solution.
If you are considering retiring from your dental practice or are an up-and-coming professional who would like to purchase a dental practice, a dental DSO lawyer can help you do so successfully.
What Is A Dental Service Organization?
A Dental Service organization is a company that owns and operates several dental practices and provides services including purchasing, marketing, and administrative support. The goal of a DSO is to improve efficiency and increase profitability by centralizing operations and standardizing systems across multiple locations.Generally speaking, DSOs purchase a dental practice and, through the use of a contract that includes an earn-out agreement, take ownership. For instance, a buyer might pay 60% of the purchase price in advance, but the seller will stay on as an employee for the next three to five years to collect the remainder of the balance. The DSO controls the financial aspects and business operations, and they own the practice. The dentist remains employed by the practice until the agreement period ends.
The expansion of Dental Service Organizations is not without its concerns. Many dentists and their patients are worried about the effect DSOs have on the quality of the care they provide. DSOs contend that they provide quality services to dental patients and improve access to care. Regardless of what stance you take on the topic, the number of DSOs in the United States has risen from roughly 100 in 2010 to more than 2,000 today. This section of the market is expected to continue to see a compound annual growth rate of 15.8% between now and 2030.
With the need for dental care constantly increasing, DSOs are certainly in an advantageous position when it comes to capitalizing on this trend. They can draw in and train new dentists and at the same time offer affordable dental services. Some DSOs also provide dentists with numerous advantages, including access to technology, support, and financial stability. Although this might make DSOs seem appealing to dentists who are looking to retire or sell their practices, the process can be time-consuming and requires due diligence.
DSO Pros and Cons
Any dentist contemplating making a deal with a DSO should take a look at the pros and cons. This will help them make the decision that best fits their current and future needs. Every Dental Service Organization is different, and the terms of the agreement you enter into will have a major impact for years to come.A few of the pros and cons you should discuss with a dental DSO attorney are:
Pros:
- Financial stability: DSOs allow dentists to have income stability, rather than exposing them to the income fluctuations experienced by independent dentists. Sellers also receive a percentage of the practice’s selling price up-front.- Support: DSOs provide both marketing and administrative support to their dentists, which allows the dentists to focus on the care of their patients.
- New technology: DSOs typically provide cutting-edge dental technology, which helps dentists give patients the best possible care possible.
Cons:
- Lack of autonomy: After they sell to a DSO, dentists no longer have any control over the daily operations of the practice.- Changes to patient care: DSOs often enact changes to patient care whether or not the dentist agrees with them. This can cause dissatisfaction and frustration.
- Culture clash: DSO culture often does not align with the pre-existing culture of the practice. This can be the source of numerous challenges and conflicts.
- Employee turnover: Selling a dental practice often leads to staff turnover, which can lead to a lack of continuity in patient care and general instability.
- Lower wages: Although DSOs provide stable wages, they sometimes require dentists to see more patients, which means working longer hours. This can result in either a lower income or job burnout.
Buying or selling a dental practice to a DSO is not something to be taken lightly. Dentists considering this option should weigh all of the pros and cons before making a choice. Making the decision that is right for you can set you up for a nice, cushy retirement, but the wrong decision can lead to lost profits and a lot of frustration.
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Posted - 10/02/2023
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