You’ve probably noticed a trend in the last two years–dentists across the country are selling their practices to DSOs. But along with those sales have come horror stories perfect for campfires and marshmallow roasting: abysmal patient care, loss of autonomy, feeling stuck and helpless. It can feel like an impossible question for a practice owner–what is more important: a profitable buyout, or continued patient care and professional satisfaction?
Luckily, things in the DSO landscape are changing. That’s why our founder, Gary Kadi, has agreed to host a new monthly column for Dental Economics magazine that discusses the current DSO landscape and offers advice for practice owners trying to decide what to do.
Gary’s first column–The question on everyone’s mind: “Should I stay or should I go?”–appeared in DE’s May issue. Here are a couple of key takeaways from his discussion.
The Cons of DSO 1.0
The earliest iterations of DSO–the ones that practice owners are most familiar with–had such striking drawbacks that Gary advised all of his clients to stay away from them. These cons included:
Loss of Autonomy: Dentists who joined DSOs early on reported a loss of autonomy and control over their practice. Some felt marginalized and restricted in decision-making, even affecting the quality of patient care.
Cultural Clash: Integrating a practice into a larger organization meant adapting to a new culture and set of values. If a practice’s philosophy didn’t align with that of the DSO, it would get steamrolled, causing dissatisfaction and compromised patient care.
Limited Influence: In a larger DSO setting, the dentist’s influence over practice management decisions was significantly reduced. Standardized protocols and systems limited their ability to implement personalized approaches or make practice-level decisions.
The Evolution of DSOs
As more and more dentists became interested in DSOs, the landscape started to shift. The first significant shift was from a buyer’s market–where DSOs called all of the shots–to a seller’s market, where practice owners have more of a say in setting terms. The DSOs themselves have also changed, offering solutions to many of the problems listed above.
In his article, Gary calls this new landscape DSO 3.0. And while he was a resistor to 1.0, he suggests that DSO 3.0 is a sweet spot for practice owners, offering a potential balance between the significant financial benefits and the autonomy and values that dentists still want to retain.
Pros of DSO 3.0
Some of the benefits of DSO 3.0 include:
Financial Benefits: Selling to a DSO can provide a substantial financial opportunity. DSOs offer competitive purchase prices, resulting in a significant return on your investment. This can be particularly beneficial for dentists burdened by out-of-control debt.
Potential for Growth: DSOs possess the resources, expertise, and networks to support the growth of your practice. They can provide access to marketing strategies, operational efficiencies, and advanced technology, enabling you to expand your patient base and increase revenue.
Administrative Support: By selling to a DSO, you can offload various administrative tasks such as billing, insurance management, and staffing. This frees up your time and energy, allowing you to focus more on providing quality patient care and reducing practice owner fatigue.
Evolving DSO Models: The emergence of newer DSOs and private equity (PE) firms has led to innovative DSO models, empowering practitioners and offering more autonomy. Dentists now have more options and flexibility when considering selling to a DSO, including rolling up with other liked-minded practice owners to create their own DSOs.
Above all, Gary warns, it is essential to seek professional guidance and engage in open communication with the DSO to ensure a smooth transition. Ultimately, making an informed decision based on your personal goals and the specific terms and culture of the DSO will help you navigate this important milestone in your career.
With extensive experience in practice management and DSO 3.0, NextLevel is an ideal resource for practice owners looking into DSOs. Along with a 30 minute free strategy session, NextLevel also offers practice valuation services so dentists can enter DSO negotiations with a clear understand of their practice’s current and potential value, as well as a 2nd Opinion service for practice owners who want a neutral party to review an offer they received from a DSO.