5 concerns with private equity in dentistry, per 1 dentist

While private equity has the potential to uplift dental practices and drive growth, there are several ways it can hurt the profession, according to one dentist owner. 

Scott Ballard, DMD, of Ballard Family Dentistry in Saginaw, Texas, recently spoke with Becker's about his concerns with private equity in the dental industry. 

Editor's note: Responses were lightly edited for clarity and length. 

Question: Is private equity hurting or benefiting dentistry?

Dr. Scott Ballard: I have seven practices, about $20 million [in] collections and decent earnings. I opened my first office 18 years ago. I work with 17 [general practitioners] and specialists. I've had numerous [private equity] firms approach me unsolicited and made generous offers, which I have turned down after careful review. 

I have several concerns. The first, for the profession, is that private equity firms are pricing dental offices out of reach of solo practitioners. They are paying based on a multiple of EBITDA rather than a percentage of collections (which is great) but their firms can simply pay a higher multiple than a solo doctor can. That adds to the crazy debt most new grads have.

Also, some established selling doctors are concentrating more on jacking numbers up in prep for a private equity sale, rather than on the long game of quality of care in prep for sale to an associate. That's not good for our collective reputation.

Other concerns I have is that private equity firms are essentially thinking of dentistry as a commodity like burgers or cellphones or shoes — move enough product to make quarterly numbers. This sounds hokey, but dentists have a sacred trust with patients. We are obligated to offer treatment options based on patient need and desire rather than hitting numbers. Do I use goals to motivate? Of course. But I also work with my doctors to ensure they always first honor the trust patients give them by offering all options equally, rather than pushing high-production procedures. Do all private equity offices put money first? Of course not, but when they run the show there is a danger of losing our needed autonomy. 

Another concern I have with PE is what happens post-sales events with operations. Will they continue offering the autonomy my patients deserve? Will they keep the culture my staff have created?

Financially, I also have questions on holdback cash-outs. There's a lot of fine print in place that seems to muddy the sale of the last of the seller's equity. 

The above does not mean I think all doctors working for private equity-owned offices are dirtbags. There are scum solo doctors and scum private equity docs. But I know patients that come from private equity-run offices complain of the high doctor turnover. How much harder is it to build a long-term relationship with a patient if they have a new provider every two years?

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