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?