There’s no “universal approach” when developing a strategy for building a successful, scalable dental service organization (DSO). De novo or acquisition, branded or not, there are a range of factors to weigh to determine what makes a certain DSO a good fit for a dental practice owner and what, conversely, makes a specific practice a good candidate for acquisition from a DSO’s perspective.
This article will offer some things to consider when expanding a DSO’s footprint via acquisition as well as de novo offices, successfully scaling the business, and differentiating your DSO from the competition.
Deliver the Best Patient Experience Possible
Almost all DSOs offer doctors centralized services, so that is rarely a differentiating point between DSOs. However, there can be fundamental differences between DSOs in quality and type of locations, investment level in state-of-the-art facilities and equipment, quantity and quality of continuing education and retention programs, and the sophistication level of branding and marketing efforts. These differences in fundamental resources ultimately need to add up to something – delivering the best patient experience possible.
By incorporating the needs of potential patients first, business development teams can make better decisions about both de novo and acquisition strategy.
Partner with the Right Practice
To ensure a patient-centric and consistent focus, when a DSO is in the discovery stage of potentially acquiring a new practice, it’s important to determine if the merger is the right fit for both parties. There are factors to weigh beyond valuation, and a disciplined DSO growing through acquisition may find itself passing on acquisition opportunities that work financially, but not culturally.
While it seems counter-intuitive, DSOs should actively encourage selling doctors to talk to a number of potential DSOs during the selling process. Except in cases where the selling doctor is retiring, the decision to sell a practice to a DSO is the beginning of a long-term, and hopefully happy, relationship. Generally, the financial valuation of a practice will be consistent across multiple bidders, but post-acquisition clinical fit may vary significantly.
If a DSO has an established model and is not just an aggregator, how does that compare against the practice for sale-payor mix, treatment mix, growth capacity, willingness to add clinical team members, desire to be branded or not, preference for centralization or de-centralization, etc. For any DSO confident in their support and culture, inviting the doctor to compare potential acquirers helps accelerate growth, not the other way around, especially as doctor referrals become a bigger part of the lead generation process.
Determining whether both parties have found “the right dance partner” is almost always best achieved by in-person, in-practice meetings, not just by business development, but by clinical and operations support as well. By ensuring that the DSO and the practice owner have a shared vision and aligned expectations, both parties can work together to create a beneficial relationship built on the mutual objective of delivering excellence in patient care.
If You Build It… They Might Not Come
There are very few demographic areas in the United States where proximal access to a dentist is nonexistent. There are areas, many rural, where there is a scarcity of dental provider coverage, but these tend to be markets less developed by most DSOs due to concern over provider recruitment and retention.
Most DSOs focus on larger metropolitan areas, and it would be foolish for an organization in the process of scaling business via de novo offices to take the approach that “If you build it, they will come.” There is not enough brand differentiation in the DSO industry to assume that patients will see a new de novo in their area as anything other than “another dental practice”. Consequently, any DSO that grows the business by de novo practices needs to have a clear understanding of how their optimal patient profile fits within the new market they are targeting, and how it differs from their competition. This can be done through careful research using demographic analyses and segmentation studies.
In the U.S., high population growth states and markets get a disproportionate amount of attention from DSOs. But if multiple DSOs targeting population growth all enter the same trade area in a short period of time, what appeared as an attractive opportunity can prove problematic very quickly. This doesn’t mean that DSOs should avoid competition, but it does mean that understanding competitive density is an important part of the development process. In addition, there needs to be an answer to “Why us?”- convenience, better location, more services, stronger co-tenants, etc., something that will allow your location to compete and stand out from everyone else.
Twenty-First Century Technology and Clinicians Skilled to Use It
A critical part of differentiating your DSO, as well as preparing to meet the needs of patients in the upcoming decade, is to leverage the latest, evidence-based technological advancements in dentistry. This includes artificial intelligence (AI), intraoral scanning, and cone-beam computed tomography (CBCT) systems that help to provide patients with the best care possible. Dental practices that offer these twenty-first century dental technologies as well as teledentistry screening appointments, virtual check-ins, and online scheduling, can differentiate themselves from competitors that have not kept up with the advances of modern dentistry.
Frequently, DSOs describe their strategic initiatives in terms of doctor-based outcomes. But the organizations with the best long-term prospects will also measure excellence by patient-based outcomes. DSOs willing to measure themselves against both doctor and patient outcomes will find opportunities to remove friction and barriers in treatment plan presentation and acceptance that other organizations will miss.
Regardless of DSO size or number of practices, this is essentially a patient-by-patient business. Software and hardware technology in the dental industry is improving dramatically, but the key is to leverage that technology to improve actual human experiences and results, both for the practice staff and the patient.