Good news, bad news for DSO leaders

There are several trends this year that could have either positive or negative effects on DSO activity and consolidation. 

Here are four pieces of good news and bad news for the DSO field:

Good news

Increased affiliation: Dentist affiliation has increased over the years as more dentists realize the opportunities that come with joining a DSO, including reduced administrative burden and financial support. Thirteen percent of dentists are now affiliated with a DSO, according to data from the American Dental Association. Thirty-two states also had an affiliation rate of 10% or more as of 2022 data. Research has also shown that dentists who have been out of dental school for 10 years or fewer are more likely to be affiliated with a DSO.

Technology: Many DSO leaders are optimistic about how new technology is enhancing patient care and improving efficiency at dental practices. Several DSOs are paying close attention to artificial intelligence. Colorado Springs, Colo.-based Peak Dental Services selected Pearl as its exclusive dental AI provider, while Heartland Dental recently added VideaHealth's artificial intelligence technology to its more than 1,700-practice network. 

Bad news

Staffing shortages: Staffing shortages continue to plague the dental industry, with dental hygienists and dental assistants remaining as some of the most difficult positions to recruit. Consulting firm McKinsey & Co. recently projected that the U.S. will be short more than 36,000 dental professionals by 2031. Additionally, dentists who are affiliated with DSOs have been found to be more concerned with staffing shortages than dentists that are not DSO-affiliated, according to a survey from the ADA's Health Policy Institute.

Economic challenges: Some DSOs have begun shifting expansion strategies and focusing on other areas of growth to wait out economic challenges currently affecting the industry, including inflated supply costs and higher costs of capital. Richard Hall, CEO of Irving, Texas-based U.S. Oral Surgery Management called macroeconomic conditions one of the biggest challenges facing DSOs, predicting these conditions to continue until the second half of 2024. Until then, he added that DSOs could begin merging out of necessity.

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