DSOs are facing new and emerging challenges this year that have led executives to rethink their growth strategies and investments.
Here are four threats to DSO growth this year:
Low practice supply
Sixty-nine percent of DSOs expect to increase their acquisition activity this year, but fewer available practices could put a wrench in those plans, according to TUSK Practice Sales’ “Dental Market Report” for the second quarter of 2026.
The DSO field is experiencing a high-demand, low-supply environment that TUSK expects to continue for the next several months. TUSK stated that DSOs will likely become more selective of their deals, placing more scrutiny on financials, operations and practice performance projections.
Economic challenges
High interest rates and operating costs have led to financial challenges for several groups in recent years. LADD Dental Group said earlier this year that organizations that grow rapidly without appropriate support systems in place, such as operational infrastructure and clinical alignment, experience additional challenges. The group noted that future success for DSOs will likely rely on operational enhancements, including regional density, doctor support, clinical leadership and sustainable financial structures.
Increased oversight
An emerging hurdle for DSOs is increased oversight of their transactions and pushback from industry leaders seeking to protect patient care and clinical autonomy. Several states have introduced legislation to limit corporate entities’ ownership of dental practices and their influence on clinical decision-making. Kentucky recently modified its Dental Practice Act to bar individuals who are not licensed to practice dentistry or entities that establish dental reimbursement rates from controlling clinical decisions. Illinois is also weighing an amendment that would require any transactions involving healthcare facilities or provider organizations to be subject to the state’s reporting requirements.
Decreased Medicaid funding
Reduced federal healthcare spending could heavily impact DSOs’ ability to care for adult and child Medicaid recipients.
The One Big Beautiful Bill Act (H.R. 1), passed in 2025, outlined nearly $1 trillion in Medicaid cuts. The bill is expected to shrink state Medicaid budgets by $664 billion through 2034, according to a RAND study published Feb. 26. Additionally, the Trump administration’s fiscal year 2027 budget released April 3 proposes another $15.8 billion in cuts to the HHS Department, representing a 12.5% reduction from 2026.
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