What made a DSO critic switch sides

NextLevel Practice, a dental practice management coaching firm, recently launched a DSO that aims to bring power back to the hands of clinicians.

Through the NextLevel Doctors Group, dental practice owners can join together to form their own group that is then sold to a private equity firm. Each practitioner will also receive NextLevel Practice's coaching on leadership, team unity and profitability. The coaching firm will also help practitioners educate patients on the oral-systemic connection.

NextLevel founder Gary Kadi recently spoke with Becker's about how his mindset on DSOs changed and NextLevel Practice's goal for the DSO.

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

Question: Why was NextLevel Practice interested in starting a DSO?

Gary Kadi: I was a staunch advocate against DSOs, so that's where it started. It started by "there's no way I'm going to do this." I'm a maniac when it comes to the men and women who go to dental school, are clinically sound, and then they have to go run a business and they're not set up to win their game. The other problem is only 4 percent of dentists can retire and live the same lifestyle. So I got really obsessed about having them be financially free, frustration-free, and giving them an opportunity to focus on the clinical side of their business and remove the downsides of the business side of dentistry. The early DSOs did not afford that.They actually interrupted their clinical autonomy. They stripped the soul of their decision-making. I was like, "It goes against every fiber of what I stood for for the private practitioner." 

The turning point was when consolidation started ramping up about five years ago and about five of my clients asked me to represent them and investigate DSOs that they were looking to join. So I became an accidental expert in getting a behind-the-scenes look at the truths behind the evolution of DSOs. I believe change happens under four conditions. We're forced to change, there's enough hurt or pain to change, you know better to change or you raise your deserve level and you go, "Hey, I deserve better, so I want to make a change." For this, I learned what was in the way of me being able to serve my doctors, was the way. I opened my mind up and did a bunch of research and found the next evolution of DSOs. There was a competition among DSOs, the original six, and they pretty much dictated how things went. But as smaller groups started to form, everybody had to get more competitive. What I saw was that the scales leaned toward balancing out the control of power from the shareholder equity partner investor to the actual clinician. That's when I got to see that I could actually accomplish more by grouping my doctors together that are consulting clients into a DSO and then we could dictate how we're going to create the DSO of the future.

Q: What were some other lessons you learned about DSOs?

GK: The first thing I would say is that the biggest concern about joining a DSO is that everybody tells you it's going to be fine, but how do you know it's going to be fine once you commit to it? I designed a way to put the leverage in the hands of the clinician. The clinician has the control and power, not the private equity firm. Then I got to see that there's some DSOs that we were able to use their expertise of centralized services, which dentists hate dealing with anyway, like insurance verification, accounting [and] IT. Those are more commoditized services that when you buy them as a group, you get them cheaper and you could provide more for your team. My number one mission is the triple win: the well-being of the clinician, the well-being of the team, and the biggest one is the well-being of associates ,and how do we get associates out of debt? We were able to create under these conditions because there's more dollars available and there's less expenses, so we had a way to pay down associate debt, which is a huge problem in today's world.

Q: What can you tell me about the first eight partners of the DSO and how you plan to expand?

GK: The dental service provider is one of them. I am the consulting firm. Having a consulting partner allows for coaching, consulting and training to be a part of the DSO, and using an expert who's been doing this for almost three decades as a partner with a vested interest in everybody doing better all the time. That's one of the things that makes it unique and then we have our other groups all across the United States. It's West to East, and the reason why we did that was because these are our leaders inside of our consulting community. So they went first and we're going to be building regional pods in the eight states we're starting in.

We're going to expand from inside of our consulting clients because we are built on attraction rather than promotion. What we mean by that is we're going to take a niche position. Our vision is that we are all like-minded and we want to leave dentistry better than we found it. Our purpose behind this is we want to enhance the quality of people's lives. So it's about the impact we're going to make on patients, team members [and] owners, and then we're going to raise the standard of care in dentistry. And there's a niche we invented called Complete Health Dentistry. It's where we educate the patient that the mouth is the gateway to whole body health. What makes us unique is that we have a collaborative community of interdisciplinary practitioners that we're bringing together for the greater good of not only dentistry, but for healthcare and the overall health and well-being of the patient.

We plan on being in every state in the U.S. within five years. And the way we're going to build pods is we have an education system. Originally, most dentists had the vision of building their practice, doing well by doing good and then at the end of their career, selling to an individual. This consolidation came up and it's very daunting for people. It's overwhelming. There's new language called LOIs and QofEs and things that, even if you had an MBA, you couldn't get in a lifetime. So what we did was set up an educational system that takes the complexity out of understanding what entering into a DSO is, what your options are and then the process you're going to go through. 

We're educators at heart. So we used that mindset as a company to build a one-day immersion, which we're going to be doing on a quarterly basis. So there's going to be certain criteria with which [doctors] can participate in and if they meet that general criteria, they can go to a one-day immersion where we remove all the complexity of understanding what the options are because there's 350 DSOs that we know of that we can place our doctors in. So it's not just about placing them into ours, it's about doing the right thing for the right individual. NextLevel Doctors Group may not be a good fit, but we have the ability to place them in a right fit place. So this is good for anybody, this quarterly immersion, it's a live interactive session where we have the entire team of people who take all this complexity and simplify it and give you a step-by-step process so that if you're just thinking about this, you can say, "Hey, this is going to be right for me," or if you've already thought about it and you tried it and you decided not to go into a DSO because it was just too overwhelming and too scary, we help remove that. Or if you're ready to go and you have good wisdom, but you're really looking at a group where you can have full clinical autonomy [and] you want to take care of your team in a brand new way, you'll be able to learn how this is unique to provide that for you and it's not like smoke and mirrors, it's a real life thing that's actually happening.

Q: What are some trends in the DSO and private equity fields that you are following right now?

GK: Well, number one is the cost of money. We know when the cost of money goes up, our doctors are going to get paid less. I'm looking at the indicators that are going to be the elements that are going to affect the multiples doctors can get for their practice. So there's a sense of urgency around this for two reasons. We know this industry will consolidate at about 60 percent and we're about halfway there. So what's happening is we're looking at the pipelines and seeing how many people are in those pipelines and about when we think the 60 percent consolidation is going to happen, and then we're looking at the money and the multiples our doctors are getting because if our doctors don't get the generational wealth we're getting now, that's going to affect our future. So it's an outside constraint that we need to pay our attention to.

We're right now looking at the mid-adopters. They're much more analytic. They have a lower threshold for risk tolerance. So we're creating ways for mid-adopters to understand the decisions and the steps they need to go through. So we're paying attention to who is buying now or who wants to sell now. We're also looking at the age groups. We're seeing more mid-career practitioners thinking they don't have to wait until the end of their career and make moves now. It makes sense no matter where you are in your career to do this because we have doctors who are in their early 40s and late 30s doing this, and that's unheard of as well, but it makes a lot of sense for them. But most early or mid-career doctors don't understand why they would sell now. We have an educational process that does that as well.

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