Sage Dental plans to expand in new states in 2024: Q&A

Sage Dental has big plans to continue its expansion in the Southeast next year.

The Boca Raton, Fla.-based DSO has expanded its network by nearly 20% since the start of 2023, reaching more than 120 offices in Florida and Georgia.

Chief Development Officer and Senior Vice President Jim Mizouni recently spoke with Becker's about the company's growth, the state of recruitment challenges in the dental industry and how economic challenges will affect DSOs in 2024.

Note: Responses were lightly edited for clarity and length. 

Question: How has Sage Dental's business model contributed to the company's growth?

Jim Mizouni: We have a very specific model. If you think about all of the groups out there, I would say the more common dynamic, especially for groups that acquire, is to more or less leave the practice they acquire alone. They may change purchasing systems or IT systems, and they may change out some of the suppliers or labs, but generally, for most dental patients, it's very hard for them to see whether or not their dental practice is a privately owned practice. For Sage, we have a very specific model. They're all branded and we generally provide the same services in every one of them. We have specialty [services] as well as general [services.] We've got a robust hygiene program in all of them. The appointment setting process is consistent and the technology [and] marketing is consistent. So one of the things that's helped us to grow is that we're doing things in a very consistent, replicable fashion. 

It's easy on the de novo side. It's easy to have the same type of real estate, the same type of equipment, etc., but it's tough to do that on the acquisition side because the acquisitions come in all shapes and sizes, revenues, number of doctors and procedure mix. One of the cool things we've been able to do is we've been able to fit those acquisitions into that same consistent model in a way that creates value for us, the selling doctor [and] the patients. That makes us a little bit unique within our space, but that's how we've been able to grow so quickly. We've gone from about 59 to 122 in about 30 months, so that's a fairly good pace. 

Q: Are there any plans to expand into new states?

JM: We have some opportunities lined up. We're probably going to expand into Tennessee and Alabama in 2024. We do want to be contiguous. There are certainly other groups of our size where maybe they've got some locations in Arizona and Michigan, some locations in Pennsylvania and some locations in Texas. That's not how we want to operate. We want to be able to get density and proximity. We're not going to jump from Georgia to Pennsylvania. We're going to go from Georgia to South Carolina or Tennessee or Alabama. We're also going to grow with some concentration. We want to get enough density so we can support them operationally and clinically. 

Q: What kind of progress has Sage Dental made with incorporating artificial intelligence into its practices?

JM: It's going really well. AI is so new that the technology is changing and it's not just the technology, it's also the integration. So whatever the radiography software and equipment is, you want AI software solutions that seamlessly integrate with that. There are multiple companies that are in that space. They're all working with other software companies in terms of trying to streamline this process so that when the patient comes in, it's completely integrated within the patient file, the treatment plan presentation [and] the practice management software. We started with Pearl and we've been very successful, but there's a lot of work to go in terms of figuring out how this is all going to ultimately be in one fully integrated, consistent package and I think there are going to be some cool developments going forward. 

Ultimately, it has to make sense for the way that it's presented to the consumer. It's not about the backend technology, it has to be something in an operatory that is easy to use for the doctor and for the patient to understand and interpret. It's going well, but it's still early. I still don't know that most patients are aware of what [AI] is and how it can give them insight into their own treatment plan, and it's still new for a lot of clinicians who are adapting to incorporating that in terms of their diagnostics as well as the treatment plan presentation. 

Q: What kind of mindset are you and other Sage Dental execs in to finish 2023 on a high note?

JM: There's always a push toward year-end. With almost every DSO, there's some kind of push in terms of utilizing their benefits before they reset at the end of the year. You're going back and looking at open treatment plans in which potentially the patient who was recommended certain treatment does not get scheduled. We have a patient service team and the cool thing is that it's in-house. In terms of outbound calling or trying to follow up with patients who have outstanding treatment plans, we can use that team to initiate those conversations as opposed to the office just being the one that always has to make all those follow-up calls and reminders. 

Q: What trends are you following going into 2024?

JM: The biggest thing on the DSO side is that the cost of capital is at an all-time high based on the macroeconomic factors and what's happening in terms of rising interest rates as the Federal Reserve tries to bring down inflation. Most groups grow through some combination of cash and debt and, frequently, debt is a big part of that. What you're going to see is that everyone is going to be much smarter about the decision process, about how they use that cash and capital ... A few years ago, interest rates were so low that the cost of capital was incredibly easy to procure. You didn't necessarily have to be that diligent. For the whole industry, the cost of debt and cash is so high that I think it is forcing people to make very difficult decisions in terms of understanding how they want to place their bets and prioritize their available resources. 

Anybody who's growing through de novos already knows this, but the cost of construction is at an all-time high. The cost of commercial leases is at an all-time high because all of these developers who are building these new locations, it's cost them more money than ever before to buy the land [and] to build the buildings, so you just have to be super selective. There's sometimes this feeling that no matter what you spend on, you're always going to have a return, and I think some people kind of over-extended themselves. In that type of environment, the winning concepts are the ones that are diligent and consistent but also are really focused on patient outcomes. It's not just about how big you can get. It has to come down to what value we're creating for the doctor, the staff and the patients because in a tough macroeconomic environment like we have right now, I don't think everyone is going to win. There are some groups that are going to run into difficult times. Some groups may stop growing. You're going to start to see some separations where successful groups are going to distance themselves from groups that maybe are not as good in terms of how they're operating. 

The second thing is understanding the role of technology and delivering outstanding clinical outcomes. It's on the hardware side, it's on the software side, it requires a lot of investment, and beyond the investment, it requires a tremendous amount of training. It requires patient education about what the value of all this is. Those are two of the biggest things. Third is recruiting. Recruiting in the dental industry right now is probably the single biggest issue. Especially [in] competitive markets, getting really good doctors, hygienists and dental assistants. It's proving to be more difficult than ever before in the post-COVID landscape. It's forcing groups to be smart about how [they] can be an employer of choice. Through compensation, culture, recognition and how we treat our teammates, how can we position ourselves to be a place where people want to be and want to stay?

Q: Are recruitment challenges worse post-COVID than during the COVID-19 pandemic?

JM: I would say yes. What happened during COVID, especially with smaller practices or practices that maybe had an older doctor who was thinking about retiring anyway, you saw some practices close down and never reopen. There was a lessening of the competitive landscape, so there were available team members out there who had gotten displaced as well as patients. Now that that dynamic is over, I think you're seeing tremendous competition for quality individuals and you're seeing things like hygienist compensation rates soaring in highly competitive markets because you've got more people looking for great hygienists. There's been a huge push by a lot of groups to try to bring [dental assistant] turnover down through mentoring programs and education programs so that there can be more stability in that position and you can retain your best and brightest long-term by offering them a path forward.

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