Dallas-based Smile Doctors, an orthodontics-focused DSO, introduced a joint venture partnership model for its partner doctors in October that allows for partners to hold ownership of practices at the local level and also join in the success of the DSO on the network level.
J. Hedrick, the company's CEO, connected with Becker's to discuss the impact of the structure and what other programs they have in the pipeline.
Editor's note: Responses were lightly edited for clarity and length.
Question: Where did the idea of the joint venture partnership model come from and how does it set Smile Doctors apart from other dental organizations?
J. Hedrick: I think you always need to have an outside-in approach to business and you always need to be trying to consistently test your model. You can often have historical outcomes dictating your future outcomes. We looked at it by asking whether there were needs in the marketplace that may not be met. We heard "I don't know if now is the right time for me to sell" a lot. We were able to create a structure where doctors don't have to give up all the upside of their practice and keep some of it, yet you are still able to diversify and take some chips off of the table, and you are able to be part of the larger organization and benefit through equity with that. It feels like, to us, it is the best of all worlds—you get the support that improves your quality of life, you get to continue to participate in your practice economics and you get to participate in the overall growth of the organization. We felt that adding this third layer of joint venture at the site-level location really solved some of the needs that doctors had about joining.
Q: Are there any other plans in the works to launch other programs to attract new affiliate doctors?
JH: The answer is yes, and some of it we'll keep close to our chest. One of the things that we have announced is that we are working on de novo programs with our existing doctors. We're basically doing joint venture models where we can front the capital and help them start their own practice with all of the support from Smile Doctors. It allows us to expand our base and allows the doctors to make more money. It is a great tool for associate doctors who might have come out of school with a lot of debt because we have the ability to help fund and get them started in a de novo, but they get to participate in the upside. We are not going out and building a de novo and then putting a doctor in. We are saying, "Dr. Smith, we believe in you, you're a great doctor who has joined us as an associate, and you are aligned with our culture; we want to bank on you and we are willing to put our money where our mouth is." We want people here for their careers, so we are always looking for more ways for them to get involved. We are very excited about launching a joint venture de novo plan with our existing doctors.
Q: When you are launching a de novo practice, what are some of the characteristics are you looking for in one of your doctors?
JH: We want, first and foremost, cultural alignment and doctors who are committed to providing the best patient experience. At the end of the day, we believe in the ultimate patient experience. They can be doctors who have already proven that they can build a successful practice. It de-risks it for us and them because they've already done it. Now they can do it without having to hire the contractor, find the site or negotiate the lease. All the things that are a headache, we can take off their plate. We also want to give a path for orthodontists who come out of school with a lot of debt and do not have the financial resources to go buy an existing practice. It lowers that barrier to entry for them. We do want them to work with us for 12-18 months before we do that because for us it is about that cultural alignment and building the organization with the best practitioners in the U.S.