Over the next five years, DSOs will double down on technology and de novo expansion while adapting to evolving workforce dynamics and insurance challenges, according to one executive.
Thomas von Sydow, the CEO of Cornerstone Dental Specialties in Irvine, Calif., recently connected with Becker’s to share his predictions for what the DSO field will look like in five years.
Note: This response was lightly edited for clarity and length.
Question: What will the DSO/MSO landscape look like in five years compared to today? What will we see more of, and what will we see less of?
Thomas von Sydow. CEO of Cornerstone Dental Specialties (Irvine, Calif.): A few observations:
– AI is going to fundamentally change the environment, especially any practice that requires reliance on radiographs and images. AI is making Moore’s Law look like transcribing the bible in the 900s. It’s doubling not every two years but probably every two months. I think we are already at a point where what you can imagine will become reality very quickly.
– I see more and more de novos in the future. Sellers are still in the 2016 mindset. Yes, acquisitions come with revenue, but they also are very expensive compared to building out. You also have the massive challenge of inculcation of culture and systems. I see this where the services are easily marketed to the public. Again, I see AI solutions that may empower more patients to self refer based on a list of symptoms.
– Aggregation of larger DSOs absorbing smaller DSOs will be a wave in the foreseeable future, as will bankruptcy. While DSOs constitute ~30% of the market, many are very duplicitous in highly competitive markets like Texas. If you think about the value proposition of a large scale general or multispecialty platform, the unit swap of 1-to-1 is not accurate. For every well-run and right-sized DSO location, they can probably displace two to three individual operations.
– Licensing changes are going to allow large, well-operated platforms to lean into these changes. Extended function hygienists and dental assistants will be adopted in large platforms versus individuals who historically are slow to adopt. Also, I see the ability for a dentist or specialist to practice in any state, removing the massive barrier of geography. Look at skilled nursing or emergency room MDs — almost none of them do not move around.
– One large risk is organized labor encroaching in. If a CEO of a large platform with thousands of dental assistants is not contingency planning for this, it would be a major mistake.
– Transparency of treatment plans and costs will continue to open up. Larger platforms will be much more efficient at educating patients about this.
– Specialty care delivered in the same location: Many large DSOs have figured this out. Most have not. Even if the turnover rate drops, it’s always probably going to be 20%. So if you deploy a “super dentist” model and you have 1,000 associates, you are going to have to train 200 a year to do restorative dentistry to the clinical standards of the lead clinical ownership team. Add on implants, extractions, root canals and periodontal procedures — it’s not sustainable.
– Lastly, (this might be a prayer) the industry at large needs to figure out a way of rebuilding the dental benefits system, or fully educating the population on what they actually have: a coupon based on a 1970s cost of living index. Once you get the patient in the door, this is by far the largest obstacle, and it has to be addressed. It’s killing everyone’s revenue, while operating margins shrink. DSOs need to step up together and take this to the next level.
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