Large group practices and corporations dominating the dental industry may be an irreversible trend at this point, according to one dentist and CEO.
The environment is currently much more difficult for solo dentists and practices compared to dental service organizations, as large companies often have access to more lenders, can negotiate with banks more easily and have a better grasp of effective marketing.
Here is why Joshua Elliss, DMD, CEO of Encanto Dental Group in Deming, N.M., believes that the trend pushing toward corporate dentistry won’t be stopped anytime soon.
Editor’s note: Responses have been lightly edited for clarity and length.
Question: What are your predictions/expectations in terms of mergers and acquisitions and consolidation within the dental industry going forward?
Dr. Joshua Elliss: My predictions are that, despite the old guard sitting around in dental association meetings decrying the takeover of our profession by private equity firms, they will still sell their offices to them.
The new crop of dentists graduating seem to be significantly different in their career goals. Those that want to own their own practices seem to think that the ideal is to have five to 10 practices and somehow sit back and work two to three days a week. If they do get to that many practices, they will understand that management and leadership involves quite a lot of work and that they just can’t sell to any old dentist, so they sell to a DSO. Those who don’t want to own their own practices seem to want to work for someplace else. My belief is that these individuals now make up the majority of people in dental schools, while 20 years ago most people wanted to own their own practices.
Another significant driver for DSO growth is that high interest rates favor corporate growth over private practice growth. For the vast majority of dentists who own their own practices, they may get one or two practice loans their entire careers. Dentists may have one or two lenders, DSOs usually have access to multiple lenders, can negotiate contracts with landlords better, can negotiate between banks, understand building costs and times, understand value of old practices, understand marketing better and pretty much can out-compete new dentists on everything that matters. So not only will high-interest loans make it more difficult for new dentists to start practices, DSOs can out compete them on everything and will be able to grow in harder business environments.
My prediction is the dental market will be taken over by large group practices and corporate-owned practices in the next 10 years. There are no current trends in the market that I can see that are pushing against this conclusion.
