Chicago-based Phase 1 Equity plans to focus on increasing practice capacity while continuing to expand into new markets this year.
The DSO, which supports more than 20 practices, entered several states last year, including New Jersey, Ohio, California, Tennessee, Louisiana and Pennsylvania.
CEO Mike Rice recently spoke with Becker’s to discuss the platform’s growth and goals for 2026.
Note: Responses were lightly edited for clarity and length.
Question: How would you describe Phase 1 Equity’s growth over the last 12 months?
Mike Rice: We’re proud of the growth we achieved, but I think it’s less about the numbers and more about the doctors, their practices, and in particular, the markets we added. Those were all extremely important and drove our excitement.
As far as numbers go, we added nine practices and 20 locations over the last 12 months. We currently have an excellent pipeline and are excited for the remainder of this year.
Q: How would you describe Phase 1 Equity’s model?
MR: We have a doctor-centric platform. We are majority owned and governed by doctors. We believe strongly in preserving local autonomy. You hear a lot about clinical autonomy, but I’ve also always believed healthcare is local. Maintaining local autonomy is part of that. The doctor and their staff have unique personalities and they deliver a certain vibe to their patients and community, so enabling them to continue to grow and foster that is important.
Another important point on our platform is the doctors have a real voice in our initiatives and goals, which are developed collectively by the doctors. They really help determine where we’re headed and the respective timing. I’ve been with several startups, and transparency and communication are key. You’ll hear many doctors throughout healthcare who will talk about bad experiences after they affiliate. A large part of that is communication. They either didn’t know about something, or they were told one thing and it turned out to be something else. Transparency and communication are extremely important for our model.
Lastly, our model is unique in its current stage and presents attractive economics for our doctors.
Q: Phase 1 Equity has expanded into several states over the last year. What brought on that out-of-state growth?
MR: We are a growth-oriented company. We take a very measured approach in finding the right opportunities. It’s not about adding a particular number of transactions, markets or states. We currently are looking at new markets but also expansion within existing markets. The right markets provide not only growth today, but organic and inorganic growth in future years, so that’s an important factor for us.
Q: What does the company have planned this year in terms of organic and inorganic growth?
MR: Organic growth is something we look for in every opportunity. Growth is talked about with the doctor and is part of our integration and execution plan. Organic growth has many levers and is part of our overall integration plans utilizing technology and best practices.
We also have some of our practices at capacity, which is a good problem. Whether it be technology, physical expansion or additional providers, we’ll look to alleviate those capacity constraint issues in the near term. We also believe in adult aligners as an organic growth opportunity. While it varies by market, we’re excited about the growth it can deliver. Long term, if you create the right culture for the providers and their staff, and create a great experience for patients, organic growth follows.
On the inorganic side, we are looking at opportunities in both new and existing markets. It can come in the form of additional affiliations with existing practices or de novo opportunities. We also have an active pipeline in the pediatric dentistry market where we have a lot of ongoing discussions. I anticipate entering that market within the coming year.
Q: There have been several DSOs that have shifted their growth strategy more toward de novos in recent months. What advantages and disadvantages come with opening de novo offices?
MR: There are many benefits to de novo growth. De novo growth, when successful, is a tremendous use of capital. In today’s environment, everybody’s holding onto their checkbooks a little bit tighter compared to say, 2021. You use a lot less capital up front in opening up a location versus buying an existing, highly profitable practice. With that said, each of them has their own unique risks.
Q: What trends are you following in pediatric dentistry and orthodontics?
MR: We’re clearly following the transactions in the industry and keeping tabs on new affiliations at the practice level. We’re also keeping track of money flow, whether it be recapitalizations or investments, at the DSO level. AI is a trend we’re also following closely. The applications in back-office operations, the patient experience and clinical applications continue to grow. It’s a fast-moving environment and it’s going to continue to advance. We’re approaching it very methodically, but we’re embracing it as it can lead to better employment and patient satisfaction, as well as better outcomes.
Q: What do you predict will be the biggest challenges for DSOs this year?
MR: Staffing continues to be a little bit of an issue. Staffing hit healthcare hard post pandemic, so improving hiring and retention is incredibly important to our doctors and their practices. It can vary market to market. Enhancing compensation and benefits to appropriate levels and creating the right culture will help both recruitment and retention.
Another issue is rising costs. We no longer have a low inflationary environment. Rising costs create margin compression. To help offset this, we are working on a number of initiatives, including AI.
Lastly, the current environment is very different from 2021 when the cost of capital was lower and that continues to impact the number of transactions and their respective pricing. However, we believe the macro environment will continue to thaw out over the next few years.
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