Oral surgery and orthodontics keep coming up as the specialties DSOs can’t stop circling — but three dental executives say it’s not the specialty itself that makes a practice worth acquiring. It’s the funnel behind it.
Three executives recently spoke with Becker’s to discuss their predictions for the dental specialties DSOs will target next and how they will evaluate these practices for potential transactions.
Note: Responses were lightly edited for clarity and length.
Question: What types of practices or specialties are going to be the most attractive for DSOs in the next five years?
Jessica Lo. Vice President of Operations of Urgent Dental Center (Indianapolis): That’s a hard one for me because in our model, we do try to keep as much in-house as we can. We definitely don’t want a provider practicing outside of their scope, but we do work to provide a lot of education, support, training [and] things of that nature. I can certainly understand the lure of investing. I would say oral surgery is always a good one. What I’ve seen, though, is it’s almost easier for a specialist to be successful on their own. Encouraging them to join a DSO over our group, there would, I assume, have to be some additional incentives for them, higher percentages of collections, net production, whatever they’re paid on, as well as potential buy-in options to have a partner, things of that nature.
Hamza Asumah, MD. Director of Operations for Juniper Services (Sparks, Nev.): We run a model where we have a central core of general practices, and then we build specialties around them. That model has taught me a couple of things. When you talk about attractiveness, the way we look at it is, what are those matches on what you do? That’s the first part of being attractive to somebody who is looking to make more money from you. The second thing is that whatever numbers you are throwing out there, are they defensible?
The third thing is your economics. The quality of your specialty office will depend on your funnel, and how you keep your patients coming through your funnel. You can have 10 patients sent out to you, and you probably end up converting just one. It’s not because your doctors are not good at converting the patients. It’s because your front office is not good at capturing the patients and getting them through the door. That’s the attractiveness any DSO who is coming in to acquire specialty practices will look [for.] We look at this from an internal and external source. What did our doctors actually send out from our offices? How many of these patients were sent to our internal offices, and how many were sent externally? Why was this sent externally? There are certain reasons why patients will want to be external. Or is it because our internal specialists are not doing a great job, so they would rather prefer to be seen somewhere else? You have to be able to investigate the reasons at every level of the funnel … but then it doesn’t stop there because you have to go back and fix any leaks that you have in the funnel. If eight people were referred to you and only four made it in, what happened to the other four? Did anybody follow them up? What was the follow-up cadence like? I’m just laying this out because anybody who is looking at the business, with all your margins and all, will also want to know sustainably, how are you keeping these margins going? How are you going to keep your patients in? How are you going to be able to keep them with the process? This is where I think most of the value, especially for specialty practices, is.
Haim Haviv. Founder and CEO of Hudson Dental (New York City): From our standpoint, we love general dentistry. General dentistry is really the base, the foundation — that’s why patients come most of the time. That’s how we care for them. We educate them, we show them what’s needed, and we have long-term relationships in which somebody will come, then you have their kids come, and then the grandkids come. That’s what we like as a core. For us, specialties are a way to do more under the same roof … being able to integrate under one roof, offering more to the patients, that’s really what we’re focused on. For us, oral surgery is key. We do what we can with general dentists with implants. We make sure at least one general dentist at each location knows how to do implants.
We do have an ortho location, but if it’s not braces for kids, a lot of adults prefer Invisalign or other brands, and we do have clear aligners. That is a very big initiative for us. Everybody needs ortho at some point, and it’s just a matter of education and understanding that’s something that’s out there for you, and patients respond very well when they see they can get both oral surgery, implants, which is the present and the future, and ortho. So for us, it’s very important that we can offer [these two specialties] in house.
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