Industry challenges such as low reimbursements and rising costs will lead to more consolidation as private practice dentists crumble under financial pressure, DSO leaders predict.
Three executives recently spoke with Becker’s to discuss where the DSO field is headed in the next five years.
Note: Responses were lightly edited for clarity and length.
Question: What will the DSO landscape look like in the next five years compared to today? What are we going to see more of and what will we potentially see less of?
Jessica Lo. Vice President of Operations of Urgent Dental Center (Indianapolis): I believe we’re going to continue to see growth in DSOs. I would not anticipate that DSOs are going to completely take over dentistry. I don’t see that happening, but I do see a lot of growth over the next five years primarily because our smaller solo offices are going to see that they’re going to get better deals with procurement. Eventually, I think we’re going to see a shift with insurance starting to prioritize the simplicity of paying DSOs under one tax ID rather than a variety of tax IDs. That just makes things a little more simple on their end, so there’s going to be some benefits there, which will give us leverage when we negotiate these schedules.
On the clinical side, we see across the board hygienists are getting very expensive. I anticipate seeing more states add in certifications for dental assistants to do more and more, at least on the preventative side of hygiene. I would anticipate seeing some cost control from that. Our assistants are going to be making as much as our hygienists. They’re going to be able to take on more of those procedures, and we can shift some of those more expensive procedures for periodontal disease over to the hygienists, which would improve their productive hourly rate and make it more reasonable for the pay that we’re giving to our hygienists.
Hamza Asumah, MD. Director of Operations for Juniper Services (Sparks, Nev.): If we look at the industry now, obviously affiliations are not going to change. People are still going to want to be affiliated with a DSO of some sort. The one thing I feel is going to happen in the next five years is that we are going to be seeing fewer smaller DSOs, and we are going to see more consolidation with larger DSOs, so we’ll have maybe fewer DSOs that are larger. There are a lot of things from the financial side, and even operationally we’ve seen how expensive it is to maintain labor and run some of the processes — everything is changing so quickly, so some of these [companies] will not have the capacity to be able to take on what the shock of the industry will bring in. That’s one of the things I think we will see.
We have seen an increase in dentist-affiliated mergers, and that’s where most of the exits happen. We have solo dentists who are ready to go on retirement and they want to cash out. That is where most of the people are coming in, but if you look at where the data is trending toward, we have more dentists who are just freshly out of school with no interest at all in owning their own practices. They just want to work for a DSO. We are seeing that number also go up. So in the next five years, what we will see is more dentists wanting to be, for lack of a better word, employees of a bigger platform than taking on the full responsibility of having to run their own practice.
The third thing I think will happen, which is already happening very quickly, is that more dental offices and DSO groups are going to move toward membership and cash-pay models because insurance reimbursements are so low and — right now, with all the rising costs for supplies, labs and labor — DSOs are no longer in a position to just depend on those reimbursements from insurances, so we will see a lot of that happening.
The last thing I think will happen, especially for DSOs of our size, is having some specialty practices as part of your practice. [Practices] that were built as just general practices will now start looking for opportunities to incorporate some specialty items, like using clear aligners … or procedures that would better enhance their margins, and not just stay within bread and butter dentistry, which has very low reimbursements.
Haim Haviv. Founder and CEO of Hudson Dental (New York City): The consolidation is continuing. I don’t see it going anywhere. You will have, and that’s always going to be the case in my mind, that section of dentists in the industry who want to be the entrepreneur, they want to run their own shop, and that’s perfectly fine. There’s definitely room for them. However, it’s getting harder and harder for them … 20 years ago, there was no speed to lead. You could get a phone call, people would leave a voicemail, and you’d get back to them the next day. They were still available to come to your office. This is not the case anymore … If you return a phone call in 30 minutes, that’s not enough. In half the cases, it’s not enough. The patient already found a new office to go to. That trend of speed to lead, the marketing costs, which are extremely important in the consolidation, just make it very hard, not to mention technology, and like my colleagues here said about reimbursements, you have to essentially have a full-time person to cover these things. It’s harder and harder for these solo entrepreneurs. It is possible. You’ll always have that segment of dentistry, but I do see consolidation not going anywhere.
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