Why Buying into a DSO Supported Practice Can Be a Great Option
By Ryan Lindgren, VP Acquisitions and Development
Today’s dental school graduates carefully weigh all practice establishment options. They take into consideration many informed factors before deciding whether to establish a solo practice, buy into a private or DSO supported practice, or join a group. This is a dramatic change from what dentists did 15-20 years ago. Dentistry has slowly, but inevitably, shifted to more DSO supported and group practices. What has precipitated this change? And how has it affected patient care and the profession? This gradual shift in practice establishment requires looking at several key-contributing factors:
- Increased dental school debt
- Changing insurance & patient dynamics
- Growing need for quality work-life balance
Student Debt Factor
According to a study done by the American Dental Education Association (ADEA), the average debt per 2016 dental school graduate was $261,149. (1) Overwhelming school loans makes it daunting for young dentists to incur additional debt to establish practices. Since 1996, dental student debt has increased 96%. (2) Fifteen to twenty years ago, most dental school grads started solo practices – either in their homes or local office buildings. But that’s not the case today. “To help pay off my dental school loans, I proctor fourth year dental school students in an underserved community health clinic,” says Ronald Leyder, Jr., D.D.S., owner of Norton Shores Dental, a DSO supported practice in Michigan. “Without this assistance, I wouldn’t have been able to buy into my dental practice,” continues Dr. Leyder. The ADEA study also reports 53.7% of dental school graduates will definitely or probably work with underserved communities after graduation. (3) However, the study doesn’t indicate whether or not their service is predicated on student debt obligations. “I push a lot of my students towards public health right out of dental school because it can help pay-off their student loans,” continues Dr. Leyder.
There’s no denying the change how today’s young dentists want to set-up offices and practice dentistry. The ADEA study reported a broad range of dental school graduate interest in group or DSO supported practices. (4) Some dental schools reported that nearly 50% of their graduates were willing to join group or DSO practices after graduation, while other schools indicated that none of their graduates were similarly inclined. (5) “In dental school, you don’t learn what it takes to run the business side of dentistry and that’s why working with a DSO was the best way for me to go into private practice,” says Dr. Leyder. It’s interesting to note that even though Dr. Leyder went to business school, he still found it challenging to manage both the clinical and business sides of a practice. “I didn’t want to spend time running the business – you know crunching the numbers and making sense of them,” Dr. Leyder continues. “It always felt like I was doing things halfway and that can be overwhelming – even with a business degree and a solid understanding of how to manage a business.”
Patients shop around for healthcare insurance, providers and services. Yet their ability to afford and pay for dental care services has diminished over the past decade. Adult dental care is not a mandatory benefit and varies by state under the Affordable Care Act. Low-income children are guaranteed dental coverage under Medicaid and CHIP. And private dental insurance is not the same as medical insurance. It’s structured completely opposite of medical insurance. (6) There’s a cap on coverage and beyond that, it’s up to the patient to pay out-of-pocket. (7) While many employers offer dental insurance, it’s usually optional and might even require employees to pay all or a significant portion of the cost.
Having dental insurance has become an issue of whether the benefits outweigh the costs of coverage. “I’ve seen how insurance has really forced patients to make choices based on their coverage. That’s why I try to figure-out a formula that gives them the care they need and deserve, not just insurance-driven,” says Thalia Shirley, D.D.S., owner of Carrier Parkway Dental Group in Dallas, Texas. Bottom line, dental care has become a luxury item for many middle and low-income families. (8) This diminution has had a significant impact on dentistry – everything from how dentists set-up and staff their practices to how they price their services.
Fluctuations in unemployment rates plus other economic uncertainties have affected how consumers allocate their discretionary funds – even on healthcare expenditures. In the early part of the 21st century, there was a gradual decline in adults going to the dentist. (9) Even with expanded government dental care for children, low reimbursement rates make it less economic for dentists to take these patients. According to the 2013 research brief done by the American Dental Association’s Health Policy Resource Center, younger adults will account for a smaller share of total annual dental expenditures, while dental services used by older adults will increase. (10) The study goes on to say that even though total dental expenditures will grow in the next thirty years, the annual rate of increase will be less than in preceding decades. This is referred to as the emergence of a “new normal” in dental spending. (11)
If aggregate spending on dental services goes down in the key demographic of young adults but goes up for older adults and children – who are covered by government programs paying lower negotiated rates – it becomes more difficult to build and sustain financially viable practices. It’s one of the primary reasons why group or DSO supported practices have become more appealing to young dentists. With the support of a group or DSO behind the practice, dentists have power in numbers and resources to help get better payor-negotiated rates, reduced costs for lab fees, dental & office supplies and facilities management. “There’s less of a financial risk with greater resources and support when starting a practice with a DSO,” says Dr. Leyder.
Work-Life Balance Factor
In the 2016 U.S. News & World Report’s best job rankings, orthodontists ranked #1 and dentists ranked #2. (12) Dentistry ranks high because practitioners can:
- LPractice in their hometowns
- LSet practice hours
- LManage practice involvement (i.e. group or DSO)
- LMinimize life-or-death patient treatments & interactions
- LEarn six-figure salaries
- LAchieve high quality work-life balance
Compared to their physician counterparts, dentists have more practice flexibility and overall reduced patient care stress. Dentists who are part of a group or DSO supported practice say they experience greater ability to focus on what they do best – dentistry – instead of office & staff management. “I have responsibilities for paying my student loans, mortgage while also trying to save for retirement. Working with a DSO like Benevis has alleviated those burdens so I can really focus on the things I’m excited about doing in dentistry,” says Dr. Leyder.
“Absolutely, it’s a model that works,” concurs Dr. Shirley, “because it allows me to develop my vision for the practice and focus on providing the best dental care to my patients without worrying about the business side.” Most dentists, whether solo or group practitioners, are able to be their own bosses, determine schedules and office set-up which in-turn enables a healthy work-life balance. That said, running a solo practice requires more hands-on responsibility to manage the business and it can often be stressful and time-consuming. “I watched my father manage every single aspect of his dental practice growing up and I know what a burden it can be. I’m glad not to have it,” says Dr. Leyder.
What’s the best way to start a dental practice? It’s ultimately dependent upon individual objectives and requirements for practice structure, involvement, location and quality of life. Like Dr. Leyder said, most dentists don’t learn the business side of dentistry in dental school and that’s an important part of running a successful practice. Bottom line, it’s really important to research all practice options to ensure financial feasibility and professional satisfaction. With a group or DSO supported practice, new dentists can focus on the clinical side while gradually learning the business side from experienced experts. There’s also opportunity for practice buy-out and sole-ownership overtime. “It’s really easy to be good at business or really easy to be good at dentistry, but it’s really hard to be good at both,” says Dr. Leyder, “Benevis has allowed me to be really good at dentistry with a high quality work-life balance.”
- Educational debt: GoDental. (n.d.). Retrieved February 21, 2017, from http://www.adea.org/GoDental/Money_Matters/Educational_Debt.aspx
- Wanchek, T., PhD, JD, Cook, B. J., PhD, Anderson, E. L., PhD, & Valachovic, R. W., DMD, MPH. (2016, May 1). Annual ADEA Survey of Dental School Seniors: 2015 Graduating Class. Retrieved February 21, 2017, from http://www.jdentaled.org/content/80/5/612.short?rss=1
- Gawel, R. (n.d.). Today’s Dental Grads Face Big Debt and More Choices. Retrieved February 22, 2017, from http://www.dentistrytoday.com/news/todays-dental-news/item/988-today-s-dental-grads-face-big-debt-and-more-choices
- Zhai Yun Tan, Kaiser Health News. (2016, July 20). Addressing an overwhelming demand for dental coverage. Retrieved February 22, 2017, from http://www.usatoday.com/story/news/2016/07/16/kaiser-addressing-overwhelming-demand-dental-coverage/87182922/
- Solomon, E., DDS, MA. (n.d.). The future of dental practice: Demographics. Retrieved February 23, 2017, from http://www.dentaleconomics.com/articles/print/volume-105/issue-4/macroeconomics/the-future-of-dental-practice-demographics-patients-professionals-and-procedures.html
- Nasseh, K., Ph.D., & Vujicic, M., Ph.D. (2013). Dental Expenditure Expected to Grow at a Much Lower Rate in the Coming Years. The American Dental Association Health Policy Resources Center Research Brief, 1-11. Retrieved February 24, 2017, from http://www.ada.org/~/media/ADA/Science%20and%20Research/Files/HPRCBrief_0813_1.ashx
- Snider, S. (2016, January 26). Discover What It’s Like to Work as a Dentist or Orthodontist. Retrieved February 25, 2017, from http://money.usnews.com/money/careers/articles/2016-01-26/discover-what-its-like-to-work-as-a-dentist-or-orthodontist