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Special Report: The Rise of Dental Service Organizations in America

Dental service organizations – sometimes referred to as dental support organizations – are becoming increasingly common in dentistry today. The American Dental Association estimates that 7.8 percent of dentists now belong to one, contracting with a DSO to handle the business side of operating a practice so that they can focus on the clinical side. DSOs advocates say they allow dentists to focus more on caring for patients. Critics, however, are concerned about corporate interests.
P. Croatto
PUBLISHED: Wednesday, February 15, 2017

As dental service organizations become more popular, experts see the business of dentistry as they know it changing right before their eyes. Image source: Fotolia

Dentistry is, for better or for worse, a business. The business of dentistry is something an increasing number of practitioners have little time or patience for running, prompting the rise of dental service organizations, or DSOs.
 
According to the American Dental Association, 7.8 percent of dentists are part of a DSO, where a dentist handles the clinical side but another party owns the business and handles the accompanying responsibilities, such as payroll, ordering supplies, and staffing.
 
Dental professionals say they already see the change arriving in full force.

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Maria G. Melone, CPA, CVA, is a partner at MORR Dental Solutions in Westborough, Mass., which handles the buying and selling of dental practices. She says several factors over the last 10 to 15 years have contributed to the increased allure of DSOs, especially among younger dentists.
 
Today’s dental school graduate graduates with an average of $300,000 in debt.
And that precedes buying or investing in a dental practice, which carries a $500,000 to $1 million price tag. Oh, and don’t forget opening the practice, which includes technology and securing dental insurance.
 
“Not having strong business acumen, you can get upside down very quickly if you’re not paying attention to things,” Melone says.
 
DSOs fit the new generation of dentists, a group, Melone says, that craves a better work-life balance. Older doctors worked six days a week or early mornings to jump start their careers. Today’s younger doctors are perfectly happy working 32 clinical hours, Melone says.
 
By working for a DSO, a young dentist immediately makes good money, none of it headed to various business expenses.
 
“You come out of school and you own 300,000 bucks in student loans or more,” says attorney Patrick Wood, founder of Wood & Delgado, a Mission Viejo, CA law firm specializing in the business needs of dentists. “You can go into the corporate world and right off the bat do fairly well.”
 
Wood teaches practice management courses at a couple of dental schools. He estimates that up to 85 percent of his students want to enter corporate dentistry.
 
“What I think is great about DSOs is that they really train the dentist on case presentation, case acceptance,” Wood says. “They keep them very busy. I heard one of the DSO’s leaders saying they felt that 90 percent or more of their time was spent on patient treatment. If you’re just coming out of dental school and you’re doing all that, your skill-set is going to get better. Plus, they’re highly motivated to be sure that you’re successful as a young dentist.”
 
The rise of DSOs is not just a young person’s trend. Melone says older dentists she talks to love taking care of their patients. But after decades “the headaches” of running a business — managing payroll and staff, for example — beat them down. Selling to a DSO relieves that burden. Plus, they can step away slowly, working an abbreviated schedule, as opposed to the usual hastiness involved in a doctor-to-doctor transition.
 
Dentistry has seen outside investment because it’s a stable industry.
 
“If you talk to the dental lenders, they’ll tell you that they have a default rate on their dental loans of less than one percent, which is pretty remarkable for start-up businesses.” Wood says. “I think it’s attractive Wall Street money.”
 
Every week, Wood’s office fields a couple of phone calls from parties interested in setting up a DSO. It is not for everyone. Beyond knowing the dental industry, the DSOs that do well are “capitalized properly. The guys that try to come in on a shoestring budget — I just see a lot of failures.”
 
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