Finding the Right Formula

DSOs are evolving to meet the needs of the profession

Sefira Fialkoff

According to data from the American Dental Association's (ADA's) Health Policy Institute (HPI), in 2022, more than 1 in 10 US dentists (13%) were affiliated with a dental support organization (DSO).¹ For dentists less than 10 years out of dental school, the rate was 23%.¹ As DSOs continue to consolidate power and influence in a profession in which these forces have traditionally been fragmented, it is clear that they are significantly influencing the future of dentistry. However, with so much variation in DSO business models, the definition of what it means to be one is still evolving. A consensus does not even exist as to whether the acronym stands for "dental support organization" or "dental service organization." The largest DSO in the United States is almost 30 years old, and it is still fine-tuning its business model—which is markedly different from that of the second-largest one. Meanwhile, newer DSOs are growing with distinctly different structures. So, how do the existing models vary; which services and responsibilities are best centralized, and which are better left to the individual dentist/practice; and how will DSOs continue to impact the profession as they evolve and become more attractive to a wider range of dentists?

Types of DSOs

DSOs not only come in various sizes but also make use of different management philosophies, clinical philosophies, marketing strategies, growth strategies, and more. The support that they provide can include centralized administrative, human resources, purchasing, and other services, which minimize overhead and enable practitioners to focus more of their efforts on clinical dentistry. However, one of the biggest differences between DSOs involves how the affiliated practices are branded and positioned externally.

What's in a Name?

In one popular model, the DSO works behind the scenes for practices that are still locally operated to a certain degree and appear independent externally. Heartland Dental, the largest DSO in the United States, operates this way. They acquire existing practices and also open "de novo" locations but maintain localized branding for each. Another DSO, Pacific Dental Services (PDS), operates similarly. "Primarily, we grow by starting de novo practices," says Stephen E. Thorne, MHA, founder and CEO of PDS. "We carefully pick prime real estate in advance, match dentists with these locations, and help the practices grow organically."

Conversely, many DSO models utilize unified branding to greater and lesser degrees. The second-largest DSO in the United States, The Aspen Group (TAG), recruits dentists to become independent owners of its Aspen Dental-branded practices and advertises its brand heavily to leverage the name recognition. Nonetheless, each branded practice is independently owned and operated by a licensed dentist.

Another model is the so-called dental partnership organization (DPO). DPOs are joint ventures in which each practice operates independently, but they pool resources toward centralized administrative and other services. "Traditional DSOs provide a very systematized, top-down model," explains Chris Steven Villanueva, DMD, founder and CEO of MB2 Dental. "We coined ‘DPO' because we didn't feel that DSO really embodied what we were creating. An overly systematized DSO won't be able to meet the very nuanced needs of certain dental practices. We're very cognizant of when to utilize our leverage versus when decisions should be squarely in the wheelhouse of the provider."

Clearly, the DSO industry is not composed of a single structure or initiative. Recent years have even seen the expansion of specialty dental practices into the mix of dental services provided. Many DSOs still rely on PPO plans for dental patients; however, some have entered into Medicaid and regulated dentistry.

Balancing Support With Autonomy

Although DSO models vary, they generally include support services such as administrative, marketing, and human resources. Some DSOs fully own their affiliated practices, whereas others offer support without complete ownership. In hybrid models, structures, ownership, and support levels can significantly differ, impacting dentists' autonomy and financial arrangements.

Dental practice operations can be divided into two categories: clinical and nonclinical. For practitioners who want to focus exclusively on the former, there are DSO models that can fully manage the latter. The appeal of DSOs includes the ability to leverage centralized practice support, advanced technology, professional education and training, and economies of scale for greater buying power. In fact, most DSO models aim to preserve the clinical autonomy of dentists, empowering them to make the most appropriate decisions related to patient care and treatment. However, the extent of this autonomy may vary depending on the specific terms of the agreements between DSOs and partnering dentists.

When choosing from among the plethora of distinct models available, prospective DSO dentists should focus heavily on culture. If the culture of a DSO does not align with that of a dentist's practice, tensions and conflicts may arise. "Our dentists go into transactions with their eyes wide open," says Chip Fichtner, co-founder of Large Practice Sales, a company that facilitates partnerships for dentists of all specialties with DSOs that work behind the scenes—which Fichtner refers to as invisible DSOs (IDSOs). "Once we narrow it down to two or three IDSO finalists, we connect our dentists with others who have already partnered with those finalists so that they can have very honest conversations about what changes and what doesn't."

With the right fit, DSOs reduce the administrative burden on dentists by streamlining nonclinical operations and create efficiencies that can enhance the overall performance and profitability of dental practices. For example, an October 2023 survey by ADA's HPI found that 29% of the respondents cited "trouble filling vacant staff positions" as a factor preventing their appointment schedule from reaching 100% during the previous week, and 93.6% of the respondents reported that it was "extremely challenging" to recruit dental hygienists.² "Some IDSOs have 30 to 40 full-time employees whose sole jobs are to recruit team members for their partner practices," explains Fichtner. "These partner practices have tools that independent dentists don't have."

Other Benefits of Partnership

DSO resources often extend to training and education. "We have significantly increased our investment when it comes to the number of courses offered to our supported doctors and their teams," says Mark Greenstein, chief growth officer at Heartland Dental. "This includes clinical training, operational training, and leadership training."

Because the practice of dentistry is becoming more and more complex, continuing education is more crucial than ever. Regarding practice management, some dental schools and programs have started to integrate business and leadership components into their curricula, but room for more education in that area remains. "For a long time, dental schools did not offer business or leadership training for dentists," says Arwinder Judge, DDS, chief clinical officer of Aspen Dental. "At Aspen Dental, we pride ourselves on offering dentists the ability to develop not only their clinical skills but also their business and leadership skills." In addition to the efforts of individual DSOs, members of the Association of Dental Support Organizations (ADSO) are leading thoughtful initiatives with dental schools to train and prepare the next generation of practitioners by exposing students to new technologies and opportunities for professional development.

Regarding advertising and marketing, joining a DSO can boost individual practices through shared resources, brand recognition, economies of scale, centralized support, and expertise in digital strategies that promote consistency and efficiency. "We're breaking down barriers to gaining access to quality dental care," says Judge. "We've created a culture that we're very proud of at Aspen Dental. Our brand helps patients understand who we are and how we break down those barriers, allowing us to reach patients in some traditionally difficult-to-serve areas." Because the level of marketing support offered and strategies employed can vary widely among DSOs, dentists who are considering joining one should carefully review what is offered and assess how well it aligns with their practice goals and target patient demographics.

Economies of scale play a pivotal role in the purchasing of equipment, the adoption of technology, and the implementation and management of electronic health records.³ With centralized group purchasing, a traditional DSO negotiates contracts with suppliers for dental equipment, supplies, and services, which can lead to significant savings. However, because the DSO often determines the vendors and contracts, dentists may have more limited autonomy in individual purchasing decisions. By contrast, in an equity-partnership model, dentists are more likely to be involved in decision-making processes, including those related to group purchasing. That is not to say that DSOs with more traditional models do not include their dentists in their decision-making at all. For example, Heartland Dental's annual Winter Conference features an exhibit floor with dozens of exhibitors, which is proof that the company's individual dentists are empowered to take part in purchasing decisions.

Similar to group purchasing decisions, the level of autonomy that dentists have in choosing their laboratory partners can vary significantly within DSO models based on the specific arrangements and agreements. Some DSOs may promote the standardization of laboratory services across their network, encouraging or mandating the use of particular laboratories for specific types of cases. Although this approach to standardization is inherently limiting, it can help to ensure consistency in the quality of restorations and prostheses and may also contribute to more efficient communication and case management.

"The trade-off here is finding the sweet spot between leveraging centralized services for efficiency and preserving enough autonomy for our practice owners to tailor their approach," says Thorne. "We're always working to strike the right balance to give our clinicians the flexibility they need to make their practice unique within our network. It requires constant calibration to ensure that both support and autonomy coexist harmoniously."

Impact on the Profession

DSOs have impacted dentistry in a number of ways and continue to do so. One of the most positive ways is through their focus on innovation and collaboration, which drives advancements that go beyond what traditional dental practices could achieve individually. Strategic partnerships, such as the one between PDS and Epic Systems for the implementation of electronic health records, accelerate broader industry trends toward holistic healthcare at a pace that solo practices likely could not drive on their own. "By integrating medical and dental records, we are contributing to a more comprehensive patient care model that recognizes the link between oral health with overall health," explains Thorne. "DSOs are not only reshaping the landscape of dental care but also contributing to a broader evolution in healthcare by fostering collaborations that prioritize patient outcomes and overall health. This ability to drive change positions DSOs as key players in shaping the future of dentistry."

Technology Adoption

Diagnostic technologies, such as salivary testing for periodontal pathogens and other biomarkers, are gaining traction in the United States, and many other technologies, some of which are powered by artificial intelligence (AI), are on the horizon. "There are products currently undergoing approval by the US Food and Drug Administration that are already being used in Europe, for example," says Scotte Hudsmith, CEO of Specialized Dental Partners. "Once those are available here, you'll see a big increase in AI and automation."

DSOs are uniquely positioned to invest in and implement these technologies because of their centralized procurement procedures, training, support, and of course, economies of scale. "Heartland Dental has brought a tremendous amount of scale as the largest commercial buyer of dental supplies, equipment, and laboratory services in the United States," says Greenstein.

At the forefront of technological adoption, DSOs are driving care that is more transparent and efficient. "Employing AI can help patients have a better understanding of the courses of treatment they can receive and why," explains Andrew Smith, CEO of ADSO. "But it can also help to increase insurance coverage for procedures because AI helps insurers understand the clinical need." The integration of AI and other technologies is just one way that DSOs are enhancing oral healthcare for patients.

Improved Access to Care

While some DSOs focus more on providing administrative and operational support for individual practices, others prioritize a more comprehensive and integrated model of care. "When considering what's best for patients, we decided to pursue integrated specialty care," explains Hudsmith. "This means that when a patient comes to one of our offices, the treatment process is streamlined, which provides not only convenience for the referring dentist but also better services, reduced pain, and increased access to care for the patient." Integrated dental care promotes comprehensive, efficient, and patient-focused treatment, addressing oral health within the broader context of overall well-being.

The rising costs of treatment, low health literacy, and other barriers to access prevent millions of US citizens from receiving the oral healthcare that they need. Removing these barriers is a priority across the industry. To that end, some DSOs donate tens of millions of dollars worth of care by providing "days of service" to the underserved, both domestically and abroad, and others operate reduced-fee centers, such as Aspen's TAG Oral Care Center for Excellence, which has provided $4 million worth of care to underserved patients in the Chicago, Illinois, area. DSOs have the power to streamline community outreach with scale, resources, networking, financial strength, and coordinated marketing, enhancing the impact of charitable efforts.

As of November 2023, more than 75 million US citizens still live in designated dental health professional shortage areas, of which approximately 70% are considered to be rural or partially rural.⁴ DSOs have expanded access in rural communities by providing economies of scale, advanced technology, streamlined operations, recruitment support, community engagement, and more. These advantages help them offer flexible, sustainable, and efficient dental care solutions to historically underserved populations.

Employee Benefits

In addition to benefitting patients, the resources of DSOs can also benefit the dental professionals they employ. Compensation is often very competitive. "Particularly for hourly employees, DSOs provide a competitive work environment with benefits that can include 401(k) plans with employer matching, health benefits, and other perks that help to attract and retain talent," explains Smith.

In addition, DSO models with equity ownership can affect the whole team. "Equity ownership is like being in ‘golden handcuffs' for associates and team members," says Fichtner. "Dental hygienists aren't going to switch to a practice with a slightly higher salary if they have equity in the IDSO where they are currently employed."

Although any individual dental practice can prioritize employee satisfaction, due to economies of scale, DSOs are often better positioned to offer greater employee benefits. DSOs often offer more career growth opportunities, implement more consistent policies, and possess more specialized expertise for competitive employee benefits than individually owned practices, which fosters greater employee satisfaction, equity, and retention.

Appeal to Dental Professionals

Just a few years ago, attitudes about DSOs were still largely negative. In a 2017 Inside Dentistry survey, 72% of the responding solo practitioners reported that they were "not at all likely" to join a group practice, DSO, or group purchasing organization (GPO) in the next 12 months, and none indicated that they were "very likely" or "extremely likely." However, in a 2018 version of the same survey, only 53% of the responding solo practitioners reported they were not at all likely, and 9% indicated that they were extremely likely.⁵ Furthermore, in a 2023 Inside Dentistry survey, only 54% of the respondents from independent or small group practices reported that they were not at all open to joining a DSO. Clearly, dentists' perceptions of DSOs are changing, but what's driving this change in perception is debatable.

One explanation is financial. Younger dentists are graduating with a much higher average level of student debt, and employment by a large group practice relieves new graduates from financing the purchase or development of a new practice.⁶ Others credit the advent of different DSO models for the shift in perceptions. "Branded DSOs aren't built for individuality," says Fichtner, "so in the beginning, you had horror stories from dentists who sold 100% of their practices to DSOs and didn't know what compromises they were signing up for. IDSOs have changed that."

As DSO models continue to evolve and offer different options, dentists are more likely to find a good fit within the industry. "A DPO model is appealing to young dentists who are looking for help scaling up their practices as well as older dentists who are looking for assistance in maintaining their legacies while phasing into retirement," explains Villanueva. "The common denominator among all of our partners is that they are entrepreneurial, competitive, and passionate."

Others attribute the change in perception to the ultimate successes of "traditional" DSOs. "The perception of DSOs has changed over time," says Judge. "When I joined the industry, DSOs were such an unknown that people were skeptical. But with time, the industry began to understand the value that DSOs can bring. DSOs are advocating for the profession along with the ADA, working together in areas such as regulatory compliance and insurance reimbursement."

Hudsmith agrees, adding that "a tremendous amount of this reputational change is a result of education. Once dentists understand that we aren't replacing jobs but rather helping them serve more patients in the amount of time that they have, it's a massive shift in mindset."

The evolution of the business models of DSOs has helped as well. "In the past, many dentists saw joining a DSO as outsourcing the back office, but now, with greater communication and transparency, we've been able to create a true partnership model that is strong," explains Hudsmith.

Ongoing changes in the industry will lead to further evolution of the DSO models. "We have been on a 25- or 30-year journey here, and change is constant," says Greenstein. "The external market and external environment are constantly changing; therefore, our systems and processes are always evolving."

Undeniably, the growth of the industry has created more options from which dentists can choose. "Clinicians and specialists today have so many choices that cover all sizes, scopes of work, and locations, so they can really shop around for that perfect fit," suggests Smith. "And the ADSO is committed to making sure that dentists are aware of all of these options."

Proceeding With Caution

The number of DSOs in the United States has grown from approximately 100 in 2010 to more than 2,000 in 2023.⁷ Simultaneously, consolidation is accelerating. "The future will present an opportunity for specialty DSOs to either consolidate in with general practice DSOs, engage more with the hospital healthcare system, or go the route of pharmacies with individual locations," says Smith. "We may even see a more global consolidation of DSOs with some of the interesting marketplaces in the United Kingdom and Europe."

Although ADA predicts that DSOs will more than triple their current market share by 2035,⁸ such rapid growth should be watched cautiously. Currently, the main driver for DSO market share is private equity investment.⁹ Dentists partnering with DSOs should seek transparency in their contractual relationships and consider the regulatory environment and laws governing dental practice in their specific locations. "If I were to offer advice at this juncture, I would suggest being very critical of the platforms out there and remaining vigilant about protecting our profession," says Villanueva. "I worry about the type of capital being infused into dentistry—a lot of which comes from what I call ‘dental grifters' who are trying to create a platform for a quick sale. I want dentists to understand that if you do what's best for your patients and your employees, the profitability will follow."

References

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9. Pushing upmarket: consolidation of DSOs and secondary private equity sales. McGuireWoods Consulting website. https://www.mcguirewoods.com/client-resources/alerts/2023/5/consolidation-dsos-secondary-private-equity-sales/. Published May 5, 2023. Accessed November 22, 2023.