by Industry trends point toward more group practices. How can dentists navigate the change in business models?
For Dr. Marc Cooper, context trumps all. And the context in dentistry is clear: The profession is moving from a large number of small businesses to a much smaller number of large ones. The entire industry is shifting to accommodate that change.
Cooper is founder of The Mastery Company, which produces the Annual SUMMIT conference for entrepreneurial dentists and experts addressing managed group practice. The most recent SUMMIT tackled the topic, “How does a dentist navigate the path from small business model to large corporate model?”
Efficiency in Group Practice talked with Cooper about the reasons for the shift in business models, and how today’s dentists are “navigating the path.”
The context
“If you look at the statistics, there are far fewer solo practices today than ever before,” says Cooper. In fact, fewer than 60 percent of practices today are operated on a solo basis. Nine out of 10 practices take some form of dental plan, and seven out of 10 patients are now covered by a plan. What’s more, among all age groups with the exception of children (age 0 to 20), average annual per-patient expenditures are going down.
“A major change is taking place in the dental world, and dentists are trying to figure out what to do about it,” he says.
Senior doctors – those in their later 50s and early 60s – who want to continue practicing for a few years, but who are having difficulty finding someone to buy their practices, are moving toward group practice as an exit strategy. Meanwhile, young dentists who are having difficulty finding an associate position – a reflection of decreasing demand for dental services as well as dentists deferring retirement – are doing the same thing. “And the folks in the middle are trying to figure it out.”
Many in that middle group are in the grips of denial and/or fear, says Cooper. They believe, “I can make it through this; I just have to keep doing what I’m doing,” or “If I just do more of the same thing, but better, I can get through this.” And they find plenty of support from a plethora of consultants who point out ways the solo practice can remain a viable business model.
“But my view – and maybe I’m an outlier – is that the movement toward group practice is unavoidable,” says Cooper. “It’s like gravity; it doesn’t matter how you jump out the window, you will hit the ground.” He cites Malcolm Gladwell, author of The Tipping Point, who believes that when an idea, trend or social behavior reaches a threshold – somewhere around 17 percent – fundamental change follows. The percentage of employee-dentists has reached that tipping point, “so now the speed will pick up,” he says.
“I’m in the latter part of my career, but I wonder, what if I were 24? ‘Do I want to buy a practice for a million dollars when I have $300,000 of debt? Maybe I’ll work for someone for five years, then take stock.’ But after five years, you get to know the culture and the folks, and you think, ‘Maybe I’ll stick this thing out.’” And the fact is, many young people coming out of dental school have no desire to own a practice.
No surprise
The fact that dentistry is undergoing consolidation shouldn’t be a surprise, says Cooper. It’s a natural occurrence in many industries – airlines, telecommunications, even the medical profession, given managed care and the rapid acquisition of physician practices by hospital systems. “The system in dentistry has changed,” he says. The solo practice dominated when the primary relationship was that of provider and patient. But today, that axis has shifted away from the patient to the employer and/or third-party payer. “When that happens, group practice is the model that succeeds.”
And the economics of owning a solo practice don’t add up in today’s world. Dental equipment is expensive, and the cost of disposables is rising. Nor are staff members going to stop wanting raises and a better standard of living. The practice owner has to stay focused on P&L, marketing, cost containment, HR, new technology – all the while continuing to practice dentistry. “How can you continue to do all that and still run a practice?”
Culture
Building a large group practice isn’t for every dentist, says Cooper.
The “classic dentist” entered the profession not only for the love of dentistry, but for economic security, he says. He or she saw dentistry as a low-risk venture. After all, everybody needs their teeth fixed from time to time. “They wanted a job that would give them a good living, allow them to retire, and remain somewhat economically immune to whatever else was going on.”
A much smaller percentage have an entrepreneurial mindset. They are risk-takers, who believe the future of dentistry will be much different than its past, and who are willing to risk – within reason – failure.
But simply having the desire and willingness to build a group practice won’t ensure success. A dentist might have one successful practice, then two, then three. “And all of a sudden, things aren’t working out, because of the complexity and because of a lack of attention to culture,” says Cooper.
Culture to a business is like water to a fish or air to a bird, and everything in between, he says. “It is the relationships people have with each other; the way they talk and communicate; the way values live within that particular environment.” The difficulty solo practitioners face is changing the culture and leadership style of the solo practice to fit a group practice.
That’s because the solo practice is led by “command and control,” he says. Typically, the dentist makes the big decisions – equipment purchases, for example – and expects staff to follow. “But when you get to a group practice, you can’t lead by command and control. You have to learn to lead by influence, and that’s a muscle that often hasn’t been very well developed.”
“Culture is a reflection of leadership,” he continues. Solo practitioners tend to think in terms of “I,” not “we.” But to make the group practice a place where people want to work, instead of a place they have to work, the leader has to think of others, foster strong relationships, and cultivate open and honest communication among the people in the practice.
Opportunity for smaller groups
Although the largest dental service organizations are growing rapidly, given their access to capital and strong reputation among the dental community, they are leaving a broad wake behind them, and that spells opportunity for smaller, regional groups to grow and thrive, says Cooper. The telltale signs? The number of consulting entities, vendors and service providers that are catering to them. “An entire industry is growing up around them,” he says. Third parties are building provider networks and approaching employers and payers to offer their services.
Today’s aggregators are building companies not to change the way dentistry is provided, but to achieve economies of scale. “But in the future, I see something else emerging,” he says. Clinics will emerge that will provide a different kind of dental care, one that is delivered by auxiliaries instead of dentists. And the technology will be much more focused.
“The focus in medicine is shifting from fee-for-service to reimbursement for outcomes and value. Eventually, this will enter dentistry and the way dentistry is delivered. Disease management, risk management, best practices, quality assurance and ‘big data’ will begin to play a dominant role in dental diagnosis and treatment planning.
“Currently, higher utilization of dental restoration or replacement is the key to success. As the changes mentioned above become more prevalent, how dentists get paid – and what they get paid for – will also shift.
“With all the changes that are occurring, group practice will be in the best position to respond.”
2016 SUMMIT
The Mastery Company will host its fifth SUMMIT Conference May 11-13, 2016, in Scottsdale, Ariz. “2016 SUMMIT: Capitalizing the Future and Corporate Leadership” will tackle two components critical to success in dental group practice.
First, leaders of successful managed group practices will offer insights and discoveries on leadership and vision in the new ecology of dental group practice. Second, equity partners and national lending institutions will discuss the means and the models for capitalizing the growth of the group dental practice.
For more information, visit www.masterycompany.com
