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In some respects, all DSOs are pretty similar. All of them aim to:
- Improve the quality of dental care their doctors provide
- Deliver that care cost-effectively
- Maintain close ties to the communities in which each of their practices operates
- Generate a healthy margin while doing all of the above
Each takes a slightly different path toward those goals. But all believe that by carefully selecting affiliation partners – that is, dentists who commit themselves and their teams to the same values as those of the DSO – growth is inevitable.
That’s why Dr. Rick Workman, founder and CEO of Heartland Dental, says, “The sky is the limit for our growth opportunities.”
Efficiency in Group Practice recently asked a number of DSO executives to talk about their strategies for growth. Participating were:
- Heartland Dental
- Aspen Dental Management Inc.
- Benevis
Heartland Dental:
Adapting to the Needs of Modern Dentists
With roots dating back to 1982, Effingham, Ill.-based Heartland Dental grows through affiliation as well as organically, says Founder and CEO Dr. Rick Workman. “Established offices that affiliate with existing supported practices can then receive Heartland Dental’s support services,” he says. “Likewise, supported practices contract with us to provide all the services needed to establish new startup offices. Utilizing both processes allows Heartland Dental to support a wider variety of dentists based on their individual needs.
“For the foreseeable future, this growth strategy will remain. However we are always ready to adapt to the needs of modern dentists, as the dental industry continually evolves.”
Heartland Dental currently supports over 660 dental offices within 31 states.
Heartland Dental’s affiliation team takes into consideration a number of factors to determine if an office is a good fit, says Justin Wendling, director of affiliations. “These factors include physical, financial and commitment standpoints. Finding a match in these areas fosters the best possible results for the affiliating office and Heartland Dental.”
Heartland Dental traditionally looks for offices with five chairs or room to grow, and at least $800,000 in annual revenue, says Wendling. In those situations where doctors are seeking a long-term exit strategy, the company traditionally asks them to commit to transition with the office for at least two years after affiliation. “The success of an office transition stems from the doctor,” he says. “A commitment on the part of the doctor furthers goodwill with the dental team and community.”
When supporting the creation of new offices, Heartland Dental’s development team focuses primarily on lease development and single- or multi-tenant land purchases throughout the country, says Jake Niebrugge, operations manager at Professional Resource Development Inc. When evaluating locations, the team looks for areas that have upper to middle-upper demographic characteristics, a median household income of $50,000+, presence on a main road, a minimum traffic count of 20,000 cars per day, and a minimum parking ratio of five spaces per 1,000 square feet. When leasing sites, the team looks for sites that are highly visible on a main road, and are grocery-anchored or have big-box tenants nearby, such as Wal-Mart, Target, Kohl’s, etc. When purchasing specific sites, the team looks for 0.5 to 2 acres of land at intersections or hard corners, which can accommodate single- or multi-tenant buildings.
With more than 1,000 supported dentists, Heartland Dental is the largest dental support organization in the country, says Workman. “But that number makes up only a small portion of all dentists in this country. There are so many other dentists out there still in need of non-clinical support, and so many opportunities for us to make a positive impact. As it becomes more difficult for dentists to practice solo or start up an office right out of dental school, the need for support will continue to increase. In that regard, the sky is the limit for our growth opportunities.”
With growth comes the challenge of maintaining the Heartland Dental culture, says Workman. “Maintaining the culture of Heartland Dental in all supported dental offices is important. To meet that challenge, we have created an environment of openness and camaraderie. All supported dentists and team members are connected through our network in order to support one another. In addition, all dentists and team members travel to our home office in Effingham, Ill., to meet the individuals who will support them face-to-face.”
Each of Heartland Dental’s supported, doctor-led offices have their own brand, logo and identity, says Workman. “This approach keeps them better connected to their local areas. Also, supported offices continually donate their time and efforts within their communities. For example, many offices hold Free Dentistry Day events in their communities each year, providing free dental services to those in need.”
Workman says he believes that the number of dentists practicing at DSO-supported offices will more than triple over the next 20 years. That’s because the DSO model fits the needs of a growing number of dentists. “DSO support helps dentists be dentists,” he says. “They didn’t graduate from dental school to be accountants, marketing gurus or HR specialists. This support helps them focus on patient care, develop as clinicians, and develop as leaders.
“Dentistry is still valued in our population and will always be valued,” he continues. “Dental disease doesn’t cure itself, so lifetime, preventative care will always be important; and it helps save people money in the long run. However, the economic problems we’ve seen have established a new reality for dentists; many are unable to sell or share their offices with associate dentists, and young dentists with $300,000 worth of student loans can’t finance a new office or startup on their own. This has led to an explosion of the number of quality dentists searching for support.”
That said, tension between DSO-supported dentists and organized dentistry remains a challenge, says Workman. “Unfortunately, a lack of understanding and trust still remains on both sides. I believe the majority of dentists share common ground. Yet DSOs are often blamed for inhibiting others to practice solo or own offices. Those supported by DSOs still lead their offices and make decisions regarding their patients and teams. From that regard, there’s really no difference between DSO-supported offices and organized dentistry, except for that extra support and education DSOs offer.
“However, dentistry is one of the last business models to transform the way it evolves in the marketplace relative to medicine, pharmacy and vision care. But we are confident that in the future, the benefits DSOs provide supported dentists will someday be looked back upon with amazement that these benefits were not universally available. This will be measured when organized dentistry and DSOs can reach agreement on how the roles and responsibilities of each can work together for the advancement of our industry.”
Aspen Dental Management Inc.:
Building to Meet a Need
The expansion of the Aspen Dental brand has been fueled entirely through organic growth, says Todd Phillips, vice president, real estate and construction, Aspen Dental Management Inc. Today, nearly 500 Aspen Dental-branded practices operate in 31 states, with 60 new practices scheduled to open before the end of the year. That includes expansion into Minnesota, Arkansas, North Dakota and South Dakota.
Approximately 80 percent of Aspen Dental practices are located in areas that have been designated as Health Professional Shortage Areas (HPSAs) by the U.S. Department of Health and Human Services, Phillips points out. “This strategy – which brings dentists to communities where they are needed – has proven to be hugely successful, and one that we intend to follow for the foreseeable future.” The company typically builds practices in high-profile locations in major retail areas, where there is a demonstrated need for access to affordable, convenient, quality dental care.
And that need is great, he says. “More than 60 new Aspen Dental-branded practices are expected to open every year for the foreseeable future. But growth isn’t our strategy. Growth is the outcome of having a clear vision and executing against that vision.
“The dentists who own and operate Aspen Dental practices are inspired and motivated by the patients they serve across America, and are focused on treatments, services and programs that can make a real difference in their lives. Together, ADMI and the dentists we support believe in the patient-centric model that is becoming more and more common across healthcare delivery today, because when patients have choice, access, and trust in their provider, better overall health follows.”
Each Aspen Dental practice is independently owned and operated, but all use the Aspen Dental brand throughout their facility design and signage, as well as in television, Yellow Pages, print and online advertising, says Phillips. The practices also work collectively on a community giving initiative called the Healthy Mouth Movement, which in 2015 is providing free dental care to veterans. “The Healthy Mouth Movement has been a great unifier for Aspen Dental teams from locations all across the country, because it taps into a shared desire to give back to the communities where they live and work,” he says.
“Our success and growth starts with clarity of purpose and values,” says Phillips. “We’re aligned around them, and they guide every business decision. At ADMI, our goal is to build highly aligned, long-term partnerships with dentists, and we are focused on building programs and infrastructure to support their success.”
Benevis: Bridging a Gap
Founded in 2002 to provide non-clinical support services to dentists’ offices in Georgia, Benevis supports 144 practices today, with plans to exceed 150 supported practices by year-end.
“We pride ourselves on looking for well-run dental offices and then working with the dentists to keep them that way,” says Ryan Lindgren, vice president, acquisitions and development. “We look closely at how the dentist is operating the office, and how stable and well-trained the staff is, and we understand what the dentist’s personal plans are. Where our tools align with the needs of the dentist and office, these are the ideal offices for our affiliation program.”
Benevis started as a company whose primary growth avenue was developing start-up (de novo) offices for the practices it supported, explains Lindgren. “Over time, we have expanded the services we can provide to dentists and their practices, so this is now a small part of our growth strategy.” That said, if the dentists it supports want to grow through de novo offices, “we continue to support that.”
One of Benevis’s primary growth avenues is affiliating with dental practices to provide non-clinical support services, says Lindgren. Benevis does not own any dental practices, and dentists continue to own their professional corporation (PC). As part of the affiliation process, Benevis buys the non-clinical assets of the practice (this is the cash investment, which includes the assets and goodwill). When the dentist is ready to retire, Benevis sources for his/her follow-on dentist, who then takes over the PC. “This provides the retiringdentist a clear way to cash out of their office, and a clear path and timeline – driven by them – to retirement,” he says. “The new dentist can then step into a well-run and successful office at a reduced price, as they are purchasing only the clinical assets.”
As Benevis affiliates with a practice, the company works closely with the dentist to change as little as possible. “We don’t change the name or re-brand the office; and we continue to encourage the dentist and staff to stay involved with their community,” says Lindgren. “Overall, we ask the doctor to continue doing all the things that have made them successful. In fact, the only services we require our affiliates to use are our HR/payroll system and accounts payable system.”
Benevis avoids targeting a specific number of offices with which to affiliate, says Lindgren. “Instead, we look to affiliate with practices that are in need of the services we provide best,” he says. “In that way, we create partnerships that are inherently beneficial to all parties and have the best chance for long-term success.”
Conditions within dentistry favor DSO growth, says Lindgren. The number of dentists entering the field is only now starting to outpace the number of dentists retiring, he points out. But their debt load upon graduation is great, averaging $247,227, according to the American Dental Education Association. This presents capital and financing problems for late-career dentists wishing to sell their practices, and for early-career professionals trying to get into a practice. “Benevis’s practice affiliation program bridges that gap,” he says.
“Women as a percentage of total dentists entering the workforce are now approaching 50 percent, which is very different from the pool of dentists currently near the end of their careers,” he adds. “One of our biggest industry challenges will be creating practice environments that appeal to and allow for better work-life balances and leaves for growing families. Because of the scale with which DSOs operate, they are uniquely positioned to accommodate these desires.”
Great Expressions Dental Centers: Close to the Patient
Great Expressions Dental Centers comprises 217 sites and is intent on continuing to grow. “The next goal is $500 million revenues,” says CEO Rich Beckman. “We could go beyond. As long as growth continues to translate to the continued ability to reinvest capital back into the company for structural, clinical, and operational improvements for the betterment of our doctors, team members, and our patients, then too big is not an issue.”
“Our goal is to have density in a market, as we want to make visiting a GEDC office as convenient as possible for the patient,” says Kurt Harvey, vice president, business development. “We want all dental services – e.g. GP, orthodontics, oral surgery, etc. – under the same roof or close nearby. This way, the patient can get the care they need and not have to worry about going outside the GEDC network.” Staying in the network means the patient’s insurance is taken; GEDC can book the appointment; and GEDC doctors can discuss the patient’s care with him or her.
The company’s primary method of growth is via affiliation, but it builds de novo where the need exists, says Harvey. “For de novos, we prefer high-traffic locations, e.g., shopping strips conveniently located in high-density and growing areas. De novos help us fill in areas where we are less dense in the market and can give patients easier access to care within GEDC network.”
The criteria for affiliation are relatively simple, says Beckman: 1) The doctor and his or her key team members align in terms of core philosophies and their willingness to stay on for at least two years (though GEDC hopes they will stay longer); 2) the valuation and terms of affiliation are a “win” for all parties involved; and 3) the practice is a strategic fit.
Maintaining and enhancing the GEDC brand and relationship with the community and patients is critically important to the company, according to Ryan Torresan, vice president of marketing and public relations. “We continue to reinforce the Power of One, that is, the idea that one dental professional can impact a patient’s life or that of a co-worker with one simple act; and we instill the concept in every aspect of the group.
“Further, giving back is part of our mission statement. GEDC partners with Feeding the Children Everywhere in each market, making hundreds of thousands of meals each year to give back to the communities we support,” says Torresan. “We also give back dental services through Missions of Mercy and mission trips.” GEDC believes dental graduates are the future, and the company donates annually to the University of Detroit Mercy School of Dentistry and Nova Southeastern University College of Dental Medicine in Florida.
More and more solo practitioners and new dental graduates are realizing the benefits of being part of GEDC, says Beckman. Further, dentists nearing retirement are looking to GEDC as an option to which they can transition their legacy and patient base.
DSOs, in general, can expect continued growth, given the continued awareness of the relationship of proper dental healthcare to the prevention of greater health issues, and the opportunity DSOs offer to save the healthcare system sizable dollars, says Beckman.
That said, challenges lie ahead, he adds. Regulatory intervention is one (though regulatory authorities are getting better educated about the benefits of DSOs), he says. What’s more, DSOs that fail to do the right thing can “cast doubt to the greater dental world on those of us who are operating the proper way.”
