How to know if selling to a DSO is right for your dental practice
So what exactly is a DSO in the dental industry?
“DSO” can stand for either “Dental Service Organization” or “Dental Support Organization,” but either way, a DSO is an organization that has full or partial ownership of a dental practice and provides support for the business (or non-clinical) side of dental practices.
There are lots of different ways that DSO acquisitions and sales are structured, and the terms of the deals vary widely. Occasionally, these organizations act like “invisible DSOs” and largely provide background support and investment, but many take a more active role in practice management and operations, from choosing which labs to use and hiring staff, to setting dentists’ pay and selecting office decor.
In 2019, about 10% of dental practices were affiliated with a DSO, though those numbers are predicted to rise, especially with new dentists and younger dentists.
But deciding whether or not to join a DSO is a big decision, so we’ve compiled some helpful information and resources so help you understand your options. In this article, we’ll cover:
Pros of joining a DSO
Cons of joining a DSO
Questions to ask a prospective DSO
Things to consider before joining a DSO
Alternatives to DSOs
Pros of joining a DSO as a dental practice owner
Less administrative work
Many DSOs provide support on the more “business” side of things: compliance, accounting, billing, collections, insurance negotiations, HR, etc. All this could free up you and your staff to focus more on the patient experience and providing excellent care.
New technology
For many practices, joining a DSO is a nice path to upgrading equipment, software and technology. Some DSOs have requirements for which technology is used in order to create economies of scale across their member practices, and they generally provide a capital infusion to take care of these upgrades. For many dental offices, DSO support was helpful in setting up tele-dentistry in the early days of COVID-19.
Marketing support
If you’re not currently investing in growing your practice—or simply aren’t able to—then pairing up with a DSO that offers marketing support could be a path to growth. If the DSO is able to support your growth through website improvements, search engine optimization, ad campaigns, direct mail and more, you may reach new patients you wouldn’t have on your own.
Loan payment assistance
If you’re still battling large student loans from dental school, some DSOs will offer full or partial loan repayment in exchange for signing a long contract to continue working with the DSO for years to come. For some younger dentists, this may be a path to reducing financial obligations. (That said, beware of pitfalls such as penalties for early termination of contract or even required repayment.)
Here’s how the Association of DSOs describes the benefits that DSOs provide.
Cons of joining a DSO as a dental practice owner
Loss of autonomy
You’ve worked hard to establish your practice, and as a business owner, take pride in your ability to effect change. With a DSO taking the reins, you will likely lose at least some of your influence on your schedule, staff, office, equipment, technology, upgrades, insurance acceptance, marketing, and more. For many practice owners, this can feel unsettling and sometimes even frustrating if it impacts your ability to practice how you want to.
Financial implications
A sale to a DSO will have large tax implications for you as a business owner, but it also undoubtedly impacts your earning potential in the future. As a business owner, your earning potential was almost entirely up to you, but with DSOs, your compensation will likely be determined by someone else. These details should be discussed thoroughly in your negotiations and included in your agreement so that you are clear on your earning potential.
Less insight into the business
As many DSOs take over the more administrative and operational tasks associated with a practice, you may lose insight into what’s working, what’s not, and how the business is doing overall. You may have less understanding of what’s happening administratively, and less ability to proactively identify potential issues and step in to address challenges. This is a big change for most business owners and may cause some discomfort.
Prioritizing profit over patients
While you may have gotten into dentistry to help your patients and do no harm, DSOs are profit-focused business entities, at the end of the day. Ultimately, their decisions will have to be geared toward maximizing profit, even when that decision may not be what’s best for you, your staff, or your patients. Some DSOs have received criticism for requiring unrealistic work schedules and encouraging (or even incentivizing) the use of more profitable procedures over what might normally be recommended. For many dentists, these priorities don’t sit well.
Questions to ask a DSO before you consider joining
When you’re talking to a DSO, think of it like a job interview: Both of you are trying to determine if there’s a fit. Come prepared with questions, like the ones below, so you can assess whether partnering with this DSO makes sense for the long-term success of your practice.
Experience: How long has the DSO been operating? How many practices are part of the DSO?
Reputation: Are there any past or pending legal actions against the DSO? What is retention like for DSO dentists? What is the financial health of the DSO?
Geographic: How many other practices does the DSO own in your area? How well does the DSO understand your market? How familiar is the DSO with state and local laws & regulations?
Collaboration: How do the practices in the DSO interact with one another, if at all? Do member practices support one another or refer business between one another?
Support: What type of support do members of the DSO receive? Does the DSO offer support with hiring, technology, billing, procurement, scheduling, marketing, branding, building upkeep, etc.
Discounts: What type of discounts does the DSO offer on supplies, services, or equipment, if any?
Billing: Will the DSO handle billing and collections, or will your staff? How will billing and collections be managed?
Marketing: Will the DSO take over marketing for your practice? If so, what marketing tactics will be used to market your practice, and how will results of that marketing be communicated to you?
Transition: Will your practice be required to switch to DSO-approved vendors? Will your practice be required to change software, equipment, or service providers? If the DSO requires changes, what support and training will they provide?
Insurance: What insurance plans does/will the DSO accept? How will this impact current provider relationships and patients?
Liability: Will you or the DSO own the building, equipment, etc. Will you maintain professional liability insurance, or does the DSO?
HR: Who will take lead on hiring, firing, promoting, employee complaints compensation, etc? What benefits does the DSO offer? What incentives or performance-based requirements are in place? What is the DSO’s policy on scheduling, vacation, sick time, parental leave, bonuses, continuing education, etc.?
What else practice owners should consider before joining a DSO
Joining a DSO is a massive decision for a private dental practice owner, so here are some things you want to be sure to consider before your make the call to make your practice part of a DSO.
How well do you know the DSO you’re considering selling to?
Anyone can build a polished website and deliver a compelling pitch. Have you done enough research and due diligence to feel confident that this DSO is everything they claim to be? Speak to practice owners who have joined the DSO in the past to understand their experience, and ask plenty of questions to make sure you have a full picture of the ecosystem your practice would become a part of if you become a member of this DSO.
What level of control are you OK with giving up?
Many DSOs will take lead on staffing, billing, procurement, marketing, and more, which could mean you lose the ability to control who you work alongside, which insurance providers you accept, what supplies and equipment you work with, how your practice is presented to potential patients, and more. Is this something you’re comfortable with? Where will you draw the lines, and what do you need to be able to control or influence to continue practicing the way you want?
Alternatives to joining a DSO
For dental practice owners who like the idea of more efficient pricing and negotiating power that comes with a group of practices, but don’t want to relinquish control of the practice, dental buying groups like GroupUps are a great alternative.
GroupUps, for example, combines the buying power of many independent dental offices to negotiate better pricing on your behalf, but has zero stakes in your business, has no influence over your operations, and is fully incentivized to help you save money, not to make money off of you.
GroupUps Premium membership gives independent dental practices access to more than $20,000 in annual savings on dental supplies and services, from reputable vendors, distributors and manufacturers.
In addition to buying groups, dental associations and professional organizations can offer dentists the opportunity to connect and collaborate with like-minded professionals and provide free or discounted continuing education opportunities to help dental pros learn to be more effective and more confident with the business side of the practice.