Who's partnering with DSOs—and why?

This is a five-part series based on my personal experiences with DSOs and provides information gleaned from boots-on-the-ground experience. Over the last three years, I have been involved with two different DSOs and worked at four different offices with dozens of staff members.

There are several types of DSO/dentist relationships. For this series, I’m only considering the employee relationship, where a dentist works as an employee for an owner-dentist who has contracted with a DSO to handle the business side of dentistry. This would be the most common relationship for a dentist looking for employment opportunities outside of practice ownership.

I graduated from dental school in 1982. Back then, there were primarily four options for dental employment: solo private practice, associate in a private practice, military service, or academia. Like the majority in my graduation class, I chose to open a solo private practice.

When I began my private practice 40 years ago, I had no idea I would ever be involved with a dental service organization. The concept of separating the business side of dental practice from the clinical side was in its infancy, and it wasn’t until years later that it grew into a full-fledged industry. According to the ADA’s Health Policy Institute’s figures from 2019, 10% of dentists are affiliated with a DSO.¹ And, under present conditions, that number is sure to grow quickly.

DSOs offer opportunity to serve those in need

Most of the media available on DSOs presents them in a positive image. But most of the media available on DSOs has been produced by DSOs. I honestly believe, though, that most have found a niche to fill and are ultimately interested in promoting the practice of dentistry. To not do so would effectively kill the goose. But there are also disadvantages.

Who partners with a DSO, and why?

So, what kind of dentists partner with a DSO and why? Let’s start with me. Three years ago my wife and I decided to relocate to be nearer our grandchildren. But I didn’t want to start from the beginning. The challenges of moving to a new state, acquiring a new license, finding and outfitting a new location, hiring and training staff, completing insurance credentialing, and building a patient base from nothing in a community where I knew no one all melded to create a mountain I didn’t feel like climbing. After all, my reason for relocating was to spend more time with family, and creating a new practice wouldn’t allow much time to do that.

Additionally, I was no longer in dentistry for the long haul. I was older. I wasn’t building for the future; I was living in the present. There are many other dentists in the same situation, some relocated, others retired temporarily, some who gave up practice due to health or injury, but for whatever reason, they’ve decided to reenter the workforce. A DSO relationship is an inviting alternative to setting up a new practice.

The driving force: Age

That attribute of age is the driving force for most older dentists who choose to associate with DSOs. I’ve met several in my experiences. Some have been in the dental industry for years as auxiliaries, lab technicians, or hygienists. Others chose to enter dental school closer to midlife, often graduating from school with older children and the expenses that accompany them, so associating with a DSO was an attractive option.

DSOs provide all the services involved in starting a new practice. Additionally, most provide health benefits, malpractice insurance, and continuing education. It allows new dentists to start seeing patients and earn income right away, and removes a lot of the hassles of managing a new practice. As with my situation, it provides the opportunity for a dentist with less future to gamble the opportunity to stay in the present.

Other older dentists have been in private practice for years but simply don’t enjoy the business side of dentistry. No one decides to go through the rigors of a dental education with the dream of one day doing payroll or filing insurance claims. Associating with a DSO offers more time to concentrate on what you love, whether it’s oral surgery, cosmetic dentistry, endodontics, or fishing.

Some older dentists will join a DSO because they’re just not good at the business side of dentistry. When I was in dental school, there was a year-long course in practice management that included business practices. I recall at the beginning of the course the instructor joked that most dentists were terrible at running a business but made enough money to make up for that. Times have changed, profit margins have narrowed, and nowadays dentists have to be on top of their business game to be financially successful. It can be quite a relief to a business skills-challenged dentist to divest the responsibilities of managing a practice.

For younger dentists: debt

The ADA’s Health Policy Institute also indicates that the number of new dentists associating with DSOs is twice the number of older dentists.¹

When I graduated, although interest rates for business loans were hovering around 18%, opening a solo practice was still the norm. Student loan interest rates were near 3% with maximum loan amounts per year; I graduated with a total of $10,000 in student loan debt.

Today’s new dentists graduate with an average of over $300,000 in student loan debt, and the interest rates can be over 7%. The cost of setting up a new practice can easily reach $500,000. To start a new practice out of school, a new dentist is looking at a debt burden approaching $1 million before the first dollar is earned.

When you consider that new dentists have limited experience in the clinical aspects of dentistry, lack experienced judgment in treatment planning, and lack speed in production, the prospect of paying off those loans becomes daunting. Unless the graduate has managed to minimize their student loan debt, or has an inside track to a position in academia or a private practice associateship, it’s understandable that they would look for a solution that offers an immediate paycheck. And, after four (or more) years of dental school, they’re ready to enjoy life for a while. After all, they have their whole future ahead of them.

The younger dentists I’ve observed in my DSOs tend to use a DSO as a temporary employment measure. Many have graduated with no concrete plan for their future. Most DSOs require a one-year contract, which gives the dentist time to earn some money and decide what their next step will be. A DSO affiliation also offers the chance to gain more clinical skills and observe how a practice is managed, as well as the opportunity to test a new community for permanent residence.

DSOs offer a lot of advantages for dentists at every stage of their careers. In upcoming articles, I’ll examine some of those, as well as some of the pitfalls I discovered in my experiences. I’ll wrap up the series with a list of specific factors to consider in agreeing to associate with a DSO—specifics I learned the hard way.

Editor's note: This article appeared in the November 2022 print edition of Dental Economics magazine. Dentists in North America are eligible for a complimentary print subscription. Sign up here.

Reference

1. HPI: Shifting practice patterns. American Dental Association. Accessed October 3, 2022. https://www.ada.org/publications/new-dentist-news/2021/december/hpi-shifting-practice-patterns