Uncovering the truth about managed practices: Beat them or join them?

Right now, dental graduates have record levels of debt. The retirement boom is forecasted to outpace the rate of new dental graduates for the next six to 10 years. Preferred provider organizations (PPOs) have created intense pressure for practice profitability. Dental consumer spending, which began to slow during the early 2000s, is expected to continue to lag for the next three to five years. And dentists' earnings remain sluggish.

Eric Nuss, MBA

Right now, dental graduates have record levels of debt. The retirement boom is forecasted to outpace the rate of new dental graduates for the next six to 10 years. Preferred provider organizations (PPOs) have created intense pressure for practice profitability. Dental consumer spending, which began to slow during the early 2000s, is expected to continue to lag for the next three to five years. And dentists' earnings remain sluggish.

These factors, among others, have pushed us to a tipping point in dentistry. More than 17% of doctors now work in group practices, a critical mass that could lead to permanent change, according to Malcolm Gladwell in his book, The Tipping Point: How Little Things Can Make a Big Difference.

What does that mean for dentists today? The coming years will constitute a period of major transition, and the prospects for dentists' earnings are unclear. The changes will affect many dentists by requiring them to give up some degree of control over their practices by outsourcing key services, hiring managed service organizations, or joining group practices.

Before making any significant changes, thoroughly research all of your options. One of the most popular choices, a management services organization (MSO), generally operates in return for 10% of gross production. For an average office with $600,000 in production, that equates to a payment of $60,000 per year. If you consider this option, look for referrals and read all of the fine print to protect yourself. Some doctors have signed contracts requiring them to relinquish control over all aspects of their practices with the sole exception of clinical decisions, only to learn much later that the contracts had terms as long as 30 years!

As dentistry has evolved, private equity firms and corporations have infiltrated its business practices in many ways. Thirty years ago, 95% of dentists were solo practitioners. Now we have group practices owned and operated by dentists, MSOs, dental support organizations (DSOs), and dental management organizations (DMOs). Within these structures, nonclinical responsibilities - such as personnel management, supply and equipment purchases, office space, patient flow, marketing, practice analytics, and insurance management - are taken out of the hands of the clinician(s) and are turned over to the managing partner or personnel.

While there are many types of practices and many ways to manage them, there are essentially three paths available to dentists who wish to remain in private practice: the traditional model, the outsourcing model, and the selling model.

1. The traditional model - The dentist serves as the clinical and managerial leader of a solo practice, handling all practice management and business processes. Under this model, the dentist/owner maintains control over all aspects of the practice. Most clinicians, however, do not receive business training to execute these functions as efficiently as outsourced providers. Without those efficiencies of scale, traditional practices need to draw a large fee-for-service clientele to remain profitable. Creating a niche practice can help traditional solo practitioners to compete more effectively.

2. The outsourcing model - The dentist maintains clinical control and practice ownership but turns over nonclinical services to experienced service providers. This frees the dentist to focus on creating new services that will be profit centers for the practice. Processes and management can be outsourced by type, category, or in full. Unlike the traditional model, which can stymie practice growth due to the time and expenses associated with in-house management, outsourcing often supports practice growth. The goal of outsourcing is to capitalize on the core competencies of the team in place.

3. The selling model - For dentists who do not want to dedicate time to improving managerial skills or refocus on a niche market segment, managed group practice may be the answer. Over the last five years, corporate dentistry has boomed as many dentists, tired of the headaches that plague small business owners, have turned ownership over to others, happily becoming employees in their own practices. While giving up control can be difficult, shorter hours and an increased ability to focus on patients may outweigh the loss. A complete or partial practice sale can also provide access to capital that may be needed as future retirement income.

Growing and competing in the dental market today requires a new level of business acumen. While there are many ways to run a successful, profitable practice, Henry Schein recognizes the challenges in the marketplace and can provide resources and solutions to help you reach your goals. To learn more about the options available for managing your practice, visit HenryScheinDental.com/DentalBusinessInstitute.


Eric Nuss, MBA, leads the Business Solutions department of Henry Schein Dental. There, he developed and now leads an educational program for dentists, the Dental Business Institute. In addition to 12 years of industry experience, he has a bachelor's degree in education and a master's degree in business. Contact Eric at (800) 372-4346 or at eric.nuss@henryschein.com.

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