Is the solo practice dead?

September 1, 2018

Article

The rise of DSOs has many solo practitioners nervous - but what does the future really hold?

The business of dentistry, like so many industries, is different than it was 20 or 30 years ago. That change can be chalked up to such influences as the economy, technology and our culture. Dental service organizations (DSOs) are becoming much more prevalent and, given the current climate, may overtake solo practices in the coming years.

So, it begs the question: Is the solo practice dead?

It depends

The short answer is, “It depends”.

“If the continuation of the industry as-is goes forward, the answer is, ‘Yes,” Dr. Marc Cooper, president and founder of the Dentist Entrepreneur Organization, a national consulting and training firm out of Portland, Oregon working exclusively in the group practice space says. “The 80/20 rule will prevail. The growth of DSOs, managed group practices, is growing about 20 percent per year. My understanding of the ADA Health Policy Institute statistics is solo practices are shrinking at the rate of about seven percent per year. They’re about 55 percent now. The trend lines are such that the growth is exponential for DSOs and is declining steadily first solo practices.”

Dr. David Burt, a general practitioner at Mountainville Dental in Allentown, Pennsylvania., says that the solo practitioners will always have a place in the industry and that they are not going anywhere. Unlike medicine, dental operates on a different model.

“Medicine has pretty rolled over to corporate,” Dr. Burt says. “We all know that, we’re all living in, we are all seeing it all the time. But that’s because, other than going for checkups, medicine is, ‘You go because you’re sick.’ Dentistry is not like that. Dentistry is an elective procedure. We are physicians and contractors, at the same time. It becomes a different kind of a beast. Where your primary care physician sits there, listens to you, and writes scripts, we sit there, figure out what’s going on, see if you’re dealing with pain or not, and make esthetics looks better, or function better. People get to decide.”

Dr. Roger Levin, CEO and chairman of dental practice consulting firm, the Levin Group in Owings Mills, Maryland., observes that there is a place for everyone in the dental space.

“There’s so much noise about the death of private practice, that a lot of people are buying into it, but it’s just not true,” Dr. Levin says. “DSOs are growing, they’re continuing to grow. Small groups coming online with multiple dentists. So, there will be fewer solo practices, but for the next 10 to 20 years, we will have solo practices with doctors who enjoy that level of independence and freedom and understand how to make it successful. I think a big part of it is business management. If you manage your practice properly, it can be extremely successful at different levels of revenue. I’m not suggesting it’s going be the only model of the future, but it is one of the models of the future. There’s no data, whatsoever, suggesting that any form of practice is going to completely disappear in the near-term. They’re going to change, but they’re not going to disappear.”

David and Goliath

DSOs, because of their sheer size, have organizational advantages that make it a challenge for solo practitioners to compete. Whereas the solo practitioner has to wear many hats – HR, payroll, etc. – in addition to actually performing dentistry, DSOs are able to hire specific people – even entire departments – to handle specific tasks.

“Solo practices are extraordinarily vulnerable to the forces that are occurring in the industry,” Dr. Cooper says. “DSOs have the capacity for high-end executives to do all of the business functions, and that’s their only job. You have someone in charge of HR, they’re handling all the staff issues, all the staff interactions, all the performance reviews, all the recruiting, all those areas. The chief financial officer really looks at the numbers every day, all the KPIs in a close fashion, does analysis, tells you where you can turn the dial to get better on the lever, so you have a whole set of professionals managing a dental enterprise, whereas a solo practice has to do all of that themselves.

"It’s a novice compared to an expert in terms of running a business. And then you have the capacity to deliver care for less per patient, because of the economies of scale. In addition, they’re able to leverage, in terms of their transactions, reductions in most expenses, because they’re buying in a much larger volume. So, it costs less to do per patient, they have a capacity to increase access by opening from 7 to 7 and on Saturdays, they can recruit better staff because they have better benefits packages and probably higher salaries.”

Different doctors

There is no one-size-fits-all when it comes to where doctors want to work. It depends on personal preference, individual finances, and where one is in his or her career. For instance, Dr. Cooper observes that millennials seem well-suited for DSOs.

“They are digital natives,” Dr. Cooper says. “For them, it’s a doorknob; for me, it’s a safe. I don’t even know the combination to a half of these things, but they do. So, they’ll embrace it. The other part of that is millennials know how to be a team, better than Generation X, better than Boomers.”

On the other hand, Dr. Burt observes that DSOs may not have young dentists’ best interests at heart.

“They overwork them,” Dr. Burt says. “They may promise the world to them: $160,000 a year, so the kids with the big debts, they’ve got to roll to that right away. They’ve got to find out that they’re going to work their asses off. And that’s what they do. The corporate take side cuts and shortcuts that ought not be.”

As an example, he talks about one dentist who left a DSO because the organization was using non-certified personnel to perform X-ray procedures.

“He said, ‘Well, if someone comes down and we get in trouble, it’s my license that’s on the line, not you guys. You’ll go back to work tomorrow and find somebody else. I’m on the line,’” Dr. Burt recounts. “And he’s right. He wanted to do it the right way.”

Patient preference

Just like the doctors, patients have a preference, and they can vote with their wallets.

“For the most part, there are patients who want the private practice and want the attention and customer service,” Dr. Levin says. “And there are patients who want the expanded hours, open six days a week, DSO for access in emergencies. But I would say the majority of patients aren’t really noticing. Because DSO marketing is excellent, and private practice is still the majority of dentists and has a very strong niche. And also, dentistry is a very personal relationship for many people. That might change in 30 to 40 years, but right now many people want to go to ‘their dentist’. There are people who are happy to go to a DSO and have any dentist, so we are seeing a shift, but the majority still like going to their dentist.”

For Dr. Burt, the personal touch really makes a difference to his patients.

“My dentist is my dentist, and some people are just fussy,” Dr. Burt adds. “They really care about what goes on with them. And they want somebody to talk to them. They want to know the proper options. They don’t want to see another guy three years from now, because there’s this huge turnover in corporate.

“The empathy factor is fairly large,” he continues. “They need somebody that wants to care about them. And I think that, with the turnover of DSOs, you just don’t get that. People just have so much fear and anxiety about going to the dentist, that when they finally connect with somebody, they want to know that they’re cared about, and I think there’re a whole lot of practitioners out there – like myself – who care about what happens to their patients. The empathy that we are able to generate for these people it’s what keeps them coming back, rather than going somewhere where they’re just a number.”

Stay in the game

Given the current climate, how do solo practitioners compete in the DSO era? Dr. Levin advises three areas in which to focus.

“Number one: retain their patients,” Dr. Levin says. “Private practices have, typically, about a 15 percent attrition rate per year, and that needs to come down to about seven or eight percent. The difference is customer service. Those practices that have good customer service need to have great customer service that wows people with their brand and a message and a level of care and convenience. Number two: Marketing programs are very important today, but the strongest marketing program is still patient referrals. When patients have excellent customer service, and then are motivated by the practice to refer to that practice, it can increase the number of new patients. Number three: Focus on convenience for the patient. That means convenient appointments, convenient payment plans, even convenient hours, in some cases, that allows the practice to retain patients, participating with plans. If the patient base is very insurance-based, it’s going to be hard to keep them if a practice does not participate at some point. And with lower reimbursements, practices need to run much more efficiently.”

To remain competitive, to offer patients what they want, Dr. Burt says solo practitioners must expand their offerings.

“The solo guy does have to bring some other specialties in-house, or they need to become diversified in what services they offer,” he says. “We do pretty much everything. I have a huge implant practice, and that’s why I have a cone beam. We have all the technologies. I do full-on orthodontics, whether it be clear aligners or bracketing, endodontics. I guess the one thing we don’t do too much is perio surgery. So, the breadth and width of services is going to force the general practitioners to have a knowledge about most specialties in dentistry and be somewhat able to deal with it, and do it properly.”

Dr. Cooper observes that the opportunities offered by DSOs makes it hard, especially for the Millennial doctors. The remain in private practice.

“If I’m in solo practice, I have a lot of conflicting thoughts. I’m in confusion,” Dr. Cooper says. “The first one is: I don’t have a buyer, unless I really cheapen down. So, I’m doing $1.1 million a year, I’m working my 180 days, my overhead is running about 60 percent, and I’m making a really pretty good living out of it, but the fight is getting harder. What do I do? Well, if I go over there, if the rumors – most of them unproven – about DSOs that they’re unethical, they lack integrity, and they do poor dentistry. However, when you look, DSOs are the only ones with quality assurance programs. Solo practices do not have those. They don’t have chart review, they don’t have peer review, they don’t have evaluation about their work, no one’s ever over their shoulder looking at what kind of quality dentistry is being done. DSOs are doing that.”

What’s next?

Where do dentists go from here? Should solo practitioners be worried? Dr. Burt says the threat is real, but solo practitioners who want to stay in the game can do so.

“We are at risk, there’s no doubt about it,” Dr. Burt says. “The DSOs will penetrate to a certain percentage, and my thinking is, there’ll always, in dentistry, be the ‘boutique’ kind of practice that people will gravitate to, and once they see it, they experience it, they’re never going back. I think the maximum penetration that corporate will ever get will be 60 percent. I think it’s like CEREC and CAD/CAM. Sure, everybody talks about chairside milling and everything else, but do you realize that in the 25 or 30 years that it’s been available, that that penetration is only been 20 to 25 percent? That’s because the doctor has to want to do his own thing and to do the chairside milling, and 75 percent of them don’t want to do that. I, myself, had to shift when I was taking some of the cheaper insurances. Instead of taking two hours for one patient to mill my own, I put two patients in the chair and produced twice as much, sent it off digitally and got a crown cheaper than what I could buy a block for the mill.”

On a larger level, Dr. Cooper says that dentists need to find the work environment that best suits them.

“I would tell dentists, ‘You can’t do dentistry without dentists,” he says. “That is the highest leverage arm you can possibly have in any industry. You cannot be replaced at the patient/doctor interface. Patients need relationships. Where you put that is up to you. I think a lot of dentists have their heads in the sand. They don’t want to see what’s really going on, but you can’t make commitments until you go through consideration, and they really need to pull their head out of the sand and start looking at the whole ecology of what’s going on and where they are in their life, and in their practice, and where it is best to put that talent and those assets.”

Further, Dr. Levin observes that to stay competitive and in practice, solo practitioners need to focus on the business of being a business.

“Practices today need to run like excellent businesses,” he says. “When a private practice runs like an excellent business, there’s a lot of opportunity for growth and success. You can’t keep doing what you used to do, but when you do what you should be doing today, from a business standpoint, with the right systems in place, the practice will be successful.”

The best way to stay in business, Dr. Burt says, is to work smarter.

“We have to think this through,” he says. “We have to think about and figure out that there are ways to make it work. I’m close to the end, but I guarantee you if I had another 20 years, I would make it up against the DSOs. You’ve got to stay on top of your game with the economics of your practice and what deficiencies there are.”

He adds, “Take heart. We’re not going away.”