Staffing shortages, stagnant reimbursements and rising interest rates are fueling financial challenges for DSOs, according to one exec.
Anthony Leonetti, DMD, the CEO of New York City-based Rising Tide Dental Partners, recently spoke with Becker’s to discuss some of the biggest challenges facing DSOs.
Note: Responses were lightly edited for clarity and length.
Question: What are some of the biggest challenges facing DSOs this year?
Dr. Anthony Leonetti: I believe staffing is a big thing facing the whole industry. When I talk to other leaders at other groups, or just independent dentists in our network, I would say [more than] 90 percent of them are reporting difficulties recruiting hygienists specifically. That’s a huge operational constraint across the industry.
Another challenge I would say when I talk to independent dentists and what I see is insurance friction. I think a lot of dentists have insurance issues as a business challenge. These plans have not increased fees or reimbursements to dentists at the rate of inflation, and with the hygiene and staffing constraints and salary increases, it’s becoming almost unprofitable to stay in some of these networks, so that’s a real challenge that dentists and DSOs are facing across the industry.
I also think capital structure is a bit of an issue. There are different platforms that were leveraged in a different rate environment, and now rates are significantly different and they’re starting to pay for that now, so I think that’s a big challenge facing a lot of these DSOs this year. We’ve seen some of that happen with some restructuring where lenders are starting to take over some of these DSOs. Some of the challenge isn’t just finding growth, but it’s surviving your own balance sheet when the rate structure changes like this. For years you were getting money basically free. Now, there’s a cost to that.
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