Many DSO executives are expecting acquisitions, same-store growth and specialty expansions to be the biggest priorities for organizations within the next five years.
Three executives recently spoke with Becker’s to discuss what the next five years of DSO growth will look like.
Note: Responses were lightly edited for clarity and length.
Question: Many DSOs are currently prioritizing de novos over acquisitions, but where will the next wave of DSO growth come from a few years from now?
Jessica Lo. Vice President of Operations of Urgent Dental Center (Indianapolis): I can say from where I sit, we are more so looking into acquisitions. The de novo focus is very cash focused on the front end. While we’re PE backed, we do want to get as much for our cash as we can, and it is just a little bit more of a risk for us rather than bringing someone into our model and adjusting them to our method of treating patients the same day.
Hamza Asumah, MD. Director of Operations for Juniper Services (Sparks, Nev.): Looking at where things are moving right now, the common theme we keep hearing are the conversations around same-store growth and organic growth and your ability to make more out of what you already have. In the next couple of years, the quality of what you make from what you already have is what is going to determine where you are, especially if you’re looking to exit. So, my two points would be probably organic same-store growth and specialty expansion.
Looking at same-store growth, it could go from anywhere from your hygiene appointments and making sure that when patients come in for their hygiene appointments, they have their recare. When patients come in for treatment, they are being referred to hygiene to continue more proactively, so you are doing retention there. Once you bring in new patients, you are increasing your number of patients, which is one of the components of your same-store growth that you need to sustain.
The second thing is, how much are you making from the patients you already have? Are you presenting treatments in a way that patients understand? Do they see the value of that treatment that you’re presenting to them, and are they willing to spend the money required for them to get the treatment they want? That is case acceptance, so that’s the second level of what you need to look at with same-store growth … The third thing is retention. You cannot bring in more patients when your hygienists are walking out of the door. Your culture is going to be one of the central points in keeping that growth going. You can have the patients out there, but if you don’t have the hygienist or the doctor to see them, then you really don’t have work for them to do.
It’s just not enough anymore to do all the cleanings and the crowns and the fillings and just the bread and butter stuff. There has to be some specialty expansion. We are modeled centrally with our general locations, and we build specialties around it. Most of our specialties are de novo, but they grow faster because we already have the core patients who are going to be fed into those specialty practices, and it keeps everything within the same group.
Haim Haviv. Founder and CEO of Hudson Dental (New York City): I think if you look at the last wave, interest rates were around zero and then, obviously in COVID, it started going up. If you look at that wave, it was a lot about buying at six, selling at 12, and in the meantime, you just put in the same table, maybe change the name, maybe don’t change the name, and you’re pretty much done. It’s hard to say — the industry tends to be cyclical, so that may happen if interest rates are at zero again, and they might be at some point because that’s cyclical as well. However, I think the industry has matured into operations. There is so much to do. There are so many little things in the dental office, when you operate an office and you really, truly care about the patient experience [and] every single interaction … Operation is going to be key, and the growth is coming from there.
You can definitely buy offices. De novos are great, but [they] need to be backed by a very large infrastructure to support that de novo, and it needs to be with a lot of cash up front, and you kind of sit and wait, and it takes you maybe 18 to 24 months to build out. It’s definitely a possibility. We focus more on acquisitions, and we bring them to the platform. For us, and I think for the industry, the operations of the offices are the key differentiator. If you just, buy, buy, buy, buy, very soon you’re going to have to say bye-bye to some of your offices because they’re not going to function well and you’re going to have to sell them or just exit. So, operations for me is the next wave.
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