Eavesdrop on any conversations about DSOs over the past two years and one big idea dominates the discussion: they’re not going away! In fact, there’s much to learn from those discussions and how the DSO model is positioned to impact dentistry in 2022 and beyond.
“According to the latest data from the American Dental Association’s Health Policy Institute, there’s been a downward trend in solo owner/practitioners since 1999. At that time, 65% of U.S. dentists ran solo practices, but by 2019 only 50.3% of dentists practiced in this manner.” 1
“In 2017 7.4% of all practicing dentists were affiliated with a DSO. This number grew to 10.4% in 2020 – a 40% increase.” 2
“A recent survey of dental professionals found that 7% of dentists are considering affiliating with a DSO or merging their practices as a result of the pandemic.” 3
What’s continuing to drive dental practice consolidation and why is it likely to continue in 2022?
Consolidation in the dental industry continues to gain more ground. If the COVID-19 pandemic did anything, it further increased momentum for consolidation.
Here are the reasons why we’ll see continued growth for DSO in 2022.
Freedom from the weight of practice debt and ownership
There was a day when graduating from dental school with an amount of debt was an accepted norm. With rising fee structures, insurance challenges, and external threats (e.g., an unforeseen pandemic) — new and early career dentists are feeling the weight of accumulated debt and related career pressures.
“In 2005, just under half of dentists under 35 owned a practice. That number shrank to 30.7% by 2019.” 4
For many, the ability to own and run a dental practice has become less and less a viable option. In fact, “…practice ownership has seen a decline in every age group, collectively dropping from 84.7% in 2005 to 76.1% in 2019.”5
DSOs offer a number of benefits to dentists looking to consolidate:
- DSOs handle a high percentage of your business of dentistry tasks
- DSOs provide access to innovative technology and specialists that could be out of budget for new or early career dentists
Investment, acquisition, and consolidation potential
Private equity groups are continuing to see the value of investing in dentistry. Merger and acquisition trends are accelerating across the industry.
Brian Colao, Director of Dykema’s DSO Industry Group, provides his corporate dentistry insight on the related trends:
“You see the evolution of dentistry from single, solo dentist-owned locations or dentist-owned group practices to DSOs. You also see consolidation in private equity groups — large DSOs, intermediate DSOs are buying up and acquiring offices.”
Roshan Parikh, DDS, MBA, and Founder of DSO Strategy confirms the investment and acquisition potential noted in an early 2021 industry forecast:
“From what I see, there are many opportunities to be had in the acquisitions space and that will continue throughout the remainder of 2021, and into 2022.”
The investment appeal for DSOs have not waned. Owing to dentistry’s relatively quick reopening and recovery and changes in the tax law, “The current DSO market penetration of approximately 30-32% will likely continue its unabated march to 75-80% over the next 10 years,” said Colao.
Staffing shortages, particularly for dental hygienists continue to challenge dental practices and may also drive more consolidation as patient return with pent up demand for hygiene appointments.
Unique positioning to close the gap on care access
A key motivating factor for becoming a dentist is the desire to help people. A DSO provides dentists with the opportunity to treat patients rather than divide their focus for business tasks.
This appeal has a natural domino-effect on patient care.
- A more patient-centric treatment environment
- Ability to innovate around new dental technology without the burden of investment debt
- Less time spent on administrative and operational tasks, allowing clinicians to focus on patient care.
DSOs also open new care access paths. For example, their available capital will help the under-resourced or underserved populations receive dental care.
“DSOs are well-positioned to provide care for Medicaid patients and close the access gap for millions of Americans. With 43% of Americans living in rural areas that lack access to dental care, the needs and opportunities are great. Access to capital allows DSOs to grow and innovate at scale.” 6
DSO resources allow them to do the heavy-lifting that solo/private practice owners find difficult to do.
- Opportunity to open a practice in an underserved rural community/area
- Develop and utilize mobile dentistry teams in regions where dental care access is limited or non-existent
Trends are tipping in the direction of DSOs. DSOs are positioned to remain core to the revival of dentistry for dental professionals, patients, and savvy investors who recognize dentistry’s potential for growth.
The following resources will help you keep your finger-on-the-pulse of DSO trends and growth:
Rely on DSO-tested technology to ride the waves of anticipated growth
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