Groupthink
The percentage of solo practitioners remains fairly steady, but many think change is in the works
Rick Workman, DDS, grew up on a farm 35 miles southeast of Effingham, Ill., in the southern part of the state. He attended a three-room grade school, where his mother was a teacher. But he had ambition, and ultimately graduated from dental school in 1980. The economic outlook that year wasn’t too hot, so he set up practice with two chairs in a basement, figuring he could always work on the farm if things didn’t work out.
"I was working probably 50 hours a week, then another two or three a night, six nights a week, for 15 years, trying to figure out how to build a better dental practice," he says. "I figured, ‘If I’m working this hard, trying to learn how to become a better dentist and improve my practice, there has to be a better way.’" Gradually, he built his practice to 29 offices throughout central Illinois. Then, in 1997, he sold most of those practices, retained the management team and started what is now known as Heartland Dental, a dental services organization that has more than 250 affiliated dental practices in 15 states.
started what is now known as Heartland Dental, a dental services organization that has more than 250 affiliated dental practices in 15 states.
"Dentists don’t have benchmarks; they don’t study each other," he says. "We are taught to be independent, non-collaborative doctors, with no way to compare outcomes of treatment. Oncologists know how their results compare to national standards. Hospitals know, surgeons know. But dentists have traditionally had a solo mindset and rarely have compared objective data. Even if they wanted to, it’s impossible, because no system exists. But by pooling the expertise and results of many dentists, a dental service organization can."
Solo practices still dominate
Among the 127,000 or so dental offices that exist in the United States today, 61 percent of dentists are in solo practice, 23 percent work with one other dentist, and close to 16 percent work with two or more dentists, according to the American Dental Association. Though the percentage of solo practitioners has remained fairly steady over the past five years or so, proponents of dental service organizations see only growth ahead.
"Most dentists don’t want to hear this, most don’t want to believe it, but in 10 or 15 years, I believe well over half of all dentistry will be delivered by dentists working with some very large entities," says Workman.
"The trend is changing, and growing toward the dental services organization side," adds Ed Meckler, DMD, chairman of DentalOne Partners. Dental service organizations may comprise just 5 to 7 percent of the market, he says. "But the total market is in the billions, "so 5 to 7 percent is a very significant number."
Meckler founded the first Sears Family Dental Center in 1981. In 2008, his company (then known as DentalCare Partners) merged with DentalOne to form DentalOne Partners. Today the company has more than 150 practices, primarily in high-growth suburban areas of major metropolitan areas such as Chicago, Dallas, Denver and Charlotte.
Meckler doubles as director of the Dental Group Practice Association, which represents the largest dental service organizations (or dental service management companies, as they are also called). Its 25 members represent some $3.5 billion in revenue. Growth among DGPA’s members last year exceeded 10 percent, he says.
Group practices are old hat
The dental industry may be conservative by nature, according to some with whom First Impressions spoke. But group practices are old hat in the profession. The American Academy of Dental Group Practice was founded in 1973, as dentists realized they needed to group together if they were to adequately service large employers or provide a comprehensive network for dental insurers, says Bob Hankin, who manages the academy’s administrative offices in Phoenix, Ariz.
"In those early days, groups were considered to be controversial," says Hankin. By the late 1970s, advertising by dental practices had become more commonplace. Not surprisingly, groups were in a better position to rent billboards or radio spots than solo practitioners. Franchising as a concept was catching on across American industry, including eye-care centers and real estate offices, and dentists wanted to catch the wave, says Hankin. They also recognized the economies of scale that groups could enjoy, in terms of acquiring supplies and equipment, and reducing other overhead costs.
Dental franchises have faded somewhat from the landscape, but dental service organizations have not, says Hankin. Large groups and dental service organizations may be just the thing for dentists who want to focus on the clinical side of their practice but not the business side.
Many flavors
The nature of the dentist’s relationship with the dental service organization varies, depending on state law and the wishes of the dentist. In some cases, the dentist may opt to become an employee of the organization. In others, the dentist or group may contract with the dental service organization to manage the practice for a fee.
Heartland Dental, for example, provides a number of options for dentists. In its affiliation model, the doctor affiliates his or her practice with a practice with which Heartland already has a management agreement. In the partnership model, Heartland invests in the practice and becomes a minority partner. But regardless of the structure, Heartland dentists maintain control of clinical decision-making, while Heartland manages non-clinical processes, such as purchasing, accounting, training and even human resources.
Rate of growth up for debate
Just how quickly dental service organizations are growing is tough to judge. It’s true that the current recession has driven some young dentists to large organizations, and some are opting to stay for a while, says Roger P. Levin, DDS, CEO and chairman of Levin Group, a dental practice management and marketing consulting firm in Owings Mills, Md. "But I can’t tell you what will happen a year from now, as the economy improves.
Is this a trend? That depends on what you define as a ‘trend.’ Yes, [dental service organizations] are growing, but not rapidly."
Debt as a driving force
Proponents of dental service organizations believe the march to their ranks is inevitable. One of the biggest driving factors is the debt facing dentistry school graduates, they say.
The average dental student graduates with $250,000 of debt, says Meckler, who sits on the board of a visiting committee of the Case Western Reserve University Dental School, where the topic recently came up. "The question was presented, ‘Can the dentist afford to pay that back?’" he says.
Traditionally, the recent grad completes a residency, then opens up shop somewhere. The problem is, the cost of opening up a practice with modern technology can be $500,000 or more, points out Meckler. Add to that the $250,000 in school debt.
Equipment costs
To avoid the cost of equipping a new practice, the young dentist may elect to become an associate of an existing practice, says Meckler. The owner of the practice has overflow patients, which the young doctor can care for. "But [the owner] can’t start paying that [young] dentist very much, at least initially. And the dentist is thinking, ‘I have to start paying off my $250,000 loan.’"
"It’s extremely difficult to service $300,000 of student debt with a small practice," adds Workman. "And it may well cost another $300,000 to even buy a small practice." To complicate matters, a young dentist may make a strategic mistake in deciding where to set up his or her practice, or fail to negotiate effectively with finance or insurance companies. Add to that the fact that they lack leverage in buying supplies and equipment, he says. "Then they struggle financially for the rest of their lives."
Indeed, the cost of opening and operating a practice is growing, adds Levin. "These are very expensive technologies, and a dentist can’t have them all and maintain an excellent profit margin."
Well-equipped offices
Heartland has national agreements with distributors and manufacturers, notes Workman. "We can help doctors get the technology and equipment they need at a price that is truly market-based." In fact, he says, dentists who may have dismissed the idea of affiliating with a dental service organization change their mind when they see the typical office. "They see digital X-ray, five or six chairs, a highly trained team, marketing experience and expertise." Add to that a healthy first-year income and they’re asking, "Why wouldn’t I do that?" he says. "The number of folks who are interviewing with Heartland and considering [affiliating with] Heartland has probably tripled over the past few years."
"There’s the myth that young dentists come out of school with - that these are bad places to practice," says Meckler. "But once they step into one of our offices, they find out they’re regular dental offices. In fact, the equipment is probably better and newer than what they would find elsewhere. Many of the models offer them ownership or partnership in their practices fairly early, so they have the ability to be an owner, and that’s a big draw. That’s why there’s growth in the [dental service organization] market. Dentists are available. We have the resources to open up new offices, to merge offices, and to do the things we need to do to grow our practices."
Learning companies
Dental service organizations and large groups offer some intangibles too, according to proponents. For young dentists who are still learning their profession, larger organizations offer the opportunity to work alongside - and learn from - experienced practitioners, points out Hankin.
"We’re basically a training company," says Workman. "When you can help dentists and their teams focus on what they’re trying to accomplish, and share with them the results that others are achieving, the results speak for themselves. We get to study the habits, outcomes, goals and results of 300-some dentists every day. That’s more than other dentists will ever get a chance to see."
Questions
Despite what proponents believe, some question marks face dental service organizations. The first are traditional negative attitudes toward them. Affiliating with a dental service organization is viewed as "less pure" than being a solo practitioner by some dentists, according to one source.
Another wild card is the impact of the growing number of women entering the dental field. "A lot of freshmen classes today are as many as 50 percent women," notes Levin. "For women who don’t have the same desire to own a practice [as men traditionally have], being employed rather than owning a practice is a viable option to consider."
"For many women, working in groups is a convenient way to practice," adds Hankin. It offers a high-income employment opportunity without the requirements of ownership, which can lock a dentist in.
A third question mark is the impact of the larger economy. "Some young dentists absolutely view [dental service organizations] as an option coming out of school," says Levin. "They gain experience, they get an income, and they get to examine if they want to stay in the organization long term or join another practice."
"The cost of starting a [solo] practice can cause some dentists to stay with groups for some time," says Hankin. In dental school, they practice in clinics, which are group practices. "They have eight, 10 or a dozen dentists, and they’re comfortable with that environment." Joining and staying with a group offers more of the same.
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