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    Why managed group practice will dominate the future

    Dentist-entrepreneurs may be positioned well for the future of dentistry as the prevalence of managed group practices increases.

    This article is about solo practice, managed group practice and dentist-entrepreneurs, and my opinion that, inevitability, managed group practice will be the dominant form of dental practice in the future. Presenting this future to dentists, it is not uncommon for dentists to find themselves in one of four places: those who are “already there,” those who are strongly interested but unsure of what to do next, those that are uncertain about the validity of this future, and those who are in denial. As a dentist, more than likely you are either in one of these four places.

    Although I believe managed group practices are the future of dentistry, ultimately, it’s your views of the dental landscape and dental practice, as well as your wants, desires, fears, beliefs, psychology, culture and history, which shape how you construe what is presented in this article.

    The evidence

    Insurance companies continue to put up barriers to payment and further squeeze reimbursement through various means and methods. According to the ADA, 90 percent of dentists now take some form of dental plan and seven out of 10 patients have a dental plan. These percentages will continue and might even slightly increase. Reimbursement per procedure will be limited or even reduced through PPO and EPO plans, and restrictions on reimbursable procedures will begin to occur as now mandated by Delta of Michigan.

    The asset value of solo practice is trending downward since there are fewer qualified buyers. New dentists’ student loan debt is around $250,000 and steadily increasing. Millennials are more interested in quality of life than sacrificing for ownership. Dental practice operational and staffing costs continue to climb. Less than 10 percent of newly minted dentists want to buy existing solo practices. New dentists are steering away from solo practices due to reasons such as student debt, significant additional debt from the purchase of existing dental practice, work-life balance, and the desire for more of a community mind-set rather than a commercial mind-set. Additionally, the myth that solo dental practice will be the financial highway to retirement has been shattered. An asset that isn’t transferable is simply a liability.

    Related reading: How DSOs can enhance your practice

    According to the ADA and its Health Resource Institute, patient visits and per-patient expenditure per visit continue to decline, and along with it, so are dentists’ incomes. Managed groups practices are growing at 20 percent per year, whereas solo practices are shrinking at seven percent per year. Performing a trend analysis on these percentages, solo private practices will make up less than 20 percent of dental practices within a decade.

    Malcom Gladwell (The Tipping Point1) defines a tipping point as "the moment of critical mass, the threshold, the boiling point.” The tipping point explains and describes the "mysterious" sociological changes that mark everyday life. As Gladwell states about the tipping point, "Ideas and products and messages and behaviors spread like viruses.” Simon Sinek2 describes the tipping point using the classic adoption curve model stating that when something surpasses 17-to-19 percent of being adopted by a market, the adoption of that idea or product spreads rapidly; notebook computers, cell phones, tattoos or yoga pants are a few examples. Today, group practices are now 20 percent of dental practices. The tipping point has been surpassed.

    Investment bankers, equity partners and numbers of banks see financing dental practice consolidation as a strong investment. The amount of capital being distributed to “roll-up” dental practices is in the billions. Heavily vested management companies (MSOs) are doing enticing recruitment of dental practices for consolidation. But some well-established larger DSOs are slowing down the acquisition of solo practices. What they are now looking for are small groups—groups in the same location or with nearby multiple locations, that demonstrate solid management, good cash flow and a steady increase in new patients. And finally, other large DSOs like Pacific Dental are moving quickly away from the acquisition model to the “denovo” model, finding it easier to create the infrastructure and culture in a denovo practice than changing an existing practice. So at this point in time, acquisition of solo practices is a “mixed bag,” but the continued growth and expansion of managed group practice is apparent.

    More from the author: How do you know when it's time to let an employee go?

    Many solo practitioners are now considering selling their practice to groups as their exit strategy. Other solo practitioners are just plain tired of the hassles of being the owner, leader, manager and clinician and are considering selling to an existing DSO. The average age of dentists who own solo dental practices (predominantly Boomers and later Generation-Xers) is increasing, growing the number of available solo practices for sale. With slumping production and declining new patient numbers, along with greater availability, the value of solo practices will continue to slump. The supply is growing and the demand is decreasing for solo practice purchase.

    The evidence presented here is just the tip of the iceberg, but it is enough to demonstrate the viability of sustaining a solo practice is in danger and the success of managed group practices is significantly improved. And, it’s this evidence that makes dentist-entrepreneurs excited to develop managed group practices because a managed group practice best meets this emerging future. 

    How are most dentists responding? The level of resistance and confrontation generated currently by most practicing dentists in the face of the obvious future of group dental practice is intense. But change takes no sides. Change is not swayed by emotion or righteousness. Change does not rely on the past. Change is context-dependent and the context has definitely changed. The future is clearly managed group practice.

    Unfortunately, except for selling their practices, the majority of dentists cannot take advantage of the changes that are occurring. They simply don’t have the qualities, characteristics, personality traits or desire to build and operate a substantial managed group practice. Most dentists of existing solo practices initially generated a practice to give themselves a good paying job and to be in control. They had little intention of building a great company. But today, a few dentists do have this intention, and those are the dentist-entrepreneurs. My estimate is somewhere between 10 and 20 percent of the dentist population (probably closer to 10 percent) have the necessary qualities of a dentist-entrepreneur.

    Next: What are the attributes of dentist-entrepreneurs? 

     

    Dr. Marc Cooper
    Dr. Cooper's professional career includes private periodontist, academician, researcher, teacher, practice management consultant, ...

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