Issue link: https://beckershealthcare.uberflip.com/i/1482787
27 BECKER'S DENTAL + DSO REVIEW // VOL. 2022 NO. 3 THOUGHT LEADERSHIP equipment, supplies and staff have been costly. I had to scrimp and save. There are no shortcuts! I realize the hardships of this new economy but when I started, interest rates were 18 percent and inflation was out of control. So we had some hard times, too. Not to mention the stock market losses in 1989, 2000, 2008 and today. But even with setbacks, I never wanted to work for someone else. I made less but I refused to sell out, and at the end of the day, I can rest my head on my pillow and know that I have done the best for the people who trust me with their dental health. And in a small way, I have tried to help propel dentistry forward into better treatments and outcomes. I think Wall Street and private equity will never care about people, only profits. Not a good thing for dentistry. Medicine has already sold its soul to government, insurance and pharmaceutical companies at the loss to the health of their patients and our nation. Jason Hirsch, DMD. Dr. J Pediatric Dentistry (Royal Palm Beach, Fla.): I am unsure if private investors have helped or hurt the profession, because it's too soon and not enough inquiry from academia has ensued to determine this, but interest rates rising has to have an impact at some point in this new scheme. The thesis for investment in dentistry was the low cost of capital and healthy profit margins. These reasons have all but vanished now, so it is too soon to tell at this point if this trend is about to fall on its face. If the roll up and out stops because of lower valuations, then we might see real pressures on these PE-invested entities. Time will tell. Steven Hymovitch, DDS. Valley Endodontics & Oral Surgery (Phoenix): It's like asking if "going public" helps or hurts a corporation. Not a simple answer. It can provide necessary funding to accomplish a practice's vision to more people and areas quicker. On the other hand, practice founders might have less control. Private equity groups are as individualized as fingerprints. I guess it might be said that how a private equity company contributes to benefiting the dental industry is like a box of chocolates. You're never really sure what you're going to get. Rajdeep Randhawa, DDS. Innovative Dentistry (Colts Neck, N.J.): Private equity has entered dental industry for the long- term profits of its investors so that they can extract high yearly rate of returns ranging from 20 percent to 35 percent and then much higher rate of returns that range from 15 to 20 times their initial investment when they group all the practices they buy and start from scratch into groups of 1,000 or more practices that can be bundled and sold to Wall Street investors making billions of dollars in their transactions. It is the same concept of Wall Street investors buying thousands of mortgages from the banks, bundling them and selling it again to another set of investors. When this game of extreme musical chairs of playing with investors' money stops like it did in the housing crisis, there is going to be a lot of damage to the dental industry. Nobody knows when this stops and how many private equity investors and their front organizations, many of whom operate like DSOs, are going to be hurt. For private equity-supported DSOs to operate profitably, they have to squeeze enough profits out of all dental professionals working for them, the insurance companies and the thousands of patients that their dental practices see everyday. This is heavily dependent on patients accepting profitable insurance and non-insurance procedures, something that becomes a major stress point in the day-to-day functioning, in case the patients start opting only for loss-making basic dental procedures due to economic stress. Many DSOs are operating as front ends for private equity, are under a lot of pressure to perform well, and they pass on this extreme pressure to perform to the dental offices, their dentist operators, other dentists, dental hygienists, other staff and managers at all levels. DSO management can see on a daily basis if thousands of dental practices are performing well or not according to well-laid parameters. The parameters that are used to oversee the functioning, production and profitability of these dental practices are the same that private equity and other Wall Street investors are looking for to buy large DSOs and thousands of their practices. Charles Rim, DDS. Oregon State Hospital (Salem): Dental industry can be positively and negatively impacted by private equity investment. Positive • Ability to leverage purchasing power to invest in infrastructure development and growth • Increase access for dental services with multispecialty and integration of healthcare systems • Strategic planning and management with well-organized operation and innovation of fast-paced technology Negative • Major incentive for production in lieu of personalized dental service • Uncertain long-term sustainability of corporation with extensive non-clinical executive overhead and competition • Potential low provider satisfaction and burnout resulting in emotional and physical exhaustion • The complexity of the healthcare system leads to wide variation in clinical practice. The clinical intervention by healthcare providers for patients requires accurate clinical diagnosis and appropriate treatment care plan. Private equity investment can be positive for the dental industry if the influx of capital can improve access, quality and value. Robert Trager, DDS. Dentist at JFK and LaGuardia Airports (New York City): Private equity has a history of a checkered past resulting in both positive and negative results. The principals seek out private investors who put up hundreds of millions of dollars. Their goal is to buy out as many dental practices deemed successfully profitable or have the potential to become highly profitable if they are managed correctly. The main goal of private equity is to reward their investors by selling the business within five years for huge profits. There have been situations where this has occurred and also other scenarios where they have been bankrupted. These private equity partnerships have helped the dental supply companies by buying new and modern equipment as well as dental laboratories, albeit by negotiating both. These private partnerships are also buying up specialty offices (endodontist, periodontist, oral surgery and orthodontist). These dentists are receiving upfront a large sum of money but have to wait for the remaining funds over a number of years.