Becker's Dental + DSO Review

26 BECKER'S DENTAL + DSO REVIEW // VOL. 2022 NO. 3 THOUGHT LEADERSHIP Is private equity hurting or benefiting dentistry? 10 dentists weigh in By Ariana Portalatin A lthough private equity has the ability to encourage growth and innovation in the dental industry, many dentists still believe there could be disadvantages to the field. Private equity has boomed in the dental industry as companies see high potential in dental companies. Several deals have taken place in the industry this year, including private equity-backed DSOs launching. Most recently, a private equity firm focused on orthodontists and pediatric dentists launched through a collaboration with investment firm DuneGlass Capital and Colorado-based practices Williams Orthodontics and Kohrs Orthodontics. Ten dentists recently spoke with Becker's about private equity's role in dentistry. Editor's note: Responses were lightly edited for clarity and length. Manny Chopra, DMD. Center for Dental Health (Cincinnati): The answer to that question is multifaceted. As more private equity money is funded in dental practices, a majority of those funds is directed to the continued growth of the DSO-model dental practice. My concern is, as these practices grow, will there be enough providers and staff to work at these practices? Further, as the DSO model grows with this private equity money, will there be a long-term concern for the retiring dentist in his/her ability to sell the dental practice to a younger dentist with substantial student loan debt? This may hinder their ability to purchase the retiring dentist's practice. It would be easier to go and work at a DSO practice that offers work-life balance and minimal added financial risk. Michael Davis, DDS. Smiles of Santa Fe (N.M.): This all depends on one's perspective. The private equity industry has in many situations forced up market evaluations on dental practices. This has benefited numbers of retiring doctors, or those seeking to sell their practice for a variety of reasons. By contrast, a young dentist seeking to own the means of capital for their labor (a dental practice) will generally see dental practices offered at higher multiples. The PE industry benefits because they have a new industry for economic resourcing, which some might term exploitation. The public will face the uncertainty of a diminished doctor/patient relationship. The patient must always face the unknown of upon whose interest is their doctor acting. No PE investor would invest in a dental practice without substantial assurances of exactly how that practice was run. Yes, doctors are free to make decisions in line with their patients' best interests, as long as those interests are fully in line with private equity investors and their interests. Doctor production metrics of corporate "daily dashboards" monitor that. Frank discussions with associate doctors guarantee their compliance, or contrastingly, a path out the door. Andy Droel, DDS. Droel Family Dentistry (Lino Lakes, Minn.): It is common knowledge that private equity money is seeking predictable and consistent returns via investments in dental enterprises. Certain stakeholders within the dental industry are taking advantage of historically high premiums being paid in practice acquisitions and other deals, and then in some cases are enjoying massive payouts from additional equity events. This is making for great financial outcomes for a relatively small number of established doctors/owners who opt to sell to [private equity] investors. Over time, if this trend continues to run concurrently with massive increases in educational debt, there will be less and less financial incentive for young people to pursue dental careers. At the same time, established doctors who are already full or partial owners of private practices will be increasingly averse to letting new doctors take over ownership, so the associateship concept will increasingly dominate the landscape in terms of available work opportunities for young, debt-strapped dentists. Long term, it's possible to envision many possible outcomes. What they all have to seem in common is this: Costs to consumers for quality dental care will continue to increase, dental careers will not offer the same level of financial stability as they have in the past and large investors who have significant market share will probably continue to extract substantial profits from the practice networks they control but do not manage. In other words, over time a very small number of people will profit handsomely, but the overall outlook for the dental industry is bleak. One hopes that there is a silver lining in terms of improved quality of care, as it is theoretically possible that large DSO-type practice networks will be motivated to maintain very high standards as a competitive advantage ... but I think it's more likely that dental care will become increasingly commoditized, lower-quality, less prevention-oriented and more expensive because of consolidation that is being driven by private equity. Janet Hatcher Rice, DDS. Rice Dental Arts (Bristol, Tenn.): I believe that the worst thing for dentistry is not DSOs but the private equity that is funding them. With this newfound money, DSOs can pay young dentists — and let's be real, young women dentists — enormous salaries that they so desperately need to pay down student debt. But now, these young dentists are serfs and will have to work for decades and sell more than what the patient needs and in the process, sell their integrity, honesty and self esteem in exchange for money to service debt. I have a fee-for-service, insurance-free, unencumbered private practice. Yes, I had the huge benefit of getting a debt-free education and taking over my father's practice, but I have not cut corners. I spent my early years learning advanced procedures and spent years building my confidence in performing these difficult procedures. I purchased top notch products, advanced technology equipment and most importantly, worked nonstop to develop skills that were valued by my patients. My building,

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