In this month’s letter, ADEA President and CEO Dr. Rick Valachovic sheds light on a potentially “disruptive innovation”: the emergence of large-group practices, where most dentists are employees rather than owners.
From Bungalow to Big Box? How DSOs Could Change the Face of Dentistry
Beyond the hype and the inflammatory rhetoric, one fact is incontrovertible: More and more dentists are choosing to work for large group practices affiliated with what have come to be known as Dental Support Organizations or DSOs.
You’ve heard the praise—guaranteed income, regular hours, few managerial headaches and a pathway to ownership—and you’ve heard the criticism—too much pressure to produce and loss of professional autonomy, sometimes leading to overtreatment and substandard care. Depending on your perspective, you may see the rise of firms that employ dozens or even hundreds of dentists in large multisite practices as a positive development, both for people seeking access to affordable care and for highly indebted graduates who lack the means to establish practices of their own. Looked at from another angle, you may think that the introduction of business values and venture capital into the practice of dentistry may be harming the profession by undermining the dentist/patient relationship and compromising the quality of care.
In 1990, almost 93% of dentists chose to care for their patients in small private practices, according to American Dental Association (ADA) survey data. By 2009, that number had dropped to 86%, and the percentage of employed dentists had more than doubled. That trend has reversed a bit in the ensuing years but seems likely to continue in the long run. New dental school graduates are three times more likely to seek employment in a large group practice than they were a decade ago, and as the competition for dental business increases, I suspect more dentists—both young and old—will find employment in a DSO an attractive option.
A parallel shift is visible among our physician colleagues. In late 2013, the American Medical Association released new data showing that while private practice in medicine remains strong, physician employment is on the rise. As of 2012, only 18% of physicians were in solo practices, down six percentage points over the previous five years, and the portion of physicians who were practice owners had decreased eight percentage points over the same time frame. Meanwhile, nearly 30% of physicians worked either directly for a hospital or for a practice owned in whole or in part by a hospital, a major increase from an estimated 16% hospital-related employment rate in 2008.
As the Dr. Marcus Welbys of the world gradually disappear, it seems only logical to ask whether private practice dentistry will follow suit. Despite our professional differences, especially when it comes to the ways in which our patients pay for care, there seems little doubt that more dentists and physicians will find themselves employed in the decades ahead.
What does this trend mean for academic dentistry? At a minimum, we must ask ourselves these questions:
- Are we doing enough to prepare students for the shifts occurring in the business of dentistry?
- Should we be doing more to help our students evaluate their opportunities both as employees and as entrepreneurs?
In 2007, a group of potential employers of our future graduates formed an industry association, now known as the Association of Dental Support Organizations (ADSO), which can help us understand this new practice model. According to the ADSO website, DSOs offer assistance with nonclinical functions, such as accounting, human resources, marketing and legal tasks, so that affiliated dentists can “focus on the delivery of high-quality, cost-effective dental care to their patients.”
DSOs also take advantage of the economies of scale that come with larger offices and multiple-practice chains, and they increase revenue by creating an in-house network of specialists rather than referring patients out. As I wrote last month, reimbursement rates for dental care are declining, and dentists report that their chairs more frequently sit empty. In this climate, DSOs’ efficient business model gives them a distinct economic advantage.
DSOs may also have an advantage in the marketplace for talent. Many in the current generation just starting in practice express a preference for employment as a lifestyle choice. Like their physician peers, they are less interested on average in taking on the responsibilities of establishing and managing a practice. By handling everything from negotiating leases to billing insurers, while providing a guaranteed and typically generous salary, DSOs offer many new graduates a very attractive pathway into practice.
At the 2014 ADEA Annual Session & Exhibition in San Antonio, researchers from the Columbia University College of Dental Medicine (Columbia CDM) presented findings of a study they conducted to determine the advantages and disadvantages of working for a DSO. They gathered information from four DSOs and surveyed Columbia CDM graduates from the classes of 2000 through 2011 about their perceptions of these companies. Among the respondents, 23% were or had been employed by DSOs.
When asked which incentives they believed drew graduates to these practices, more than two-thirds of respondents selected guaranteed salary, freedom from the worries of practice management and opportunities to acquire experience and gain speed. When asked about the drawbacks of working for DSOs, graduates chose production pressure (including the use of quotas), an inability to provide patient-centered care and influence from corporate management toward more profitable procedures.
When the researchers broke down the responses between those who had and those who had not worked for DSOs, some notable differences emerged. For example, among those who had not worked for DSOs, 68% and 72% named concerns about treatment-planning autonomy and production quotas as potential drawbacks, whereas only 35% and 37% of those who had worked for DSOs expressed the same concerns.
Indeed, many of the Columbia CDM graduates had very positive things to say about their experience as employed dentists. They saw working for a DSO as a good first job that would help them gain speed and confidence and allow them to pay down loans and accumulate capital. But just over a quarter of those who had tried DSOs stayed more than two years, suggesting that employment is seen by many as a stepping-stone to joining or setting up a private practice down the line. Others who had worked for DSOs complained of high stress, profit-oriented decision-making and questionable ethical standards.
Much of the criticism lobbed at DSOs hinges on two issues:
- Whether these corporations truly limit their role to providing management support or whether they are in effect practicing dentistry by unduly influencing how licensed professionals treat their patients.
- Whether the investment of venture capital in some of these companies—and the attendant expectation of high profit margins—creates incentives to put profits before the best interests of patients.
There is no doubt that some bad apples have cast an unwelcome spotlight on this practice sector by seeking to capitalize on the expansion of dental benefits under Medicaid. An investigation of five corporate dental chains by a U.S. Senate committee found evidence that some DSOs have failed to meet quality and compliance standards, providing unnecessary and sometimes painful treatment to children, often without consent, and overbilling Medicaid for these procedures. A number of states are also investigating DSOs (and individual dentists as well) for Medicaid fraud, and a few states have introduced or passed legislation in an effort to clarify how DSOs may operate in their jurisdictions.
Despite this scrutiny, the numbers of DSOs and their share of the dental market are growing. Although currently available ADA data does not distinguish DSOs from other large group practices, it does show that the number of dental firms with more than 10 offices increased from 157 in 1992 to 3,009 in 2007, and that the number of offices in each firm grew as well.
Is it any surprise that our traditional cottage industry is gradually giving way to trends that have been shaping the business of health care more generally? Indeed, while many in my baby-boomer generation may treasure their independence and the 32-hour workweek, it is becoming increasingly difficult to make a strong economic case for the traditional solo practice, or to ignore the potential benefits large group practices could hold for consumers. The Federal Trade Commission, for example, urged the North Carolina legislature to reject a state bill that would have imposed restrictions on the business organization of dental practices on anticompetitive grounds, concluding that “When licensed dentists contract with DSOs to provide nonclinical services to their dental practices, DSOs appear to increase efficiency and support entry by new dental practices, which may lead to lower prices, expanded access to dental services, and greater choice for dental consumers.”
For the most part, associations representing practicing dentists neither encourage nor discourage dentists from signing on with practice-management firms. Our Association and our member schools have also remained largely silent on the issue, but it’s time we educated ourselves on this growing sector of our profession, as our colleagues at Columbia CDM are striving to do.
DSOs are gaining a greater share of the dental marketplace, and they have become part of the face of the profession in many regions. How DSOs will reflect on our profession in the long run remains to be seen. Our future graduates will likely have a major influence on how these large group practices evolve and on whether they fulfill the vision articulated by ADSO or find themselves further mired in controversy. Perhaps it is time we put aside our preconceived notions about DSOs and make a conscious effort to prepare our students for the full-range of practice options that await them.