The future of dental practice is managed group practice.
By Dr. Marc B. Cooper
How can I be so certain when 80 percent of practicing dentists and nearly every other practice management consultant proclaim that solo practice will prevail?
Because context is decisive.
Context is crucial. Context determines the bottom line. Context determines what wins and what loses. For the last 100 years, the context of the dental industry has enabled solo private practice to flourish. But there has been a definite contextual shift and solo practice will not have the wherewithal to be successful as it has in this past.
What causes a shift in context is a series of breakpoint changes in the system generated by breakthroughs and economic demands. For example; the iPhone in cell phones, Southwest in the airline industry, and Amazon in retail shopping. In dentistry, those breakpoint changes are more subtle, but clearly present. Here is partial list of these changes.
- Emergence of midlevel providers
- All 3rd parties headed for PPO plans only
- Over 57% of employed workers having some form of dental plan and growing
- Dentists graduating with debt of $250,000 and more
- Seven new dental schools, three of which are for-profit
- Exponential growth of MSOs/DSOs
- Loss of state’s authority for dental licensure
- The Affordable Health Care Act with Exchange Programs and Accountable Care Organizations
- Less than 20% of graduates seeking ownership
- 47% of graduates being women
- Third party consolidation without much antitrust restrictions
- Vendor acquisitions and consolidation.
- Emergence of significant private equity and venture capital in the dental space
- The Comprehensive Dental Plan bill by Senator Sanders
- Shift of power from Patient-Provider to Purchaser-Payer
- Rapid and continuous upgrade of dental technologies and costs
- Drive for measurable and reportable quality assurance
- Emergence of cloud computing where databases can be examined and analyzed and then algorithms developed for measuring clinical results and access to this data by patients, payers and purchasers
- Next year, dentistry as an industry will surpass $110 billion in revenues, with a profit margin of almost 18%, attracting large scale investors. Wall Street will be very present.
Managed group practice can adapt to these changes; solo practice cannot. In fact, managed group practice is positioned perfectly to succeed in this new context.
Managed group practice isn’t the same kind of animal as small solo, or two or three partnered practices. Managed group practices are multicellular in nature and, therefore, much more complex. Trying to employ the culture, communications, leadership, management, structures and systems of solo practice in a more complex managed group system won’t work. Therein lies the huge disconnect between dentists currently in private practice and emerging or established managed group practices.
GETTING ON THE SAME PAGE
Many practicing dentists are uncertain about what exactly a managed group practice is. I like to look at it as a species. Let’s take monkeys, for example. A monkey is a primate of the Haplorrhini suborder and simian infraorder, either an Old World monkey or a New World monkey, but excluding apes and humans. Monkeys are generally considered to be intelligent. Unlike apes, monkeys usually have tails. There are about 260 known living species of monkey. Just as there are hundreds of different subspecies of monkeys, there are many different subspecies of managed group practices.
In the species of managed group practice there are small, medium and large ones. They can be a mix of generalists and specialists, generalists alone or specialists only. Some operate within one state, others in regions, some throughout the country, and still others globally in several countries. Some managed group practices are internally managed and they hire executive talent, depending on their size. The larger ones have professional executives such as CEOs, COOs, HR and CFOs. Smaller ones usually utilize existing staff or experienced dental office managers and then outsource some of their executive functions.
Then, there are managed group practices that are externally managed. These entities are called Managed Service Organizations (MSO) or Dental Practice Management Companies (DPMC). They provide all business functions and management of nonprofessional staff. They vary in size; from 8 to 10 offices to 350 to 400 offices. Within the MSO subspecies there are many variations, each offering a unique brand, set of services, and operating contracts. MSOs are typically very specific about the kinds of practices they grow with. I.E. Heartland Dental Care works primarily with single offices whereas American Dental Partners works exclusively with existing large group practices.
In some cases, dentists aggregate together and formalize into a corporate entity called a Dental Service Organization (DSO). A DSO has its own Board and its own executives, but every state mandates that DSOs must be owned and operated by dentists. The DSO is accountable for the diagnosis, treatment planning, and clinical delivery within the group. These DSOs contract with an MSO to provide management services in which case the MSO and DSO are co-joined by a long term agreement. What holds true for DSOs also holds true for those individual practices which are contracted with an MSO.
As most things in business, there are benefits and costs and managed group practice certainly has both.
BENEFITS OF ‘GROUP’
In the world of business everything at some level has a benefit and a cost. For example, hiring a great employee enhances your performance and that’s clearly a benefit, but salaries go up and other employees are affected and that is a cost. There are clearly benefits and costs with managed group practices.
Certainly managed group practice is, by its nature, able to more effectively and efficiently address key issues, concerns and problems that solo practice dentist-owners now face. That is clearly a benefit. The management side of a group practice can generate the executive fire power and staff capacity to deliver business functions, HR functions, more powerful marketing, manage budgets and increase profitability for member dental practices to be more successful than if they took on these functions alone. Here is a partial list of benefits for dentists.
- Economies of scale
- Collaboration (We stronger than I)
- More predictable exit strategy
- More compelling entrance strategy
- Negotiation as a group (vendors, labs, support services)
- Strength in expertise (i.e. HR, finances, marketing, real estate)
- Quality Assurance can be installed
- A powerful culture
Here is a partial list of issues that managed group handles far more effectively than individual dentists.
- Decreasing reimbursement from 3rd parties
- Increasing government mandates
- Increasing cost of doing business
- Regulations and taxes
- Difficulty in staff recruitment, retention and benefit packages
- More complex financial management
- Technology purchases
- Marketing that really works
- Negotiating power with suppliers, vendors and 3rd parties
- Focused customer service
But you can’t have up without down, in without out, so you can’t have benefits without costs.
COSTS OF ‘GROUP’
For the dentist, the costs often seem extremely high.
- Loss of autonomy
- Loss of control
- Loss of decision making in asset management
- Loss of direct management control with staff
- Diminished sense of power and authority
- Loss of the ownership spirit
- Dealing with executives who don’t understand dentistry
For the management side of the house the costs can also be high;
- Lack of partnership with dentists
- Lack of support by dentists
- Deficiency of responsibility and, therefore, commitment of dentists
- Absence of leadership by dentists
- Overriding self-interest of dentists rather than commitment to company’s success
- Increasing cost of capital
- Inability to directly manage dentists
- Immense amount of time required to manage dentists and handle their complaints
- Dealing with all the internal problems with doctors and staffs that should be handled in each practice location
- Opposition from dentists in solo practice and their political and legal groups
The benefits and costs are easily revealed. But unless the costs are addressed, the ability to institute plans and implement actions for increased efficiencies will be sucked into the black hole caused by these costs.
In spite of all the benefits and costs, consolidation is the easy part. What is typically missing in managed group practice, and therefore its greatest risk, is ‘integration.’ By integration I mean the capacity of a managed group practice to develop its dentists to behave and interact like “we” and not “I.” The culture of dentists from dental school through solo practice has always been about “me, I.”
Dentists who join managed group practices rarely develop into a united commitment to the success of the company. Therefore, the company is driven from the top down and consequently struggles to establish a culture that generates a sustainable success. Although being under-capitalized is often cited as the ‘cause’ for the failure of managed group practices, in my view it is the absence of ‘group’ that is the main reason for the collapse of MSOs and DSOs. You simply can’t create a corporate culture, a sense of team, a commitment to company success, and a willingness to change unless that thinking and way of being (I, me, my) are transformed. Is it possible to transform this way of thinking and being in dentists? Yes, but it takes powerful leadership.
LEADERSHIP IS KEY
For many managed group practices this is a big “missing” in their evolution. Treating dentists like employees doesn’t work. Coddling or ignoring them doesn’t work either. Unless there is strong dentist leadership and dentists are involved and on board with a company vision and mission that is bigger than ‘I,’ improving efficiency at the group level will have only limited success.
The fact is, improving efficiencies goes straight to the depth and power of leadership. Leadership needs to generate relationships of trust, a shared vision, high integrity, partnership and a palpable commitment to each other’s success. With this in place, the issues and problems around improving efficiencies can be tackled as a collaborative group and implemented globally with far greater success.
The action of leadership is speaking and leaders speak about a future, in the present. Leaders speak about something that will make a lasting difference and articulate the future in a way people can envision being a part of.
Leaders unconditionally committed to making a vision of the future happen, speaking so others can see it and feel it, get people moving in the same direction. They create a condition of commitment, alignment and attunement. Working inside the new context with strong leadership will set the table for managed group success and group efficiencies that would be otherwise impossible to attain as a solo provider.
Dr. Cooper’s professional career includes private periodontist, academician, researcher, teacher, practice management consultant, corporate consultant, trainer, seminar director, board director, author, entrepreneur and inventor.
Dr. Cooper has studied with masters in many disciples, participated in formal business educational programs, and worked as an independent contractor with top-flight consulting companies. In 2011, Dr. Cooper was selected as a coach for the prestigious TED Fellows Program.
The Mastery Company has been in existence since 1984. Dr. Cooper’s client experience in dentistry includes solo private practice, small partnered practices, managed group practices and retail corporate enterprises. Dr. Cooper has worked with numbers of health care entities such as insurance companies, clearing houses, bio-technical companies and disease management companies, as well as the senior executives and boards of large hospitals and hospital systems and a number of their related physician groups. In addition, Dr. Cooper has worked with Silicon Valley start-ups and Fortune 500 companies and he has worked with dental clients internationally.
Dr. Cooper has written seven books including; Mastering the Business of Practice, Partnerships in Dental Practice and Running on Empty to name a few. Subscribe to his newsletter at www.themasterycompany.com. Dr. Cooper can be contacted at: [email protected]