The Advantages of the DSO Business Model

Table of Contents

• What Is the DSO Business Model?
• Why Should Dentists Choose the DSO Business Model?
• How to Grow Your Dental Service Organization

The dental industry is experiencing a seismic shift in dental practice models.

According to the American Dental Association, while practice ownership rates have been on the decline, group practice affiliation has continued to rise. In 2005, 85% of dentists owned their practice. By 2019 the number had dropped to 76%, with 10% of dentists affiliated with dental service organizations (DSOs).

Everything DSO states that today, approximately 18-20% of dental practices are affiliated with a DSO, and notes that trade insiders predict that by the year 2025, that percentage will grow to 50-65%.

Read on to find out why so many dentists are electing to align with DSOs, how the DSO model works, the advantages it can bring, and how technology can help support the growth and success of dental organizations.

The Dental Service Organization (DSO) business model provides dentists with critical non-clinical business support. By managing the "business side" of running a practice, the DSO model allows dentists to focus on providing quality care to their patients rather than spending valuable time on business functions they don't necessarily have the knowledge, education, or abilities to complete effectively.

For veteran dentists fighting a human labor shortage, or new dentists with large student debts, DSOs alleviate the pressures of administrative tasks while providing oversight and accountability while delivering additional financial benefits.

More simply stated, DSOs allow dentists to spend their time being dentists while they take care of everything else.

How Does the DSO Business Model Work?

Acting as independent contractors, DSOs can be thought of as business support centers that help to facilitate growth and success.

As those in the industry well know, running a dental practice comes with its own set of challenges. The realities of day-to-day life in a dental office can often impede growth and improvements and leave little time for even vital business tasks.

It's no wonder the DSO model is gaining so much traction, with all the serious benefits it provides to practitioners, patients, and investors.

As Helen Keller once said, "Alone, we can do so little; together, we can do so much." A dental service organization with multiple dentists all serving the same loyal client base is able to unite efforts, divide labor and take advantage of efficiencies of scale for the benefit of all. Its relevance to your specific practice, however, is determined by taking an objective view of your ability to manage patient care, growth, and operational efficiencies.

For dentists with high student loan debt, the DSO model offers a stable, predictable salary with no need to invest in a personal practice. Removing the need to manage and run their own business and worry about things like regulatory compliance also allows practitioners to focus all their efforts on providing top-quality patient care.

For solo private practices or private group practices, the DSO model can take a load off of overburdened shoulders and deliver significant advantages, including:

• Managing essential business functions such as marketing, employee recruitment and training, human resources, and billing and payroll.
• Access to emerging technologies and best practices without the need for a large outlay of cash or increasing overhead.
• Consistent pay and salary growth incentives. Some DSOs may also offer a signing bonus.
• Increased networking, improving your access to colleagues, mentorship opportunities, specialists, and continuing education.

• DSOs can take advantage of economies of scale and leverage more buying power to lower overhead costs and negotiate better deals for supplies and services.
• Compared to traditional investments, DSO profit margins are a lot higher for lower risk. This is why the model has experienced rapid expansion and continues to attract capital from investors.
• Huge marketing advantages. DSOs are able to amortize marketing costs across a number of locations. More marketing means more business, even marketing that specifically targets one practice will benefit others; it's what is referred to as leakage.

For example, compared to individual practices, DSO practices are much more likely to spend heavily on Google Ads, and the difference is tenfold when comparing large DSOs to lone practitioners. Only 6% of lone practices are buying Google Ads. Comparatively, 60% of large DSOs commit dollars to buy Google Ads.

Standard, repeatable processes, that optimize outcomes and minimize waste, enable an organization to scale. Method's spend management platform was uniquely designed with this in mind, providing dental organizations with the opportunity to scale quickly by leveraging automation.

Streamlined e-procurement provides DSOs with better visibility and spend control across locations, allowing you to:

• Leverage company-wide purchasing volumes to reduce dental supply costs
• Create formularies and control spend practices across locations
• Monitor actual spend against budget so you can meet your targets
• Implement best practices that safeguard your profitability and stop cost leakage
• Avoid stockouts and improve cashflow with improved inventory management
• Optimize operational efficiencies and reduce your "soft" costs

From identification of requirements, price shopping, requesting and analyzing quotes, selecting suppliers, entering order requests, approving orders, receiving shipments, and paying invoices— Method was designed to improve the entirety of the end-to-end procurement process.

Designed by procurement experts specifically for the dental industry, Method provides everything you need for effective centralized procurement that delivers operational efficiencies and cost reductions while ensuring your employees remain focused on providing quality patient care.

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Method: Everything you need to drive strategic procurement and maximize opportunity for cost reductions across sites.

With Method's full, end-to-end inventory and order management and an easy-to-use interface, ordering dental supplies is straightforward and hassle-free, ensuring quick implementation, high adoption rates, and continued usage across your organization, making for a fast Return On Investment (ROI).

Rest assured, however, Method's customer success team is with you along the way, setting you up for success and staying with you as you grow.

Acting as a true partner, Method will assist you along your procurement journey, helping to guide your transformation as you improve your practice and your profits.

Visibility and Spend Control

• Implement formularies with confidence that negotiated cost savings will result in measurable, hard-cost savings.

• Empower better buying decisions with our easy-to-use Amazon-like marketplace that brings the dental supply market to your fingertips with real-time pricing.

• Procurement data analytics that allow you to analyze spend patterns and identify areas for improvement, find synergies and gather the data you need for negotiations.

• By monitoring every order against budget and reviewing and approving orders before they are placed, you can ensure you stay on track and avoid costly errors and overspending.

• Customizable buying rules allow you to leverage automation to implement company-wide buying policies and curb rogue spend.

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Implement Best Practices

• Safeguard against fraud and error by automating the entirety of the purchase-to-payment lifecycle and implementing best practices such as the three-way match process.

• Simplify collaboration across your team, and reduce unnecessary, incorrect, and duplicate purchases.

• Improve cash flow and mitigate the risk of waste from expired, damaged, or lost items with improved inventory management.

• Negotiate before you buy with time-saving RFQ processes that enable you to quickly and easily compare quotes, select vendors, and turn quotes into orders that are then automatically placed with vendors.

Ready to start scaling? Learn how Method Procurement's spend management solutions can help you gain control of your spend. Get in touch with our team today or request a demo to see it for yourself.

Learn More About Dental Practice Management

• Practice Efficiencies
• Dental EBITDA
• Hard and Soft Costs
• Making Your Practices More Efficient
• Picking a GPO
• Increasing ROI